Copper giant First Quantum acquires 15pc of Zambian explorer Prospect Resources

First Quantum Minerals will snare a 15pc stake in Zambian copper explorer Prospect Resources and one of the most exciting undeveloped deposits.

Zambian copper explorer Prospect has received a major boost via a $15.2m investment from neighbouring giant First Quantum Minerals. Pic: Getty Images

• Copper explorer Prospect Resources to soar with $15.2m investment from $15bn copper giant First Quantum Minerals

• 15c share issue priced at 36% premium, with as much as $18.5m to be raised in total

• First Quantum produces ~400,000tpa of copper in Zambia, a hotspot for the metal

Special Report: Prospect Resources has attracted a key cornerstone investment from one of the world’s top copper miners, underlining the unbridled potential of its Mumbezhi copper deposit in northwest Zambia.

TSX-listed First Quantum Minerals, which produces 402,000t of copper in concentrate at the Sentinel and Kansanshi mines in the southern African country and holds a market cap of $15.5 billion, will take a 15% cornerstone stake in the $80m capped ASX-listed junior via a $15.2m placement.

At an issue price of 15c, the investment comes in at a 36% premium to Prospect Resources (ASX:PSC) previous closing price of 11c and 28% premium to its 20-day VWAP of 11.7c. It also brings the Canadian giant in as a 15% shareholder and key technical partner to support Prospect’s exploration team at Mumbezhi.

Mumbezhi has quickly emerged as one of the largest pre-development copper resources on the ASX, with a recent resource estimate clocking in at 107.2Mt at 0.5% copper for 514,600t of contained copper metal.

Given its scale and the rapid nature of the resource’s growth since Prospect became an 85% owner of the project 12 months ago in an initial US$6.5m deal, it’s understandable the resource announcement caught the eye of FQM.

First Quantum’s +200,000tpa Sentinel mine is located just 25km to the northwest.

And it’s not the only investor topping up, with fellow major shareholder Eagle Eye Holdings tipping in $2.8m at 15c to maintain its 15.3% stake. That gives Prospect $18.5m in new funding to accelerate exploration, with a phase 2 drill programme to start this quarter.

“We are delighted to welcome First Quantum to the Prospect share register testament to their conviction on the scale potential at Mumbezhi,” PSC managing director and CEO Sam Hosack said.

“The FQM strategic investment offers us a considerable funding runway, coupled with serious regional exploration expertise, to continue advancing our planned exploration of Mumbezhi.

“We are also grateful for the continued support of our existing shareholder, Eagle Eye, as a reflection of its confidence in Prospect’s strategy and vision in Zambia as we welcome First Quantum.”

Mumbezhi is located between the three giant copper deposits of Zambia and is just 25km from FQM’s Sentinel mine. Pic: Prospect Resources

Conviction for scale

The investment could make Mumbezhi an important cog in First Quantum’s long-term plans in Zambia, where the African nation’s government wants to see copper production more than triple to 3Mtpa by 2031.

Its operations are among the largest in the country, which sits at the eastern edge of a belt that includes the monster sedimentary copper discoveries made recently in DRC and Botswana like Kamoa-Kakula and Khoemacau.

The region is the fastest growing copper domain in the world, at a time when the growth of traditional powerhouses Chile and Peru is slowing.

Prospect’s Sam Hosack said the investment by First Quantum, which is expanding its in-country smelting capacity at Kansanshi to 400,000tpa, validated its conviction in the scale of Mumbezhi and its Nyungu Central deposit.

“Bringing First Quantum into the fold as both a strategic cornerstone shareholder and technical partner offers exceptional value-accretive opportunities for both parties,” Hosack said.

“Mumbezhi is hosted in a similar regional geological setting to First Quantum’s existing Zambian operations at Sentinel, which is located proximal to the Mumbezhi Project.

“Gaining access to First Quantum’s breadth of regional expertise to complement our current multi-disciplinary exploration strategy, Prospect is well placed to continue identifying further regional prospects, make targeted new discoveries and add potential new copper tonnage to the existing Mumbezhi mineral resource estimate at a far greater rate.

“This investment strongly validates our conviction for scale at Mumbezhi, as well as 2024 works which recently culminated in the delivery of a significant maiden 515kt contained copper mineral resource across just the Nyungu Central and Kabikupa deposits.

“It also demonstrates a robust belief in the long-term growth potential on offer across the broader Mumbezhi tenure, which covers two granted mining licences.”

More to come

That growth potential will be tested, with Prospect agreeing to apply at least US$2.5m of the amount raised towards agreed exploration outside Nyungu Central.

“With our Phase 2 drilling programme expected to commence this quarter and test further prospective regional targets at Nyungu North, Nyungu South and West Mwombezhi, there is ample potential resource upside waiting to be unlocked at Mumbezhi,” Hosack noted.

“We look forward to working closely with First Quantum with the ongoing support of Eagle Eye in targeting the next world-class copper asset in Zambia and in doing so making a material contribution to the Zambian strategy 2031 to produce 3 million tonnes of copper.”

As part of the investment agreement, FQM will be able to nominate one person to the Prospect board, establish a technical working group and have rights to participate in future equity raisings.

It has an 18-month standstill and voluntary escrow, though is able to buy on-market to maintain the size of its stake and has committed to vote in the manner recommended by the Prospect board, subject to a limited number of exceptions.

While the investment has come in at a premium, some analysts see more blue sky for Prospect, which already engineered one African success story with the sale of its Arcadia lithium project in neighbouring Zimbabwe in 2022 for US$378m.

Canaccord Genuity’s Tim Hoff upped his price target on the spec buy rated junior from 30c to 40c after last month’s resource update, 2.5x above the FQM/Eagle Eye issue price.

This article was developed in collaboration with Prospect Resources, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Originally published as Copper giant First Quantum acquires 15pc of Zambian explorer Prospect Resources