HomeBase MetalsDRC mine judgment sends First Quantum shares reeling

DRC mine judgment sends First Quantum shares reeling

First Quantum’s
Kingamyambo Musonoi
Tailings (KMT) project
at Kolwezi
Lubumbashi, DRC — MININGREVIEW.COM — 26 May 2010 – Shares in Canada-based mining group First Quantum Minerals Limited fell nearly 5% in London after the Supreme Court of the Democratic Republic of Congo (DRC) annulled its rights to two copper mines.

The judgment, which a mines ministry official revealed to Reuters here, puts a cloud over the future of the company’s Frontier and Lonshi mines in the south of the country, after the DRC government last year closed down its separate Kolwezi plant.

Reuters reports that the new legal setback means over US$1 billion (R7.5 billion) worth of First Quantum’s investments in the central African state are in jeopardy.

“We have no option but to vigorously pursue our rights to the Kolwezi project through international arbitration and, if necessary, will do the same with respect to any actions taken against Frontier and Lonshi,” said First Quantum chairman and CEO Philip Pascall in a statement released here. “We will pursue any avenue we can to resolve this matter amicably and to resolve it in general,” Pascall told a subsequent conference call.

The DRC government shut First Quantum’s Kingamyambo Musonoi Tailings (KMT) project at Kolwezi last September, after a mining review of 61 companies had flagged up contract irregularities and production delays at the mine.

The Supreme Court ruling annuls a 2000 mines ministry letter that gave First Quantum title to the Frontier and Lonshi copper mines, and handed it instead to state-owned Societe de Developement Industriel et Minier du Congo (Sodimico).

Pascall said the court decision was in retaliation for First Quantum’s moves to seek international arbitration over KMT and the company’s refusal to resolve this dispute by agreeing to submit to arrangements with unspecified third parties”.

First Quantum did not give any details on the third parties mentioned, but analysts say rival mining companies may be seeking to secure rights to the Kolwezi mine if the company is forced out.