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First Quantum Minerals' Cobre Panama mine, in Donoso, Panama, on Dec. 6, 2022. Shares in Vancouver-based First Quantum recently lost about half their value after the Panamanian government in November ordered the company to close the mine.STRINGER/Reuters

Barrick Gold Corp. ABX-T is reportedly considering a fresh takeover bid for embattled Canadian copper miner First Quantum Minerals Ltd. FM-T, after making an earlier approach in the middle of last year.

According to a report on Wednesday, Toronto-based Barrick contacted some of First Quantum’s biggest shareholders late last year to ascertain their interest in a takeover. Barrick would need their support in the event of a transaction.

China-based Jiangxi Copper Co. Ltd. has a 18.5 per cent stake in First Quantum, according to a November securities filing. Jiangxi could not be reached for comment.

Capital Research and Management owns 12.8 per cent, according to a filing last July. A spokesperson with the California-based investment management firm declined to comment.

Shares in Vancouver-based First Quantum recently lost about half their value after the Panamanian government in November ordered the company to close its Cobre Panama mine, after the country’s Supreme Court ruled that its mining contract was unconstitutional.

While Barrick is predominantly a gold miner, it’s in the process of expanding its exposure to copper. The company already has copper operations in Zambia and Saudi Arabia. Barrick also has plans to build a major new copper and gold mine in Pakistan.

“A transaction with First Quantum would be consistent with Barrick’s messaging,” Josh Wolfson, analyst with RBC Dominion Securities wrote in a note to clients on Wednesday, after the report from Bloomberg News appeared.

Barrick did not immediately respond to a request for comment. First Quantum declined to comment.

Shares in First Quantum rose by 11 per cent on Wednesday on the Toronto Stock Exchange to close at $13.29 apiece, while shares in Barrick fell by 2.9 per cent to $23.14.

Barrick approached First Quantum midway through last year to discuss a merger proposal, Bloomberg and The Globe and Mail reported last year.

Barrick chief executive Mark Bristow has considerable experience in fixing resource disputes with host countries, in part because the company has had several of them.

Last month, Barrick said that its Porgera gold mine in Papua New Guinea was finally restarting production after a suspension that had been in place since 2020 in the aftermath of a fiscal dispute. To fix the fracas, Barrick agreed to grant PNG and various other stakeholders a much bigger share of the economics of the mine.

Mr. Bristow has also stickhandled resource disputes in the past with Tanzania and Pakistan that lasted for many years, and also saw the company make major concessions around the economics of mines there.

Mr. Wolfson said that Barrick’s history of “navigating strained government relationships in higher-risk jurisdictions” could prove valuable in fixing First Quantum’s impasse in Panama.

Barrick’s last major acquisition was in 2019, when it bought Randgold Resources Ltd. in a nil-premium transaction for US$6-billion. Since then, Barrick has sat on the sidelines as many of its competitors have done major M&A deals, and often at sizable share price premiums. Mr. Bristow repeatedly has criticized such transactions as value-destructive for shareholders.

Acquiring First Quantum, whose share price is down 65 per cent from its peak, may give Barrick an opportunity to buy coveted copper assets at a discount, but the deal would carry significant risk, as an agreement to restart production at Cobre Panama would have to be hashed out with Panama.

One avenue that acquirers have used in the past to limit downside risk is by inserting a contingent value right (CVR) in a transaction. In such deals, acquirers typically pay only a small premium when a deal closes, but agree to fork out a larger amount if certain milestones are reached. In this case, such a milestone could be the restart of First Quantum’s operations in Panama.

The Cobre Panama mine is one of the biggest of its kind on the planet, accounting for about 1.5 per cent of global copper production. In the first three quarters of 2023, it generated 46 per cent of First Quantum’s revenue, and accounted for about 80 per cent of its operating profit.

Panama may slash GDP growth forecast due to suspension of First Quantum mine

First Quantum launched arbitration proceedings against Panama last month to try to mitigate the huge financial damage it potentially faces over the next few years. Arbitration between the private sector and governments typically takes years to play out.

Gold miners are increasingly broadening their exposure beyond precious metals as the world turns to critical minerals such as copper, which are needed for low-carbon energy sources, especially electric-car batteries.

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