(In United States dollars, except where noted otherwise)
TORONTO, Feb. 20, 2024 (GLOBE NEWSWIRE) — First Quantum Minerals Ltd. (“First Quantum” or “the Company”) (TSX:FM) today reports results for the three months ended December 31, 2023 (“Q4 2023” or the “fourth quarter”) of a net loss attributable to shareholders of the Company of $1,447 million ($2.09 loss per share) and an adjusted loss1 of $259 million ($0.37 adjusted loss per share2). For the year ended December 31, 2023, the Company reported a net loss attributable to shareholders of the Company of $954 million ($1.38 basic loss per share) and adjusted earnings1 of $261 million ($0.38 adjusted earnings per share2).
“2023 closed with the Company facing one of its biggest challenges in recent history. However, I am confident in the resilience of First Quantum and the determination of our teams to work through these challenges. The Company continues to take a proactive approach to managing its balance sheet and addressing its liquidity in a fulsome and disciplined manner. As a continuation of these efforts, it is pleasing to share that since the reporting period, the Company has signed a $500 million copper prepay arrangement at competitive terms with Jiangxi Copper. This arrangement is a reminder of the strategic nature of copper as supply challenges abound across the sector. Constructive discussions with our lenders for an amendment and extension of our loan facilities, which are an important component to our fulsome solution, are well-advanced and there is a high degree of alignment among all parties. We continue with sales processes for some of our smaller assets and minority stake sales in our larger assets, with strong interest from highly credible counterparties for both,” commented Tristan Pascall, Chief Executive Officer of First Quantum. “In Zambia, we continue to be confident in the investment climate in the country and, as such, we remain committed to our investment in the S3 Expansion, which is expected to generate significant free cash flow once operational in the second half of 2025. At Cobre Panamá, the blockades around the mine have dissipated, allowing for critical supply deliveries by port and by road. We continue to work closely with local authorities in order to ship the concentrate stockpile from the site, which is required to fund critical environmental work. We remain focused on the preservation, safe and responsible stewardship of Cobre Panamá. Finally, I would like to thank everybody at First Quantum for their continued perseverance and hard work in these challenging times.”
Q4 2023 SUMMARY
In Q4 2023, First Quantum reported gross profit of $87 million, EBITDA1 of $273 million, a net loss attributable to shareholders of $2.09 per share, and an adjusted loss per share2 of $0.37. Relative to the third quarter of 2023 (“Q3 2023”), fourth quarter financial results were negatively impacted by the disruptions experienced at the Cobre Panamá mine which led to the mine being placed in a phase of Preservation and Safe Management (“P&SM”). In addition, disruptions at the mine’s port prevented the shipment of concentrates since the beginning of November last year.
Total copper production for the fourth quarter was 160,200 tonnes, a 28% decrease from Q3 2023. The quarter-over-quarter decrease in production was attributable to lower production at all three of the Company’s main operations, mainly Cobre Panamá. Copper C1 cash cost2 of $1.82 per lb for Q4 2023 was $0.40 per lb higher than in Q3 2023 due to lower production and higher electricity costs at the Zambian operations following the signing of the new ZESCO agreement, mitigated by lower maintenance costs.
Three-year guidance on production, copper C1 cash costs1, copper all-in sustaining costs (“AISC”)1 and capital expenditures that were previously disclosed on January 15, 2024 remain unchanged and exclude Cobre Panamá. For 2024, copper production is forecast to be 370,000 to 420,000 tonnes while copper C1 cash costs1 are guided to be $1.80 to $2.05 per lb. Capital cost guidance for 2024 is expected to be between $1,250 million and $1,400 million.
____________________________________
1 EBITDA and adjusted earnings (loss) 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 (loss) per share and copper C1 cash cost (copper C1) 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”.
Q4 2023 OPERATIONAL HIGHLIGHTS
Total copper production for the fourth quarter was 160,200 tonnes, a 28% decrease from Q3 2023. The quarter-over-quarter decrease in production was impacted by the ramp down in operations at Cobre Panamá to a phase of P&SM due to illegal blockades around the mine site while lower production at Kansanshi and Sentinel also contributed to the decline. Copper sales volumes in Q4 2023 totaled 127,721 tonnes, approximately 32,479 tonnes lower than production, mainly due to port disruptions at Cobre Panamá that prevented the shipment of copper concentrates.
