DRC stays chilly towards First Quantum

First Quantum Minerals’ (FM-T) run of bad news from the Democratic Republic of the Congo continues.

The company must now pay $6 million in damages to three parties that it had filed lawsuits against.

First Quantum filed suit against the government, state-run miner Gecamines and the mining regulatory agency after its permit for the Kolwezi project was stripped.

Thus far, the mining contract review that was responsible for the company losing the project, has only ruled against First Quantum.

All other mining contracts were ultimately upheld, with Freeport McMoran (FCX-N) and Lundin Mining (LUN-T) still waiting for a ruling on its massive Tenke Fungurume copper project.

In all the government review looked at 61 mining deals to ensure their terms were indeed acceptable to the government. The concern was that deals signed shortly after the 1998 – 2002 war didn’t secure enough revenue for the government.

Reuter’s reports that it has seen the court ruling and that it uphold the government’s cancellation of the project and orders First Quantum to pay damages for filing the cases.

First Quantum can still take its dispute to a court of international arbitration and last month it stated its intention to do so.

The exploitation permit for Kolwezi had been held 65% by First Quantum, 12.5% by Gecamines, 10% by the Industrial Development Corporation of South Africa (IDC), 7.5% by International Finance Corporation (IFC) and 5% by the government of the DRC.

Back in September, shortly after the government ordered the site shut down, First Quantum laid out its case for the illegality of the move.

It argued, among other things, that the General Prosecutor – who issued the sealing of the site – was not authorized to do so.

First Quantum said that two of its partners in the project – the IFC and the IDC – also believed the government’s actions have no legal basis.

The project was roughly 65% complete at the time of the shut down, and was slated to start commissioning in May of next year.

Initial production rates were expected to be 35,000 tonnes copper and 7,000 tonnes cobalt per year, rising to 70,000 tonnes copper and 14,000 tonnes cobalt within 2 years.

In Toronto on Oct. 30 – the day the news was released – the company’s shares were off $1.73 to $74.02 on 656,000 shares traded.