First Quantum options large Peru copper project

First Quantum Minerals Ltd. (FM-TSX) has entered into a joint venture agreement with Rio Tinto Plc [RIO-NYSE] that would allow the company to earn a 55% stake in the giant La Granja Cu project in northern Peru.

La Granga is one of the world’s largest undeveloped copper projects, containing a very large and relatively high grade inferred resource of 4.31 billion tonnes of grade 0.51% copper. Under the agreement, First Quantum will pay $105 million in cash and invest $546 million of the initial project capital (the remaining capex will be shared pro-rate on a 55%-45% basis).

Project work over the next several years is largely study based, requiring on modest capital spending. It is speculated that the development of the company’s Taca Taca copper project in Argentina is likely to move forward first (sometime after 2024) pending sufficient balance sheet deleveraging and an acceptable investment climate.

News of the La Granja joint venture came after the close of trading of trading on March 31, 2023, when First Quantum shares rose 2.50% or 75 cents to $30.75. The shares are currently trading in a 52-week range of $45.38 and $18.67.

The announcement comes after First Quantum recently settled a tax and payments dispute with the Government of Panama, related to its Cobre Panama mine.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania. The company’s portfolio of assets includes the Kansanshi mine in Zambia, which ranks as the largest copper mine in Africa.

Cobre Panama is First Quantum’s flagship operation. It is a huge open-pit copper project located in the Panama jungle, about 120 kilometres west of Panama City and ranks as First Quantum’s key asset.

Cobre Panama contributes to approximately 5.0% of Panama’s GDP, makes up 75% of the country’s export goods and has created at least 40,000 jobs, directly and indirectly, that supports an estimated 100,000 or more Panamanians.

First Quantum CEO Tristan Pascall said La Granja has the potential to be a Tier 1 copper mine. The project is located in the district of Querocoto in the northern region of Cajamarca, Peru, approximately 90 kilometres northeast of Chiclayo, the capital of the Lambayeque region, at an altitude of between 2,000 and 2,800 metres.

“Rio Tinto has operated the project since 2006, carrying out an extensive drill program that has significantly expanded the resource and has managed a world class community relations program that has ensured strong local support for the project,’’ First Quantum said in a press release.

First Quantum will acquire a majority stake in the project and will undertake a feasibility study and possible further development of what that the potential to be a large, long-life operation, it said.