Summary

  • First Quantum is a global copper company produce copper in the form of concentrate, cathode and anode, and have inventories of nickel, gold and cobalt.
  • The company is one of the world's top 10 copper producers and also hold significant interests in nickel.
  • Its portfolio includes high-quality, low-cost copper mines, particularly Kansanshi in Africa and Cobre Panama in Latin America.

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Company Overview

First Quantum (TSX:FM, OTC:FQVLF) is a global copper company. The company produce copper in the form of concentrate, cathode and anode, and have inventories of nickel, gold and cobalt. The company operate long life mines in several countries and employ approximately 20,000 people world-wide.1

The company's global operating assets generate strong cash flow and earnings to support First Quantum's growth and diversification strategy. First Quantum Minerals is one of the world's top 10 copper producers and also hold significant interests in nickel.

The company's portfolio includes high-quality, low-cost copper mines, particularly Kansanshi in Africa and Cobre Panama in Latin America. The company also have significant copper and nickel projects in Africa and Australia. In addition to these minerals, the company produce gold, zinc and cobalt as commercially important by-products from its copper and nickel extraction.

By 2021, the combined output of its mines will be more than 800,000 tonnes of copper per year, making it one of the world's top producers of this metal. First Quantum Minerals was founded on its belief in the fundamentals of copper and the company expect demand for copper will continue to grow.

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Produce

The company's primary product is copper. The company also produce nickel and have access to significant deposits of this metal. As part of its processing operations the company also realize signficant value from a range of other metals - gold, zinc and cobalt.

  • Copper
  • Nickel
  • Gold
  • Zinc
  • Cobalt

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Mines

First Quantum Minerals is one of the world's top 10 copper producers. The company operate across four continents and employ about 20,000 people.2

Cobre Panama

Cobre Panama is its newest operation, located in Colon Province, 120km west of Panama City.

With 3.0 billion tonnes of proven and probable reserves, Cobre Panama is one of the largest new copper mines opened globally in the past decade. Located in Colon Province, 120km west of Panama City, the production complex includes two open pits, a processing plant, two 150 megawatt power stations and a port.

Commercial production started in 2019 and at full current capacity, the plant will process 85Mtpa of ore to produce more than 300,000 tonnes of copper per year along with gold, silver and molybdenum.

Cobre Panama comprises a series of copper porphyry deposits The main deposits are Balboa, Botija, Colina and Valle Grande. There are also a number of smaller mineralized zones; the most significant being Brazo and Botija Abajo. The operation has a 34-year mine life.

In November 2017, First Quantum increased its ownership interest in MPSA to 90 per cent.

Kansanshi

The Kansanshi copper-gold mine near Solwezi, in the North Western Province of Zambia, has been its flagship operation since 2005.

From its two open pits, the Kansanshi copper-gold mine near Solwezi, in the North Western Province of Zambia, produces more copper than any other mine in Africa.

Since the company started production at Kansanshi opening in 2005, First Quantum Minerals has installed several expansions, and the operation is now capable of producing 340,000 tonnes of copper and more than 120,000 ounces of gold per year.

Kansanshi is a vein deposit, with economic copper and gold mineralization occurring in three ore-types: primary sulphide, mixed supergene and oxide.

The Kansanshi mine is owned and operated by Kansanshi Mining PLC, which is 80 per cent owned by First Quantum.

Sentinel

The Sentinel open-pit copper mine, 150km west of Solwezi in North Western Province of Zambia, is at the forefront of mining technology.

Constructed over four years from 2012, Sentinel represents US$2.1 billion of investment - Zambia's largest infrastructure investment since the Kariba Dam was constructed in 1959. The operation is based on sophisticated technology – including the world's largest steel-ball mills and the world’s largest semi-mobile rope shovels.

Mining capacity will eventually extend to around 65 million bulk cubic metres of ore and waste mined per annum. The plant has capacity to treat 55 million tonnes of ore to produce 300,000 tonnes of copper per annum.

Sentinel is a sediment-hosted stratiform copper deposit, with predominantly primary chalcopyrite copper mineralisation.

