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First Quantum Minerals Ltd
Symbol FM
Shares Issued 691,061,319
Close 2022-01-17 C$ 34.98
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First Quantum produces 816,000 tonnes copper in 2021

2022-01-17 17:58 ET - News Release

Mr. Philip Pascall reports

FIRST QUANTUM MINERALS ANNOUNCES 2021 PRELIMINARY PRODUCTION, 2022-2024 GUIDANCE, CLIMATE CHANGE TARGETS AND FINANCIAL POLICY

First Quantum Minerals Ltd. has released the preliminary results of its production for the three months and year ended Dec. 31, 2021, and guidance for production, capital expenditures and costs for the years 2022 to 2024. In addition, the company has released its targets for reductions in greenhouse gas emissions (GHG) and a financial policy that includes a new performance-based dividend payout policy. The company has released an updated National Instrument 43-101 (Standards of Disclosure for Mineral Projects) resource for its Las Cruces underground project.

"First Quantum continues to be focused on delivering disciplined and responsible growth, which is reflected in the strong increase in our copper and nickel production through the guidance period," commented Philip Pascall, chairman and chief executive officer. "We remain committed to reducing our debt levels whilst at the same time cautiously increasing capital returns to reflect the robust financial outlook. At First Quantum, we are committed to extracting resources responsibly, and the importance that we place on sustainability is an intrinsic part of everything we do. We are pleased to have identified tangible solutions to significantly reduce our greenhouse gas emissions and to contribute to the global energy transition by delivering the critical metals required."

Highlights:

  • Fourth quarter and 2021 production: First Quantum achieved its highest ever annual copper production of 816,000 tonnes, a 5-per-cent increase from 2020, attributable to record production at Cobre Panama and the resilience of its other operations. Copper production in Q4 2021 was 201,000 t.
  • Three-year guidance: Copper and nickel production is forecast to grow to 850,000 to 910,000 t and 40,000 to 50,000 t, respectively, by 2024. Capital cost guidance has increased to $1.25-billion in 2023 and 2024 and $1,375-million in 2024, principally due to inflationary pressures.
  • Inaugural climate change report: First Quantum has set tangible targets with an identified realistic path to reduce its GHG emissions by 50 per cent by 2030. The achievement of these targets is not expected to result in significant increases in capital expenditures or operating costs from previous forecasts.
  • Financial policy: With the company on track to meet the previously announced $2-billion debt reduction in first half 2022, the target for debt reduction in the short to medium term has increased by $1-billion. A dividend policy has been adopted that will comprise a performance dividend so that 15 per cent of available cash flows generated after planned capital spending and distributions to non-controlling interests are allocated to shareholder returns. Within the performance dividend, there is expected to be a minimum annual base dividend of 10 cents per share, comprising biannual dividends of five cents per share.
  • Updated Las Cruces NI 43-101 resource: Following extensive drilling, testwork and pilot plant studies, the NI 43-101 resource upgrades the previous polymetallic primary sulphide (PPS) inferred mineral resources to 41.2 million tonnes of PPS measured and indicated mineral resources, which include 5.02 million tonnes of indicated mineral resources tabled as stockpiles. There is an additional 7.1 million tonnes of inferred mineral resources.

2021 preliminary production and 2022-2024 guidance

2021 preliminary production

First Quantum achieved its highest ever annual copper production of 816,000 t, a 5-per-cent increase from 2020, attributable to record production at Cobre Panama and the resilience of its other operations in dealing with the continuing challenges brought about by COVID-19 over the last two years. Copper production in Q4 2021 was 201,000 t, 2,000 t below Q4 2020. Copper production was within January, 2021, guidance of 785,000 to 850,000 t.

Cobre Panama achieved record copper production of 331,000 t for the full year, 125,000 t more than 2020. Copper production in Q4 2021 of 80,000 t was an increase of 14,000 t from Q4 2020. Despite facing COVID-19 preventative restrictions for over three quarters of the year, Cobre Panama's performance was strong, exceeding initial 2021 guidance announced in January, 2021, and delivering its first full year of uninterrupted production since announcing commercial production on Sept. 1, 2019.

Sentinel achieved copper production of 233,000 t for the full year and 61,000 t in Q4 2021, 18,000 t and 2,000 t lower than 2020 levels, respectively. Two thousand twenty-one performance was impacted by the train 1 ball mill trunnion failure in the first quarter and a lower-grade profile; however, record quarterly throughput was achieved in Q4 2021.

Kansanshi achieved copper production of 202,000 t for the full year, 19,000 t lower than 2020, reflecting the depleting oxide ore in the maturing mine. Copper production in Q4 2021 was 52,000 t, a reduction of 1,000 t from Q4 2020 resulting from the lower grades and oxide recoveries.

