Exclusive-First Quantum execs discuss investment, disputed copper with Chinese officials

By Thomson Reuters Mar 27, 2024 | 9:09 AM

By Julian Luk and Divya Rajagopal

LONDON/TORONTO (Reuters) – Executives from Canadian miner First Quantum Minerals met with Chinese government officials last week to discuss funding and business options involving top investor Jiangxi Copper Co, three sources with knowledge of the matter said.

The talks in Jiangxi province included topics such as the potential for state-run Jiangxi Copper, China’s leading producer, to gain influence on First Quantum’s board decisions, two of the sources said. Also discussed was the future of First Quantum’s Zambian assets and the prospect of Jiangxi buying its disputed copper concentrates inventory from Panama, they said.

Since November last year, Jiangxi has invested about $745 million in First Quantum through debt, equity and a prepayment copper deal. Still, despite being one of the biggest shareholders, Jiangxi does not have any say in board decisions.

Under a standstill agreement, Jiangxi is prevented from buying more than a 20% equity stake in First Quantum. It currently holds 18.4%.

It was not clear whether there would be further new investments after the meeting, one of the sources said.

First Quantum declined to comment, while Jiangxi Copper did not respond to queries from Reuters by email or phone.

Relations between Jiangxi and First Quantum have been volatile since 2019, when the Chinese miner invested $1 billion, fuelling speculation it was preparing for a hostile takeover.

However, Jiangxi was a firm supporter during recent turbulence for the Canadian company, buying bonds and shares over the past four months.

“By far they (Jiangxi) have been the most useful partner for the company,” said an official aware of First Quantum’s operations.

First Quantum has shed some C$8 billion or $5.89 billion in market capital since Panama’s government ordered the shutdown of the Cobre Panama mine late last year following sustained local protests.

The sudden closure order of Cobre Panama, accounting for 40% of First Quantum’s revenue, dealt a blow to investor confidence and led to a cut in its debt rating.

First Quantum announced measures in February that included offering $1 billion worth of common shares and a copper pre-payment agreement with Jiangxi worth $500 million. Jiangxi also purchased $212 million of First Quantum shares earlier in March.

First Quantum has been negotiating with the Panama government for a resolution of the dispute. One of the discussions has centred on selling copper concentrate to pay for care and maintenance of the disputed mine.

Jiangxi Copper accounted for one-fifth of China’s total production last year and is one of the world’s top buyers of mined copper raw material and, like other copper smelters, it faces an acute shortage of feedstock.

Reuters reported earlier Jiangxi Copper was in talks to acquire a stake in First Quantum’s Kansanshi mine in Zambia.

($1 = 1.3562 Canadian dollars)

(Reporting by Julian Luk; Divya Rajagopal; Editing by Veronica Brown and Bernadette Baum)