First Quantum dismisses “false rumours” of Zambia mine sales

KANSANSHI COPPER MINE, ZAMBIA -- SEPTEMBER 11, 2019: Maxar satellite imagery of the Kansanshi Mine. Kansanshi mine is a large copper mine located in the North-Western Province of Zambia. Please use: Satellite image (c) 2019 Maxar Technologies.

FIRST Quantum Minerals on Tuesday dismissed speculation it was planning to sell a stake in its Zambian copper mines.

“There is no truth in the report that First Quantum is in discussions to sell a stake in its Zambian operations to Jiangxi Copper Corporation, or indeed any other company,” said the group’s manager for Zambia Godwin Beene.

“As the nation’s largest taxpayer we remain fully committed to our Zambia operations and the associated economic and social contributions to the country,” he said.

China’s Jiangxi Copper owns 18% of First Quantum, and is among one of several shareholders that was approached by Barrick, according to a Bloomberg report earlier this week. A separate report by Reuters said Jiangxi Copper was discussing the possible purchase of a stake in First Quantum’s Zambian mines.

The Toronto-listed firm, which is due to update shareholders later this month on how it intends to meet its debt obligations following a shock order by Panama in December to close the Cobré Panama mine, said the sale speculation was a “false rumour”.

First Quantum has debt of $1.05bn which comes up for maturity in early 2025. Ratings agency Fitch warned last month that if the Cobré Panama mine were permanently shut, First Quantum’s net debt leverage ratio in 2024 would increase to more than five times earnings before interest, tax, depreciation and amortization resulting in a covenant breach.

Net debt leverage ratio is a measure used to assess a company’s borrowing capacity. “If unresolved, the covenant breach may trigger an event of default across all its debt instruments,” the ratings firm said.

The Panamanian government ordered the closure of Cobré Panama last year after a court found its mining licence contravened 25 articles of its constitution. First Quantum had put $10bn into developing the 350,000 ton a year mine.

According to Bloomberg this sent Barrick Gold CEO Mark Bristow to sound out shareholders whether they would support a takeover of First Quantum. Bristow is thought to have expressed an interest in a deal with First Quantum last year in an effort to build his company’s copper production.

In Zambia, First Quantum wholly owns the Sentinel mine and 80% of the Kansanshi mine, with the rest owned by the Zambian government.