First Quantum Minerals, Guelb Moghrein Mine, Mauritania
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PWYP-Canada’s Mini-Case Project Exploring Project Level ESTMA DATA In 2015, The Government of Canada enacted the Extractive Sector Transparency Measures Act. This Act requires that mining, oil and gas companies registered in Canada or listed on a Canadian stock exchange disclose annually the payments they make to governments in Canada and around the world. By June of 2017, over 400 companies had filed reports with NRCAN. With over 1200 publicly listed extractive companies operating in over 100 countries this game-changing disclosure has far reaching impacts. This case study and the others in this series explore project-level information disclosed by extractive companies. They seek to contextualize and further explain the company and the payments made in relation to one mine. They are a tool to promote and encourage the use of ESTMA data by journalists and civil society advocates. To access First Quantum Mineral Ltd.’s ESTMA report click here. About Publish What You Pay and Publish What You Pay Canada Publish What You Pay is the world’s leading coalition of civil society organizations united in the call for a more transparent and accountable extractive sector. With more than 800 members, a global secretariat and 40 national coalitions that span the globe, PWYP is committed to working together to ensure that citizens have a say over whether their resources are extracted, how they are extracted and how their revenues are spent. Publish What You Pay Canada is the Canadian coalition of the global PWYP network. Since its foundation in 2007, PWYP-Canada has been at the forefront of the national movement for transparency in the Canadian extractive sector, championing and driving forward the passage of legislation that requires that Canadian extractive companies disclose their payments to governments in Canada and across the globe. In addition, the coalition has worked to actively encourage and support the use of Canadian company information in global advocacy efforts. As part of its transparency promotion, PWYP Canada is calling for a publicly available centralized registry of the beneficial owners of all companies registered, listed, and operating in Canada, both provincially and federally. Author: Puneet Singh Copyright © 2018 IMPACT Transforming natural resource management (host organization of PWYP-Canada). All rights reserved. Reproduction in whole or in parts is permitted, provided that full credit is given to IMPACT and provided that any such reproduction, in whole or in parts, is not sold or incorporated in works that are sold. Written permission must be obtained from IMPACT if any such reproduction would adapt or modify the original content. PWYP-Canada’s Mini-Case Project Exploring Project Level ESTMA Data First Quantum 2016 Key Financial Highlights1,2 Minerals, Guelb Revenue $2,693,000,000 Net Income ($45,000,000) Moghrein Mine, Cash and Cash $365,000,000 Mauritania Equivalents Company Background Debt $5,061,000,000 Headquartered in Vancouver, First Annual Dividend $0.01/share Quantum Minerals (TSX: FM) is one of the Copper Produced 539,458 tonnes top copper producers in the world.3 The firm also produces gold, nickel, and zinc. Average Realized $2.26 per pound First Quantum currently operates six Copper Price mines including the Guelb Moghrein Mine Copper AISC/Cash $1.46/$1.06 per in Mauritania. First Quantum’s other Cost pound mines are located in Zambia, Australia, Turkey, and Spain.4 Page 1 – First Quantum Minerals Guelb Moghrein Mine, Mauritainia ***Note: all figures in USD unless otherwise noted PWYP-Canada’s Mini-Case Project Exploring Project Level ESTMA Data Corporate Structure FQM Finance Ltd. Mauritan Holidings First Quantum Mauritanian Copper (British Virgin Ltd. (British Virgin Minerals (Canada) Mines S.A. ("MCM") Islands) Islands) Mauritanian Copper Mines S.A. is the subsidiary that owns First Quantum’s Guelb Moghrein mine in Mauritania.5 This subsidiary links back to First Quantum Minerals (FQM) in Canada through two other corporations set up in the British Virgin Islands, a country that ranked 16th in the Tax Justice Network’s 2018 Financial Secrecy Index6 and offers a low tax regime, including no taxes on corporate income7. 2017 Outlook FQM indicates that its main focus is the development of its Cobre Panama asset. With the firm’s recent asset sale of Kevitsa in Finland, credit agencies have upgraded their view on the company (for example, S&P upgraded the outlook for the firm from negative to stable).8 First Quantum is continuing to develop Cobre Panama and looks to have the mine start operating in 2018.9 Cobre Panama’s project financing should close within the year.10 Guelb Moghrein Description Copper deposits close to the Akjoujt area of Mauritania, the site of the Guelb Morhrein Mine, were identified as early as 6000 BCE. The first company to mine at the site following Mauritania’s independence from France in the 1960’s was Anglo American, which had to close the mine in 1977 due to technical difficulties.11 Following mining law reform in Mauritania, a Mauritania chartered company (GEMAK) tried to develop the site in 1999 but failed to move beyond the completion of a feasibility study. 