First Quantum Minerals Ltd. ("First Quantum" or the
"Company") (TSX:FM) today reported results for the three
and six months ended June 30, 2020. The Company reported, for
the three months ended June 30, 2020 (“Q2”), a comparative loss1 of
$84 million ($0.12 loss per share1), net loss attributable to
shareholders of the Company1 of $156 million ($0.23 loss per
share1) and cash flows from operating activities of $155 million
($0.23 per share1).
“Although the second quarter of 2020 has brought
unprecedented challenges around the globe, the Company has shown
resilience and performed very well financially and operationally.
Copper production from our Zambian operations, in particular, was
strong and Sentinel achieved record low unit costs for the quarter.
Our organization has had to change and adapt in order to protect
the health and welfare of our workforce and communities, while
ensuring the continuation of the business in these uncertain times.
With this in mind, we’ve been proactive in taking steps to provide
stability to future cashflows with the expansion of our sales hedge
program in July, as copper prices continue to rise significantly
from low prices experienced for much of the quarter,” commented
Philip Pascall, Chairman and CEO. “We are indebted to our workforce
at the front line in our mines, many of whom have been unable to
return to their family and homes for long periods as a result of
quarantine requirements, rotation timings and travel restrictions.
I would like to thank all of our people who have made these
personal sacrifices and recognize the significant contribution they
continue to make to the success of the business. I would also like
to express our sincere condolences to those who have been ill and
especially to the families and colleagues of the five employees and
contractors who very sadly died in Panama.”
SECOND QUARTER SUMMARY:
- Operational Highlights:
- 169,059 tonnes of total copper
production2 in Q2, comparable to the same period of 2019, including
21,733 tonnes of copper production from Cobre Panama while on
preservation and safe maintenance.
- Q2 cost of copper production3:
all-in sustaining cost (“AISC”) of $1.62 per lb and cash cost
(“C1”) of $1.20 per lb, 8% and 9% lower, respectively, than the
comparable period in 2019; total unit costs, C1 and AISC are
at the lowest level achieved in three years.
- 54,651 ounces of total gold
production in Q2, an 8% decrease from the comparable period of
2019.
- 1,979 tonnes of total nickel
production2 in Q2 as Ravensthorpe continued to ramp up
production. The first shipment of nickel occurred in May with
a successive shipment in June and monthly shipments are expected
for the remainder of the year. Ravensthorpe is expected to
continue ramping up through the third quarter.
- Sentinel performed exceptionally in
the quarter, with its highest production since 2018 of 60,761
tonnes, and record low costs for the operation, C1 costs for the
quarter of $1.36 per lb. Throughput increased significantly
resulting in an 11% increase in copper production, while lower fuel
prices and currency depreciation, coupled with increased
production, improved costs.
- Kansanshi delivered another robust
performance with higher throughput and recoveries on the sulphide
and mixed ore circuits ensuring overall production was in line with
the same quarter in 2019.
- Guelb Moghrein delivered production
consistent with same period in 2019 with significantly lower costs.
C1 costs of $0.48 per lb were 47% lower than the same period in
2019 driven by lower mining and fuel costs and the lowest in a
decade. AISC of $0.87 per lb was 27% lower than the same period in
2019 and the lowest ever reported.
- Las Cruces production was higher
than the same period in 2019 as a result of operating at normal
throughput levels compared to the second quarter of 2019, which was
impacted by a land slippage.
- Cobre Panama’s production was
significantly impacted in the quarter as a result of being placed
on preservation and safe maintenance on April 7, 2020 following
suspension of labour activities due to COVID-19. During this
suspension, the port and power plant continued operations in order
to supply essential electrical power into the Panama national grid,
and to sustain the preservation and safe maintenance activities. On
July 3, 2020 the temporary suspension orders at Cobre Panama were
lifted and on July 7, 2020, the Company announced the resumption of
normal operations and the commencement of the reopening plan for
the ramp up of operations, full production levels are expected to
be reached by mid-August.
- Kansanshi smelter processed 273,673
dry metric tonnes of copper concentrate, produced 66,905 tonnes of
copper anode and 264,000 tonnes of sulphuric acid, lower than the
comparable period in 2019 as a result of lower throughput due to a
planned maintenance shutdown in the quarter.