Cobre Las Cruces

Las Cruces is a very high grade (5-6%) open-pit copper mine and hydrometallurgical plant located in the Sevilla Province of Southern Spain.

The hydrometallurgical plant relies on a unique atmospheric ferric leaching process to recover copper from the rich Las Cruces chalcocite ore. The process, specifically designed for Las Cruces polymetallic ore, is optimized to produce London Metal Exchange grade copper cathode with minimal water and energy use, controlled liquid effluent and a dry solid waste stream.

The plant is designed to produce approximately 72,000 tonnes of copper cathode per year which is shipped as final product.

The Las Cruces deposit is a polymetallic Volcanogenic Massive Sulphide deposit, similar to other Iberian Pyrite Belt deposits. A thick, high-grade supergene zone overlies the primary sulphides, comprised of a gold-bearing gossan zone in the upper part and a copper-rich secondary sulphide zone underneath.

Çayeli

The Çayeli mine is an underground copper and zinc operation in north eastern Turkey.

Çayeli Bakır is located on the Black Sea coast of north eastern Turkey and operated by Çayeli Bakir Isletmeleri A.S., a wholly-owned subsidiary of First Quantum.

Since 1994, Çayeli Bakır has produced copper and zinc concentrates. It has the capacity to mine and process 1.3 million tonnes of ore per annum.

Çayeli is a volcanic hosted massive sulphide (VHMS) copper-zinc deposit.

Çayeli’s mine design is based on underground bulk mining methods with the use of delayed backfill to extract ore in a sequential manner.

Guelb Moghrein

The Guelb Moghrein copper-gold operation is located 250km northeast of Mauritania's capital, Nouakchott, near the town of Akjoujt.

The Guelb Moghrein deposit was first developed in the early 1970s by Anglo American Corporation, however, it closed in 1977 due to technical difficulties and high fuel prices. First Quantum re-commenced production in 2006, and the company increased its investment with plant upgrades in 2008 and a magnetite plant built in 2013. The operation currently mines around 16 million tonnes of material a year, and processes some 1.5 million tonnes through flotation.

Guelb Moghrein is an example of the Iron Oxide Copper Gold type deposit, but is unusual in being hosted in carbonate strata.

First Quantum acquired an 80% interest in the asset in 2004 and achieved commercial production in 2006. In 2010, the Company increased its ownership in Guelb Moghrein to 100%.

Ravensthorpe

The Ravensthorpe Nickel Operation (RNO) is an open-pit mine and primary processing plant located in the south west of Western Australia.

RNO is located in the Esperance region of Western Australia, approximately 550km south east of the State capital Perth. RNO is commencing a restart process in readiness for early 2020.

Investment will be undertaken at RNO to enable expansion into a second stage nickel laterite deposit, known as Shoemaker-Levy. This major expansion will give RNO a long-term life of approximately 30 years.

In May 2021, First Quantum entered into a binding agreement to sell a 30% equity interest to POSCO, one of the world's largest steel producers.

Ongoing annual production from RNO is targeted at approximately 30,000 tonnes of contained nickel.

Ravensthorpe comprises three separate deposits of low-grade nickel-in-laterite.

Pyhäsalmi

The Pyhäsalmi mine is an underground copper, zinc and pyrite mine located in central Finland.

The Pyhäsalmi copper, zinc and pyrite mine is in central Finland, four kilometers southeast of the town of Pyhäjärvi, on Lake Pyhäjärvi.

Pyhäsalmi is one of the oldest and deepest underground mines in Europe. It is also one of the most efficient non-caving underground mines in the world. It was developed by Outokumpu Oyj in 1962 following accidental discovery of the deposit by a farmer. In the 1990s a 1450-metre deep automated hoisting shaft was constructed to exploit deeper ore. The shaft itself is a rare asset, providing access via hoist in less than three minutes or via driving the 11km decline in 30 minutes. It added ten years to Pyhäsalmi's life of mine. It has produced around 60 million tonnes of ore in its history.

Outokumpu started production from the new shaft in 2001, and in 2002, Inmet completed the acquisition of Pyhäsalmi and continued underground production. First Quantum acquired Pyhäsalmi in 2013 through its acquisition of Inmet.

