good news for f q, bhp,the congo etc

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    With First Quantum as Anvils major shareholder and a price target of $7.50 CDN ahead,it is exploring in the Congo and is linking up with BHP. Golden Stars shareprice is over $3 CDN and travelling well-AVL owns a swag of these. With the recent rumblings from Miningnut and NT re a imminent AVL price hike and their coy mumblings of something big about to happen we should watch this little tiddler with outstanding management. I do recall AVL also have had chats with the likes of BHP and the W B in the past so who knows--keep watching although I am sure you will all be informed of any possible positive events re this stock!

    First Quantum widens Zambian net

    By: Nicole Mordant

    Posted: 2003/05/26 Mon 14:47 PDT | © Mineweb 1997-2003

    VANCOUVER – While mining heavyweights Anglo American and Avmin have beaten a hasty retreat from the Zambian copperbelt, aspiring Canadian mid-tier producer First Quantum (TSX: FM | LSE: FQM) continues to grow its copper operations in the southern African country and has just won more concrete backing from BHP Billiton.
    First Quantum announced last week that BHP will spend $2.4 million over the next four years to earn a 51% stake in a joint exploration venture in the north-west corner of the copperbelt. BHP and First Quantum have been poking around the area for the past two years doing some very early stage exploration but this is a far bigger financial commitment from the world’s biggest resources company in the Mwinilunga project and a sign that it is hopeful of a discovery.

    “There is a reasonable chance of identifying several good targets,” First Quantum chairman and chief executive Philip Pascall told Mineweb, a refreshingly un-hyped statement for a Vancouver-based resources company. He does add, though, that it is common knowledge that BHP would only be interested in “pretty huge” projects. The Mwinilunga area in the largely unexplored western section of the copperbelt is virgin territory to modern exploration techniques and last saw some active work in the 1970s.

    The joint venture will spend just over a $1m in the first year on drill testing and using BHP’s airborne geophysical system over the land, which was originally acquired from Cypress Amax after its takeover by Phelps-Dodge. First Quantum is also exploring for copper around its Lonshi deposit in neighbouring Democratic Republic of the Congo where there have been hints of a possibly exciting find. But management remains consistently coy, adopting what Pascall calls the “oil industry approach”. “We won’t announce anything until we have more detailed results,” he says.

    First Quantum has had a busy May month. On top of the usual quarterlies, annual report and annual general meeting, the BHP announcement came hot on the heels of the closure of $6m in debt funding for Lonshi. The Canadian company, whose projects are 100% located in Africa, is replacing its contractor to do its own mining in future and will use the finance to buy mining equipment. Pascall reckons that a do-it-yourself approach could save First Quantum about a third in mining costs at Lonshi. As an example of where cost-savings will come from, Pascall says that First Quantum can ferry six loads of ore across the border to its Bwana Mkubwa processing facility 36km to the northwest in Zambia in the time it takes the contractor to transport 3.5 loads. First Quantum has taken over several select employees from the contractor to smooth the transition.

    Debt versus equity
    Shareholders at this year’s AGM seemed relatively pleased with the 36% rise in their stock this year, which is not all that far from its all time high of C$5.80.

    Other than the fact that the company is starting to produce positive free cashflows, one of the selling points of this stock is the relative frugality with which it has issued shares. In a junior mining industry where shareholder dilution is the norm rather than the exception, First Quantum has been successful at raising debt, albeit mostly project finance, for its capital projects. Three European-based banks have stumped up funding for the $163 million construction of a mine at First Quantum’s 80%-owned Kansanshi deposit in Zambia, where production is due to begin late next year. All financing for the low-cost, 125,000 tonne-a-year mine should be in the bag by the end of June, somewhat later than expected after the various tranches took some time to put together. Pascall reckons First Quantum’s success at raising finance has a lot to do with Zambia’s relative political stability and liberties, such as regular elections and a free press. “Zambia is a priority for EU support; it is in a region where it is important to the world to have someone grow and develop.”

    First Quantum on Friday reported earnings of $7,459 or $0.00 per share for the first three months of this year. This compares with a loss of $4.5 million or negative $0.10 a share in the first quarter of 2002. Copper revenues increased 130% to $6.8 million following the expansion of production at Bwana Mkubwa. Operations produced cash flow of $1.6 million compared with a deficit of $4 million a year ago. Cash costs were 44 cents per lb, although First Quantum is forecasting a drop to 35 cents for the full year.

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