Cobre Panamá produced 62,616 tonnes of copper in Q4 2023, a decrease of 50,118 tonnes from the previous quarter as production was suspended at the end of November 2023 due to illegal blockades at the Punta Rincón port and at the roads to the site that prevented the delivery of supplies that were necessary to operate the power plant. Prior to the disruptions from the illegal blockades, Cobre Panamá operated at an annualized throughput rate of 93 million tonnes for the month of October. This, combined with higher grades and improving recoveries, allowed the operation to achieve monthly record production of 41,543 tonnes. Copper production for the full year 2023 was 330,863 tonnes, down from 350,438 tonnes in 2022. Copper C1 cash cost1 of $1.45 per lb was $0.26 per lb higher than the previous quarter due to lower copper production volumes and lower gold by-product credits. 2024 production guidance for Cobre Panamá has been suspended as the site currently remains in a phase of P&SM. At the request of the Ministry of Commerce and Industries (“MICI”), Cobre Panamá delivered a preliminary draft for the first phase of P&SM on January 16, 2024. Previous illegal blockages around the mine have dissipated, allowing for the delivery by road and at port of necessary supplies to conduct the P&SM program. The associated costs for the program are estimated at $15 to $20 million per month and further reductions could follow depending on environmental stewardship programs. Approximately 121 thousand dry metric tonnes of copper concentrate remains onsite following disruptions at the Punta Rincón port. The sale of this concentrate will result in a net cash inflow of approximately $225 million at current market prices.
Kansanshi’s copper production of 31,887 tonnes in Q4 2023 was 7,713 tonnes lower than the previous quarter as a result of lower throughput, grades and recoveries across all three circuits. Lower throughput was primarily due to mining constraints in M17 resulting in slower mining rates and the stockpiling of material from M15 and M17 due to acid volume restrictions. Kansanshi’s production for 2023 of 134,827 tonnes was within the revised guidance range of 130,000 to 140,000 tonnes. Copper C1 cash cost1 of $2.43 per lb was $0.80 higher than Q3 2023 mainly due to lower copper production volumes. Production guidance for 2024 is expected to be 130,000 to 150,000 tonnes of copper and 65,000 to 75,000 ounces of gold.
Sentinel reported copper production of 59,964 tonnes in Q4 2023, 3,841 tonnes lower than the previous quarter mainly due to lower throughput as production continued to be impacted by the mining of very hard rock from the lower levels in Stages 1 and 2 of the open pit. Mining productivity, however, continued to improve during the quarter with improved blast fragmentation and reduced congestion with the commencement of the Stage 3 (Western Cut-back) mining. Sentinel copper production for 2023 of 214,046 tonnes was lower than the revised guidance range of 220,000 to 230,000 tonnes. Copper C1 cash cost1 of $1.85 per lb was $0.20 per lb higher than the preceding quarter, reflecting higher electricity prices. Copper production guidance for 2024 is 220,000 to 250,000 tonnes. The major focus for 2024 at Sentinel will be on the development of Stage 3 (Western Cut-back) in order to enable improved mining productivities and increased availability of softer material from higher elevations. The wet weather preparations and improved storm water management processes have been implemented to mitigate the risk of water accumulation as experienced in previous raining seasons.
Enterprise produced 2,751 tonnes of nickel during the fourth quarter, an increase from 1,556 tonnes in Q3 2023 as the operation continues to ramp up. Production guidance in 2024 for Enterprise is 10,000 to 20,000 contained tonnes of nickel. Commercial production and full plant throughput is expected in 2024.
At Ravensthorpe, as previously announced, a decision was made subsequent to the year-end to scale back mining operations and associated processing activities as a result of continued low nickel prices. A new operating plan has been developed under which Ravensthorpe aims to maintain production from ore stockpiles and suspend mining from the Shoemaker Levy ore body. The high-pressure acid leach circuit will also be bypassed and ore will be exclusively processed through the atmospheric leach circuits. Production from existing ore stockpiles is expected for 18 months after which time, mining at Hale Bopp and Halley’s ore bodies is expected to commence.
