First Quantum Minerals suspended construction at the Kolwezi tailings project in the Democratic Republic of the Congo (DRC) as of September 16, 2009, following issuance of an order by the General Prosecutor of Katanga to seal the facilities of Kingamyambo Musonoi Tailings SARL (KMT). KMT holds the exploitation permit for the Kolwezi project under a Contract of Association and is owned 65% by First Quantum; 12.5% by Gecamines; 10% by Industrial Development Corp. of South Africa; 7.5% by the International Finance Corporation; and 5% by the government of the DRC.
The government action was apparently related to its mining-contract revisitation process and a letter sent to First Quantum in August that, First Quantum stated, purported to try to establish the basis on which the Kolwezi project may be cancelled. However, First Quantum said, its lawyers had advised it that the General Prosecutor’s order is illegal because: 1) the General Prosecutor is not allowed to order such measures, especially without a court order; 2) the order referred to the “spirit” of the letter of the General Attorney of August 21, 2009, as its basis, which is not a proper legal basis, especially as the Attorney General’s letter did not provide for such actions; and 3) sealing is usually associated with financial matters, like non-payment of taxes, which was not the case with KMT.
First Quantum said it had filed notices of force majeure. The company also said that it was preparing to file for international arbitration pursuant to the Contract of Association but that it would continue to seek an alternative solution to the claims that resulted from the contract revisitation process and would provide further updates as warranted.
Construction of the Kolwezi project is about 65% complete, and the project was on schedule to start commissioning in May 2010. Initial production rates were expected to be 35,000 mt/y of copper and 7,000 mt/y of cobalt, rising to 70,000 mt/y of copper and 14,000 mt/y of cobalt within two years.