FQM had a market capitalization of approximately C$3.0 billion as of April 20, 2009. The company has a good track record in Africa with operations in Zambia, DRC, and Mauritania. In Zambia, it owns 100% of Bwana Mkubwa (an SX/EW facility and sulphuric acid plant) and 80% of Kansanshi open pit copper-gold mine. FQM also holds strategic investments in the Nkana underground copper mine and cobalt refinery, and the Mufulira underground copper mine, smelter and copper refinery, both in Zambia. In the DRC, FQM operates the 100% owned Lonshi open pit copper mine, which provides oxide copper ore for processing at Bwana Mkubwa, a 95% interest in the Frontier copper deposit, in addition to a 65% interest in this project. In Mauritania, FQM operates the 80% owned Guelb Moghrein copper gold mine. In 2008, FQM reported a net profit of US$46 (after a one-off non-cash impairment adjustment of US$314) million (US$520 million in 2007) on revenue of US$1.6 billion (US$1.5 billion in 2007). Copper production increased by 48% in 2008 to 334,415 tonnes from 226,693 tonnes in 2007.

The project is currently under construction at an estimated capital cost of approximately US$600 million. The Project will be funded through a combination of commercial bank debt and shareholders’ contributions. IFC, as a shareholder, will initially contribute about US$30 million in equity and another US$30 million in senior debt. This is in addition to the amount IFC has already contributed to funding feasibility study on the Project. IFC’s investment would be used to fund construction work and support social and community development work associated with the Project.

The town of Kolwezi, located in the Katanga Province, is a well-established mining town, with considerable existing infrastructure including a railway, power supply, and a small airport. The tailings reserves are contained in tailings dams about 2km from Kolwezi town. It is expected that the tailings will be piped as slurry to the processing plant currently under construction.

Mining is a key sector in the DRC and has been the backbone of the Congolese economy since colonial times. The Project would be one of the early ones to be developed since the re-launch of sustainable commercial mining activities in the DRC. A successful project would likely spur significant additional mining interest in the DRC. The World Bank Group is actively involved in supporting the development of a sustainable mining industry in the DRC. The expected development impacts of the Project include:

Contribution to DRC’s Economy: The Project is expected to generate considerable economic benefits in the form of fiscal payments to Government (taxes, dividends and royalties). It is expected that the DRC government would receive about US$4.5 million annually in royalties once the Project is in production.

Direct and Indirect Employment opportunities for Local Community: The Project is expected to create over 1,300 direct jobs during the construction phase and over 660 direct full-time jobs during the operational phase of which most will go to Congolese nationals.

Development of infrastructure: The Project will construct about 200 km of roads using its own resources including a new road from Kolwezi to Zambia to be used to transport final products for export. This will stimulate the revival of infrastructure required for the transport of goods and services.

Improvement of Environmental and Social Practices: The high quality Environmental and Social (“E & S”) documentations produced during the feasibility study stage are regarded as the one of the most advanced in the Congolese mining sector. It is expected that the Project will, with IFC’s continued involvement, continue to set new benchmarks on environmental and social sustainability practices in the sector.

Linkages: The Project will promote spending with local suppliers and contractors that will create jobs and stimulate economic activity.

This is a Category A project according to IFC''s Environmental and Social Review Procedure. The main environmental issues associated with the Project include effluent disposal, tailings dam safety, groundwater protection associated with tailings dam leachate, occupational health & safety management, noise, hazardous materials handling and management, emergency response and air emissions from the processing plant. The main social issues associated with this project include impacts associated with land acquisition and physical displacement of one village (80 persons), public safety, management of security forces, community development planning, construction camp management and stakeholder engagement. All IFC Performance Standards (PSs) except PS 7 Indigenous Peoples are relevant to this project. IFC is an existing shareholder of the Project company and as such has been extensively involved in the review of environmental and social documentation since 2005. Site visits were undertaken in 2005, 2006, 2007, 2008 and 2009. A detailed IFC Environmental and Social Review Summary and Action Plan are available for the Project.

It is expected that a fair share of the net project benefits from the development of the Project will accrue to the Government in the form of taxes and royalties, in compliance with the Mining Code. Notwithstanding the Government’s efforts at improving governance, institutional capacity to enforce good governance at the moment is weak. The country achieves low scores in a variety of governance assessments (World Bank Institute’s Governance Indicators Country Policy and Institutional Assessment, for example). The Government is actively engaged with the World Bank (in collaboration with other development partners including GTZ and DFID) to address these governance weaknesses through a range of interventions – advisory and analytical work, technical assistance and capacity building, and finance. The DRC also recently joined the Extractive Industries Transparency Initiative (“EITI”) as a further effort to increase transparency in the mining and forestry sectors. In addition, KMT will publicly disclose all payments that will be made to the Government. IFC has considered the potential benefits and risks stemming from weak governance in the DRC and has come to the view that the Project should be supported.