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1 Copper C1 cash costs (C1), and copper all-in sustaining costs (AISC) are 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”.
FINANCIAL HIGHLIGHTS
Compared to Q3 2023, fourth quarter financial results were considerably weaker due to the suspension of production at the Cobre Panamá mine at the end of November 2023 when the mine was placed in P&SM. Financial results were also impacted by approximately 121 thousand dry metric tonnes of copper concentrate that remains unsold from Cobre Panamá as a result of the disruptions at the Punta Rincón port. An impairment charge of $900 million was recognized which includes $854 million at Ravensthorpe as a result of significant margin pressure due to weak nickel prices, lower payabilities and high operating costs. Impairment expenses also include $46 million in respect of exploration assets.
The Company’s total and net debt1 increased during the fourth quarter due to a one-time payment of $567 million to the Government of Panama on November 16, 2023 in respect to taxes and royalties for the period from December 2021 to October 2023.
Gross profit for the fourth quarter of $87 million was 87% lower than in Q3 2023, while EBITDA1 of $273 million for the same period was 72% lower.
Cash flows used by operating activities of $185 million ($0.27 per share2) for the quarter were $779 million lower than Q3 2023.
Net debt1 increased by $783 million during the quarter, taking the net debt1 balance to $6,420 million as at December 31, 2023. As at December 31, 2023, total debt was $7,379 million (total debt was $6,892 million at September 30, 2023).
An interim dividend of CDN$0.08 per share, in respect of the financial year ended December 31, 2023 was paid on September 19, 2023 to shareholders of record on August 28, 2023. On January 15, 2024, the Company announced that it has suspended its dividend as a result of Cobre Panamá being in a phase of P&SM.
The current situation at Cobre Panamá has impacted the EBITDA1 generating potential of the Company, putting at risk the Company’s ability to meet the net debt1 to EBITDA1 ratio covenant as defined in its current senior banking facilities. Current forecasts for 2024, before taking into account future balance sheet initiatives, indicate the Company may breach the prevailing net debt1 to EBITDA1 ratio covenant during the coming twelve months, and failure to address this would result in the existence of a material uncertainty that may cast a significant doubt about the Company’s ability to continue as a going concern. Accordingly, disclosure of this material uncertainty has been made in the notes to the consolidated financial statements.
Management has a strong expectation that the balance sheet initiatives initiated earlier this year will be realized in the near term. The disclosure of material uncertainty does not include potential changes in the Company’s covenants, which are materially advanced in discussions with the Company’s banking partners nor the financing initiatives described in more detail below, which would significantly reduce the risk of breaching covenants if realized.
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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, and copper C1 cash cost (copper C1) 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”.
BALANCE SHEET INITIATIVES
With Cobre Panamá in a phase of P&SM, the Company is employing a number of measures to prudently allow for the planned capital spending elsewhere across First Quantum’s business, most notably the S3 Expansion at Kansanshi, which will further strengthen cash flows when it is commissioned in 2025. The Company is advancing several initiatives in 2024 to give optionality and flexibility:
Copper prepayment agreement (“Prepayment Agreement”): After the reporting period, the Company signed a $500 million 3-year Prepayment Agreement with Jiangxi Copper at competitive rates. The agreement provides for the delivery of 50kt of copper anode per annum from Kansanshi payable at market prices. The prepaid amount will reduce in line with deliveries over the second and third years of the Prepayment Agreement. Proceeds will be used towards general corporate purposes and to increase liquidity.
Dividend suspension: On January 15, 2024, the Board suspended the semi-annual dividend. The Board will review the Company’s financial policy on an ongoing basis and adjust the dividend approach when appropriate.
Capital expenditure reductions: Planned capital programs across the Company were reduced or re-phased by approximately $400 million in 2024 and $250 million in 2025. The Company remains committed to delivering the S3 Expansion project at Kansanshi in 2025.