Other sites achieved consolidated copper production of 50,000 t for the full year, a 51,000-tonne reduction from 2020, resulting from the cessation of open-pit mining at Las Cruces and Guelb Moghrein in late 2020 and early 2021, respectively. Las Cruces is now reprocessing high-grade tailings while Guelb Moghrein is processing stockpiled ore until cutback ore is available, which is expected in 2023.

Total copper sales volumes, in particular for product from Zambian sites, were impacted by several port availability and operational issues, as well as the general and widespread constraints that the global container freight sector experienced over the majority of 2021. Although the bulk shipping sector was less affected by the global supply chain and freight-related constraints, vessel freight costs were higher than the average over recent years. Concentrates from Panama and Cayeli are shipped bulk.

The production and sales figures provided herein are preliminary and subject to final adjustment. The final production and sales figures will be confirmed in the company's financial results for the fourth quarter and year ended Dec. 31, 2021.

                            PRODUCTION 
                              (000s)

                           Q4 2021   Q4 2020   Year 2021   Year 2020

Copper production (tonnes)     201       203         816         779
Gold production (ounces)        74        69         312         265
Nickel production (tonnes)       3         6          17          13
                              ----      ----        ----        ----

                   COPPER PRODUCTION
                     (000s tonnes) 

              Q4 2021   Q4 2020   Year 2021   Year 2020
   
Cobre Panama       80        66         331         206
Kansanshi          52        53         202         221
Sentinel           61        63         233         251
Other               8        21          50         101
Production        201       203         816         779
                 ----      ----        ----        ----

                    GOLD PRODUCTION
                      (000s ounces)

                Q4 2021   Q4 2020   Year 2021   Year 2020

Cobre Panama         33        25         142          85
Kansanshi            34        30         128         128
Other                 7        14          42          52
Production           74        69         312         265
                   ----      ----        ----        ----

                    NICKEL PRODUCTION 
                      (000s tonnes)

                Q4 2021   Q4 2020   Year 2021   Year 2020

Ravensthorpe          3         6          17          13
                     --        --          --          -- 

                        COPPER SALES 
                        (000s tonnes)

                  Q4 2021   Q4 2020   Year 2021   Year 2020

Total copper          213       217         822         764

COVID-19

The company continues to maintain pro-active health and sanitary protocols, and remains committed to support the government health authorities in each jurisdiction according to the needs across all of its sites, operations and host communities to combat the spread of COVID-19, including new variants as they emerge.

2022-2024 guidance

Guidance is based on a number of assumptions and estimates as of Dec. 31, 2021, 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 include 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.

             PRODUCTION GUIDANCE 
                   (000s) 

                     2022      2023      2024

Copper (tonnes)   810-880   840-910   850-910
Gold (ounces)     285-310   275-300   295-320
Nickel (tonnes)     25-30     30-40     40-50
                  -------   -------   -------

Production guidance by operation

                   COPPER
               (000s tonnes)
 
                  2022      2023      2024

Cobre Panama   330-360   350-380   370-400
Kansanshi      190-210   190-210   205-220
Sentinel       260-280   270-290   255-270
Other sites         30        30        20
               -------   -------   -------

                  GOLD
              (000s ounces)

                  2022      2023      2024

Cobre Panama   135-150   140-155   155-170
Kansanshi      120-130   105-115   110-120
Other sites         30        30        30
               -------   -------   -------

                NICKEL
            (000s tonnes)
 
                 2022    2023    2024

Ravensthorpe    25-30   25-30   25-30
Enterprise          -    5-10   15-20
                -----   -----   -----

Guidance for Cobre Panama includes expected commissioning of the sixth ball mill in first quarter 2023 with a ramp-up over the course of the year to achieve a throughput rate of 100 million tonnes per annum (Mtpa) by the end of 2023.

Kansanshi copper and gold production in 2024 includes some limited production from the proposed S3 expansion, with the approval and timing still subject to board approval.

Two thousand twenty-three copper production for other sites has increased from previous guidance due to the tailings reprocessing at Las Cruces. Processing of cutback 4 ore at Guelb Moghrein is expected to commence in 2023.

Guidance on nickel production at Enterprise has been included for the first time, with first production assumed during 2023. The development timeline for Enterprise is expected to be approximately 12 months. The development of the project is still subject to board approval.

                CASH COST AND ALL-IN SUSTAINING COST
 
Total copper ($/lb)               2022          2023          2024

C1                         $1.30-$1.50   $1.30-$1.50   $1.25$-1.45
AISC                         1.90-2.05     1.90-2.05     1.85-2.00
                           -----------   -----------   -----------

Ravensthorpe nickel ($/lb)        2022          2023          2024

C1                         $5.75-$6.50   $5.75-$6.50   $5.50-$6.25
AISC                         7.00-7.75     7.00-7.75     6.75-7.25
                           -----------   -----------   -----------

C1 cost guidance for both copper and nickel reflects recent inflationary and commodity price pressures, as well as movement in foreign exchange rates, particularly in Zambia. All-in sustaining cost guidance also reflects higher royalties in Zambia related to copper prices, as well as an increase in sustaining capital expenditures. At this stage, guidance assumes no change in royalties in Panama. C1 and AISC guidance for 2024 includes contribution from the S3 expansion at Kansanshi.

