First Quantum Minerals Ltd. (TSX:FM) reported results for the three and six months ended June 30, 2020. The Company reported, for the three months ended June 30, 2020, a comparative loss1 of $84 million ($0.12 loss per share1), net loss attributable to shareholders of the Company1 of $156 million ($0.23 loss per share1) and cash flows from operating activities of $155 million ($0.23 per share1).
“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.”
SECOND QUARTER SUMMARY:
|Three months ended||Six months ended|
|June 30||June 30|
|(U.S. dollars where applicable)||2020||2019||2020||2019|
|– Production2 (tonnes)||169,059||168,399||364,344||305,368|
|– Sales4 (tonnes)||159,944||149,333||349,897||279,595|
|– Cost of production3:|
|o AISC (per lb)||$1.62||$1.77||$1.63||$1.77|
|o C1 (per lb)||$1.20||$1.32||$1.25||$1.33|
|o C3 (per lb)||$2.08||$2.17||$2.14||$2.19|
|– Realized price (per lb)||$2.60||$2.80||$2.58||$2.80|
|– Production (ounces)||54,651||59,647||123,439||109,004|
|– Sales (ounces)5||54,591||56,922||128,373||103,712|
|Three months ended
|Six months ended
|(U.S. dollars millions, except where noted otherwise)||2020||2019||2020||2019|
|Net earnings (loss) attributable to shareholders of the Company|
|Basic and diluted earnings (loss) per share||($0.23)||$0.11||($0.32)||$0.19|
|Comparative earnings (loss)1||(84)||87||(163)||182|
|Comparative earnings (loss) per share1||($0.12)||$0.13||($0.24)||$0.26|
|Cash flow from operating activities||155||179||628||338|
|Cash flow from operating activities per share1||$0.23||$0.26||$0.91||$0.49|
1 Net earnings (loss) attributable to shareholders of the Company has been adjusted to exclude items which are not reflective of underlying performance to arrive at comparative earnings (loss). 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 period ended June 30, 2020 for further information.
2 Production is presented on a contained basis and is presented prior to processing through the Kansanshi smelter.
3 AISC, C1 and C3 costs per pound are not recognized under IFRS. Refer to the “Regulatory Disclosures” section in the MD&A for the period ended June 30, 2020 for further information. C1, C3 and AISC costs exclude third-party concentrate purchased at Kansanshi.
4 Copper 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 the three and six months ended June 30, 2020 (nil and 1,182 tonnes for the three and six months ended June 30, 2020, respectively).
5 Excludes refinery-backed gold credits purchased and delivered under the precious metal streaming arrangement.
6 Adjustments to comparative EBITDA in the second quarter of 2020 relate principally to foreign exchange (foreign exchange and write-off of assets and costs associated with the land slippage at Las Cruces in the second quarter of 2019).
The Company continues to focus on measures to prevent and manage the transmission of COVID-19 amongst the workforce and the wider community. When COVID-19 was declared an international public health emergency by the World Health Organization in late January, the Company moved quickly to introduce health and sanitation protocols across all of its sites in compliance with both local and international guidelines. These health protocols continue to be reviewed and adjusted as needed. In Panama, the Company is supporting the wider community with donations of medical equipment and supplies, as well as responding to the Panamanian Government’s request to support families in need with food and supplies. In Zambia, the Company has pledged financial support for the provision of medical logistics support in the Solwezi and Kalumbila districts of North-Western Zambia. In addition to increased medical facility resilience initiatives at the mine clinics in Mauritania, Zambia and Panama, COVID-19 protective measures to minimize person-to-person transmission in the work place and protect business continuity have been implemented across all operations.
Tragically, five employees/contractors from Cobre Panama succumbed to symptoms associated with COVID-19 in April and May. The Company extends its deepest sympathies to their families and colleagues and is grateful to the dedicated health professionals in Panama who treated them in hospital and those who have been working to resolve the wider pandemic in the country. Cobre Panama has undertaken a deep disinfection program and has developed heightened health protocols at the highest international standards and which are regularly inspected by the Ministry of Health of the Republic of Panama (“MINSA”). These strict protocols and sanitary vigilance remain in place as a “new normal” way of working. During preservation and safe maintenance there were approximately 800 personnel onsite, which will be gradually increased in compliance with Cobre Panama’s reopening plan and in line with MINSA guidelines as the operation ramps up to full production, expected by mid-August. There are approximately 1,450 personnel currently onsite.
The Company’s other operations have not been significantly impacted by restrictions arising from COVID-19, with the exception of Las Cruces, which recommenced mining activities on April 13, 2020, after a two-week suspension to mining activities, during which the operation continued to process stockpiles.
Production guidance for Cobre Panama for 2020 has been revised to 180,000 to 200,000 tonnes of copper and 70,000 to 80,000 ounces of gold. Guidance for production at all other copper operations remains unchanged from previously disclosed.
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 $50 million to reflect lower production at Cobre Panama.
|Copper (tonnes)||725 – 770|
|Gold (ounces)||230 – 250|
|Nickel (tonnes)||15 – 17|
Cash Cost and All-In Sustaining Cost
|Copper ($/ lb)||2020|
|C1||1.20 – 1.35|
|AISC||1.65 – 1.80|
|Sustaining capital and other projects||500|
|Total capital expenditure||675|
Guidance provided is based on a number of assumptions and estimates as of June 30, 2020, including among other things, assumptions about metal prices and anticipated costs and expenditures. 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. Guidance involves estimates of known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different. (Please see the Company’s Management Discussion and Analysis for the period ending June 30, 2020 for additional detail.)
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