First Quantum Minerals Ltd. ("First Quantum" or the
"Company") (TSX:FM) today reported results for the three
and nine months ended September 30, 2020. The Company reported, for
the three months ended September 30, 2020 (“Q3”), comparative
earnings1 of $64 million ($0.09 per share1), net earnings
attributable to shareholders of the Company1 of $29 million ($0.04
per share1) and cash flows from operating activities of $452
million ($0.66 per share1).
“The third quarter was strong from an
operational and financial perspective. Cobre Panama restarted
normal operations and was back into full production well ahead of
schedule. Almost all of our operations delivered lower costs
and a number of new production and cost records were
achieved. As promised, we have maintained our focus on
balance sheet de-leveraging and I am pleased to report that our net
debt position is now beginning to decline. We have continued our
program of active balance sheet management with the completion of a
senior note offering of $1.5 billion which has been used to extend
our senior debt maturities and reduce our debt service costs,”
commented Philip Pascall, Chairman and CEO. “We continue to
prioritize the health and safety of our workforce as we navigate
the COVID-19 pandemic that is now the ‘new normal’. Despite
all the challenges, our workforce and operations continue to be
extremely resilient. This has resulted in a strong
operational performance, allowing us to increase our production
expectations for the year at slightly improved costs. I am proud of
how we continue to navigate this very challenging year while
preparing the Company for continued future success.”
THIRD QUARTER
SUMMARY:
- Operational Highlights:
- 211,396 tonnes of total copper production2 in the quarter, 10%
higher than the same period in 2019, due to record production at
both Sentinel and Cobre Panama.
- Q3 cost of copper production3: all-in sustaining cost (“AISC”)
of $1.48 per lb and cash cost of copper production (“C1”) of $1.07
per lb for the third quarter of 2020, a $0.38 per lb and $0.29 per
lb decrease, respectively, compared to the same period in
2019.
- Almost all of our copper operations delivered a reduction in
cash costs and total cash costs were at their lowest level in four
years. Sentinel achieved a record low AISC of $1.77 per lb and C1
cash cost of $1.25 per lb, respectively. There was also a notable
reduction in C1 cash cost at Guelb Moghrein, to $0.24 per lb, the
lowest C1 cash cost for over a decade, and the lowest reported
AISC.
- 72,926 ounces of total gold production for the quarter, 4%
higher than the same period in 2019 reflecting increased gold
production at Cobre Panama.
- Sentinel performed exceptionally in the quarter, achieving its
highest ever quarterly production of 70,829 tonnes and record low
cash costs. Increased throughput and higher grades resulted in the
25% increase in copper production from the same period in 2019,
while lower maintenance costs, lower fuel prices and currency
depreciation drove improved unit costs.
- Performance at Cobre Panama was strong as it ramped up from
preservation and safe maintenance in July to full production levels
in August, slightly ahead of expectation. Copper production in the
quarter was 62,055 tonnes, significantly higher than the same
period in 2019.
- Las Cruces operated at normal throughput levels compared to the
third quarter of 2019, which was impacted by a land slippage in
January 2019. Robust performance at Guelb Moghrein resulted in 8%
higher production compared to the same period in 2019. Q3 total
copper production at other operations: Las Cruces, Guelb Moghrein,
Cayeli and Pyhasalmi was 24,082 tonnes.
- Kansanshi performed consistently during the quarter. Copper
production of 54,430 tonnes was slightly lower than Q3 2019 as a
result of reduced grades and recoveries despite increased
throughput. Cash costs were lower driven by currency depreciation
and lower fuel costs.
- The Kansanshi smelter processed 362,554 dry metric tonnes
(“DMT”) of copper concentrate, produced 89,090 tonnes of copper
anode with recoveries of 98%, together with 342,000 tonnes of
sulphuric acid.
- Production guidance for 2020 has been updated. Total copper
production expected for 2020 has been increased to between 750,000
– 785,000 tonnes, gold production expected is now to be between
245,000 – 260,000 ounces and nickel production expectation has been
reduced to 13,000 - 15,000 tonnes.
|
Three months ended |
Nine months ended |
|
September 30 |
September 30 |
(U.S. dollars where applicable) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
COPPER |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Production2,7 (tonnes) |
211,396 |
|
192,510 |
|
575,740 |
|
497,878 |
|
- Sales4,7 (tonnes) |
197,533 |
|
203,827 |
|
547,430 |
|
483,422 |
|
|
|
|
|
|
|
|
|
|
- Cost of production3: |
|
|
|
|
|
|
|
|
o AISC (per lb) |
$1.48 |
|
$1.86 |
|
$1.58 |
|
$1.80 |
|
o C1 (per lb) |
$1.07 |
|
$1.36 |
|
$1.19 |
|
$1.34 |
|
o C3 (per lb) |
$1.97 |
|
$2.20 |
|
$2.08 |
|
$2.19 |
|
- Realized price (per lb) |
$2.77 |
|
$2.62 |
|
$2.65 |
|
$2.73 |
|
GOLD |
|
|
|
|
|
|
|
|
- Production (ounces) 7 |
72,926 |
|
70,120 |
|
196,365 |
|
179,124 |
|
- Sales (ounces)5,7 |
78,013 |
|
71,664 |
|
206,386 |
|
175,376 |
|
- Financial Highlights
- Sales revenues for the quarter of $1,402 million, an increase
of 42% from the comparable period of 2019, were primarily driven by
the commercial sales volumes of copper and gold from Cobre Panama,
increased sales volumes at Kansanshi and higher realized metal
prices.
