First Quantum Minerals Ltd. (TSX:FM) reported results for the three and nine months ended September 30, 2020. The Company reported, for the three months ended September 30, 2020 (“Q3”), comparative earnings1 of $64 million ($0.09 per share1), net earnings attributable to shareholders of the Company1 of $29 million ($0.04 per share1) and cash flows from operating activities of $452 million ($0.66 per share1).
“The third quarter was strong from an operational and financial perspective. Cobre Panama restarted normal operations and was back into full production well ahead of schedule. Almost all of our operations delivered lower costs and a number of new production and cost records were achieved. As promised, we have maintained our focus on balance sheet de-leveraging and I am pleased to report that our net debt position is now beginning to decline. We have continued our program of active balance sheet management with the completion of a senior note offering of $1.5 billion which has been used to extend our senior debt maturities and reduce our debt service costs,” commented Philip Pascall, Chairman and CEO. “We continue to prioritize the health and safety of our workforce as we navigate the COVID-19 pandemic that is now the ‘new normal’. Despite all the challenges, our workforce and operations continue to be extremely resilient. This has resulted in a strong operational performance, allowing us to increase our production expectations for the year at slightly improved costs. I am proud of how we continue to navigate this very challenging year while preparing the Company for continued future success.”
THIRD QUARTER SUMMARY:
|Three months ended||Nine months ended|
|September 30||September 30|
|(U.S. dollars where applicable)||2020||2019||2020||2019|
|– Production2,7 (tonnes)||211,396||192,510||575,740||497,878|
|– Sales4,7 (tonnes)||197,533||203,827||547,430||483,422|
|– Cost of production3:|
|o AISC (per lb)||$1.48||$1.86||$1.58||$1.80|
|o C1 (per lb)||$1.07||$1.36||$1.19||$1.34|
|o C3 (per lb)||$1.97||$2.20||$2.08||$2.19|
|– Realized price (per lb)||$2.77||$2.62||$2.65||$2.73|
|– Production (ounces) 7||72,926||70,120||196,365||179,124|
|– Sales (ounces)5,7||78,013||71,664||206,386||175,376|
|Three months ended
|Nine months ended
|(U.S. dollars millions, except where noted otherwise)||2020||2019||2020||2019|
|Net earnings (loss) attributable to shareholders of the
|Basic and diluted earnings (loss) per share||$0.04||($0.11||)||($0.27||)||$0.08|
|Comparative earnings (loss)1||64||32||(99||)||214|
|Comparative earnings (loss) per share1||$0.09||$0.05||($0.14||)||$0.31|
|Cash flow from operating activities||452||151||1,080||489|
|Cash flow from operating activities per share1||$0.66||$0.22||$1.57||$0.71|
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.
3AISC, 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 September 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 nine months ended September 30, 2020 (nil and 1,182 tonnes for the three and nine months ended September 30, 2019, respectively).
5Excludes refinery-backed gold credits purchased and delivered under the precious metal streaming arrangement.
6Adjustments to comparative EBITDA in the third 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 2019).
7Cobre Panama declared commercial production effective September 1, 2019. Copper production volumes includes pre-commercial production from Cobre Panama of 36,783 tonnes and 67,704 tonnes for the three and nine months ended September 30, 2019, respectively. Copper sales volumes include pre-commercial sales from Cobre Panama of 42,425 tonnes and 48,967 tonnes for the three and nine months ended September 30, 2019, respectively. Gold production volumes includes pre-commercial production from Cobre Panama of 13,570 ounces and 24,120 ounces for the three and nine months ended September 30, 2019, respectively. Gold sales volumes include pre-commercial sales from Cobre Panama of 16,032 ounces and 18,659 ounces for the three and nine months ended September 30, 2019, respectively. Pre-commercial production and sales volumes at Cobre Panama are not included in earnings, C1, C3 and AISC calculations.
The Company remains focused on ensuring the health and safety of the workforce and continuing measures to prevent and manage transmission of COVID-19 amongst the workforce and the wider community. The Company is managing the necessary country-by-country restrictions in order to assist in the protection of those most vulnerable. At its mine sites, health protocols are in place for control, isolation and quarantine as necessary and these continue to be reviewed and adjusted as necessary with circumstances at each location.
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 its sites in compliance with both local and international guidelines. These health protocols measures 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.
COVID-19 had a direct impact at Cobre Panama where the operation was placed on preservation and safe maintenance beginning April 7, 2020 following Panamanian government restrictions related to COVID-19. On July 7, 2020, the Company announced the resumption of normal operations and full production levels were achieved ahead of expectation, on August 8, 2020. Cobre Panama continues to operate while adhering to the strictest protocols that have been implemented to protect the health of the workforce and communities.
The Company’s other operations have not been significantly impacted by restrictions arising from COVID-19. The Company has not experienced any significant disruption to supply chains and product shipments since the onset of the pandemic. The Company is working to manage the logistical challenges presented by the closure of trade borders, using alternative routes where feasible. Border restrictions, if ongoing, could result in supply chain delays.
2020 Guidance Revisions
Guidance provided below is based on a number of assumptions and estimates as of September 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.
Guidance has been increased for copper production to between 750,000 and 785,000 tonnes, an increase of 25,000 to the lower range and 15,000 tonnes to the upper range and gold production to between 245,000 and 260,000 ounces, an increase of 15,000 ounces to the lower range and 10,000 ounces to the upper range. Guidance on Ravensthorpe production has been reduced to between 13,000 to 15,000 tonnes of nickel.
Cash costs guidance, including Cobre Panama, has been narrowed for C1 Cost to $1.20 per lb to $1.30 per lb, a reduction of $0.05 per lb to the upper end range and reduced for AISC to $1.60 per lb to $1.70 per lb, a reduction of $0.05 per lb to the lower range and $0.10 per lb to the upper range.
The improved guidance reflects the lower operating cost environment, with favourable foreign exchange movements, lower fuel prices, and other cost control measures, coupled with the impact of higher gold prices.
Total capital expenditure guidance is unchanged at $675 million.
|Copper (tonnes)||725 – 770||750 – 785|
|Gold (ounces)||230 – 250||245 – 260|
|Nickel (tonnes)||15 – 17||13 – 15|
|Production guidance by operation|
|Cobre Panama||180 – 200||190 – 205|
|Kansanshi||220 – 235||220 – 230|
|Sentinel||230 – 240||240 – 250|
|Cobre Panama||70 – 80||75 – 85|
|Kansanshi||120 – 130||125 – 130|
|Ravensthorpe||15 – 17||13 – 15|
Cash cost and all-in sustaining cost
|C1 (per lb)||$1.20 – $1.35||$1.20 – $1.30|
|AISC (per lb)||$1.65 – $1.80||$1.60 – $1.70|
Net interest expense for the quarter ended September 30, 2020, was $179 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 2020 remains unchanged and is expected to range between $770 million and $810 million. This includes interest accrued on related party loans to Cobre Panama and a finance cost accreted on the precious metal streaming arrangement.
Excluding Cobre Panama and the impact of interest expense, the effective tax rate for 2020 is expected to be approximately 35% reflecting the impact of the Company’s sales hedge program which is not tax effected.
Depreciation expense for the quarter was $323 million. The full year 2020 depreciation expense is expected to be approximately $1,250 million, unchanged from previous disclosure.
Complete Financial Statements and Management’s Discussion and Analysis
The complete Consolidated Financial Statements and Management’s Discussion and Analysis for the period ended September 30, 2020 are available at www.first-quantum.com and should be read in conjunction with this news release.
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We acknowledge the [financial] support of the Government of Canada.