First Quantum Minerals Ltd. ("First Quantum" or the
"Company") (TSX:FM) today reported for the three months
ended March 31, 2020 (“Q1”) comparative loss1 of $79 million ($0.11
per share1), net loss attributable to shareholders of the Company1
of $62 million ($0.09 loss per share1) and cash flows from
operating activities of $473 million ($0.69 per share1).
“The COVID-19 pandemic has brought unprecedented
challenges to communities, industries and the global economy. Our
priority continues to be the health and safety of all of our
employees and the communities where we work. We are managing
the restrictions and protocols implemented in each country where we
operate to assist in the protection of all and particularly those
most vulnerable,” commented Philip Pascall, Chairman and CEO. “We
have reduced our operating costs and capital spending to deal with
the current environment and have hedges in place to mitigate the
uncertainty of the copper price. With the support of our banking
group, we have improved our flexibility and liquidity. We will
continue to make the changes necessary to deal with this global
crisis.”
FIRST QUARTER SUMMARY:
• Operational Highlights:
- 195,285 tonnes of total copper
production2 for Q1, an increase of 43% from the comparable period
of 2019 including a contribution of 56,240 tonnes from Cobre
Panama.
- 68,788 ounces of total gold
production for Q1, an increase of 39% from the comparable period of
2019.
- Q1 cost of copper production3:
All-in sustaining cost (“AISC”) of $1.64 per lb, cash cost (“C1”)
of $1.30 per lb and total cost (“C3”) of $2.19 per lb.
- Cobre Panama’s production was
impacted initially by unplanned downtime on the crushing circuits,
which was resolved, followed by the impact of COVID-19 restrictions
described below.
- Kansanshi and Las Cruces achieved
higher copper production for the quarter compared to 2019.
- Despite Sentinel achieving record
throughput in Q1, production was down 2% compared to 2019 due to
lower grade and recovery.
- Kansanshi smelter processed 329,946
dry metric tonnes of copper concentrate, produced 80,280 tonnes of
copper anode and 315,000 tonnes of sulphuric acid.
- Ravensthorpe continued operational
readiness work resulting in the restart of the acid plant and the
atmospheric leaching operations in March 2020. The first high
pressure acid leach (“HPAL”) circuit was brought online mid-April
and the second HPAL circuit is scheduled to come online thereafter.
Nickel mixed hydroxide product drying and containerizing also
commenced in April.
|
|
|
Three months endedMarch 31 |
(U.S. dollars where applicable) |
2020 |
|
2019 |
|
|
|
|
|
|
COPPER |
|
|
|
|
- Production2 (tonnes) |
195,285 |
|
136,969 |
|
- Sales4 (tonnes) |
189,953 |
|
130,262 |
|
- Cost of production3: |
|
|
|
|
o AISC (per lb) |
$ 1.64 |
|
$ 1.77 |
|
o C1 (per lb) |
$ 1.30 |
|
$ 1.34 |
|
o C3 (per lb) |
$ 2.19 |
|
$ 2.21 |
|
- Realized price (per lb) |
$ 2.56 |
|
$ 2.79 |
|
|
|
|
|
|
GOLD |
|
|
|
|
- Production (ounces) |
68,788 |
|
49,357 |
|
- Sales (ounces)5 |
73,782 |
|
46,790 |
|
• Financial Highlights
- Sales revenues for the quarter of
$1,182 million, an increase of 38% from the comparable period of
2019 boosted by Cobre Panama production.
- Realized price for copper of $2.56
per lb for the quarter was 8% lower than the same period in 2019.
This compares to a decrease of 9% in the London Metal Exchange
(“LME”) average copper price for the same period. The Company’s
copper sales hedge program contributed $26 million ($0.06 per lb)
to sales revenues in the quarter, compared to a $8 million sales
hedge gain ($0.03 per lb) in the same quarter of 2019.
- $473 million of cash flows from
operating activities ($0.69 per share3) generated during the
quarter, an increase of over 197% from the comparable period of
2019.
- Gross profit of $147 million for
the quarter.
- Comparative EBITDA1 of $434 million
for the quarter.
- At April 27, 2020, the Company had
unmargined copper forward sales contracts for: 175,525 tonnes at an
average price of $2.59 per lb outstanding with periods of maturity
to January 2021; zero cost collar unmargined sales contracts for
127,500 tonnes at weighted average prices of $2.66 per lb to $2.92
per lb outstanding with maturities to January 2021; unmargined
nickel forward sales contracts for 11,000 tonnes at an average
price of $6.76 per lb outstanding with maturities to February 2021;
and has hedged 180 million litres of Ultra Low Sulphur Diesel at an
average price of $0.32 per litre as part of the Company’s cost
management strategy.
