Canada’s First Quantum Minerals Ltd has confirmed it was in talks with China-based Jiangxi Copper Co Ltd for a potential sale of a minority interest in its Zambian copper assets.
The company, however, said it had no knowledge of any potential takeover bids.
The shares were down about 12% in afternoon trading.
First Quantum’s shares had gained about 20% since Thursday after Bloomberg reported, citing sources, that the Canadian miner had attracted preliminary buyout interest and was working with advisers to weigh options.
The company has been embroiled in a dispute with the Zambian government after being handed a $5.8 billion bill for unpaid import duties last year.
The Zambian government’s decision to appoint a provisional liquidator to run Vedanta Resources’ Konkola Copper Mines, claiming license breach, has added to concerns for international miners such as First Quantum.
A Jiangxi Copper source said the company had recently bought a stake of almost 10% in First Quantum on the secondary market, below the threshold for disclosure for Toronto-listed companies.
Jiangxi did not respond to a request for comment.
A minority stake in First Quantum’s Zambian assets – Kansanshi and Sentinel – could fetch about $2 billion, according to Scotiabank analysts.
They said a deal would enable the company to repay debt at the same time production at its massive Cobre Panama copper mine gears up.
“In our view, a transaction that simultaneously reduced the company’s African exposure while improving the balance sheet via a cash infusion would be positively received by investors,” Scotiabank analyst Orest Wowkodaw said in a research note.
First Quantum’s net debt stood at about $7.3 billion at the end of the second quarter, according to Jefferies.
“From a strategic perspective, now is a good time to acquire copper assets as the copper price remains low and the implied value of assets in copper mining equities is depressed,” Jefferies analyst Christopher LaFemina told clients.
First Quantum produced 605,853 tonnes of copper in 2018, with the Kansanshi