Nickel unit cost guidance does not include Enterprise. By 2024, C1 costs at Enterprise are expected to range between $4.25 and $5.25 per pound.

              CAPITAL EXPENDITURE
                  ($ million)

                             2022    2023    2024
  
Capitalized stripping        $250    $250    $275
Sustaining capital            310     290     290
Project capital               690     710     810
Total capital expenditure   1,250   1,250   1,375
                            -----   -----   -----

The company has been experiencing cost increases and delays on most current capital project works associated with shipping, steel price, fuel costs and labour with the latter often an impact of COVID-19 constraints.

Guidance on 2022 and 2023 capital expenditures has been increased to reflect these inflationary and logistical pressures, in particular on project expenditures, as well as the inclusion of new projects.

Across the three years of guidance, approximately $700-million will be spent on the Kansanshi S3 project development with the majority of the spend to occur over 2023 and 2024. Project capital over the guidance period now includes the South East Dome pit prestripping mining activities for a further $100-million.

The total Kansanshi S3 development capital expenditure over the full life of the project is expected to be approximately $900-million. The commencement of the S3 project will bring forward prestrip mining activities of the South East Dome pit, which is expected to be an approximately $350-million further over five years to 2026. Prestrip mining is classified as project capital. Kansanshi S3 development includes the development and construction of the S3 process plant circuit and mining fleet acquisitions.

Approximately $450-million has been included for the 100-million-tonne-per-annum expansion at Cobre Panama (CP100), including development of the Colina pit. The CP100 expansion includes ball mill 6, secondary screening, process water upgrades, overland conveyors, port modifications and the concentrate shed expansion.

In addition, approximately $60-million is included in guidance for the development of the Enterprise nickel project.

New projects not previously included in guidance are: (1) the Enterprise nickel project; (2) Guelb Moghrein's cutback 4 in 2022 that extends the mine life by two years; and (3) upgrades to accommodation and camp facilities at Cobre Panama over three years. Expenditure over the three years has also been increased for the acquisition of a fifth rope shovel, eight additional ultraclass haul trucks and port modifications at Cobre Panama. Its Las Cruces underground project has not been included in capital expenditure guidance.

Sustaining capital expenditure is expected to range between $290-million and $310-million over the three years and reflects recent inflation and an increase in TSF costs, as well as timing of fleet component replacement programs.

Climate change report and GHG reduction targets

First Quantum today released the company's inaugural climate change report. This report, in keeping with the company's commitment to the continuing development of its environmental, social and governance reporting, demonstrates its continued commitment to communicate consistently and transparently. The report is aligned with the Task Force on Climate-related Financial Disclosures, and sets out the company's climate strategy and resilience to the impacts of climate changes, as well as outlines its targets to reduce GHG emissions while delivering responsible production growth in the metals that are essential to the global transition to a low carbon economy.

In the report, First Quantum has set tangible targets and identified a realistic path to reduce its GHG emissions. The achievement of these targets is not expected to result in significant capital expenditures over the lives of mine or significant increases in operating costs based on the current cost of electricity at each location. The report is consistent with the company's climate change position statement that can be found on its website.

The reduction of the company's carbon footprint includes, but is not limited to, the following actions:

  • The expansion to 100 Mtpa at Cobre Panama is expected to be powered by renewable energy by 2023, saving approximately 70,000 tonnes of carbon dioxide equivalent per year.
  • By 2025, First Quantum expects to be able to source alternative supply options of up to 50 per cent of the energy currently provided by the Panama power station with renewable energy. This will contribute to a 30-per-cent reduction in the company's absolute GHG emissions.
  • By 2030, First Quantum expects to reduce its absolute GHG emissions and GHG intensity of its copper production by 50 per cent as it aims to increase the use of alternative power and further reduce reliance on coal at Cobre Panama while maintaining its production through the Kansanshi S3 expansion and the Cobre Panama CP100 expansion.
  • As it remains focused on responsible growth in copper production, it has implemented a carbon price for the evaluation of new projects to incentivize the use of lower carbon technologies and renewable sources of power as it seeks to lower the GHG intensity of its production.
  • First Quantum will continue to embrace innovation and the development of new technologies for optimizing productivity, profitability and environmental impact through, for example, the expansion of its trolley assist infrastructure, expansion of in-pit crushing and conveying systems, and increased use of electrical mining equipment.