- Approximately half of expected
remaining copper sales in 2020 are hedged to unmargined forward and
zero cost collar sales contracts, at an average floor price of
$2.62 per lb.
- The Company issued $750 million in
Senior Notes in January 2020, using the proceeds to repay and
cancel the remaining $300 million of 7.00% Senior Notes due
February.
- Ended the quarter with $1,145
million in net unrestricted cash and cash equivalents and in full
compliance with all financial covenants.
- On April 22, 2020, the Company
announced the amendment of financial covenants under the senior
term loan and revolving credit facility in response to uncertainty
related to COVID-19. The Net Debt to EBITDA ratio has been
increased and the Debt Service Cover Ratio has been decreased, for
the remainder of 2020 and 2021. (see the Company’s release dated
April 22, 2020 for more detail)
|
Three months ended |
March 31 |
(U.S. dollars millions, except where noted otherwise) |
|
2020 |
|
2019 |
|
|
|
|
Sales revenues |
|
1,182 |
|
857 |
|
Gross profit |
|
147 |
|
185 |
|
|
|
|
Net earnings (loss) attributable to shareholders of the
Company |
|
(62) |
|
53 |
|
Basic and diluted earnings (loss) per share |
($0.09) |
|
$0.08 |
|
|
|
|
|
Comparative EBITDA1 |
|
434 |
|
368 |
|
Comparative earnings (loss)1 |
|
(79) |
|
95 |
|
Comparative earnings (loss) per share1 |
($0.11) |
|
$0.14 |
|
|
|
|
|
Cash flow from operating activities |
|
473 |
|
159 |
|
Cash flow from operating activities per share1 |
($0.69 |
) |
$0.23 |
|
1 Net earnings (loss) attributable to
shareholders of the Company has been adjusted to exclude items
which are not reflective of underlying performance to arrive at
comparative earnings (loss). Comparative earnings (loss),
comparative earnings (loss) per share, comparative EBITDA and cash
flows per share are not measures recognized under IFRS and do not
have a standardized meaning prescribed by IFRS. The Company has
disclosed these measures to assist with the understanding of
results and to provide further financial information about the
results to investors. Refer to the “Regulatory Disclosures” section
in the MD&A for the quarter ended March 31, 2020 for further
information.2 Production is presented on a copper contained basis
and is presented prior to processing through the Kansanshi
smelter.3AISC, C1 and C3 costs per pound are not recognized under
IFRS. Refer to the “Regulatory Disclosures” section in the MD&A
for the quarter ended March 31, 2020 for further information. C1,
C3 and AISC costs exclude third-party concentrate purchased at
Kansanshi.4 Copper sales exclude the sale of copper anode produced
from third-party concentrate purchased at Kansanshi. Sales of
copper anode attributable to third-party concentrate purchases were
nil for the three months ended March 31, 2020 (1,182 tonnes for the
three months ended March 31, 2019).5Excludes refinery-backed gold
credits purchased and delivered under precious metal streaming
arrangement.
On March 11, 2020, the World Health Organization
declared COVID-19 a pandemic. The virus has brought unprecedented
challenges to communities, industries and the global economy. First
Quantum’s priority is the health and safety of its employees and
communities. Efforts by countries to control and mitigate the
spread of the virus include travel restrictions, temporary border
restrictions, and closure of non-essential business operations. The
Company is managing the necessary country-by-country restrictions
in order to assist in the protection of those most vulnerable. At
its mine sites, preparations are in place for control, isolation
and quarantine as necessary.
On April 6, 2020, Ministry of Health of the
Republic of Panama (“MINSA”) ordered the temporary suspension of
labour activities at the Cobre Panama operation, as a sanitary
control measure due to COVID-19. The Company decided to place the
Cobre Panama operation onto preservation and safe maintenance from
April 7, 2020 until MINSA are satisfied that the quarantine
conditions are appropriate. The heightened quarantine conditions
require that mining and processing operations be halted. The port
and power plant have continued operations in order to supply
essential electrical power into the Panama national grid, and to
sustain the preservation and safe maintenance activities.
