(In United States dollars, except where noted otherwise)
TORONTO, July 25, 2023 (GLOBE NEWSWIRE) -- First Quantum Minerals Ltd. (“First Quantum” or “the Company”) (TSX: FM) today reports results for the three months ended June 30, 2023 (“Q2 2023” or the "second quarter") of net earnings attributable to shareholders of the Company of $93 million ($0.13 earnings per share) and adjusted earnings1 of $85 million ($0.12 adjusted earnings per share2).
“After a challenging start to the year, it is pleasing to see the improvements at our three largest operations. During the second quarter, Sentinel achieved its highest monthly production for the year in May and Cobre Panamá and Kansanshi achieved the same records in June. We remain well on track for a stronger performance in the second half of the year. Our brownfield projects achieved important milestones during the quarter with the Enterprise project producing first nickel concentrate and both Enterprise and the CP100 Expansion periodically demonstrating nameplate capacity,” commented Tristan Pascall, Chief Executive Officer. “While we expect the positive operational momentum to continue into the second half of the year, we are cognizant of the global economic slowdown. I believe that we are well-positioned to navigate through the near-term challenges with our focus on improving productivity and unit costs.”
Q2 2023 SUMMARY
In Q2 2023, First Quantum reported gross profit of $265 million, EBITDA1 of $568 million, net earnings attributable to shareholders of $0.13 per share, and adjusted earnings of $0.12 per share2. Relative to the first quarter of this year (“Q1 2023”), second quarter financial results benefitted from higher copper sales volumes and lower input costs, which was partially offset by lower realized copper and nickel prices.
Total copper production for the second quarter was 187,175 tonnes, a 35% increase from Q1 2023. The quarter-over-quarter increase in production was attributable to an improvement in grades at Cobre Panamá, Kansanshi and Sentinel and higher throughput at Cobre Panamá and Sentinel.
Copper C1 cash cost2 of $1.98 per lb for Q2 2023 was $0.26 per lb lower than Q1 2023. The improvement in copper C1 cash costs2 was related to improved production volumes and lower fuel and explosive costs.
Production at the three major copper operations is expected to be higher in the second half of the year. Guidance for copper, gold and nickel production remains unchanged, however full year production for each metal is expected to be towards the lower end of guidance to reflect year-to-date production. C1 cash cost2 and AISC2 for both copper and nickel remains unchanged. Unit cash costs2 are expected to decrease in the second half of the year with higher production and are expected to be towards the upper end of guidance for the full year.
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1 EBITDA and adjusted earnings are non-GAAP financial measures. These measures do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures”.
2 Adjusted earnings per share, copper C1 cash cost (copper C1), and all-in sustaining costs (AISC) are non-GAAP ratios which do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures”.
Q2 2023 OPERATIONAL HIGHLIGHTS
Total copper production for Q2 2023 was 187,175 tonnes, up from the 138,753 tonnes reported in Q1 2023 as each of the Company's three largest operations reported improved grades during the period. Copper sales volumes in Q2 2023 totalled 177,362 tonnes, 9,813 tonnes lower than production.
- Cobre Panamá produced 90,086 tonnes of copper in Q2 2023, an increase of 24,659 tonnes from the previous quarter as the current quarter saw improved grades and higher tonnes milled from the continued successful ramp-up of the CP 100 Expansion project. Copper C1 cash cost3 of $1.71 per lb was $0.06 per lb higher than the previous quarter due lower gold by-product credits. 2023 Production guidance for Cobre Panamá remains unchanged at 350,000 to 380,000 tonnes of copper and 140,000 to 160,000 ounces of gold. For the full year 2023, grades and recoveries are expected to be broadly consistent with 2022 regardless of the increased processing throughput, with some fluctuation from quarter to quarter. Ramp-up of the CP100 Expansion continues, with the expansion facilities periodically demonstrating nameplate capacity during the second quarter, and the expansion to 100 million tonnes per annum ("Mtpa") remains on schedule for the end of 2023. Significant progress has been made on the pre-strip work for the Colina pit and earthworks for the associated overland conveyor and in-pit crushing facility. The first crusher at Colina is expected to be commissioned in 2024. Construction of the molybdenum recovery circuit is progressing well with completion of construction and commencement of commissioning expected by the end of 2023 with first molybdenum concentrate production to commence in the first quarter of 2024.
