First Quantum Minerals Falls After Denying Takeover Talks

- September 23rd, 2019

The company confirmed it is in talks with China-based Jiangxi Copper for the sale of a minority stake in its Zambian operations. 

Shares of Canadian copper miner First Quantum Minerals (TSX:FM,OTC Pink:FQVLF) plummeted on Monday (September 23) after it denied rumors that it has received takeover offers.

Last week, a report from Bloomberg, citing sources familiar with the matter, said global miners were interested in First Quantum, which operates Kansanshi — Africa’s largest copper mine. The sources said the company was working with defense advisors to examine its options.

“First Quantum has not engaged in any discussions regarding a takeover bid or other change of control transaction and has no knowledge of potential takeover bids, change of control transactions or proposals,” the company said in a statement on Monday.

However, the miner confirmed it is currently engaged in talks with China-based Jiangxi Copper (OTC Pink:JIAXF,HKEX:0358) for the sale of a minority stake in its Zambian operations.

First Quantum added that no transaction has been agreed upon yet and there is no guarantee that the companies will reach a deal.

Jiangxi Copper has bought almost a 10 percent interest in the company in recent months, sources told Bloomberg. The Chinese company, one of the Asian country’s largest copper producers, reported production of 102,000 tonnes of copper concentrate during the first six months of the year.

First Quantum produced 605,853 tonnes of copper in 2018, with its Kansanshi and Sentinel mines in Zambia contributing almost 80 percent of the company’s total output.

The miner has faced some challenges in the African country lately, with a dispute over US$5.8 billion in unpaid import duties recently settled.

The country has also increased its sliding scale for royalties and introduced a new 10 percent tax when the price of copper exceeds US$7,500 per tonne — a move that has impacted international miners including First Quantum, Barrick Gold (TSX:ABX,NYSE:GOLD) and Glencore (LSE:GLEN,OTC Pink:GLCNF).

The government’s ongoing dispute with Vedanta (NYSE:VEDL) over control of Konkola Copper Mines has also added concerns to mining companies operating in the country. Zambia is the seventh largest copper-producing country, and the second in Africa behind the Democratic Republic of Congo.

Aside from its assets in Zambia, First Quantum holds interests in the Las Cruces copper mine in Spain and the Ravensthorpe nickel mine in Australia.

Additionally, the Canadian miner started ramping up production at its massive Cobre Panama project earlier this year, shipping its first concentrate in June. The asset is forecast to produce 140,000 to 175,000 tonnes of copper annually.

In 2019, First Quantum’s copper output is expected to reach about 718,000 tonnes.

On Monday, shares of First Quantum were trading down 9.91 percent at C$11 in Toronto.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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