First Quantum Minerals may be out of luck in the DRC

A mining official in the Democratic Republic of Congo has stamped out any lingering hopes First Quantum Minerals (FM-T) may have had that it could bring its Kolwezi tailings project in the central African nation into production.

Deputy mines minister Victor Kasongo told a reporter at Bloomberg news agency in Kinshasa that the government’s decision last month to cancel the mining contract was final. “Regarding KMT, it’s over,” Kasongo was quoted as saying. “The government has taken a decision and that’s that.”

According to the news agency, First Quantum was unwilling to alter its contract to suit the wishes of the DRC during its review of 61 mining contracts.

Sharon Loung, investor relations for First Quantum in Toronto, was reluctant to comment on the Sept. 14 news report. But she did say that “arbitration is still a right under our contract.”

First Quantum Minerals owns 65% of the Kolwezi project while Gecamines holds 12.5%, the Industrial Development Corporation of South Africa holds 10%; the International Finance Corporation 7.5% and the DRC government 5%.

Kolwezi, about 300 km northwest of Lubumbashi in Katanga province, consists of stockpiled flotation tailings left over from past producing mines dating as far back as the early 1950s. Poor recoveries from previous conventional concentrating techniques resulted in two tailings dams (Kingamyambo and Musonoi) that today remain full of very valuable metal. The company planned on using high pressure water guns or monitors to extract the metal.

The lucrative project contains about 112.8 million tonnes grading 0.32% cobalt and 1.49% copper, equivalent to 361,000 tonnes of contained cobalt and 1.7 million tonnes of contained copper. (About 97% of the reserve is in the proven category.)

As recently as December 2008, First Quantum estimated that the project would likely operate from 2010 until 2032.

At presstime First Quantum was trading at $74.84 – near the very top of its 52-week trading range of $12.75-$77.07per share.

The company has 78.37 million shares outstanding.