Canadian mining company, First Quantum Minerals is currently in discussions to divest a share of its copper mines in Zambia to one of its major shareholders, Jiangxi Copper.
In Zambia, First Quantum owns the Sentinel mine outright and possesses an 80 per cent stake in the Kansanshi mine, with the remaining 20 per cent held by the Zambian Government.
During the third quarter of the previous year, these Zambian mines reportedly generated $943 million in revenue and $210 million in operating profit.
Based on their earnings, industry estimates suggest that these assets could be valued at nearly $6 billion.
Jiangxi Copper, the largest shareholder in First Quantum, is considering acquiring either one of the mines or a partial stake in one of them, according to an insider cited by the news agency.
However, the specifics of the potential deal remain unconfirmed, and the likelihood of an agreement coming to fruition is uncertain.
These negotiations with the Chinese state-owned enterprise commenced following a setback for First Quantum in Panama, where it was instructed to cease operations at its Cobre Panama mine.
The company’s market value experienced a significant decline, losing approximately C$10.3 billion since protests against the Cobre Panama mine began in late October.
Notably, this mine contributed about 40 per cent to the company’s overall revenues, raising concerns about its borrowing capacity.
First Quantum is also grappling with a maturing debt of $1.05 billion early next year. In 2019, similar discussions between First Quantum and Jiangxi took place, leading to Jiangxi acquiring a notable minority stake in First Quantum rather than in the Zambian mines themselves.
Presently, Jiangxi holds an 18.2 per cent stake in First Quantum, with a standstill agreement in place preventing the Chinese company from increasing its stake beyond 20 per cent.
Recent reports from Bloomberg suggest that Barrick Gold is engaging in talks with key investors in First Quantum regarding a potential takeover.
However, the outcome of these discussions has yet to provide a clear indication of whether Barrick will proceed with a bid.
By: Gladmore Ndhlovu