Temporary costs are estimated at between $4 and $6 million per week
assuming the suspension of labour contracts and other variable and
fixed costs.
In light of the preservation and safe
maintenance period, production guidance for Cobre Panama for 2020
has been reduced to 210,000 to 235,000 kt of copper and 90,000 to
100,000 koz of gold. Production guidance for production at all
other operations remains unchanged from previously disclosed.
Cobre Panama updated copper and gold guidance
range is dependent upon receiving approval from MINSA to end
the preservation and safe maintenance shutdown and to commence
the restart of operations before or by the end of May. Normal
production levels would be expected to return in late June 2020 to
early July 2020. A delay to this timeline would have an impact on
the guidance range.
Mining operations at Las Cruces were shut down
on March 30, 2020 following an order by the Spanish government,
which designated mining as a non-essential operation. The plant
continued to process the surface ore stockpile, sufficient for an
expected two months of production at current levels. Las Cruces
resumed operations on April 13, 2020, following the end of the
government imposed shutdown on non-essential services on April 9,
2020. Production guidance for Las Cruces is unchanged.
With the closure of the South African and
Zimbabwean borders, the export of the Company’s Zambian production
is currently being managed through alternate routes. To date,
there has not been any significant disruption to sales, supply
chains and product shipments at the Company’s other operations,
however, its exploration programs have been affected by
international and local travel restrictions associated with
COVID-19.
With the slowdown of global economic activity,
commodity prices have weakened. The copper LME price fell to a low
of $2.08 per lb in late March before recovering somewhat in April
to $2.32 per lb on supply disruptions and expectations of stronger
demand. The Company’s copper hedge program, which utilizes both
unmargined copper forward sales and unmargined zero cost collar
sales contracts, mitigates some of the price volatility in the near
term. The Company also has nickel hedges in place for a large
proportion of its Ravensthorpe forecast 2020 production at prices
significantly above current LME prices. Gold market prices have
increased from $1,520/oz at the end of 2019 to $1,720/oz during
April 2020.
Under the assumption of an extended period of
health protocols, travel restrictions and depressed commodity
prices, the Company’s main overall priority is the active
management of all capital spending and operating costs while
maintaining a high level of safety and productivity. Within this
context, capital expenditure guidance for 2020 has been reduced by
$175 million, reflecting the deferral of some initiatives and AISC
guidance for 2020 has been reduced by $0.05 per lb.
2020 GUIDANCE REVISIONS
Production guidance has been reduced for copper
by 75,000 tonnes to 755,000 – 805,000 tonnes and gold by 30,000
ounces to 250,000 – 270,000 ounces as a result of a reduction in
production expectations at Cobre Panama following its response to
COVID-19. Production guidance at all other operations remains
unchanged from expectations previously disclosed. For cash costs,
AISC guidance range has been reduced by $0.05 per lb and the upper
end of the guidance range for C1 costs has been reduced by $0.05
per lb. Capital expenditure guidance has been reduced by $175
million.
Guidance is based on a number of assumptions and
estimates as of March 31, 2020, including among other things,
assumptions about metal prices and anticipated costs and
expenditures. Guidance involves estimates of known and unknown
risks, uncertainties and other factors which may cause the actual
results to be materially different. (Please see the Company’s
release dated January 9, 2020 and the Management Discussion and
Analysis for the period ending March 31, 2019 for additional
detail.)
Production Guidance
|
000’s |
2020 |
|
Copper (tonnes) |
755 -
805 |
|
Gold (ounces) |
250 -
270 |
|
Nickel (tonnes) |
15 - 20 |
Cash Cost and All-In Sustaining Cost
|
Copper ($/ lb) |
2020 |
|
C1 |
1.20 -
1.35 |
|
AISC |
1.65 - 1.80 |
Capital Expenditure
|
$ million |
2020 |
|
Capitalized stripping |
225 |
|
Sustaining capital and
other projects |
450 |
|
Total capital
expenditure |
675 |
Guidance for the Company’s sustaining capital
and other projects includes expenditure relating to Cobre Panama
for construction work for the tailings management facility and
development work associated with the expansion to 100 mtpa
capacity. Other projects in 2020 include the Shoemaker Levy deposit
at Ravensthorpe, and some spend on the fourth crusher at Sentinel.
Reduction in capital expenditure includes moving construction work
on the fourth crusher at Sentinel into 2021 as well as deferring
some development project capital expenditure and some process
improvement and sustaining maintenance program at operations.
