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First Quantum Minerals Reports Fourth Quarter and Full Year 2020 Results

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First Quantum Minerals Ltd. (TSX:FM)  reported for the three months ended December 31, 2020 comparative earnings1 of $53 million ($0.08 per share1), net earnings attributable to shareholders of the Company1 of $9 million ($0.01 per share1) and cash flows from operating activities of $533 million ($0.77 per share1). For the full year 2020, the Company reports a comparative loss1 of $46 million ($0.07 per share1), a net loss attributable to shareholders of the Company1 of $180 million ($0.26 per share1) and cash flows from operating activities of $1,613 million ($2.34 per share1).

 

CEO’S COMMENTS


“2020 was a very challenging and unprecedented year as a result of the COVID-19 pandemic.  Despite the challenges, the Company achieved its highest ever annual copper production.  Sentinel performed exceptionally well and was a big contributor to that record production.  Cobre Panama experienced a period of preservation and safe maintenance related to the virus, but still performed very well, ramping back up to full production in early August. We expect our 2021 copper production to grow this year to more than 785,000 tonnes.  This makes First Quantum one of the top global copper producers with one of the largest Mineral Reserve bases,“ said Philip Pascall, Chairman and CEO. “Our success in meeting the challenges of the year was directly attributable to the dedication and resilience of our workforce and their adaptability to the new way of working.”

 

“We continue to prioritize the health and safety of our workforce and extend all efforts to protect our operations from COVID-19 and help mitigate the spread through the communities.   I am very proud of the efforts of our entire First Quantum team in this regard. In addition, we recently published our policy on climate change which formalizes and further demonstrates our commitment to the environment and reducing emissions across the business,” he said. “Our focus in 2021 continues to be on debt reduction to enable us to plan for returns to shareholders and future growth.”

 

FOURTH QUARTER AND FULL YEAR 2020 SUMMARY:

 

  • Operational Highlights:
    • Total copper production2 was 203,171 tonnes in Q4 and 778,911 tonnes for the full year, annual production increased 11% from 2019.
      • Sentinel produced 251,216 tonnes of copper for the year, a record for annual production and a 14% increase from 2019 as a result of a significant increase in annual throughput to 57 million tonnes.
      • Cobre Panama copper produced5 65,520 tonnes in Q4 and 205,548 tonnes for the full year, a significant increase from Q4 and full year 2019, despite the mine operating for most of 2020 under strict protocols related to COVID-19, and the planned 7-day shutdown of the SAG mills during Q4.
    • Q4 copper production3 costs: cash cost of $1.28 per lb, total cost of $2.20 per lb, and all-in sustaining cost of $1.77 per lb. Costs slightly increased from Q4 2019.
      • Q4 costs benefitted from lower C1 costs at Kansanshi and Sentinel of $1.01 and $1.44 per lb, respectively, resulting from favourable foreign exchange rates and lower fuel costs. C1 costs at Cobre Panama were $1.34 per lb inclusive of approximately $10 million in costs for increased health and safety protocols.
    • 2020 copper productioncosts: C1 of $1.21 per lb, C3 of $2.11 per lb and AISC of $1.63 per lb.
      • C1 costs for the year were the lowest in four years and $0.10 per lb lower than 2019 driven by record low C1 costs at Sentinel of $1.40 per lb and C1 cost of $1.09 per lb at Kansanshi, both better than the previous year. C1 costs at Cobre Panama across the year were in line with expectation despite the impact of COVID-19 disruptions and additional costs.
    • Realized copper price8 was $2.97 per lb for Q4 and $2.74 per lb for the full year.
    • Gold production of 68,747 ounces in Q4 and 265,112 ounces for the full year including 84,667 ounces produced at Cobre Panama.
    • Nickel production was 5,603 tonnes in Q4 and 12,695 tonnes for the full year as Ravensthorpe continued to ramp up through the year after the re-start of operations in Q1 2020.
  Three months ended
December 31
Full year ended December 31
(U.S. dollars where applicable) 2020 2019 2020 2019
COPPER        
–  Production2, 5 (tonnes) 203,171 204,270 778,911 702,148
–  Sales4,5 (tonnes) 217,041 205,964 764,471 689,386
         
–  Cost of production3, 5:        
o  AISC (per lb) $1.77 $1.73 $1.63 $1.78
o  C1 (per lb) $1.28 $1.24 $1.21 $1.31
o  C3 (per lb) $2.20 $2.07 $2.11 $2.16
–  Realized price (per lb) 8 $2.97 $2.62 $2.74 $2.70
 

GOLD

       
–  Production (ounces) 68,747 77,789 265,112 256,913
–  Sales (ounces)5, 6 70,905 79,409 277,291 254,785
 

NICKEL

       
–  Production (tonnes) 5,603 12,695
–  Sales (tonnes) 5,343 12,120

 

