UPDATE 1-First Quantum sues HSBC Bank Canada over ABCP

(Adds comment from HSBC Bank Canada. Figures in U.S. dollars unless noted)

TORONTO, April 21 (Reuters) - Mining company First Quantum Minerals Ltd (FM.TO: Quote, Profile, Research) is suing HSBC Bank Canada for negligence and breach of contract, claiming that the bank recommended investing in asset-backed commercial paper shortly before this market seized up last summer.

In a statement of claim filed in Vancouver, British Columbia, last week, First Quantum said it "relied extensively" on HSBC Bank Canada for advice on how to invest its excess cash.

In the middle of July 2007, according to First Quantum, HSBC recommended that it invest in 30-day notes issued by Slate Trust, Rocket Trust and Selkirk Funding Trust.

Those trusts never did pay $11.3 million owed to First Quantum on their maturity dates. Instead, the investments were caught up in turmoil in the Canadian market for asset-backed commercial paper that was issued by companies other than the country's big banks. Demand for this paper dried up last August, and about two dozen trusts including Slate, Rocket and Selkirk Funding, were unable to roll over maturing notes or tap emergency funding.

Eight months later, investors who own C$32 billion ($32 billion) worth of stranded non-bank ABCP are due to vote on a complicated restructuring proposal this week. It would convert existing short-term notes into longer-dated paper.

If approved, the restructuring, led by veteran Bay Street lawyer Purdy Crawford, would also shield all ABCP market participants from litigation.

HSBC Bank Canada misrepresented the nature of the trust investments, claims First Quantum, which said it regularly sought advice on conservative, short-term and highly liquid investments.

First Quantum's filing in the Supreme Court of British Columbia does not specify how much it seeks in damages.