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First Quantum Minerals Reports Fourth Quarter and Year-End 2023 Results

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First Quantum Minerals Reports Fourth Quarter and Year-End 2023 Results

 

 

 

 

 

First Quantum Minerals Ltd. (TSX: FM) reports results for the three months ended December 31, 2023 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 costs1 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.

 

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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: 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   $1,665  
Average LME nickel cash price (per lb) $7.82   $9.23   $11.47   $9.74   $11.61  
Net realized nickel price1 (per lb) $7.53   $8.96   $13.67   $9.07   $11.93  
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.
 

 

2024 GUIDANCE

 

Guidance is based on a number of assumptions and estimates as of December 31, 2023, 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.

 

Production, cash cost and capital expenditure guidance for 2024 to 2026 remain unchanged from the News Release “First Quantum Minerals Announces 2023 Preliminary Production, 2024-2026 Guidance and Balance Sheet Initiatives” dated January 15, 2024 and is presented excluding Cobre Panamá as the mine remains in a phase of P&SM with production halted. The associated funding of P&SM is expected to range from $15 to $20 million per month and further reductions could follow depending on environmental stewardship programs.

 

2024 Copper production guidance is between 370,000 to 420,000 tonnes and is expected to increase to between 400,000 to 460,000 tonnes in 2025 and 2026 as the S3 Expansion at Kansanshi comes online. For 2024, copper C1 cash costs1 are guided to be $1.80 to $2.05 per lb. Total copper C1 cash costs1 and copper AISC1 unit cost ranges are in line with prior year guidance when excluding Cobre Panamá. Improvements in operating costs such as fuel, maintenance, contractors and labour mitigated the impact of lower by-product credits from Kansanshi and lower production at Sentinel.

 

Capital expenditure continues to experience inflationary cost increases driven by higher shipping rates, steel prices, power costs, labour rates and general inflation. Guidance reflects these cost increases as well as additional scope increases and the timing of expenditures, including approximately $235 million of expenditure carried over from 2023. However, strategic measures have been implemented to offset the impact of these inflationary increases and deferred expenditure through optimizing and prioritizing capital expenditure.

 

Total capital expenditure for the S3 Expansion project remains unchanged at $1.25 billion, with approximately $215 million spent to date. The S3 Expansion includes the development and construction of the S3 process plant circuit and mining fleet acquisitions. Across the three-year guidance period, capital expenditure for the S3 Expansion project is expected to be approximately $780 million with the majority of the spend planned over 2024 and 2025. Pre-strip activities for the

South East Dome pit are expected to continue through 2025, of which $220 million is included in the S3 project capital within the guidance period. First production from S3 continues to be expected in H2 2025.

 

Interest expense on debt for the full year 2024 is expected to be approximately $610 – $630 million and excludes interest accrued on related party loans to Cobre Panamá and Ravensthorpe, a finance cost accreted on the precious metal streaming arrangement, capitalized interest expense and accretion on asset retirement obligation.

 

Cash outflow on interest paid is expected to be approximately $555 – $575 million for the full year 2024. This figure excludes interest paid on related party loans to Cobre Panamá and Ravensthorpe and capitalized interest paid.

 

Capitalized interest is expected to be approximately $55 million for the full year 2024.

 

The effective tax rate for 2024 excluding Cobre Panamá and interest expense is expected to be approximately 30%.

 

The full year 2024 depreciation expense excluding Cobre Panamá is expected to be between $630 to $660 million. Whilst under P&SM, depreciation at Cobre Panamá is expected to be $90 million to $120 million on an annualized basis.

 

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1 Realized metal price, C1 cash cost (C1), and All-in sustaining cost (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”.

 

PRODUCTION GUIDANCE

 

000’s 2024   2025   2026  
Copper (tonnes) 370 – 420   400 – 460   400 – 460  
Gold (ounces) 95 – 115   120 – 140   140 – 165  
Nickel (contained tonnes) 22 – 37   26 – 41   36 – 51  
             

 

PRODUCTION GUIDANCE BY OPERATION1

 

Copper production guidance (000’s tonnes) 2024   2025   2026  
Kansanshi 130 – 150   170 – 200   180 – 210  
Trident – Sentinel 220 – 250   210 – 240   210 – 240  
Other sites 20   20   10  
Gold production guidance (000’s ounces)            
Kansanshi 65 – 75   85 – 95   90 – 105  
Guelb Moghrein 28 – 38   34 – 44   49 – 59  
Other sites 2   1   1  
Nickel production guidance (000’s contained tonnes)            
Ravensthorpe 12 – 17   11 – 16   11 – 16  
Trident – Enterprise 10 – 20   15 – 25   25 – 35  
1 Production is stated on a 100% basis as the Company consolidates all operations.
 