- Kansanshi’s copper production of 34,657 tonnes in Q2 2023 was 5,974 tonnes higher than the previous quarter. Kansanshi production improved in the second quarter with mining cutbacks at elevated benches with historically higher grades, which will continue to be the focus for the remainder of the year. Copper C1 cash cost1 of $2.36 per lb was $0.52 lower than Q1 2023 mainly due to lower fuel costs and improved production volumes. Production in 2023 is expected to be at the lower end of the guidance range of 130,000 to 150,000 tonnes of copper and 95,000 to 105,000 ounces of gold. Mining fleet deployment changes over the past six months have enabled the operation to open up mining areas, placing less reliance on low-grade ore stockpiles. Additionally, mining will focus on cutbacks M15 and M17 at upper elevations in the main pit, where mineralization is predominantly disseminated in stratigraphy and with wider veins, and therefore higher grades. This will continue to be a focus for the remainder of the year, which will benefit production through the rest of 2023.
- Sentinel reported copper production of 54,045 tonnes in Q2 2023, 17,813 tonnes higher than the previous quarter as the operation saw steady improvement after the impact of record heavy rains experienced in the first quarter. Mining activities continued to be impacted by excess water in the pit until mid-May when dewatering activities reduced water levels in the pit, allowing operations to regain access to higher-grade ore. Copper C1 cash cost1 of $2.04 per lb was $0.66 per lb lower than the preceding quarter, reflecting lower fuel costs and higher production volumes. As a result of the challenges encountered at the start of the year, copper production for 2023 is expected to be toward the lower end of guidance of 260,000 to 280,000 tonnes. A drilling contractor will be deployed from July alongside the Company’s own drill rigs to increase stocks of broken material. The focus will remain on blast quality to improve fragmentation and mine-to-mill optimization. Production is expected to continue to improve in the second half of the year with improved milling rates in line with the comparable period in 2022 and with ground water now under control, providing full access to high-grade ore. Grade improvement is expected to continue for the rest of the year.
- At Enterprise, first production of nickel concentrate was achieved in the second quarter, with nameplate capacity of the process plant temporarily demonstrated during the second quarter, and first concentrate sale is expected in the third quarter of 2023. The ramp-up continues to commercial production and full plant throughput in 2024. Oxide material is impacting recoveries of the plant and the ore profile has been updated to reflect the classification of material. 2023 production for Enterprise is expected to be at the lower end of guidance of 5,000 – 10,000 contained tonnes of nickel.
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1 C1 cash costs (C1) is a non-GAAP ratio which does not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures”.
COBRE PANAMÁ UPDATE
On March 8, 2023, the Company and the Government of Panamá (the "GOP") reached an agreement in respect of the terms and conditions for a Refreshed Concession Contract, which is subject to approval by law. The Refreshed Concession Contract provides for an initial 20-year term with a 20-year extension option and possible additional extensions for life of mine. The Refreshed Concession Contract has been signed by the GOP and the Company on June 26, 2023, having completed the public consultation process, and is currently under the ordinary course of business review by the National Comptroller prior to its countersignature. Once counter signed by the Comptroller, it is expected to be presented before the National Assembly of Panamá during the current legislative term that commenced on July 1, 2023.
Once the agreement is signed and passed into law as expected, payments to cover taxes and royalties up to the year-end 2022 of approximately $395 million are expected to be made within 30 days of the Refreshed Concession Contract being enacted into law. In addition, past due amounts payable for 2023 corporate tax instalments, withholding taxes and quarterly royalty payments will also be due 30 days after being enacted, without penalty or interest. It is intended that the charge relating to taxes and royalties up to the year-end 2022 be excluded from 2023 adjusted earnings. The expected taxes and royalties to the GOP relating to 2023 is $375 million.
BROWNFIELD PROJECTS
Construction work for the CP100 Expansion project was completed and commissioned in the first quarter. With the expansion facilities periodically demonstrating nameplate capacity in the second quarter, the ramp up to a throughput rate of 100 Mtpa remains on schedule for the end of 2023.
At the S3 Expansion, detailed design is progressing well. Long-lead mining fleet and long-lead process plant equipment have been ordered with deliveries expected to commence in the second half of 2023. Overall project procurement is approximately 33% committed as at the end of the quarter. The majority of the capital spend on the S3 Expansion is expected in late-2023 and 2024.
At Enterprise, nameplate capacity of the process plant was temporarily demonstrated during the second quarter. First production of nickel concentrate was achieved in the second quarter and first concentrate sale is expected in the third quarter of 2023. The ramp-up continues to commercial production and full plant throughput in 2024.
At the Las Cruces Underground Project, work continues to advance with the release of the NI 43-101 Technical Report on Reserves and Resources expected later in the year. The proposed underground project involves supplementing the existing copper facilities at Las Cruces with additional processing capacity for zinc, silver and lead. The Las Cruces Underground Project is awaiting Board approval, which is not expected before the end of 2023 and will take into consideration prevailing economic conditions and the Company's debt reduction objectives.