Financial Highlights

    • Net debt decreased by $266 million in 2020 with $136 million of that reduction in Q4.
    • $1,613 million of cash flows from operating activities ($2.34 per share1) generated for the full year of 2020, a $724 million increase from 2019, with $533 million of cash flows from operating activities ($0.77 per share1) generated in Q4.
    • $5,199 million of sales revenues for the full year, including Q4 sales revenues of $1,601 million, were 28% higher than 2019 as a result of higher sales volumes and higher realized copper and gold prices.
    • Gross profit of $443 million for Q4 and $1,077 million for the full year.
    • Comparative EBITDA1 for Q4 of $725 million and $2,152 million for the year.
    • Comparative earnings1 of $53 million ($0.08 per share1) in Q4, an increase of $0.03 from Q4 2019 and net earnings attributable to shareholders1 of $9 million ($0.01 per share1).
    • Comparative loss1 of $46 million ($0.07 per share1) for the full year and net loss attributable to shareholders1 of $180 million ($0.26 per share1).
    • Capital expenditure was $610 million in 2020, significantly below 2019 levels and $65 million below guidance.
    • Ended the quarter and year with $914 million in net unrestricted cash and cash equivalents, $600 million of committed undrawn senior debt facilities and in full compliance with all financial covenants.
    • Final dividend declared of CDN $0.005 per share in respect of the 2020 year-end; total dividends for the year totaled CDN $0.01.
    • At February 16, 2021, the Company had unmargined copper forward sales contracts for 128,625 tonnes at an average price of $2.86 per lb outstanding with periods of maturity to December 2021. In addition, the Company has zero cost copper collar unmargined sales contracts for 198,500 tonnes at weighted average prices of $2.93 per lb to $3.25 per lb outstanding with maturities to December 2021. This represents approximately 40% of the Company’s expected sales for the next 12 months. In January 2021, the Company realized unmargined copper forward sales contracts for 23,500 tonnes and zero cost copper collar unmargined sales contracts for 15,900 tonnes, at an average price of $2.91 per lb.

 

 

  Three months ended
December 31
Full year ended
December 31
(U.S. dollars millions, except where noted otherwise) 2020 2019 2020 2019
         
Sales revenues 1,601 1,284 5,199 4,067
Gross profit 443 259 1,077 790
         
Net earnings (loss) attributable to shareholders of the Company 9 (115) (180) (57)
Basic and diluted earnings (loss) per share $0.01 ($0.17) ($0.26) ($0.08)
         
Comparative EBITDA1, 7 725 511 2,152 1,609
Comparative earnings (loss)1 53 35 (46) 249
Comparative earnings (loss) per share1 $0.08 $0.05 ($0.07) $0.36
         
Cash flow from operating activities 533 400 1,613 889
Cash flow from operating activities per share1 $0.77 $0.58 $2.34 $1.29

 

1Comparative 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 not reflective of underlying performance. 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 year ended December 31, 2020 for further information. The use of comparative earnings (loss) and comparative EBITDA represents the Company’s adjusted earnings (loss) metrics.
Production is presented on a copper 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 year ended December 31, 2020 for further information. C1, C3 and AISC costs exclude third-party concentrate purchased at Kansanshi.
4Copper 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 year ended December 31, 2020 (nil and 1,182 tonnes for the three months and year ended December 31, 2019, respectively).
5Cobre Panama declared commercial production effective September 1, 2019. Copper production volumes includes pre-commercial production from Cobre Panama of nil and 67,704 tonnes for the three months and year ended December 31, 2019, respectively. Copper sales volumes include pre-commercial sales from Cobre Panama of nil and 48,967 tonnes for the three months and year ended December 31, 2019, respectively. Gold production volumes includes pre-commercial production from Cobre Panama of nil and 24,120 ounces for the three months and year ended December 31, 2019, respectively. Gold sales volumes include pre-commercial sales from Cobre Panama of nil and 18,659 ounces for the three months and year ended December 31, 2019, respectively. Pre-commercial production and sales volumes at Cobre Panama are not included in earnings, C1, C3 and AISC calculations.
6Excludes refinery-backed gold credits purchased and delivered under the precious metal streaming arrangement refer to page 35 of MD&A.
7Adjustments to comparative EBITDA in 2020 relate principally to foreign exchange revaluations (foreign exchange revaluations and impairment of assets in 2019).
8Realized metal prices are not recognized under IFRS and defined within the “Regulatory Disclosures” section from page 40 of MD&A.

 

OTHER

 

On October 1, 2020, the Company completed the offering of $1.5 billion of Senior Notes due 2027, and the proceeds of the offering were used towards the partial repayment of the Company’s existing revolving credit facility, and the redemption in full of the Company’s outstanding Senior Notes due 2022. On October 19, 2020, the redemption of the notes, at par, was completed.

 

COVID-19 UPDATE

 

The Company continues to maintain defensive health and sanitary protocols and to support the government health authorities in each jurisdiction according to the needs across all of its sites and operations to combat the spread of COVID-19.  As the pandemic has worsened globally, the Company has identified cases amongst the workforce.  All of the cases have been effectively contained and isolated, according to the established protocols and in coordination with local health authorities, with limited impact to operations. The Company will continue to employ measures to ensure minimal spread of the contagion and the health and wellbeing of our workforce continues to be a priority.