Operating costs and other reductions: Following a detailed review of all operating and administrative costs, the Company has identified savings which will offset recent inflationary pressures. The cost savings initiatives include a change in strategy at Ravensthorpe to temporarily remove higher cost production.
Working capital: The Company is also targeting reductions in working capital requirements and savings in the procurement of materials, supplies and third party service costs where possible.
Assets and stake sales: A sales process for the Las Cruces mine in Spain is well-advanced with strong interest given the strategic location and processing capabilities of the project. Following a number of inbound expressions of interest, the Company is evaluating the possibility of a minority investment by strategic investors in the Company’s Zambian business.
Financing activity: The Company continues to take a proactive approach to managing its balance sheet and the refinancing of its near-term debt maturities. An ongoing process between the Company and its banking partners is materially advanced, with a high degree of alignment regarding amendment and extension. A conclusion on these amendments is expected in the near term. The Company is also assessing a range of alternatives across the capital markets to maintain a robust financial position and preserve value for its shareholders.
CONSOLIDATED FINANCIAL HIGHLIGHTS
QUARTERLY
FULL YEAR
Q4 2023
Q3 2023
Q4 2022
2023
2022
Sales revenues
1,218
2,029
1,832
6,456
7,626
Gross profit
87
660
361
1,292
2,200
Net earnings (loss) attributable to shareholders of the Company
(1,447
)
325
117
(954
)
1,034
Basic earnings (loss) per share
($2.09
)
$0.47
$0.17
($1.38
)
$1.50
Diluted earnings (loss) per share
($2.09
)
$0.47
$0.17
($1.38
)
$1.49
Cash flows from (used by) operating activities3
(185
)
594
237
1,427
2,332
Net debt1
6,420
5,637
5,692
6,420
5,692
EBITDA1,2
273
969
647
2,328
3,316
Adjusted earnings (loss)1
(259
)
359
151
261
1,064
Adjusted earnings (loss) per share3
($0.37
)
$0.52
$0.22
$0.38
$1.54
Realized copper price (per lb)3
$3.62
$3.70
$3.56
$3.76
$3.90
Net earnings (loss) attributable to shareholders of the Company
(1,447
)
325
117
(954
)
1,034
Adjustments attributable to shareholders of the Company:
Adjustment for expected phasing of Zambian value-added tax (“VAT”) receipts
20
(15
)
56
(49
)
190
Ravensthorpe deferred tax charge
160
–
–
160
–
Total adjustments to EBITDA1 excluding depreciation2
1,031
61
6
1,129
(155
)
Tax adjustments
273
(12
)
(22
)
271
(7
)
Minority interest adjustments
(296
)
–
(6
)
(296
)
2
Adjusted earnings (loss)1
(259
)
359
151
261
1,064
1 EBITDA and adjusted earnings (loss) are non-GAAP financial measures, and net debt is a supplementary financial measure. These measures do not have a standardized meaning under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Adjusted earnings (loss) have been adjusted to exclude items from the corresponding IFRS measure, net earnings (loss) 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 (loss) and EBITDA represents the Company’s adjusted earnings (loss) metrics. See “Regulatory Disclosures”.
2 Adjustments to EBITDA in 2023 relate principally to an impairment expense of $854 million relating to Ravensthorpe and $46 million to exploration assets, royalty expense of $22 million related to 2022 pursuant to Law 406 and royalties payable to ZCCM-IH for the year ended December 31, 2022, foreign exchange revaluations and a restructuring expense of $49 million (2022 – foreign exchange revaluations and non-recurring costs relating to previously sold assets).
3 Adjusted earnings (loss) per share, realized metal prices, and cash flows from operating activities per share 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”.
4 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 10,965 tonnes and 40,134 tonnes for the fourth quarter and full year ended December 31, 2023, respectively, (8,651 and 13,379 tonnes for the fourth quarter and full year ended December 31, 2022).