- $452 million of cash flows from operating activities ($0.66 per
share1) generated during the quarter, a significant increase from
the same period of 2019.
- Gross profit of $346 million for the quarter compared to $150
million for the same period in 2019.
- Comparative EBITDA1 of $641 million for the quarter compared to
$354 million for the same period in 2019.
- Realized price for copper of $2.64 per lb for the quarter, 6%
higher than the same period in 2019. This compares to an increase
of 13% in the London Metal Exchange (“LME”) average copper price,
to $2.96 per lb, for the same period.
- The Company’s copper sales hedge program reduced sales revenues
by $51 million ($0.12 per lb) in the quarter, while the nickel
sales hedge program contributed $2 million to sales revenues.
- Net debt decreased during the quarter by $113 million to $7,545
million at September 30, 2020.
- Ended the quarter with $915 million in net unrestricted cash
and cash equivalents, current working capital of $1,132 million and
in full compliance with all financial covenants.
- On October 1, 2020, the Company completed the offering of $1.5
billion of Senior Notes due 2027 (“the Offering”). Interest will
accrue at the rate of 6.875% per annum and will be payable
semi-annually. The proceeds of the Offering were used towards the
repayment of $650 million principal amount under the Company’s
existing revolving credit facility, and the redemption in full of
the Company’s outstanding Senior Notes due 2022. On September 18,
2020, the Company issued a notice of redemption of the 7.25% Senior
Notes due 2022, and redemption at par was completed on October 19,
2020.
- At October 28, 2020, the Company had hedge positions for
416,775 tonnes of copper using unmargined copper forward and zero
cost collar sales contracts with an average floor price of $2.79
per lb and maturities to December 2021. This represents
approximately half of the Company’s expected sales for the next 12
months.
|
Three months endedSeptember
30 |
Nine months endedSeptember
30 |
(U.S. dollars millions, except where noted otherwise) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
Sales revenues |
1,402 |
|
987 |
|
3,598 |
|
2,783 |
|
Gross profit |
346 |
|
150 |
|
634 |
|
531 |
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to shareholders of
the Company |
29 |
|
(73 |
) |
(189 |
) |
58 |
|
Company |
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share |
$0.04 |
|
($0.11 |
) |
($0.27 |
) |
$0.08 |
|
|
|
|
|
|
|
|
|
|
Comparative EBITDA1,6 |
641 |
|
354 |
|
1,427 |
|
1,098 |
|
Comparative earnings (loss)1 |
64 |
|
32 |
|
(99 |
) |
214 |
|
Comparative earnings (loss) per share1 |
$0.09 |
|
$0.05 |
|
($0.14 |
) |
$0.31 |
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities |
452 |
|
151 |
|
1,080 |
|
489 |
|
Cash flow from operating activities per share1 |
$0.66 |
|
$0.22 |
|
$1.57 |
|
$0.71 |
|
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.3AISC,
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 September 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 nine months ended September 30, 2020 (nil and
1,182 tonnes for the three and nine months ended September 30,
2019, respectively).5Excludes refinery-backed gold credits
purchased and delivered under the precious metal streaming
arrangement.6Adjustments to comparative EBITDA in the third 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 2019).7Cobre Panama declared commercial production
effective September 1, 2019. Copper production volumes includes
pre-commercial production from Cobre Panama of 36,783 tonnes and
67,704 tonnes for the three and nine months ended September 30,
2019, respectively. Copper sales volumes include pre-commercial
sales from Cobre Panama of 42,425 tonnes and 48,967 tonnes for the
three and nine months ended September 30, 2019, respectively. Gold
production volumes includes pre-commercial production from Cobre
Panama of 13,570 ounces and 24,120 ounces for the three and nine
months ended September 30, 2019, respectively. Gold sales volumes
include pre-commercial sales from Cobre Panama of 16,032 ounces and
18,659 ounces for the three and nine months ended September 30,
2019, respectively. Pre-commercial production and sales volumes at
Cobre Panama are not included in earnings, C1, C3 and AISC
calculations.
The Company remains focused on ensuring the
health and safety of the workforce and continuing measures to
prevent and manage transmission of COVID-19 amongst the workforce
and the wider community. 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, health
protocols are in place for control, isolation and quarantine as
necessary and these continue to be reviewed and adjusted as
necessary with circumstances at each location.
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 its sites in compliance with both local
and international guidelines. These health protocols measures
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.
COVID-19 had a direct impact at Cobre Panama
where the operation was placed on preservation and safe maintenance
beginning April 7, 2020 following Panamanian government
restrictions related to COVID-19. On July 7, 2020, the Company
announced the resumption of normal operations and full production
levels were achieved ahead of expectation, on August 8, 2020. Cobre
Panama continues to operate while adhering to the strictest
protocols that have been implemented to protect the health of the
workforce and communities.
