First Quantum reports Q2 2020 copper output was comparable to Q2 2019 tonnage; net loss widens

COVID-19 crisis hit hardest the Company’s Cobre Panama mine where 5 workers have lost their lives due to illness

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 loss of $84 million ($0.12 loss per share), net loss attributable to shareholders of the Company of $156 million ($0.23 loss per share) and cash flows from operating activities of $155 million ($0.23 per share).

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.

“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.”

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.

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