Mr. Philip Pascall reports
FIRST QUANTUM MINERALS REPORTS THIRD QUARTER 2021 RESULTS
First Quantum Minerals Ltd. has released results for the three and nine months ended Sept. 30, 2021. (In United States dollars, except where noted otherwise.) The company reported, for the three months ended Sept. 30, 2021 (Q3), comparative earnings (1) of $197-million (29 cents per share (1)), net earnings attributable to shareholders of the company (1) of $303-million (44 cents per share (1)) and cash flows from operating activities of $703-million ($1.02 per share (1)).
"In the third quarter, we delivered continued strong operational performance at all three of our large assets. This performance, combined with the closing of the Ravensthorpe stake sale in the quarter and our declining hedge book, means we are well on our way towards achieving our debt reduction target of at least $2-billion on an accelerated timetable in early 2022. Following the recent elections and subsequent smooth transfer of power in Zambia, we are pleased to be engaging constructively with the new government as we look to establish the parameters for long-term investments into our growth projects in the country. Law 9 discussions with the government of Panama continue to be transparent and constructive towards a mutually beneficial agreement. We were pleased to conclude the environmental and labour aspects of the discussions in the quarter," commented Philip Pascall, chairman and chief executive officer. "The global pandemic from COVID-19 continues to present its challenges and I am grateful to our entire work force for the commitment and tenacity that they demonstrated through these uncertain times. We remain committed to operating in a responsible and sustainable manner for the health and safety of our employees and providing support for our local communities during these challenging times."
Third quarter summary
First Quantum's financial performance continues at strong levels, driven by higher metal prices and strong operational performance resulting in a significant year-over-year increase in comparative EBITDA (earnings before interest, taxes, depreciation and amortization)(4,5) and net earnings, as well as notable further reduction in net debt (3).
On a quarter-over-quarter basis, reported comparative EBITDA of $886-million in Q3 came in slightly below the $902-million reported in Q2 2021. Total copper production for the third quarter was 209,859 tonnes, up from 199,689 tonnes in Q2 2021. However, copper sales for the period were 194,278 tonnes, reflecting a challenging shipping environment. Partially offsetting the timing of sales was a higher realized copper price of $3.68 per pound (lb) in Q3 compared with $3.55 in Q2 2021, as the company's copper hedges continue to roll off.
Net debt decreased by $449-million during the quarter, with a total reduction of $1,107-million during the nine months year to date, bringing the balance down to $6,302-million as of Sept. 30, 2021. With the current strength in the copper price and continuing strong operational performance, a significant further reduction is expected in the last quarter of this year.
Third quarter total copper production of 209,859 tonnes was up 5 per cent from Q2 2021. Production improved quarter over quarter as a result of record production at Cobre Panama and continued strong performance at Sentinel while Kansanshi production remained steady during the quarter. Total copper production guidance for the year has been narrowed by 15,000 tonnes to a range of 800,000 and 835,000 tonnes.
- Total copper C1 cost was $1.26 per lb during the period while AISC of $1.87 per lb continues to be impacted by higher Zambia royalties due to higher copper prices. Some marginal impact from logistics, shipping, fuel and consumable costs, and labour has been felt on operating costs. C1 cost guidance for the year has been narrowed by five cents to $1.25 and $1.35 per lb. However, copper AISC guidance of $1.80 to $1.95 per lb remains unchanged.
- During the third quarter, anode shipments in Zambia were impacted a global shortage of container shipping capacity as well as port congestion at the Durban, Walvis Bay and Dar Es Salaam ports. Consequently, a number of planned shipments were rolled into the fourth quarter. These logistical challenges for Zambian sales and on increased finished goods inventories are expected to continue into the fourth quarter.
- Cobre Panama delivered a record 87,242 tonnes of copper production in Q3, an increase of 7 per cent over Q2 2021 levels as the operation achieved further quarterly milestones in tonnes milled. Gold production also hit record levels of 36,649 ounces during the quarter. Throughput is expected to improve in the fourth quarter while grades are expected to be lower than the first nine months of 2021. Third quarter C1 cash costs at Cobre Panama increased slightly from Q2 2021 to $1.27 per lb, reflecting higher freight and fuel costs. A collar structure for the operation's coal requirements has been in place since May, 2020, that will prevent exposure to further increases in the coal price until December, 2023.
- Sentinel delivered its best quarter of the year, producing 59,931 tonnes of copper, a 10-per-cent increase from the preceding quarter. Copper C1 and AISC costs improved from the previous quarter to $1.37 and $2.16 per lb, respectively, on higher production volumes. A record milling rate was achieved in August and improved ore grades were processed in September. Grade is expected to continue to improve in the fourth quarter and throughout 2022 as higher grade ore is exposed in both the Stage 1 and Stage 2 pits. The fourth in-pit crusher at Sentinel is scheduled for commissioning in December, 2021, which will enable the plant to increase throughput to 62 Mtpa (million tonnes per annum) in 2022.
- Ravensthorpe achieved third quarter contained nickel production of 4,248 tonnes, C1 cash cost of $9.58 per pound and AISC of $11.66 per pound. The operation continued to be impacted by challenges in labour availability due to COVID-19-related travel restrictions in Western Australia. However, commissioning of Shoemaker Levy was largely completed toward the end of the third quarter which enabled the introduction of first saprolite ore into the plant in September. Completion of construction and commissioning works at the Shoemaker Levy project and the delivery of limonite ore is the main priority for the fourth quarter of 2021. Two thousand twenty-one nickel production has been revised lower and costs, which are also being impacted by higher sulphur prices, have been revised higher from prior guidance.