 

The Company is working to manage the logistical challenges presented by the closure of trade borders, using alternative routes where feasible. Some sales shipments were delayed in the fourth quarter due to COVID-19 related port restrictions and similar delays have also been experienced to date in 2021.  The Company has also experienced some disruption and additional costs on freight shipments out of Asia. The Company has not experienced any other major disruptions to supply chains and product shipments since the onset of the pandemic and has no immediate expectation of further disruption other than port delays and additional shipping costs noted above.

 

CLIMATE CHANGE POLICY

 

The Company has always been committed to extracting resources responsibly and our sustainability strategy is an intrinsic part of everything we do. Recently, to formalize this commitment we have published our approach to climate change.  The approach includes the integration of climate change and energy issues and impacts into our decision making and strategic planning. Over the next years, we will be setting progressive and realistic targets with an identified pathway to achievement.

 

Full details of our climate change approach, our commitments to climate change, and other ESG related programs, policies and data can be found at https://www.first-quantum.com/English/sustainability/default.aspx.

 

2021 – 2023 GUIDANCE

 

Guidance provided below is based on a number of assumptions and estimates as of December 31, 2020, including among other things, assumptions about metal prices and anticipated costs and expenditures. Guidance involves estimates of known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different. 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. (Please see the Company’s release dated January 26, 2021 and the December 31, 2020 Management Discussion and Analysis for additional detail.)

 

 

Production Guidance

 

  000’s 2021 2022 2023
         
  Copper (tonnes) 785 – 850 805 – 860 820 – 880
  Gold (ounces) 280 – 300 280 – 300 290 – 310
  Nickel (contained tonnes) 23 – 27 25 – 30 27 – 32
         

Production guidance by operation

 

Copper

  000’s tonnes 2021 2022 2023
         
  Cobre Panama 300 – 330 310 – 340 330 – 360
  Kansanshi 210 – 225 200 – 210 210 – 220
  Sentinel 230 – 250 265 – 280 270 – 290
  Other sites 45 30 10
         

 

Gold

  000’s ounces 2021 2022 2023
         
  Cobre Panama 120 – 130 135 – 145 145 – 155
  Kansanshi 120 – 130 115 – 125 115 – 125
  Other sites 40 30 30
         

 

Nickel

  000’s tonnes (contained) 2021 2022 2023
         
  Ravensthorpe 23 – 27 25 – 30 27 – 32
         

 

Cash cost and all-in sustaining cost

 

Copper

    2021 2022 2023
         
  C1 (per lb) $1.20 – $1.40 $1.20 – $1.40 $1.20 – $1.40
         
  AISC (per lb) $1.70 – $1.85 $1.70 – $1.85 $1.70 – $1.85
         

 

Nickel

    2021 2022 2023
         
  C1 (per lb) $5.00 – $5.50 $4.40 – $4.90 $4.20 – $4.70
         
  AISC (per lb) $5.50 – $6.00 $4.90 – $5.40 $4.70 – $5.20
         

 

Capital expenditure

     2021 2022 2023
         
  Capitalized stripping 250 250 250
  Sustaining capital and other projects 700 700 800
         
         
  Total capital expenditure 950 950 1,050
         
         

 

 

Capital expenditure of $950 million is expected in 2021 and 2022, which includes $40 million in each year on the smelter expansion at Kansanshi. 2021 and 2022 also includes a total of approximately $100 million in capital expenditures deferred from 2020. Other projects in 2021 include Shoemaker Levy development at Ravensthorpe and some spend on the fourth crusher at Sentinel.

 

In 2023, capital expenditure is expected to be $1,050 million and includes $270 million for the proposed S3 expansion at Kansanshi. This project is subject to board approval and the timing could be accelerated or delayed depending on capital availability, commodity prices and the Zambian fiscal regime.

 

Project capital expenditure across the three years also provides for the expansion to 100 million tonnes per annum at Cobre Panama. The majority of this capital is for pre-strip and mine fleet for Colina pit and process plant upgrades including the secondary crushing screening plant and the sixth ball mill.

 

Sustaining capital expenditure is on average approximately $250 million per year, but is expected to be up to $40 million higher in 2021 with planned maintenance of the Kansanshi smelter.

 

Interest

 

Net interest expense for the year ended December 31, 2020, was $738 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 2021 is expected to range between $740 million and $780 million. This includes interest accrued on related party loans to Cobre Panama and a finance cost accreted on the precious metal streaming arrangement.

 

Cash outflow on interest paid for the year ended December 31, 2020 was $574 million and is expected to be approximately $525 million for the full year 2021. This figure excludes interest paid on related party loans to Cobre Panama.

 

Tax

 

Excluding the impact of interest expense, the effective tax rate for 2020 was 33%. Excluding the impact of interest expense, the effective tax rate for 2021 is expected to be approximately 30%.

 

Depreciation

 

Depreciation expense for the year ended December 31, 2020 was $1,217 million. The full year 2021 depreciation expense is expected to be approximately $1,125 million.

 

COMPLETE FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS

 

The complete Consolidated Financial Statements and Management’s Discussion and Analysis for the year ended December 31, 2020 are available at www.first-quantum.com and at www.Sedar.com and should be read in conjunction with this news release.

 

 

Posted February 17, 2021

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