GREENFIELD PROJECTS
The primary Environmental and Social Impact Assessment (“ESIA”) for Taca Taca was submitted to the Secretariat of Mining of Salta Province in 2019 and supplementary information on tailings and waste management were filed to the authority during 2022. As a part of the revision process, in June 2023, the Company received a second set of observations to the ESIA and is currently working to provide the requested information. Approval of the ESIA is expected in 2023. The Phase III groundwater exploration campaign successfully concluded during the second quarter of 2023, with eighteen pumping wells constructed and tested, obtaining positive results. The initial water use permit applications were submitted during the second quarter of 2023 and the remaining will be submitted progressively in 2023.
At Haquira, negotiations for land access to support a drill program were resumed during the second quarter and agreements were reached with three local communities. The Company is working on upgrading camp facilities, preparing required logistics including local suppliers and workers, renewing and/or progressing applicable environmental permits, and formalizing access contracts, with the aim of starting an in-fill drilling campaign at Haquira East deposit during the second half of 2023. The Company hopes to resume land access discussions with the remaining communities to extend the drilling program into Haquira West and other targets in the area of the project.
FINANCIAL HIGHLIGHTS
- Gross profit for the second quarter of $265 million was 5% lower than Q1 2023 due to higher depreciation, while EBITDA4 of $568 million for the same period was 10% higher due to higher sales volumes, partially offset by lower realized metal prices.
- Cash flows from operating activities of $719 million ($1.04 per share5) for the quarter were $420 million higher than Q1 2023 due mainly to working capital movements related to trade and other receivables and trade and other payables.
- Net debt1 decreased by $130 million during the quarter, taking the net debt1 balance to $5,650 million as at June 30, 2023. As at June 30, 2023, total debt was $6,528 million (March 31, 2023, total debt was $6,878 million). The decrease in net debt1 and total debt1 was attributable to the favourable timing of working capital cash flows.
- On May 17, the Company announced an offering of $1.3 billion of Senior Notes due 2031. Proceeds from the offering was used towards the repayment of $970 million of the Company’s existing revolving credit facility and a $300 million redemption of the Company’s outstanding Senior Notes due 2025.
- On July 25, the Company announced an interim dividend of CDN$0.08 per share, in respect of the financial year ended December 31, 2023 (July 26, 2022: CDN$0.16 per share), to be paid on September 19, 2023 to shareholders of record on August 28, 2023.
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1 EBITDA is a non-GAAP financial measures and net debt is a supplementary financial measure. These measures do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures”
2 Cash flows from operating activities per share, copper C1 cash cost (copper C1), and copper all-in sustaining cost (copper AISC) are non-GAAP ratios which do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures”.
CONSOLIDATED OPERATING HIGHLIGHTS
| QUARTERLY | ||||||
| Q2 2023 | Q1 2023 | Q2 2022 | ||||
| Copper production (tonnes)1 | 187,175 | 138,753 | 192,668 | |||
| Cobre Panamá | 90,086 | 65,427 | 90,778 | |||
| Kansanshi | 34,657 | 28,683 | 39,719 | |||
| Sentinel | 54,045 | 36,232 | 52,447 | |||
| Other Sites | 8,387 | 8,411 | 9,724 | |||
| Copper sales (tonnes) | 177,362 | 150,287 | 187,642 | |||
| Cobre Panamá | 86,964 | 70,028 | 90,568 | |||
| Kansanshi2 | 30,732 | 31,538 | 35,966 | |||
| Sentinel | 51,135 | 40,313 | 50,912 | |||
| Other Sites | 8,531 | 8,408 | 10,196 | |||
| Gold production (ounces) | 52,561 | 47,874 | 74,959 | |||
| Cobre Panamá | 28,994 | 23,878 | 36,931 | |||
| Kansanshi | 16,346 | 15,960 | 27,937 | |||
| Guelb Moghrein | 6,686 | 7,585 | 9,060 | |||
| Other sites | 535 | 451 | 1,031 | |||
| Gold sales (ounces)3 | 48,640 | 51,941 | 69,998 | |||
| Cobre Panamá | 26,881 | 28,853 | 35,251 | |||
| Kansanshi | 15,825 | 17,244 | 26,775 | |||
| Guelb Moghrein | 5,233 | 5,482 | 6,974 | |||
| Other sites | 701 | 362 | 998 | |||
| Nickel production (contained tonnes)4 | 5,976 | 5,917 | 4,853 | |||
| Nickel sales (contained tonnes) | 5,906 | 5,846 | 2,892 | |||
| Cash cost of copper production (C1) (per lb)5,6 | $ | 1.98 | $ | 2.24 | $ | 1.74 |
| Total cost of copper production (C3) (per lb)5,6,7 | $ | 2.92 | $ | 3.30 | $ | 2.73 |
| Copper all-in sustaining cost (AISC) (per lb)5,6,7 | $ | 2.64 | $ | 2.87 | $ | 2.37 |
1 Production is presented on a contained basis, and is presented prior to processing through the Kansanshi smelter.
2 Sales include third-party sales of concentrate, cathode and anode attributable to Kansanshi. 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 8,821 tonnes for the three months ended June 30, 2023 (580 tonnes for the three months ended June 30, 2022).
