Bloomberg News

First Quantum Says It Won’t Sell Congo Copper Plant to ENRC

July 06, 2011

(Updates with comment from ex-ENRC director in fifth paragraph.)

July 6 (Bloomberg) -- First Quantum Minerals Ltd., the copper miner that lost Congo mining rights to Eurasian Natural Resources Corp., said it won’t sell a processing plant in the country to ENRC because it still expects to restore its license.

First Quantum is “focused” on pursuing its “rights” to the Kolwezi project “through legal action against ENRC and any redress must take into account the full extent of the loss that has been suffered,” First Quantum President Clive Newall said in an e-mail today. “To suggest that the issue of the plant can somehow be dealt with separately outside the framework of a full and fair settlement is completely disingenuous.”

The Democratic Republic of Congo shuttered the $750 million Kolwezi copper venture and revoked First Quantum’s license in August 2009, saying the Vancouver-based miner hadn’t fulfilled its contractual obligations, a claim the company denied. First Quantum entered international arbitration with the government and sued ENRC units after the license was transferred the following year.

ENRC’s acting Chief Executive Officer Felix Vulis said July 4 that the Kazakh ferroalloy producer may build its own plant at the Kolwezi project as First Quantum hadn’t responded to several approaches regarding the existing plant. That facility had been nearing completion before First Quantum’s license was canceled.

Copper Prices

When it purchased the Kolwezi concession, ENRC expected that it would either complete work on the plant itself or that First Quantum would do so and sell the operation to ENRC, Richard Sykes, a former senior independent director at ENRC, said in a June 29 telephone interview.

Congo, which confiscated the plant last year, should ensure that it becomes productive to take advantage of higher copper prices, Sykes said.

“By the beginning of 2011, this should’ve been sorted,” he said.

Congo is still awaiting the result of the arbitration bewteen First Quantum and ENRC in Paris, Mines Minister Martin Kabwelulu said in an SMS text message today. Telephone calls made by Bloomberg News to the office managing the liquidation of First Quantum’s assets weren’t answered.

Sykes and another ENRC independent director, Ken Olisa, were ousted from the board in June. Olisa said in a July 1 interview that ENRC’s Kolwezi purchase exacerbated friction between the board and its main shareholders, Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev, who founded the company.

While it was an “ethical transaction,” ENRC could have better communicated the circumstances of the deal in the face of media criticism that the process wasn’t transparent, Olisa said. Paul Judge, another independent director, voted against the deal, saying it may harm ENRC’s reputation, Olisa said.

--Editors: Simon Casey, Tina Davis

To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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