The company's GHG emission reduction targets have an identified pathway to achievement and are based on commercially available solutions. For this reason, it has not made a net zero commitment at this time. It will continue to monitor the development of new technologies for implementation at its operations as they become commercially viable, and it will update its GHG emission reduction targets accordingly.

Updated financial policy

First Quantum has updated its corporate financial policy, reflecting continued higher commodity prices, continued strong operational performance and an accelerated reduction of group debt since the second quarter of 2020. First Quantum's financial policy underlines its confidence in the future of the business whilst still enabling the company to advance its strong portfolio of growth projects.

In the near term, First Quantum's focus remains the following.

1. Debt reduction: Its commitment is to reduce total debt to levels appropriate for its business. The targeted debt reduction program of $2-billion is expected to be completed by first half 2022. This debt reduction target has been extended by a further $1-billion in the short to medium term.

Its longer-term policy objective is a through-the-commodity-cycle net debt/EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of less than two times.

2. Investment in the business: Disciplined business and growth investments will be considered in line with the financial policy leverage limits. This will include investment in brownfield projects to add incremental value at its existing mines. Capital investment in greenfield projects toward creating a third major production centre will remain limited whilst the company first delivers on debt reduction and advances its brownfield projects.

3. Increasing cash returns to shareholders: Given the outlook for strong continuing earnings from the business, the board intends to commence a cautious increase in shareholder dividends.

The board has adopted a new dividend policy comprising:

  • A performance dividend so that an aggregate of 15 per cent of available cash flows generated after planned capital spending and distributions to non-controlling interests are allocated to shareholder returns.
  • Within the performance dividend, there is expected to be a minimum annual base dividend of 10 cents per share, comprising biannual dividends of five cents per share.

The board expects the base dividend to be sustainable in a range of market conditions whilst acknowledging the cyclical nature of the industry. Through the performance dividend, the board will maintain an appropriate capital allocation between debt reduction, investment in the future of the business and cash returns to shareholders. The declaration of dividends remains at the discretion of the board.

  • Interim dividend: to be announced with second quarter and half-year results, and paid in September;
  • Final dividend: to be announced with fourth quarter and full-year results, and paid in March.

Available free cash flows for assessment of performance dividends will be reviewed at least annually.

The company has established a dividend reinvestment and share purchase plan for its Canadian-resident shareholders. The plan enables eligible shareholders to reinvest the cash dividends paid on all or a portion of their common shares into additional common shares, which will be issued at 97 per cent of the average market price (as defined in the plan), and provides the opportunity to make optional cash purchases of additional common shares on a semi-annual basis on dividend payment dates.

To participate in the plan, registered eligible shareholders must deliver a properly completed enrolment form to Computershare Trust Company of Canada (in its capacity as plan agent under the plan), as directed under the plan, by no later than 4 p.m. Eastern Time on the fifth business day immediately preceding a dividend record date for the cash dividend, to which such record date relates, to be reinvested under the plan.

Updated National Instrument 43-101 resource for Las Cruces underground project

First Quantum today announced the filing of an updated NI 43-101 technical report dated Dec. 31, 2021, for its Las Cruces operations. Las Cruces was an open-pit copper mine and hydrometallurgical plant operating in Sevilla province, southern Spain. The technical report documents an updated mineral resource estimate that upgrades the previous PPS inferred mineral resources to 41.2 million tonnes of PPS measured and indicated mineral resources, which include 5.02 million tonnes of indicated mineral resources tabled as stockpiles. There is an additional 7.1 million tonnes of inferred mineral resources.

Las Cruces operated its open-pit mine and hydrometallurgical plant over the last 12 years. Operations have depleted the remaining secondary sulphide resources and reserves, which were the subject of the previous NI 43-101 technical report dated June, 2015. This previous NI 43-101 disclosed 35.8 million tonnes of inferred PPS mineral resources. Since June, 2015, Las Cruces has continued to extend and improve confidence in the PPS mineralization. Extensive geological drilling, mine planning studies, metallurgical testwork and pilot plant studies have provided sufficient detail to support a confident PPS mineral resource estimate. The geological drilling involved the addition of 229 diamond core drilled holes for 44,875 added metres of core. The added data have improved overall understanding of the prevailing PPS geological and grade continuity.

The positive findings of these works form the basis to continue to conduct further detailed technical work for converting mineral resources to mineral reserves as part of its Las Cruces underground project.

The technical report was prepared for First Quantum's Cobre Las Cruces operation in Spain, Andalucia. The technical report was prepared by Juan Manuel Escobar Torres (European Federation of Geologists), David Gray (fellow of the Australian Institute of Geoscientists) and Robert Stone (chartered engineer of the Institute of Materials, Minerals and Mining), all full-time employees of First Quantum and each qualified persons as defined by the National Instrument 43-101's rules and policies. The QPs have reviewed this news release and declare its technical content to be a correct reflection of the technical report.

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