- Total gold production for the quarter was 78,124 ounces, a 4-per-cent decrease from Q2 2021. While gold production remained steady at Cobre Panama and Kansanshi, Guelb Mogrein experienced lower production levels. Total gold production guidance for 2021 has increased by 10,000 ounces to a range of 290,000 and 310,000 ounces on stronger performance at Cobre Panama.
2021 guidance update
Guidance provided below is based on a number of assumptions and estimates as of Sept. 30, 2021, 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.
Total copper production guidance has been narrowed to between 800,000 and 835,000 tonnes, with Cobre Panama guidance lower end of the range increasing 10,000 tonnes to 320,000 tonnes, while Kansanshi top end of the guidance range has been reduced 10,000 tonnes to 205,000 tonnes and Sentinel guidance range has been narrowed 5,000 tonnes to between 235,000 and 245,000 tonnes. Other sites guidance remains unchanged.
Total gold production guidance has been increased to between 290,000 and 310,000 ounces, with Cobre Panama guidance range increasing 10,000 ounces to between 135,000 and 145,000 ounces.
Copper C1 cash cost guidance range has been narrowed five cents per lb to between $1.25 per lb and $1.35 per lb. Despite AISC year to date being in the lower end of guidance range, no amendment has been made to the range due to the impact of the royalty expense with movements in metal prices.
Due to the performance year to date, Ravensthorpe nickel production has been reduced to between 17,000 and 20,000 contained tonnes. The lower production profile for Ravensthorpe has had a commensurate impact on nickel cash costs for the year, alongside inflation in key input prices and exchange rates.
Guidance for total capital expenditure is unchanged at $950-million. Sustaining capital and other projects capital expenditure guidance increases $10-million, while capitalized stripping guidance decreases $10-million, reflecting the inflationary pressures on capital expenditure projects with the increase in key input prices, in particular steel, and freight, logistics and labour rates in some markets. Capital expenditure for the quarter ended Sept. 30, 2021, was $274-million and for the first nine months of the year was $718-million.
Panama law 9 update
In July, 2021, the government of Panama announced the appointment of a high-level commission of senior government ministers and officials, chaired by the Minister of Commerce, to discuss the company's concession contract. During September, 2021, the company and the high-level commission were engaged in formal discussions in Panama. Over the course of the month the Ministry of Commerce publicly announced the culmination of the high-level formal discussions on two topics, being environmental and labour matters. Discussions primarily on financial matters were continuing as at the end of the quarter. The company welcomes the transparency of the high-level commission process and the opportunity to resolve this matter in the medium term.
The company continues to maintain health and sanitary protocols and to support the government health authorities in each jurisdiction to combat the spread of COVID-19. These measures continue to be reviewed and adjusted as needed.
Due to high vaccination rates at Cobre Panama during Q3, postquarter-end as of Oct. 11, fully vaccinated employees are no longer be required with isolate prior to arrival to site. In addition, the restrictions to the number of personnel onsite has been lifted, which will allow the operation to return to optimal staffing levels. Social and sanitary restrictions will continue to remain in place, which are consistent with government regulation. The company continues to support the Ministry of Health of Panama (MINSA) with access and supplies to surrounding communities.
In Zambia, the company has provided testing and medical equipment and assisted with the construction of isolation facilities for the community. Continuing support includes the provision of oxygen, consumables, face mask, and sanitation stations and transportation of medical supplies. Frequent interaction and sensitization with the surrounding communities is in place. The company is working with the Ministry of Health in the northwestern province to provide vaccination stations to employees and affiliated contractors in support of the national vaccination program.
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 workplace and protect business continuity have been implemented across all operations.
As noted in prior quarters, the company has made a number of commitments with respect to climate change.
Continued progress has been made on the company's Task Force on Climate-related Financial Disclosures (TCFD) project and remains on course to commence reporting aligned with the TCFD this year.
Work on setting greenhouse gas (GHG) emissions targets is progressing, with the focus on addressing the Cobre Panama power station, inherited by the company upon takeover of the project, which is the most significant source of GHG emissions. In keeping with the company's intention to base these commitments on actions with a pathway to achievement, addressing this one area of the company's business will have a substantial impact in reducing overall and intensity of GHG emissions. Targets related to the company's climate change policy are expected to be provided by the end of the year.
The company has established a range of carbon prices and determinant commodity prices that will now be integrated into the evaluation of new projects.
Details of the company's environmental, social and governance (ESG) reporting, policies and related programs, including approach and commitments to climate change, policies and data can be found on the company website.
The company's primary ESG report, the annual environment, safety and social data report (ESSDR), which set out the company's 2020 performance in a number of key environmental, safety and social metrics, as well as, the ESG data summary and GRI content index can be found on the company website.
Complete financial statements and management's discussion and analysis
The complete consolidated financial statements and management's discussion and analysis for the three and nine months ended Sept. 30, 2021, are available on the company's website
and on SEDAR,
and should be read in conjunction with this news release.
Conference call details
First Quantum will host a conference call and webcast to discuss the results on Wednesday, Oct. 27, 2021, at 9 a.m. ET to discuss third quarter results.
Conference call and webcast details:
Toll-free North America: 1-800-952-5114
Toronto local and international:
Toll-free United Kingdom: 00-80042228835
Passcode: 3445838 followed by the pound key
Webcast: First Quantum website
Conference call replay:
Toll-free North America: 1-800-408-3053
Toronto local and international:
2396459 followed by the pound key
The conference call replay will be available from Oct. 27, 2021, until 11:59 p.m. ET on Nov. 10, 2021.
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