First Quantum Awarded interests in Zambian Copper Belt.
>
>First Quantum (FM.CDNX) and partner Glencore International AG have won a
>bidding process to acquire the Nkana mining and concentrator assets and the
>Mufulira mine, concentrator, smelting and refining operations in the
>copperbelt of Zambia. Zambia's copperbelt hosts some of the world's richest
>copper-cobalt deposits, but the mines have been in steady decline since the
>1970s and desperately require foreign investment. Copper accounts for most
>of Zambia's hard currency earnings and mining is a major employer in this
>country of 10 million people. But output has dropped to about 250,000
>tonnes annually from a peak of over 700,000 tonnes in the early 1970s. The
>consortium of First Quantum and Glencore will now enter into negotiations
>to fix terms on which to acquire these assets, subject to approvals by the
>Zambia Consolidated Copper Mines board and government approvals.
>
>Although terms of the acquisition were not disclosed, it is expected to be
>similar to a recent acquisition by Anlgo American. Anglo will take an 80
>percent interest in the Konkola, Nchanga and Nampundwe mines owned by
>Zambia Consolidated Copper Mines through a new company, Konkola Copper
>Mines Plc.
>
>Glencore is a commodity trader (private) with large interests in laterite
>nickel projects. Glencore's involvement is viewed largely as financial
>backing to First Quantum. First Quantum has proven to be an efficient mine
>operator of smaller assets (Connemara and Bwana Mkubwa mines). Connemara is
>a gold operation in Zimbabwe and Bwana Mkubwa is a very successful copper
>leach operation from tailings in Zambia. Bwana Mkubwa also has a stand
>alone acid plant which has proven to be very profitable; the cost per pound
>of copper is $0.35 and net of acid production it is ($.02). Historically
>the company has suffered from a lack of working capital. It has recently
>made great progress in paying down debt.
>
>Nkana resources are currently 200 million tonnes grading 2% copper with
>annual production of 60,000 tonnes Cu/year. Mufulira resources stand at
>some 86 million tonnes grading 3% copper with similar production as Nkana.
>The bulk of production comes from underground.
>
>
>COMMENTS
>These latest acquisitions are clearly significant and will elevate FM into
>the intermediate producer category with longer-term reserves. The two
>operations under its control have been considered successful, but do not
>have long life resources. One concern we have would be any requirement to
>assume any of the debt of the new acquisitions. Another concern we have
>will be ability to modernize the operations - if the government imposes
>restrictions on the number of employees and the social requirements to
>maintain a larger than necessary workforce, the economic benefit to FM will
>be reduced. However, despite the non-disclosure of any terms at this time,
>we view this a significant transaction for FM.
Happy Holidays
Geoff Chater
First Quantum Minerals Ltd.
email geoff@first-quantum.com
T. 604-688-6577 F. 604-688-3818 |