The Company’s other operations have not been
significantly impacted by restrictions arising from COVID-19. The
Company has not experienced any significant disruption to supply
chains and product shipments since the onset of the pandemic. The
Company is working to manage the logistical challenges presented by
the closure of trade borders, using alternative routes where
feasible. Border restrictions, if ongoing, could result in supply
chain delays.
2020 Guidance Revisions
Guidance provided below is based on a number of
assumptions and estimates as of September 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.
Guidance has been increased for copper
production to between 750,000 and 785,000 tonnes, an increase of
25,000 to the lower range and 15,000 tonnes to the upper range and
gold production to between 245,000 and 260,000 ounces, an increase
of 15,000 ounces to the lower range and 10,000 ounces to the upper
range. Guidance on Ravensthorpe production has been reduced to
between 13,000 to 15,000 tonnes of nickel.
Cash costs guidance, including Cobre Panama, has been narrowed
for C1 Cost to $1.20 per lb to $1.30 per lb, a reduction of $0.05
per lb to the upper end range and reduced for AISC to $1.60 per lb
to $1.70 per lb, a reduction of $0.05 per lb to the lower range and
$0.10 per lb to the upper range.
The improved guidance reflects the lower operating cost
environment, with favourable foreign exchange movements, lower fuel
prices, and other cost control measures, coupled with the impact of
higher gold prices.
Total capital expenditure guidance is unchanged
at $675 million.
Production guidance |
|
|
|
2020 |
2020 |
000’s |
Previous guidance |
Updated guidance |
|
|
|
Copper (tonnes) |
725 – 770 |
750 – 785 |
Gold
(ounces) |
230 – 250 |
245 – 260 |
Nickel (tonnes) |
15 – 17 |
13 – 15 |
Production guidance by operation |
|
|
|
|
|
Copper |
|
|
|
2020 |
2020 |
000’s tonnes |
Previous guidance |
Updated guidance |
|
|
|
Cobre
Panama |
180 – 200 |
190 – 205 |
Kansanshi |
220 – 235 |
220 – 230 |
Sentinel |
230 – 240 |
240 – 250 |
Las
Cruces |
52 |
55 |
Other sites |
43 |
45 |
Gold |
|
|
|
2020 |
2020 |
000’s ounces |
Previous guidance |
Updated guidance |
|
|
|
Cobre
Panama |
70 – 80 |
75 – 85 |
Kansanshi |
120 – 130 |
125 – 130 |
Other sites |
40 |
45 |
Nickel |
|
|
|
2020 |
2020 |
000’s tonnes |
Previous guidance |
Updated guidance |
|
|
|
Ravensthorpe |
15 – 17 |
13 – 15 |
Cash cost and all-in sustaining cost
|
2020 |
2020 |
Copper |
Previous guidance |
Updated guidance |
|
|
|
C1
(per lb) |
$1.20 - $1.35 |
$1.20 – $1.30 |
|
|
|
AISC (per lb) |
$1.65 - $1.80 |
$1.60 – $1.70 |
Interest Net
interest expense for the quarter ended September 30, 2020, was $179
million. A significant proportion of the Company’s interest expense
is incurred in jurisdictions where no tax credit is recognized.
Interest expense for the full year 2020 remains unchanged and is
expected to range between $770 million and $810 million. This
includes interest accrued on related party loans to Cobre Panama
and a finance cost accreted on the precious metal streaming
arrangement.
TaxExcluding Cobre Panama and the impact of
interest expense, the effective tax rate for 2020 is expected to be
approximately 35% reflecting the impact of the Company’s sales
hedge program which is not tax effected.
DepreciationDepreciation expense for the
quarter was $323 million. The full year 2020 depreciation expense
is expected to be approximately $1,250 million, unchanged from
previous disclosure.
Complete Financial Statements
and Management’s Discussion and Analysis
The complete Consolidated Financial Statements and Management’s
Discussion and Analysis for the period ended September 30, 2020 are
available at www.first-quantum.com and should be read in
conjunction with this news release.
The Company will host a conference call and webcast to discuss
the results. Conference call and webcast details are as
follows:
Date: |
October 29, 2020 |
|
|
Time: |
9:00 am (EDT); 1:00 pm (BT);
6:00 am (PDT) |
|
|
Webcast: |
www.first-quantum.com |
|
|
Dial in: |
North America (toll free):
(877) 291-4570 |
|
North America and
international: (647) 788-4919 |
|
|
Replay: |
Available from noon (EDT) on
October 29, 2020 until 11:59 pm (EDT) on November 12, 2020 |
|
North America (toll free):
(800) 585-8367 |
|
North America and
international: (416) 621-4642 |
|
|
Passcode: |
4678165 |
|
|
For further information visit our website at
www.first-quantum.com
North American contact: Lisa Doddridge, Director,
Investor RelationsTel: (416) 361-6400 Toll-free: 1 (888) 688-6577
United Kingdom contact: Clive Newall, PresidentE-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,
nickel, silver, iron, cobalt, pyrite, zinc 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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