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Congo Court Threatens First Quantum Copper Claim (Update2)
May 24,2010 10:21CST
industry news

May 23 (Bloomberg) -- First Quantum Minerals Ltd., Canada's second-largest copper producer, may see its rights to two copper projects in the Democratic Republic of Congo revoked after the country's Supreme Court ruled in favor of a state-owned rival.

The court notified First Quantum on May 21 that it supported a claim by state-owned Societe de Developpement Industriel et Minier du Congo, or Sodimico, that the permits to the Lonshi and Frontier mining sites were illegally awarded to First Quantum subsidiaries, Alexis Mikandji, chief of staff for Congo's Mines Minister, said by phone late yesterday in Lubumbashi, the capital of Katanga province.

"The Supreme Court cancelled the decision of a letter from 2000 by the minister of mines that allowed First Quantum to have the deposits," Mikandji said. "If it's cancelled, that triggers the process of the revocation of the title."

First Quantum, which was notified of the decision late Friday, has "no intention of stopping production," country manager Mike Parker said in an interview. The company "will vigorously defend its rights," he said.

First Quantum's subsidiaries obtained the deposits in 2000 and 2001 "on grounds that were verified as available by the mines minister of Congo," Parker said. "The titles were reconfirmed as valid in the transfer to the new mining code in 2002 and 2003."

Question of Guarantee

The company's low-grade, high-tonnage Frontier mine was Congo's biggest source of copper last year, producing 94,000 tons of the metal. The company paid $55 million in taxes to the Congolese authorities, Parker said.

"Should this ruling be upheld, what guarantee of land tenure is there in Congo," he said.

First Quantum expects the Frontier site to produce 90,000 to 100,000 tons of copper this year and has invested $300 million in the project, Parker said. The Congolese state holds a 5 percent stake in the site.

The company is also trying to defend mining rights at its Kinganyambo Musonoi Tailings Sarl project, which was cancelled by the government in August. First Quantum, which has invested more than $700 million in buying and developing the site, brought the case to the International Chamber of Commerce's International Court of Arbitration in Paris on Feb. 1.

"I think it would be naïve not to see the link between the KMT arbitration and the current cases that are on the go in DRC against First Quantum entities," Parker said in a separate interview yesterday.

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