First Quantum cuts stake in Mopani

Vancouver A restructured deal has First Quantum Minerals (FM-T) reducing its interest in Zambia’s Mopani Copper Mines to 16.9% from the original 44%.

The company intends to dilute its interest in Carlisa, which holds a 90% stake in Mopani, to 18.8% from 49%. In return, partner Swiss-based Glencore will release First Quantum from its obligation to repay a total of US$21.84 million. Mopani comprises Nkana and Mufulira copper and cobalt mines and accounts roughly for 30 percent of Zambia’s metals production. It was bought by the First Quantum-Glencore consortium in March 2000 as part of a mine privatization plan.

"Our new arrangement at Mopani will allow us to focus our resources on the development of our entire project portfolio in Zambia, while leaving us with the flexibility to consider new opportunities that may become available in the near term," says First Quantum’s Chief Executive Officer, Philip Pascall.

Despite the dilution, management is firmly committed to ramping up production at its other operations.

"An expansion is currently underway at our 100% owned Bwana Mkubwa mine, which will see copper production increase three-fold in 2003," adds Pascall. "In late 2002, subject to certain conditions, we expect to make a commitment to proceed with our 80% owned Kansanshi copper deposit located near Solwezi."

Hosting an open pit mineral resource of 267 million tonnes grading 1.28% copper and 0.16 gram gold per tonne gold, First Quantum acquired its 80% stake in the property from Cyprus Amax, a wholly-owned subsidiary of Phelps Dodge (PD-N), by paying US$50,000, assuming US$27.45 million in gross debt — US$25 million net of cash — and issuing 1.4 million shares. Thirty days after commercial production begins, the junior producer must also pay US$25 million less the market value at the time of 1.4 million of its shares. Government held Zambian Consolidated Copper Mines (ZCCM) holds the remaining 20% interest

With US$25 million already spent on exploration and development of Kananshi, First Quantum has launched a bankable feasibility study, which will consider the potential development of a large-scale open pit mine capable of producing 75,000 tonnes of copper per year.

Based on 100,900 metres of drilling, the pit-contained resources for the deposit comes in at 77.9 million tonnes grading 1.58% copper in the measured category, 126.2 million tonnes grading 1.18% copper in the indicated category and nearly 63 million tonnes averaging 1.11% copper in the inferred class.

Lying in the northwestern portion of the country some 15-km north of the town of Solwezi and 16-km south of the Democratic Republic of Congo border, Kansanshi is one of the oldest known mines in Zambia. Since the discovery of ancient workings in 1899, the deposit has been intermittently mined for high-grade copper from both underground and open pit. The total production from the Kansanshi deposit to date is approximately 80,000 tonnes of copper.

In January 1997, as part of the privatization of ZCCM, Cyprus Amax Minerals entered into an agreement with ZCCM and the Government of the Republic of Zambia to secure majority ownership of the Kansanshi project. This agreement was finalized on March 14, 1997. Cyprus Amax, which was subsequently acquired by Phelps Dodge, completed over 80,000 metres of drilling and produced a preliminary feasibility study in April 2000.

Copper mineralization on the property occurs both in steeply dipping, generally north-south trending quartz-carbonate veins and as essentially flat lying, bedding controlled stratabound mineralization, within altered phyllitic rocks. The deposit has been defined in two areas, the Main zone and the Northwest zone. Supergene enrichment and subsequent oxidation of the original sulphide mineralization has produced oxide, mixed and hypogene ore types.

"We remain a committed long term investor in Zambia," says Pascall, "and we believe that the development of new low cost copper deposits will play an increasingly important role in the future of Zambia’s copper industry.”