3 Excludes refinery-backed gold credits purchased and delivered under the precious metal streaming arrangement (see “Precious Metal Stream Arrangement”).
4 Nickel production includes 220 tonnes of pre-commercial production from Enterprise, which is not included in earnings or C1, C3 and AISC calculations.
5 Copper all-in sustaining cost (copper AISC), copper C1 cash cost (copper C1), and total cost of copper (copper C3) are non-GAAP ratios, which do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures”.
6 Excludes the sale of copper anode produced from third-party concentrate purchased at Kansanshi. Sales of copper anode attributable to third party concentrate purchases were 8,821 tonnes for the three months ended June 30, 2023 (580 tonnes for the three months ended June 30, 2022).
7 Copper C3 and AISC for the three months ended June 30, 2023 exclude $18 million royalty attributable to ZCCM-IH relating to the year ended December 31, 2022.
REALIZED METAL PRICES1
| QUARTERLY | |||||||||
| Q2 2023 | Q1 2023 | Q2 2022 | |||||||
| Average LME copper cash price (per lb) | $ | 3.84 | $ | 4.05 | $ | 4.31 | |||
| Realized copper price (per lb) | $ | 3.75 | $ | 3.95 | $ | 4.19 | |||
| Treatment/refining charges (“TC/RC”) (per lb) | $ | (0.15 | ) | $ | (0.14 | ) | $ | (0.14 | ) |
| Freight charges (per lb) | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.03 | ) |
| Net realized copper price1 (per lb) | $ | 3.57 | $ | 3.79 | $ | 4.02 | |||
| Average LBMA cash price (per oz) | $ | 1,976 | $ | 1,890 | $ | 1,872 | |||
| Net realized gold price1,2 (per oz) | $ | 1,797 | $ | 1,766 | $ | 1,736 | |||
| Average LME nickel cash price | $ | 10.12 | $ | 11.79 | $ | 13.13 | |||
| Net realized nickel price1 | $ | 9.50 | $ | 10.25 | $ | 10.09 | |||
| 1 | Realized metal prices are a non-GAAP ratio, do not have standardized meanings under IFRS and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures” for further information. |
| 2 | Excludes gold revenues recognized under the precious metal stream arrangement. |
CONSOLIDATED FINANCIAL HIGHLIGHTS
QUARTERLY Q2 2023Q1 2023Q2 2022Sales revenues 1,651 1,558 1,904 Gross profit 265 280 629 Net earnings attributable to shareholders of the Company 93 75 419 Basic earnings per share$0.13 $0.11 $0.61 Diluted earnings per share$0.13 $0.11 $0.60 Cash flows from operating activities 719 299 904 Net debt1 5,650 5,780 5,339 EBITDA2,3 568 518 906 Adjusted earnings2 85 76 337 Adjusted earnings per share4$ 0.12 $ 0.11 $ 0.49 Realized copper price (per lb)4$ 3.75 $ 3.95 $ 4.19 Net earnings attributable to shareholders of the Company 93 75 419 Adjustments attributable to shareholders of the Company: Adjustment for expected phasing of Zambian value-added tax (“VAT”) receipts (31) (23) 106 Total adjustments to EBITDA2 excluding depreciation 15 22 (238)Tax and minority interest adjustments 8 2 50 Adjusted earnings2 85 76 3371 Net debt is a supplementary financial measure which does not have a standardized meaning under IFRS, and might not be comparable to similar financial measures disclosed by other issuers. See “Regulatory Disclosures.
2 EBITDA and adjusted earnings are non-GAAP financial measures, which do not have a standardized meaning under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Adjusted earnings have been adjusted to exclude items from the corresponding IFRS measure, net earnings attributable to shareholders of the Company, which are not considered by management to be reflective of underlying performance. The Company has disclosed these measures to assist with the understanding of results and to provide further financial information about the results to investors and may not be comparable to similar financial measures disclosed by other issuers. The use of adjusted earnings and EBITDA represents the Company’s adjusted earnings metrics. See “Regulatory Disclosures”.
3 Adjustments to EBITDA in 2023 relate principally to royalties payable to ZCCM-IH for the year ended December 31, 2022, and foreign exchange revaluations (2022 - foreign exchange revaluations).
4 Adjusted earnings per share, realized metal prices, copper all-in sustaining
