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First Quantum Minerals Ltd. (FM-T22.220.241.09%) is closing a painful chapter of its history in Democratic Republic of the Congo (DRC) by selling its mines and settling all legal claims for $1.25-billion (U.S.), years after its operations were nationalized by the government.
Vancouver-based First Quantum will sell the controversial Kolwezi copper-cobalt project, as well as its Frontier and Lonshi mines, to Kazakh miner Eurasian Natural Resources Corp. PLC, also known as ENRC, the same company it has been battling in international courts over its properties in DRC, one of the world’s most attractive copper regions.
The settlement comes as copper prices (HG-FT3.40-0.03-0.80%) are struggling to rebound from a 20-per-cent drop last year, amid worries that debt concerns in Europe and a slowdown in China’s rapidly growing economy could curb demand for the metal used in everything from cars to construction.
Copper closed at $3.42 a pound on the London Metal Exchange on Thursday, well off its record of $4.60 set 11 months ago, but up from recent lows of just below $3 this fall.
“It brings to a close First Quantum’s current involvement in the DRC and secures substantial compensation for our shareholders for the loss they have suffered,” First Quantum chairman and chief executive officer Philip Pascall said in announcing the agreement on Thursday.
The deal also helps London-listed ENRC expand its copper footprint in Congo, to become the second-largest copper producer in Africa within a few years, behind First Quantum.
First Quantum’s investors appeared to view the agreement with ENRC as a surprise windfall, helping lift shares by nearly 9 per cent on the Toronto Stock Exchange on Thursday, before closing up 4.4 per cent.
Analysts had valued the company’s Congo assets at about $2.5-billion two years ago, but most had written them down to zero after the government seized control of its Kolwezi project in 2009, alleging the company wasn’t complying with a new mining code.
First Quantum took the matter to international arbitration, including the government’s sale of the asset to a company controlled by Israeli mining entrepreneur Dan Gertler, who later sold it to ENRC.
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