First Quantum Minerals, a Canadian mining powerhouse, is reportedly in discussions to sell a significant stake in its Zambian copper mines to Jiangxi Copper Corp, China's state-owned enterprise. This potential deal is part of First Quantum's broader strategy to strengthen its financial position following setbacks in Panama.
The talks, which initiated last month, revolve around First Quantum's 100% ownership of the Sentinel mine and its 80% stake in the Kansanshi mine, with the Zambian government holding the remaining interest. While details are still under wraps and no formal agreement has been reached, sources indicate that Jiangxi, already a major shareholder in First Quantum, might acquire one or both Zambian mines or a portion thereof.
The Zambian assets, which raked in a combined revenue of US$943 million and an operating profit of US$210 million in the quarter ending September 2023, could fetch a valuation around US$6 billion. Despite similar negotiations in 2019 that culminated in Jiangxi acquiring a significant minority stake in First Quantum rather than the mines, the current financial climate might push the deal through different channels.
First Quantum's financial health has been under scrutiny, particularly after the Cobre Panama mine incident that led to more than half of its market value erosion, amounting to about C$10.3 billion. The company faces a crucial debt maturity of US$1.05 billion in early 2025. Fitch Ratings has warned of a potential covenant breach and default event if the Cobre Panama mine's situation remains unresolved.
On the other hand, Jiangxi Copper's potential acquisition aligns with China's broader strategy to secure significant stakes in resource-rich regions. This move could bolster their supply chains and reinforce their position in the global commodities market.
As the negotiations progress, First Quantum is expected to provide an update on its plan to meet debt obligations by the end of January. The outcome of these talks is eagerly anticipated by the industry, as it could significantly impact the dynamics of the copper market and the financial trajectory of one of its key players.
