First Quantum: A Move to Legitimize African Mining

| About: First Quantum (FQVLF)
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By Andrew Willis

First Quantum Minerals (OTCPK:FQVLF) spent $260 million (U.S.) on Monday to change the way investors view the African mining play.

A copper and gold play, First Quantum owns a number of properties in Democratic Republic of Congo. And the Congo is a challenging jurisdiction for mining companies, in a continent filled with challenges. Heavy exposure to this country, and its unpredictable politics, translates into a weak stock market valuation.

However, First Quantum also has mines in Zambia, a country with a far more stable track record when it comes to dealing with resource companies. On Monday, the Vancouver-based company boosted its holdings in Zambia with a cash-and-shares bid for London-based Kiwara PLC, which is listed on the London Stock Exchange’s AIM subsidiary. The bid came at a 41% premium to where Kirawa shares were trading, and is supported by 76% of the company’s shareholders.

Kiwara owns a copper property that is expected to be developed as an open pit mine in the same region as existing First Quantum mines, along with nickel and uranium properties.

“The offer for Kiwara fits with First Quantum’s strategy of acquiring advanced projects and adds growth potential to the copper business outside of the Democratic Republic of Congo,” said a report Monday from London-based BMO Nesbitt Burns analyst David Radclyffe. “In addition, the prospective Kawako nickel project fits with First Quantum’s emerging nickel business.”

On the advisory front, First Quantum used law firm McCarthy Tetrault, and didn’t hire investment bankers. The Canadian content for Kiwara came from law firm Fasken Martineau, while its financial advisor was London-based FinnCap.