Zambia's Lungu Orders Case Against First Quantum Be Droppedby and
London arbitration case will continue as state sees swift end
First Quantum letter to attorney-general ‘unnecessary’
Zambian President Edgar Lungu told the state investment company to drop its fraud case against the country’s biggest copper producer and some of its directors, his spokesman said. Arbitration over the matter will continue in London.
First Quantum Minerals Ltd., based in Vancouver, had written to Zambia’s attorney-general expressing fears that directors named in the case could be arrested if they enter Zambia, where it produced more than 70 percent of its copper last year, and asked him to intervene. ZCCM Investments Holdings, which has a 20 percent stake in First Quantum’s flagship Kansanshi mine, also started arbitration proceedings against the company in London last year.
“The instruction is firstly to reach an amicable settlement,” Amos Chanda, Lungu’s spokesman, said by phone late Tuesday. “The settlement presupposes that the arbitration case in London will continue but these other actions that have been started here in Lusaka, they have to stop.”
First Quantum’s shares rose as much as 3.2 percent in Toronto, the most since April 28, and traded at C$11.90 by 11:04 a.m., giving the company a market value of C$8.2 billion.
First Quantum declined to comment, and ZCCM-IH didn’t immediately respond to a request for comment.
Lungu asked Finance Minister Felix Mutati to oversee the dispute between First Quantum and ZCCM-IH a month ago, Chanda said.
“We foresee a swift settlement of this matter,” he said. The letter Matt Pascall, First Quantum’s operations director, wrote to the attorney-general on April 21 was “totally unnecessary,” he said.
In the Lusaka High Court case and the London arbitration, ZCCM-IH argues First Quantum took out a loan from Kansanshi at non-commercial interest rates and used it for company operations outside Zambia, disadvantaging ZCCM-IH as a 20 percent shareholder in the mine. First Quantum denies this.
First Quantum has had a rocky relationship with the government in Zambia, Africa’s second-biggest copper producer. The company said it suspended $1 billion worth of investment in 2015 because of uncertainty about tax rates. In 2008, it started arbitration proceedings because of tax changes at Kansanshi, and agreed to temporarily halt those in 2013.
The company plans to spend $350 million to upgrade the Kansanshi mine and at least $700 million to build a second smelter, having already invested almost $4 billion in the country, Pascall said in the letter.