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Three months ended |
Six months ended |
|
June 30 |
June 30 |
|
(U.S. dollars where applicable) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
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|
|
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COPPER |
|
|
|
|
|
|
|
|
|
- Production2
(tonnes) |
169,059 |
|
168,399 |
|
364,344 |
|
305,368 |
|
|
- Sales4
(tonnes) |
159,944 |
|
149,333 |
|
349,897 |
|
279,595 |
|
|
|
|
|
|
|
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- Cost of
production3: |
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|
|
|
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|
|
|
o AISC (per
lb) |
$1.62 |
|
$1.77 |
|
$1.63 |
|
$1.77 |
|
|
o C1 (per
lb) |
$1.20 |
|
$1.32 |
|
$1.25 |
|
$1.33 |
|
|
o C3 (per
lb) |
$2.08 |
|
$2.17 |
|
$2.14 |
|
$2.19 |
|
|
- Realized price
(per lb) |
$2.60 |
|
$2.80 |
|
$2.58 |
|
$2.80 |
|
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GOLD |
|
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|
|
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|
|
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- Production
(ounces) |
54,651 |
|
59,647 |
|
123,439 |
|
109,004 |
|
|
- Sales (ounces)5 |
54,591 |
|
56,922 |
|
128,373 |
|
103,712 |
|
- Financial Highlights
- Sales revenues for the quarter of
$1,014 million, an increase of 8% from the comparable period of
2019 primarily driven by copper and gold sales from Cobre Panama
and higher sales from Las Cruces offset by lower realized copper
prices and the timing of sales at Sentinel delayed by an outage at
a third party smelter.
- $155 million of cash flows from
operating activities ($0.23 per share1) generated during the
quarter was slightly lower than the same period in 2019 as a result
of a $26 million increase in taxes paid.
- Gross profit of $141 million for
the quarter compared to $196 million for the same period in
2019.
- Comparative EBITDA1 of $352 million
for the quarter compared to $376 million for the same period in
2019.
- Realized price for copper of $2.60
per lb for the quarter was 7% lower than the same period in 2019.
This compares to a decrease of 12% in the London Metal Exchange
(“LME”) average copper price, to $2.43 per lb, for the same
period.
- The Company’s copper sales hedge
program contributed $77 million ($0.22 per lb) to sales revenues in
the quarter, compared to a $19 million sales hedge gain ($0.06 per
lb) in the same quarter of 2019. The Company’s nickel sales hedge
program contributed $9 million to sales revenues in the
quarter.
- Subsequent to the end of the
quarter, as a result of increased copper prices and given
uncertainty around the impact of COVID-19, the Company has taken
the opportunity to extend its copper sales hedge program to
mitigate any future price risk. At July 28, 2020, the Company had
hedge positions for 416,200 tonnes of copper using unmargined
copper forward and zero cost collar sales contract with an average
floor price of $2.70 per lb. This represents approximately half of
the Company’s expected sales for the next 12 months.
- Ended the quarter with $882 million
in net unrestricted cash and cash equivalents, current working
capital of $1,078 million and is in full compliance with all
financial covenants.
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Three months endedJune 30 |
Six months endedJune 30 |
|
(U.S. dollars millions, except where noted otherwise) |
2020 |
|
2019 |
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2020 |
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2019 |
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Sales
revenues |
1,014 |
|
939 |
|
2,196 |
|
1,796 |
|
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Gross
profit |
141 |
|
196 |
|
288 |
|
381 |
|
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Net
earnings (loss) attributable to shareholders of the Company |
|
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|
|
|
|
|
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|
Company |
(156) |
|
78 |
|
(218) |
|
131 |
|
|
Basic
and diluted earnings (loss) per share |
($0.23) |
|
$0.11 |
|
($0.32) |
|
$0.19 |
|
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|
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|
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Comparative EBITDA1,6 |
352 |
|
376 |
|
786 |
|
744 |
|
|
Comparative earnings (loss)1 |
(84) |
|
87 |
|
(163) |
|
182 |
|
|
Comparative earnings (loss) per share1 |
($0.12) |
|
$0.13 |
|
($0.24) |
|
$0.26 |
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Cash
flow from operating activities |
155 |
|
179 |
|
628 |
|
338 |
|
|
Cash flow from operating activities per share1 |
$0.23 |
|
$0.26 |
|
$0.91 |
|
$0.49 |
|
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 period ended June 30, 2020 for further
information.2 Production is presented on a contained basis and is
presented prior to processing through the Kansanshi
smelter.3 AISC, C1 and C3 costs per pound are not recognized
under IFRS. Refer to the “Regulatory Disclosures” section in the
MD&A for the period ended June 30, 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 and six months ended June 30, 2020
(nil and 1,182 tonnes for the three and six months ended June 30,
2020, respectively).5 Excludes refinery-backed gold credits
purchased and delivered under the precious metal streaming
arrangement.6 Adjustments to comparative EBITDA in the second
quarter of 2020 relate principally to foreign exchange (foreign
exchange and write-off of assets and costs associated with the land
slippage at Las Cruces in the second quarter of 2019).
The Company continues to focus on measures to
prevent and manage the transmission of COVID-19 amongst the
workforce and the wider community. When COVID-19 was declared an
international public health emergency by the World Health
Organization in late January, the Company moved quickly to
introduce health and sanitation protocols across all of its sites
in compliance with both local and international guidelines. These
health protocols continue to be reviewed and adjusted as needed. In
Panama, the Company is supporting the wider community with
donations of medical equipment and supplies, as well as responding
to the Panamanian Government’s request to support families in need
with food and supplies. In Zambia, the Company has pledged
financial support for the provision of medical logistics support in
the Solwezi and Kalumbila districts of North-Western Zambia.
