First Quantum Said to Dispute in Zambia Delaying Mine

First Quantum Minerals Ltd. (FM) ended a dispute with Zambia’s electricity supply company to erect a line to supply power to a $1.7 billion copper project the company is building, a person familiar with the matter said.

Zesco Ltd., the government-owned power supplier, proposed that First Quantum build the line and that proposal has been accepted by the company, the person said, asking not to be identified because an official announcement is yet to be made. The disagreement began on April 23, when the Vancouver-based company took the electricity supplier to arbitration because of a dispute over selecting contractors after a tender for the construction of a transmission line, First Quantum said May 6.

The accord will prevent delays to the Sentinel mine First Quantum is building in the North Western province in Zambia, Africa’s biggest copper producer. It will allow a local First Quantum unit to award the construction contract for the power line that will cost about $95 million, while Zesco will hire a consultant to oversee works, the person said yesterday.

“The potential for a prolonged legal dispute between First Quantum and Zesco was a growing concern as it presented a risk the Sentinel project could fall behind schedule,” Patrick Jones, a London-based analyst with Nomura International Plc, said in reply to e-mailed questions. “A resolution of this will likely be taken well by the market.”

Calls to First Quantum’s office in Toronto outside normal office hours weren’t answered and an e-mail wasn’t immediately responded to. Bestty Phiri, a spokeswoman for Zesco, declined to comment.

The 615-kilometer (382-mile) power line will run from Lusaka West via Mumbwa and Kalumbila to Lumwana, where Barrick Gold Corp. (ABX) owns a mine. Kalumbila will be complete by the end of next year and will produce as much as 300,000 tons of copper, First Quantum said in December.

To contact the reporter on this story: Matthew Hill in Lusaka at mhill58@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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