12 FQM bought 80 percent of the asset from GEMAK in 2004.13 Guelb Moghrein is located northeast of Mauritania’s capital city, Nouakchott.14 Commercial production commenced in April 200615. In 2016, the company estimated the remaining life of mine to be approximately six years, assuming a treatment rate of 4 million tonnes per annum (Mtpa) and considering all high and low grade stockpiles.16 The Government of Mauritania and FQM’s subsidiary in the country established a mining concession in 2006 and the concession was most recently renegotiated in 2009.17 The firm also was granted five other exploratory concessions in the area.18 In 2010 the firm purchased the remaining 20 percent of the asset to become its sole owner.19 The table below shows reserve estimates for the asset. Page 2 – First Quantum Minerals Guelb Moghrein Mine, Mauritainia ***Note: all figures in USD unless otherwise noted PWYP-Canada’s Mini-Case Project Exploring Project Level ESTMA Data Mineral Reserve Estimates as of December 31, 201520 Classification Volume Tonnes Copper Gold (Mbcm) (Mt) (%) (g/t) Pit Proven Reserve 3.40 12.70 0.81 0.63 Probable Reserve 2.30 8.60 0.89 0.80 Total 5.70 21.40 0.84 0.70 ROM Stockpile Proven Reserve 0.70 1.90 0.90 0.97 Probable Reserve - - - - Total 0.70 1.90 0.90 0.97 Reserve Without Proven Low Grade Reserve 4.10 14.70 0.82 0.68 Stockpiles Probable Reserve 2.30 8.60 0.89 0.80 Total 6.40 23.30 0.85 0.72 Low Grade Proven Stockpile Reserve 2.50 6.60 0.42 0.55 Probable Reserve - - - - Total 2.50 6.60 0.42 0.55 Reserve Including Proven High and Low Reserve 6.60 21.30 0.70 0.64 Grade Stockpiles Probable Reserve 2.30 8.60 0.89 0.80 Total 8.90 29.90 0.76 0.68 Page 3 – First Quantum Minerals Guelb Moghrein Mine, Mauritainia ***Note: all figures in USD unless otherwise noted PWYP-Canada’s Mini-Case Project Exploring Project Level ESTMA Data Mining in Mauritania The first mining code in Mauritania was established in 1977.21 Amendments to the code have been made over the years with the most recent being in 2008 and 2012.22 Amendments to the code in 2008 established that the state be allowed a 10 percent stake in any corporation holding an exploration permit at no cost.23 This 10 percent also cannot be diluted in the event of additional financing requirements.24 Under an amendment to the Mining Code in 2012, exploration permit areas must be reduced by 25 percent upon each renewal.25 The code also stipulates that capital gains tax be capped “at 10 percent for the transfer of any exploitation permit”.26 The firm’s concession agreement (2006) with the Government of Mauritania granted the company a tax holiday that ended on February 20, 2012.27 The company now operates under a corporate tax rate of 25 percent.28 The original concession agreement was renegotiated in 2009 and contained minor updates to the royalty regime to better align the agreement with updates to the mining code. The mining concession covers 81 square kilometers in Mauritania and lasts until 2042.29 A mining agreement was originally signed by Mauritania, Gemak S.A., and First Quantum in 2004.30 Upon acquisition of 80 percent of the asset in 2004, First Quantum set up its subsidiary, Mauritanian Copper Mines Limited (MCM) inside the country to manage the mine.31 As a result, the terms of the mining agreement were transferred to MCM in December 2004.32 The ownership structure in 2004 was as follows: First Quantum– 80 percent, Wadi Al Rawda and Gemak S.A.– 15 percent, and others five percent.33 Today as mentioned, First Quantum owns 100 percent of the asset. The firm is subject to a three percent royalty on copper sales and four percent on gold sales every quarter.34 Additionally, FQM must pay $0.75/tonne milled for all tonnes milled that exceed 11 million.35 In Mauritania almost all extractive industry revenues flow to the Treasury with little to no transfer of revenue money to the extractive areas or the communities affected.36 Labour Challenges First Quantum has dealt with two major strikes by workers at the Guelb Moghrein mine site in 201237 and 2014.38 Both strikes led to the suspension of operations at the site. Protests at the site in 2014 turned violent as a clash between security and demonstrators left one person dead.39 The strikes were carried out, according to workers at the mine, due to unfair pay and working conditions.40 Page 4 – First Quantum Minerals Guelb Moghrein Mine, Mauritainia ***Note: all figures in USD unless otherwise noted PWYP-Canada’s Mini-Case Project Exploring Project Level ESTMA Data Payments as per ESTMA Report According to the Extractive Sector Transparency Measures Act report, FQM made $12,160,000 in total payments last year related to their Mauritanian asset.41 Payments in the form of taxes and royalties were made to various governmental institutions in Mauritania.