In addition to increased medical facility resilience initiatives at
the mine clinics in Mauritania, Zambia and Panama, COVID-19
protective measures to minimize person-to-person transmission in
the work place and protect business continuity have been
implemented across all operations.
Tragically, five employees/contractors from
Cobre Panama succumbed to symptoms associated with COVID-19 in
April and May. The Company extends its deepest sympathies to their
families and colleagues and is grateful to the dedicated health
professionals in Panama who treated them in hospital and those who
have been working to resolve the wider pandemic in the country.
Cobre Panama has undertaken a deep disinfection program and has
developed heightened health protocols at the highest international
standards and which are regularly inspected by the Ministry of
Health of the Republic of Panama (“MINSA”). These strict protocols
and sanitary vigilance remain in place as a “new normal” way of
working. During preservation and safe maintenance there were
approximately 800 personnel onsite, which will be gradually
increased in compliance with Cobre Panama’s reopening plan and in
line with MINSA guidelines as the operation ramps up to full
production, expected by mid-August. There are approximately 1,450
personnel currently onsite.
The Company’s other operations have not been
significantly impacted by restrictions arising from COVID-19, with
the exception of Las Cruces, which recommenced mining activities on
April 13, 2020, after a two-week suspension to mining activities,
during which the operation continued to process stockpiles.
Production guidance for Cobre Panama for 2020
has been revised to 180,000 to 200,000 tonnes of copper and 70,000
to 80,000 ounces of gold. Guidance for production at all other
copper operations remains unchanged from previously disclosed.
2020 GUIDANCE REVISIONS
Production guidance has been reduced for copper
by 30,000 tonnes at the bottom end of the range previously given
and 35,000 tonnes at the top end to 725,000 – 770,000 tonnes and
gold by 20,000 ounces to 230,000 – 250,000 ounces to reflect
current assumptions at Cobre Panama following the lifting of
temporary suspension orders on July 3, 2020. Guidance on
Ravensthorpe production has been narrowed to 15,000 to 17,000
tonnes of nickel.
C1 and AISC cost guidance remains unchanged.
Guidance for total capital expenditure is
unchanged at $675 million but with a change in mix between
capitalized stripping and other capital expenditure. The
reduction in capitalized stripping to $175 million, reflects latest
mine plans and reduced activity at Cobre Panama during the second
quarter. The increase in sustaining capital and other projects to
$500 million, reflects essential expenditure on mining fleet and
equipment as well as latest phasing of capital expenditure.
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.
Underlying sustaining capital expenditure is expected to be
approximately $220 million in 2020.
Guidance on 2020 interest expense of between
$770 and $810 million, and effective tax rate of 30%, remain
unchanged from previously disclosed. Depreciation for the
full year 2020 is now expected to be approximately $1,250 million,
a reduction of $50 million to reflect lower production at Cobre
Panama.
Production Guidance
000’s |
2020 |
Copper (tonnes) |
725 -
770 |
Gold (ounces) |
230 -
250 |
Nickel (tonnes) |
15 - 17 |
Cash Cost and All-In Sustaining Cost
Copper ($/ lb) |
2020 |
C1 |
1.20 -
1.35 |
AISC |
1.65 - 1.80 |
Capital Expenditure
$ million |
2020 |
Capitalized stripping |
175 |
Sustaining capital and
other projects |
500 |
Total capital
expenditure |
675 |
Guidance provided is based on a number of
assumptions and estimates as of June 30, 2020, including among
other things, assumptions about metal prices and anticipated costs
and expenditures. The unprecedented challenges presented by
COVID-19 pose some additional risk to the accuracy of forward
looking information. Production guidance and cost guidance includes
current assumptions on the impact of COVID-19 on operations.
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 Management
Discussion and Analysis for the period ending June 30, 2020 for
additional detail.)
CONFERENCE CALL & WEBCAST |
Conference call and webcast details are as
follows: |
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Date: |
July 29, 2020 |
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Time: |
9:00 am (EDT); 2:00 pm (BST); 6:00 am (PDT) |
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Webcast: |
www.first-quantum.com |
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Dial in: |
North America (toll free): (877) 291-4570 |
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North America and international: (647) 788-4919 |
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Replay: |
Available from noon (EDT) on July 29, 2020 until 11:59 pm (EDT)
on August 12, 2020 |
|
North America (toll free): (800) 585-8367 |
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North America and international: (416) 621-4642 |
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Passcode: |
1388802 |
COMPLETE FINANCIAL STATEMENTS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS The complete
Consolidated Financial Statements and Management’s Discussion and
Analysis for the period ended June 30, 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 (including but not limited to the
temporary suspension of labour activities at Cobre Panama
implemented in April 2020), 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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