First Quantum talks possible sale of Zambian assets

First Quantum Minerals Ltd. (FM-TSX) is in talks to sell a stake in its Zambian copper mines to Chinese state-owned Jiangxi Copper Corp., according to published reports which said First Quantum is aiming to bolster its finances.

The Reuters report which was published in a Scotiabank morning newsletter, comes amid news that Barrick Gold Corp. [ABX-TSX, GOLD-NYSE] has spoken with some of First Quantum’s major investors to gauge their support for a potential takeover.

First Quantum was recently left reeling after Panama’s top court ruled that the operating contract for the company’s flagship Cobre Panama copper-gold mine is unconstitutional.

The court ruling, which followed protests against the contract has plunged the open pit mine into months of uncertainty and impacts First Quantum’s partner Franco Nevada Mining Corp. [FNV-TSX, NYSE], which recently revised its production targets following the curtailment of operations at Cobre Panama and the risk of further disruptions at the mine site.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania.

Cobre Panama is First Quantum’s flagship operation. It is a huge open-pit copper project located in the Panama jungle, about 120 kilometres west of Panama City and ranks as First Quantum’s key asset.

In Zambia, First Quantum wholly owns the Sentinel mine and 80% of the Kansanshi mine, with the balance owned by the Zambian government. Jiangxi, First Quantum’s top shareholder, could end up buying one of the two mines or a stake in one of them, sources have told Reuters news service.

Talk of a possible deal has emerged one year ahead of the $1.05 billion in First Quantum debt that comes up for maturity in early 2025. The two Zambian mines together generated $943 million in revenue in the quarter ended September, 2023, and $210 million in operating profit according to company filings.

It is worth noting that First Quantum and Jiangxi held similar talks over the Zambian mines in 2019. Those talks resulted in Jiangxi picking up a significant minority stake in the company instead of stakes in the two mines.

Meanwhile, on Friday, First Quantum shares eased 2.2% or 29 cents to $12.76 on volume of 1.07 million. The shares are currently trading in a 52-week range of $39.13 and $9.31.

Published reports say it is not immediately clear if First Quantum shareholders have received a fresh approach from Barrick Gold following talks that occurred late last year. Barrick has been seeking to expand in copper and a deal with First Quantum would transform the company into one of the world’s biggest producers.