First Quantum rubbishes Zambian arbitration claims

VANCOUVER (miningweekly.com) – Base metals miner First Quantum Minerals on Wednesday rubbished two claims by Zambia government-owned ZCCM International Holdings (ZCCM), filed days apart, which seek to recover money involved in transactions between First Quantum and certain subsidiaries.

ZCCM is a 20% shareholder in the Kansanshi Mining PLC (KMP) and, on October 27, filed a notice of arbitration against KMP and Kansanshi Holdings, the 80% shareholder of KMP.

On October 28, KMP also received a statement of claim filed in the Zambia High Court naming more defendants, including First Quantum, its subsidiary FQM Finance, and a number of directors of the named corporate defendants and First Quantum president Clive Newall.

According to a statement issued by First Quantum, this dispute arises out of the rate of interest paid on deposits made by KMP with the company's financing entity, FQM Finance. The company explained that the funds on deposits were retained for planned investment by KMP in Zambia.

FQM Finance paid interest on the deposits to KMP based on an assessment of an arms-length fair market rate, which is supported by independent third party analysis, according to First Quantum. ZCCM asserts that the interest rate paid to KMP on the deposits is insufficient.

First Quantum lamented ZCCM’s “extraordinary additional step” of commencing with further action in the Zambia High Court, making allegations repeated from the notice of claim against certain First Quantum directors and Newall, labelling the suit as “inflammatory, vexatious and untrue”.

“Having carefully studied the claims made in both the notice of arbitration and statement of claim, First Quantum is firmly of the view that the claims are utterly without merit, or indeed any foundation in facts,” it stated.

To the contrary, First Quantum noted that the KMP deposits were fully repaid to KMP and were then used to fund a major investment programme in Zambia, including the construction and commissioning of the Kansanshi smelter and expansion of the processing plant and mining operations. “In fact, KMP is now indebted to FQM Finance for the funding of further investment in Zambia,” First Quantum stressed.

The company noted that it was currently engaged in “constructive” discussions with representatives of the Zambian government, which holds a 92% direct and indirect majority shareholding in ZCCM, with a view of achieving an amicable resolution.