First Quantum inks $500 million copper deal with Jiangxi amid Panama mine struggles

First Quantum Minerals (TSX: FM) said on Wednesday it would get a $500-million shot in the arm from Jiangxi Copper, the Canadian miner’s largest shareholder, that will help it to shore up finances.

The three-year, prepay arrangement with Jiangxi will see First Quantum deliver 50,000 tonnes of copper anode per year to the Chinese miner. The material will be extracted at the Kansanshi mine in Zambia and is payable at market prices, the company said.

“This arrangement is a reminder of the strategic nature of copper as supply challenges abound across the sector, First Quantum said in a statement. “Constructive discussions with our lenders for an amendment and extension of our loan facilities, which are an important component to our fulsome solution, are well-advanced and there is a high degree of alignment among all parties.”

The company, which was forced to shut down in December its flagship copper mine in Panama, has quickly seen its financial situation deteriorate. Its exposure to nickel, which prices have dropped to two-year lows, has added extra pressure.

Together with reporting a net loss for the fourth quarter, First Quantum recorded an impairment charge of $900 million, which includes $854 million at its Ravensthorpe nickel mine, due to significant margin pressure triggered by the battery metal’s weak prices and high operating costs.

First Quantum has billions of dollars of debt maturing in the coming years and concerns about the future of Cobre Panama, its main source of income, has put it at risk of a covenant breach in the coming year. This has resulted in “material uncertainty” that may cast doubt on the company’s “ability to continue,” the miner said.

The Vancouver-based company noted it is in talks with lenders to amend and extend its loan facilities, and expects a conclusion “in the near term.” 

The miner holds out hope the May Presidential elections in Panama may bring a change in fortune for its halted operation, one of the world’s largest new copper mines to open in the past decade.

First Quantum is also considering a minority investment from strategic investors in its Zambian business, and is running a sales process for its small Las Cruces mine in Spain, chief executive Tristan Pascall said in a Wednesday call conference to discuss fourth quarter results.

The company is the sole owner of the Sentinel copper mine and has a 80% stake in the Kansanshi mine. Its presence in Zambia, Africa’s second-largest copper producer, includes the Fishtie copper project, near the border with the Democratic Republic of Congo. It also comprises two licence options through a deal with African Pioneer (LON: AFP).