 

CASH COST1 AND ALL-IN SUSTAINING COST1

 

Total Copper 2024 2025 2026
C1 (per lb)1 $1.80 – $2.05 $1.80 – $2.05 $1.80 – $2.05
AISC (per lb)1 $2.70 – $3.00 $2.85 – $3.15 $2.80 – $3.10

 

 

Total Nickel 2024   2025   2026  
C1 (per lb)1 $7.00 – $8.50   $5.50 – $7.00   $5.00 – $6.25  
AISC (per lb)1 $8.40 – $10.40   $7.70 – $9.70   $6.50 – $7.80  
1 C1 cash cost (C1), and all-in sustaining cost (AISC) are non-GAAP ratios, and 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”.
 

 

PURCHASE AND DEPOSITS ON PROPERTY, PLANT & EQUIPMENT

 

  2024   2025   2026  
Capitalized stripping1 180 – 230   180 – 230   280 – 310  
Sustaining capital1 260 – 290   450 – 480   280 – 320  
Project capital1 810 – 880   570 – 590   290 – 320  
Total capital expenditure 1,250 – 1,400   1,200 – 1,300   850 – 950  
1 Capitalized stripping, sustaining capital and project capital are non-GAAP financial measures 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”.
 

 

COBRE PANAMÁ UPDATE

 

Cobre Panamá remains in a phase of P&SM with production halted. Approximately 1,400 workers remain on site to run the P&SM program. Further reductions to a headcount below 1,000 workers may follow depending on environmental stewardship programs. 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.

 

On June 26, 2023, the Company and the GOP signed the Refreshed Concession Contract and it was subsequently countersigned by the National Comptroller of Panama. The Refreshed Concession Contract was presented before the Commerce Committee of the National Assembly of Panama, that recommended the amendment of certain terms of the contract.

 

On October 17, 2023, the Refreshed Concession Contract, with amended terms, was resubmitted to and approved by the Commerce Committee of the National Assembly of Panama. On October 20, 2023, the National Assembly in Panama passed Bill 1100 for the approval of the Refreshed Concession Contract for the Cobre Panamá mine. On the same day, the President of Panama sanctioned Bill 1100 into Law 406 that was subsequently published in the Official Gazette.

 

On November 16, 2023, in accordance with its contractual obligations to the Republic of Panama under Law 406, the Company made tax and royalty payments of $567 million in respect of the period from December 2021 to October 2023.

 

On November 28, 2023, the Supreme Court of Justice of Panama declared Law 406 unconstitutional and stating the effect of the ruling is that the Refreshed Concession Contract no longer exists. The Supreme Court did not order the closure of the Cobre Panamá mine. The ruling of the Supreme Court was subsequently published in the Official Gazette on December 2, 2023.

 

On December 19, 2023, the Minister for Panama’s MICI announced plans for Cobre Panamá following the ruling of the Supreme Court. The validity of Panama’s mineral resource code which was established more than 50 years ago was reiterated by the Minister given the absence of retroactivity of the Supreme Court ruling. As part of these plans, a temporary phase of environmental Preservation and Safe Management would be established until June 2024, during which intervening period independent audits, review and planning activities would be undertaken. It was stated that Panama would be the first country in the world to implement a sudden mine closure of this magnitude, and therefore the planning is estimated by the GOP to take up to two years, and 10 years or more to implement. The Minister also announced plans to consider the economic impacts of the halt to operations of Cobre Panamá at both a national and local level. The Company is of the view, supported by the advice of legal counsel, that it has acquired rights with respect to the operation of the Cobre Panamá project, as well as rights under international law.

 

In January 2024, the Company and MICI had discussions related to a formalized P&SM program and the associated costs for Cobre Panamá. Additionally, the Company hosted a large delegation from MICI and the Ministry of the Environment, as well as other government departments and a broad range of civil society organizations to demonstrate the measures that are being undertaken as part of the P&SM program. At the request of MICI, Cobre Panamá delivered a preliminary draft for the first phase of P&SM on January 16, 2024.

