First Quantum Minerals Faces Growing Geopolitical and Safety Risks in Zambia: Time to Reevaluate Exposure

The African mining sector is undergoing a seismic shift as governments assert greater control over mineral resources, while recurring safety failures at First Quantum Minerals' (FQV.TO) Zambian operations highlight systemic risks threatening the company's valuation. Combine these factors with regional trends of nationalization—exemplified by Mali's clash with Barrick Gold (GOLD)—and the case for reducing exposure to First Quantum becomes compelling.

Fatal Accidents and Safety Scrutiny in Zambia
First Quantum's Kansanshi and Sentinel mines have been plagued by fatal incidents since 2023. In early 2025, a tracked dozer collision at Kansanshi caused a temporary shutdown, disrupting production of copper and gold. This followed a 2023 dump truck accident at Sentinel that led to an employee's death and an operational pause. These incidents, coupled with contractor fatalities in 2024, have drawn scrutiny from Zambia's regulatory framework, the Industrial Safety and Penalties on Non-Compliance (ISPON) act, which mandates strict safety standards. Non-compliance risks fines, prolonged shutdowns, or even revocation of licenses—a stark threat to a company reliant on Zambian assets for 80% of its revenue.

The human toll extends to ESG investors, who now demand accountability. The International Labour Organization (ILO) has flagged Zambia's mining sector as having some of Africa's highest fatality rates, prompting institutional investors to reassess First Quantum's governance. This pressure, combined with operational disruptions (e.g., a 0.6% stock drop after the 2025 suspension), has already triggered a valuation discount of 10–15% relative to peers.

Africa's Resource Nationalism: A Sector-Wide Threat
First Quantum's risks are not isolated. Across Africa, governments are renegotiating mining contracts to boost state revenue and sovereignty. Mali's military government, for instance, has seized control of Barrick Gold's Loulo-Gounkoto mine, demanding a 35% equity stake and retroactive tax payments. The dispute has cost Barrick $200–300 million annually in lost EBITDA and led to executive detentions—a stark warning for Western firms.

Niger's parallel moves—revoking licenses like GoviEx's Madaouela uranium project—reflect the same resource nationalism. These governments seek to capitalize on mineral wealth amid rising geopolitical tensions, with Mali even partnering with Russia to build gold refineries. For First Quantum, Zambia's own push for greater equity stakes and royalties (as seen in its 2024 mining reforms) adds to operational and financial uncertainty.



Valuation Risks and Investment Advice
First Quantum's reliance on Kansanshi—a mine contributing 134,827 tonnes of copper in 2024—is a double-edged sword. While the asset fuels revenue, any further disruptions could breach its $500 million prepayment deal with Jiangxi Copper, risking penalties and liquidity strains. Meanwhile, ESG-driven investors are increasingly wary of firms with poor safety records, amplifying valuation discounts.

The broader sector faces a reevaluation. Barrick's stock has underperformed gold prices by 18% since late 2023 due to Mali's dispute. First Quantum's lack of progress on safety reforms and exposure to Zambian regulatory overreach suggest similar risks. Analysts estimate a potential 10–15% further discount until governance improves.

Conclusion: Reduce Exposure Until Risks Subside
Investors should take a cautious stance on First Quantum. Until the company demonstrates:
1. Transparent safety improvements (e.g., third-party audits),
2. Diversification beyond Zambian assets, and
3. Mitigation of contractual risks tied to its Jiangxi Copper deal,
the stock remains vulnerable. Sector-wide geopolitical and ESG headwinds justify reducing exposure now. Consider reallocating capital to firms with stronger local partnerships (e.g., AngloGold Ashanti in Ghana) or ETFs like the VanEck Gold Miners ETF (GDX) for diversified exposure.

The path forward for First Quantum is clear: address safety failures and navigate Africa's shifting regulatory landscape—or risk further erosion of investor confidence.