First Quantum in $260m purchase

[] — FIRST QUANTUM is acquiring junior explorer Kiwara for $260m in cash and shares in a transaction that will give it future growth in Zambia in copper, cobalt, nickel and uranium.

Kiwara, a JSE- and AIM-traded exploration company, has three prospects in Zambia that it is exploring, with one, the Kalumbila property moving into a pre-feasibility study. The barely traded shares on the JSE were unchanged at 650 cents.

The Kalumbila property, which has the potential to be an opencast mine, has an inferred resource of 340 million tonnes at a grade of 0.78% copper. Kiwara appointed Snowden Mining Consultancy in early October to advise on the pre-feasibility and bump resources into higher confidence categories via an in-fill drilling programme.

“Kiwara has recognised that the Kalumbila project, and indeed the licence area in general, has potential well in excess of our current resource capability,’ said Kiwara chairman Colin Bird, who is CEO of Jubilee Platinum.

Analysts said this was a good deal for First Quantum.

“We believe that in the long term this acquisition could potentially add significantly to FQM’s (First Quantum) copper production profile,’ said Mike Stuart from Numis Securities.

“FQM’s expertise lies in the efficient definition, design, engineering and construction of large mining projects – and can add significant value to Kalumbila,’ he said. “Zambia is FQM’s backyard and we believe they may be significant synergies with FQM’s nearby Kansanshi mine where the company has significant infrastructure and development.’

First Quantum has secured irrevocable support from the owners of 76% of Kiwara’s shares for the deal which will be voted by all shareholders on 11 January 2010. The board, whose directors own shares in Kiwara and have given their support to First Quantum, have recommended the deal.

“This transaction is consistent with First Quantum’s strategy of acquiring projects to which we can add value by applying our considerable technical expertise,’ said Philip Pascal, CEO of First Quantum.

First Quantum has grown its copper output 10-fold between 2003 and 2008 to 334,000 tonnes. It is targeting 380,000 tonnes this year and more than 500,000 tonnes in financial year 2011. As at end-September this year it had $808m in cash.

First Quantum is in dispute with the government of the Democratic Republic of Congo over the ownership of the Kolwezi copper cobalt project in which the company has invested $553m and which has the potential to produce 35,000 tonnes of copper and 7,000 tonnes of cobalt salts a year.

The government has ordered development of the project, which is 75% completed, to be halted and handed over to state-owned Gecamines. First Quantum says the order was illegal and that it has the option to take the matter before international arbitration.