CONSOLIDATED OPERATING HIGHLIGHTS
QUARTERLY
FULL YEAR
Q4 2023
Q3 2023
Q4 2022
2023
2022
Copper production (tonnes)1
160,200
221,550
206,007
707,678
775,859
Cobre Panamá
62,616
112,734
89,652
330,863
350,438
Kansanshi
31,887
39,600
34,802
134,827
146,282
Sentinel
59,964
63,805
73,409
214,046
242,451
Other Sites
5,733
5,411
8,144
27,942
36,688
Copper sales (tonnes)2
127,721
218,946
198,912
674,316
782,236
Cobre Panamá
35,809
113,616
85,330
306,417
343,448
Kansanshi2
31,295
41,820
32,496
135,385
159,007
Sentinel
55,112
58,600
71,642
205,160
241,162
Other Sites
5,505
4,910
9,444
27,354
38,619
Gold production (ounces)
53,325
73,125
70,493
226,885
283,226
Cobre Panamá
30,986
45,996
38,302
129,854
139,751
Kansanshi
16,718
19,946
24,479
68,970
109,617
Guelb Moghrein
5,327
6,765
7,434
26,363
30,845
Other sites
294
418
278
1,698
3,013
Gold sales (ounces)3
45,365
77,106
59,568
223,052
270,775
Cobre Panamá
19,861
45,959
34,208
121,554
134,660
Kansanshi
19,396
23,704
16,156
76,169
101,015
Guelb Moghrein
5,539
7,292
8,601
23,546
30,852
Other sites
569
151
603
1,783
4,248
Nickel production (contained tonnes)4
7,313
7,046
5,705
26,252
21,529
Nickel sales (contained tonnes)5
5,719
5,749
6,840
23,220
20,074
Cash cost of copper production (C1) (per lb)6,7,8
$1.82
$1.42
$1.86
$1.82
$1.76
Total cost of copper production (C3) (per lb)6,7,8
$2.77
$2.29
$2.79
$2.76
$2.73
Copper all-in sustaining cost (AISC) (per lb)6,7,8
$2.52
$2.02
$2.42
$2.46
$2.35
1 Production is presented on a contained basis, and is presented prior to processing through the Kansanshi smelter.
2 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 10,965 tonnes and 40,134 tonnes for the fourth quarter and full year ended December 31, 2023, respectively, (8,651 tonnes and 13,379 tonnes for the fourth quarter and full year ended December 31, 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 2,751 tonnes and 4,527 tonnes of pre-commercial production from Enterprise for the fourth quarter and full year ended December 31, 2023, which is not included in earnings (loss) or C1, C3 and AISC calculations. (nil tonnes for the year ended December 31, 2022).
5 Nickel sales (contained tonnes) includes 1,554 tonnes and 1,651 tonnes of pre-commercial sales from Enterprise for the fourth quarter and full year ended December 31, 2023, respectively.
6 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”.
7 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 10,965 tonnes and 40,134 tonnes for the fourth quarter and full year ended December 31, 2023, respectively, (8,651 and 13,379 tonnes for the fourth quarter and full year ended December 31, 2022)
8 Copper C3 and AISC for the year ended December 31, 2023 exclude $18 million royalty attributable to ZCCM-IH relating to the year ended December 31, 2022. Copper C3 and AISC for the year ended December 31, 2023 exclude the 2022 impact of $28 million royalty pursuant to Law 406 in Panama.
REALIZED METAL PRICES1
QUARTERLY
FULL YEAR
Q4 2023
Q3 2023
Q4 2022
2023
2022
Average LME copper cash price (per lb)
$3.70
$3.79
$3.63
$3.85
$3.99
Realized copper price1 (per lb)
$3.62
$3.70
$3.56
$3.76
$3.90
Treatment/refining charges (“TC/RC”) (per lb)
($0.13
)
($0.15
)
($0.12
)
($0.15
)
($0.13
)
Freight charges (per lb)
($0.05
)
($0.02
)
($0.04
)
($0.03
)
($0.03
)
Net realized copper price1 (per lb)
$3.44
$3.53
$3.40
$3.58
$3.74
Average LBMA cash price (per oz)
$1,974
$1,929
$1,728
$1,941
$1,800
Net realized gold price1,2 (per oz)
$1,835
$1,764
$1,574
$1,786
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