 

Presidential and national legislative elections will take place in May 2024, with a new president, GOP cabinet and National Assembly assuming office in July 2024.

 

The Company has commenced international arbitration processes including notification under the Free Trade Agreement between Canada and Panama, and under the International Court of Arbitration relating to concession agreement. The FTA provides for, among other things, arbitration before the International Centre for Settlement of Investment Disputes, which is seated in Washington, D.C.

 

BROWNFIELD PROJECTS

 

At the S3 Expansion, the majority of the capital spend is expected to occur in 2024. Detailed design is largely complete. Earthworks and civil works continue to progress and the project remains on track to come online during the second half of 2025. The first 11 ultra-class trucks and first shovel are commissioned and are in service on site.

 

Earthworks and civil works continued to progress and project procurement was approximately 70% committed at the end of the quarter. Deliveries of major long lead equipment such as mills, primary crusher and thickeners commenced in the third quarter of 2023 and will continue through to the second quarter of 2024. Construction continues across all disciplines and excavation of the primary crusher position commenced during the quarter.

 

At Enterprise, all major mining and plant infrastructure has been completed. However, additional equipment is being mobilized for higher mining volumes and the cleaner circuit expansion, to include columns and Jameson cell flotation technology, is progressing towards commissioning in early 2024. The focus remains on stripping of waste and the final ramp-up of the process plant to full production capacity, which was challenged by the metallurgical characteristics of the shallow ore. Oxide material has been impacting recoveries, but the ore profile has been updated to reflect the classification of material and provide a good understanding of the impact of this material on plant performance and recoveries. Recovery and concentrate quality are continuously improving as supply of the fresher sulphide ore increases, consistent with expectations from the geo-metallurgical understanding of the deposit. Commercial production and full plant throughput is expected in 2024.

 

On February 20, 2024, the Company filed an updated NI 43-101 Technical Report on Mineral Resources and Reserves for the Las Cruces Underground Project. The purpose of the Technical Report is to update the 2022 Mineral Resources estimate, declare a Mineral Reserves estimate and to provide commentary on the project development strategy. Polymetallic Primary Sulphides (Underground) Measured and Indicated Mineral Resources have increased from 36.2 million tonnes from the January 2022 Technical Report to 41.4 million tonnes with the copper equivalent grade decreasing from 2.51% to 2.29%. There is an additional 5.0 million tonnes of Polymetallic Primary Sulphides tabled as stockpiles and 0.9 million tonnes of Secondary Sulphide (Underground Measured and Indicated Mineral Resources).

 

OTHER DEVELOPMENTS

 

Zambian mines secure 100% renewable power with new Power Supply Agreement (“PSA”)

 

On November 27, 2023, a 10-year PSA was signed between the Company and ZESCO, the Zambian state energy provider. As part of the agreement, ZESCO is committed to supplying 100% certified renewable power, principally hydroelectricity, to Trident and Kansanshi.

 

This agreement marks an important step in the Company’s greenhouse gas emissions reduction plan and underlines the Company’s commitment to sustainability, and lowering the carbon intensity of responsibly mined copper production.

 

Zambian Power Supply

 

The Kariba Lake level closed the fourth quarter of 2023 at 477.23 meters, compared to 475.60m recorded at the same time last year. The rainy season in Zambia generally starts in November and continues through April, with the heaviest rainfall normally experienced in the months of January, February and March. However, the lower than normal rains experienced in the current rainy season have resulted in a reduction in water allocation for ZESCO’s electricity generation. ZESCO is currently implementing mitigation measures to address the lower water allocation. No extended power restrictions are expected for the Zambian mining operations beyond normal fluctuations on the national grid.

 

Pioneering full battery dump truck trials for green mining

 

Hitachi Construction Machinery Co.,Ltd. completed the construction of the full battery dump truck and shipped it to the Kansanshi mine in January 2024. The technological feasibility trials are expected to start in mid-2024.

 

The development and trials of the full battery dump truck, in partnership with Hitachi, will leverage First Quantum’s industry-leading trolley assist expertise. This will be key to the next phase of the Company’s climate change strategy as it seeks to reduce greenhouse gas emissions associated with mining operations.

 

COMPLETE FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS

 

The complete Consolidated Financial Statements and Management’s Discussion and Analysis for the three months and year-ended December 31, 2023 are available at www.first-quantum.com and at www.sedarplus.com and should be read in conjunction with this news release.

Posted February 21, 2024

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