First Quantum, the Canadian base metals producer, says the notice of arbitration its Kansanshi Holdings subsidiary received from ZCCM International Holdings, under the Kansanshi Mining (KMP) shareholders agreement, involve claims that have no merit or foundation in facts.
ZCCM, a 20% shareholder in KMP, filed the notice of arbitration against KMP and Kansanshi Holdings, which holds a 80% stake in KMP. KMP has also received a statement of claim filed in the High Court of Zambia including additional defendants, including First Quantum, its subsidiary FQM Finance, as well as a number of directors and an executive of these corporates.
First Quantum said the dispute arises out of the rate of interest paid on deposits made by KMP with the company’s financing entity, FQM Finance. The interest earned on deposits were retained for planned investment by KMP in Zambia. FQM Finance paid interest on the deposits to KMP based on an assessment of an arms-length fair market rate, which is supported by independent third party analysis. ZCCM disputes that interest rate paid to KMP on the deposits was sufficient.
“Unfortunately, ZCCM has taken the extra-ordinary additional step of commencing a further action in the High Court of Zambia, repeating allegations from the Notice of Claim against certain First Quantum directors and an executive that are inflammatory, vexatious and untrue.
“Having carefully studied the claims made in both the Notice of Arbitration and Statement of Claim, First Quantum is firmly of the view that the claims are utterly without merit, or indeed any foundation in facts,” First Quantum said in statement today.
First Quantum said the KMP deposits were fully repaid to KMP and then used to fund a major investment programme in Zambia. In fact, the company is now indebted to FQM Finance for the funding of further investment in Zambia.
First Quantum said it is currently engaged in constructive discussions with representatives of the Zambian government, which holds a 92% shareholding in ZCCM, with a view of finding an amicable solution.