The Pyhäsalmi deposit is a copper-zinc volcanogenic massive sulphide deposit of Proterozoic age.

Pyhäsalmi uses non-entry, bulk open-stope mining methods in a primary-secondary sequence. On average, stope size varies from 50,000 tonnes for narrow primary stopes to over 100,000 tonnes for wider secondary stopes. After single-stage primary crushing by an underground jaw crusher, ore is hoisted to a fines crushing plant, where it is ground in three stages. This is followed by conventional flotation, consisting of three sequential flotation circuits, one each for copper, zinc and pyrite.

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Enterprise

The Enterprise nickel project is located 12km away from its Sentinel copper mine in the North Western Province of Zambia.

The nickel process plant was completed in 2016, and shares a number of sections with the Sentinel process circuit. It is designed to produce 28,000 tonnes of nickel in concentrate, but this can be increased to 60,000 tonnes. The plant is integrated with the Sentinel copper circuit so that it can produce additional copper concentrate when not producing nickel.

Enterprise and Sentinel are 100 per cent owned by Kalumbila Minerals Limited (KML), a First Quantum subsidiary. They were secured in 2010 when First Quantum acquired 100 per cent of Kiwara PLC and its main asset - a controlling interest in a prospecting license on the periphery of the Kabombo Dome area. The combined license area was renamed Trident after the acquisition. Sentinel and Enterprise will ultimately share processing infrastructure and tailings facilities.

Enterprise is a sediment-hosted nickel-sulphide deposit with a total measured and indicated resource of 40 million tonnes of ore containing 431,000 tonnes of nickel.

Haquira

Haquira is an undeveloped copper deposit in Apurimac region of southern Peru.

Haquira is one of the world’s major undeveloped copper deposits with excellent potential for a large-scale copper mine. It is located in the Peruvian Andes, in the Apurimac region of southern Peru.

First Quantum secured the Haquira deposit via its acquisition of Antares Minerals in 2010. In 2013, First Quantum secured titles over seven concessions (6400 ha) adjacent to Haquira that now form part of the Haquira project, adding to potential copper resources and to the potential to accommodate infrastructure for Haquira. When fully operational the Haquira Project has the potential to produce more than 200,000 tonnes of copper a year.

Mineralisation at Haquira is related to porphyry-copper systems. Mineralisation has been identified in enriched supergene copper blankets, copper sulfide-bearing stockworks and sheeted-vein systems in underlying primary copper porphyries.

Taca Taca

Taca Taca is a high-potential copper-gold-molybdenum porphyry deposit in an advanced exploration phase.

Taca Taca is located in Salta Province in north west Argentina, 230 km west of the city of Salta and 55 km east of the Chilean coast.

The Taca Taca copper-gold-molybdenum porphyry deposit is held in a composite package consisting of a number of separate concessions and exploration permits. First Quantum has successfully consolidated these landholdings in preparation for project development stage. Two of the mining concessions have a 50 per cent ownership with third party groups. These properties are subject to a 1.5 per cent net smelter returns royalty.

First Quantum acquired 100 per cent of Taca Taca from Lumina Copper Corporation in 2014, through its subsidiary, Corriente Argentina S.A. (CASA).

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Financial Highlights

Record annual copper production was achieved during the year ended December 31, 2021, with total copper production at 816,435 tonnes, representing a 5% annual increase from the prior year. The record achievement was mainly attributable to the strong operational performance at Cobre Panama, which more than offset the production decreases seen at Sentinel, Kansanshi and other sites.3

Cobre Panama had several milestone achievements during the year, leading up to a record annual copper production of 331,000 tonnes for the year. Total plant throughput for the year was 80.8 million tonnes compared to the target of 85 million tonnes, however, Cobre Panama produced strong operational results due to increased mill availability, throughput rates, and higher ore grades processed during the year. Cobre Panama demonstrated a strong recovery from the prior year, when it was placed on preservation and safe maintenance from April to August 2020 due to COVID-19 restrictions.

Copper production at the Zambian sites, Sentinel and Kansanshi, saw an annual decline of 7% and 9%, respectively, compared to the prior year, due to lower grades at Sentinel, and lower grades as well as throughput at Kansanshi.