Underlying sustaining capital expenditure is expected to be
approximately $200 million in 2020.
CONFERENCE CALL &
WEBCASTConference call and webcast details are as
follows:
Date: |
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April 28,
2020 |
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Time: |
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9:00 am (EDT); 2:00 pm (BST); 6:00 am (PDT) |
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Webcast: |
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www.first-quantum.com |
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Dial in: |
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North America (toll free): (877) 291-4570 |
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North America and international: (647) 788-4919 |
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Replay: |
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Available from noon (EDT) on April 28, 2020 until 11:59 pm
(EDT) on May 12, 2020 |
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North America (toll free): (800) 585-8367 |
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North America and international: (416) 621-4642 |
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Passcode: |
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4315239 |
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COMPLETE FINANCIAL STATEMENTS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS The complete
Consolidated Financial Statements and Management’s Discussion and
Analysis for the quarter ended March 31, 2020 are available at
www.first-quantum.com and should be read in conjunction with this
news release.
For further information visit our website at
www.first-quantum.com
North American contact: Lisa Doddridge, Director,
Investor Relations Tel: (416) 361-6400 Toll-free: 1 (888) 688-6577
United Kingdom contact: Clive Newall, President Tel: +44 7802
721663E-Mail: info@fqml.com
CAUTIONARY STATEMENT ON FORWARD-LOOKING
INFORMATIONCertain statements and information herein,
including all statements that are not historical facts, contain
forward-looking statements and forward-looking information within
the meaning of applicable securities laws. The forward-looking
statements include estimates, forecasts and statements as to the
Company’s expectations of production and sales volumes, and
expected timing of completion of project development at Enterprise
and post-completion construction activity at Cobre Panama and are
subject to the impact of ore grades on future production, the
potential of production disruptions, potential production,
operational, labour or marketing disruptions as a result of the
COVID-19 global pandemic, capital expenditure and mine production
costs, the outcome of mine permitting, other required permitting,
the outcome of legal proceedings which involve the Company,
information with respect to the future price of copper, gold,
silver, nickel, zinc, pyrite, cobalt, iron and sulphuric acid,
estimated mineral reserves and mineral resources, First Quantum’s
exploration and development program, estimated future expenses,
exploration and development capital requirements, the Company’s
hedging policy, and goals and strategies. Often, but not always,
forward-looking statements or information can be identified by the
use of words such as “plans”, “expects” or “does not expect”, “is
expected”, “budget”, “scheduled”, “estimates”, “forecasts”,
“intends”, “anticipates” or “does not anticipate” or “believes” or
variations of such words and phrases or statements that certain
actions, events or results “may”, “could”, “would”, “might” or
“will” be taken, occur or be achieved.
With respect to forward-looking statements and
information contained herein, the Company has made numerous
assumptions including among other things, assumptions about
continuing production at all operating facilities, the price of
copper, gold, silver, nickel, zinc, pyrite, cobalt, iron and
sulphuric acid, anticipated costs and expenditures and the ability
to achieve the Company’s goals. Forward-looking statements and
information by their nature are based on assumptions and involve
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements, or industry
results, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements or information. These factors include,
but are not limited to, future production volumes and costs, the
temporary or permanent closure of uneconomic operations, costs for
inputs such as oil, power and sulphur, political stability in
Zambia, Peru, Mauritania, Finland, Spain, Turkey, Panama, Argentina
and Australia, adverse weather conditions in Zambia, Finland,
Spain, Turkey, Mauritania, Australia and Panama, labour
disruptions, potential social and environmental challenges
(including the impact of climate change), power supply, mechanical
failures, water supply, procurement and delivery of parts and
supplies to the operations, the production of off-spec material and
events generally impacting global economic, political and social
stability.
See the Company’s Annual Information Form for
additional information on risks, uncertainties and other factors
relating to the forward-looking statements and information.
Although the Company has attempted to identify factors that would
cause actual actions, events or results to differ materially from
those disclosed in the forward-looking statements or information,
there may be other factors that cause actual results, performances,
achievements or events not to be anticipated, estimated or
intended. Also, many of these factors are beyond First Quantum’s
control. Accordingly, readers should not place undue reliance on
forward-looking statements or information. The Company undertakes
no obligation to reissue or update forward-looking statements or
information as a result of new information or events after the date
hereof except as may be required by law. All forward-looking
statements and information made herein are qualified by this
cautionary statement.
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