State-owned ZCCM-IH launched action in October 2016 to sue First Quantum for $1.4 billion over claims that the Canadian company borrowed $2.3 billion from its Zambian copper mining subsidiary Kansanshi Mining Plc without informing ZZCM-IH, a minority shareholder.

First Quantum asked the court in February last year to dismiss the lawsuit by ZCCM-IH, which holds minority stakes in most of the country's copper mines.

First Quantum argued, among other things, in court papers that ZCCM-IH had taken the action without the approval of the ZCCM-IH board, which was dissolved when proceedings began.

However, High Court Judge Winnie Mwenda said in a ruling seen by Reuters on Friday that the case would go ahead.

"The issues raised by the parties in their respective affidavits are, in my view, so contentious that disallowing them to go to trial would not serve justice well," Mwenda said.

Zambia is Africa's second-largest copper producer and differences with mining companies over taxes, electricity prices, environmental concerns and labor matters often arise.

The $1.4 billion claim by ZCCM-IH includes $228 million in interest on $2.3 billion of loans it claims First Quantum borrowed from Kansanshi, as well as 20 percent of the principal amount, or $570 million.

ZCCM-IH said in court papers filed in October that First Quantum used the money as cheap financing for other operations but First Quantum says the loans were at a fair market rate.

ZCCM-IH's Chief Executive Pius Kasolo told Reuters in November that an out-of-court settlement might yet be reached with First Quantum but the court case would continue to run in parallel with discussions.

(Reporting by Chris Mfula; Editing by Susan Fenton)