First Quantum gets financial boost from Chinese company

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Receiving a US$500-million prepayment from a Chinese shareholder

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A Canadian miner is receiving a US$500-million prepayment from a Chinese shareholder with hopes of strengthening its balance sheet after its key copper mine in Panama was forced to stop production late last year.

In return, Toronto-based First Quantum Minerals Ltd. will annually supply Jiangxi Copper Corp. with 50,000 tonnes of copper for three years from its Kansanshi mine in Zambia. The Canadian miner will also have to pay interest on the prepayment, the company said.

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“We sell copper to Jiangxi, just as we sold to them in the past as a regular customer,” chief financial officer Ryan MacWilliam said on a conference call on Feb. 21. “The focus is really on having a strong balance sheet.”

The Panamanian government ordered First Quantum to shut down its lucrative copper mine in December following protests from environmentalists and a Supreme Court order that annulled a mining contract the company had signed with the country.

First Quantum’s agreement with Jiangxi comes at a time when Canada is trying to reduce its dependence on China for metals such as copper and lithium that are considered important for the transition away from fossil fuels.

In November 2022, Ottawa ordered three Chinese companies to divest their shares from three junior Canadian lithium miners. Industry Minister François-Philippe Champagne in December said he would not compromise on national security, reaffirming Canada’s stance of distancing itself from the Asian giant.

First Quantum’s Cobre Panama mine, considered to be one of the largest new copper mines to open in the past decade, was responsible for nearly half its revenue in 2023, but with production stalled, the company is looking to shore up its finances. The company is also looking to sell some of its smaller mines and stakes in some of its larger mines.

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“(Last year) closed with the company facing one of its biggest challenges in recent history,” First Quantum chief executive Tristan Pascall said in a statement. “However, I am confident in the resilience of First Quantum and the determination of our teams to work through these challenges.”

The Cobre Panama may have stopped producing, but it hasn’t shut down, which is a process that generally takes several years. The company is currently focusing on a preservation and safe management plan that will address issues such as the fate of the mine’s employees and management and ensure there’s no environmental degradation. There are also questions about who is going to foot the closure bill, since the entire process could cost between $15 million and $20 million per month.

Pascall said the anti-mining emotion in Panama has now dialed back and there may be room opening to discuss mining’s contribution to the country’s economy as voters gear up for an election in May.

He has previously said a lot of the emotion about Cobre Panama was sparked by fake news and rumours about how the company was taking water from the Panama Canal and clearing large swaths of land. As such, the company on Feb. 21 said it has taken steps to better communicate with Panamanians and has started a program that will allow 3,000 people to visit the mine every month.

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Despite First Quantum’s legal tussles, it hopes to restart the mine in the long run. It also has an option to seek compensation through an international arbitrator, which would be legally binding. On Feb. 21, Pascall said the company could seek at least US$20 billion from Panama for damages.

For the three months ending Dec. 31, First Quantum reported a US$1.4-billion net loss, compared to a US$325-million profit in the third quarter of 2023. For the year, it reported a US$954-million loss, compared to a US$1.03-billion profit in 2022.

• Email: nkarim@postmedia.com


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