At the Company’s other sites, copper production decreased year-over-year at Las Cruces by 40,700 tonnes, and Guelb Moghrein by 9,646 tonnes, which represented a significant decrease due to the mines nearing their end of life.

Record annual gold production was achieved during the year ended December 31, 2021, with total gold production at 312,492 ounces, representing an 18% annual increase. Cobre Panama contributed a record 141,637 ounces of gold in 2021, a 67% increase from the prior year, while Kansanshi was the other large contributor at 128,199 ounces, consistent with the prior year.

Ravensthorpe nickel production for the year was 16,818 contained tonnes, a significant increase of 32% from the prior year, as Ravensthorpe recommenced operations with the first nickel production in late April 2020.

Total copper sales during the year of 821,889 tonnes are the Company’s highest annual sales seen to date, reflective of the record production achieved during the year and represents an 8% increase in copper sales from the prior year. Cobre Panama was a major contributor to the increase in copper sales, with a 63% increase from prior year.

Gold sales volumes increased by 16% compared to the prior year, also reflective of the record gold production for the year and significant contribution from Cobre Panama.

Nickel sales volumes at Ravensthorpe were 17,078 contained tonnes sold for the year, a 41% increase from the prior year.

Copper C1 cash cost of $1.30 per lb for the year ended December 31, 2021 increased by $0.09 per lb from the prior year mainly due to the decreased production at Sentinel, Kansanshi, and Las Cruces, as well as higher fuel costs and freight charges. Copper C1 cash cost at Cobre Panama remained the same as the prior year at $1.31 per lb, while Kansanshi copper C1 cash cost decreased by $0.05 per lb and Sentinel copper C1 cash cost increased by $0.04 per lb

Total copper AISC of $1.88 per lb for the year ended December 31, 2021 was $0.25 per lb higher than the prior year, mainly resulting from an increase in copper AISC at Kansanshi and Sentinel due to the higher Zambian royalty rate following the increase in copper prices, as well as an increase in copper AISC at Las Cruces further contributing to the total increase in copper AISC.

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Sales Revenues

Sales revenues for the year ended December 31, 2021 were $7,212 million, 42%, or $2,142 million higher than the prior year, reflecting an increase in copper sales revenues and gold sales revenues of $1,955 million and $46 million respectively, together with a $95 million increase in nickel sales revenues as Ravensthorpe ramped up following restart of production in late April 2020.

Copper sales revenues of $6,332 million were 45%, or $1,955 million, higher than the prior year reflecting higher sales volumes at Cobre Panama, combined with higher net realized prices. Copper sales revenues include an $892 million loss, or $0.49 per lb, on the copper sales hedge program, compared with a loss of $59 million, or $0.04 per lb, in the prior year.

The realized price for copper of $3.64 per lb in 2021 was 33% higher than the prior year. This compares to an increase of 51% in the average LME price of copper for the same period, to $4.23 per lb.

Gold sales revenues in 2021 were 11%, or $46 million, higher than the prior year, reflecting a 16% increase in gold sales volumes, attributable to Cobre Panama, which contributed total gold revenue of $166 million, an increase of $65 million, and higher realized gold prices. Cobre Panama gold and silver revenues of $208 million include $156 million of gold and silver revenues recognized under the precious metal stream, and an associated $237 million cost for the purchase of refinery-backed gold and silver credits to satisfy the obligation.

Nickel sales revenues of $254 million have been recognized for the year ended December 31, 2021 and include a $10 million loss on the nickel sales hedge program, or $0.32 per lb compared with an $11 million gain, or $0.51 per lb, in the comparative period. Nickel sales volumes at Ravensthorpe, were 17,078 contained tonnes sold for the year, a 41% increase from the prior year.

Gross profit for the year ended December 31, 2021 of $2,562 million was $1,485 million higher than 2020, based on higher metal prices and contribution from Cobre Panama.

Gross profit of $2,562 million was a notable increase of $1,485 million, or 138%, from 2020, and driven by increased sales volumes at Cobre Panama and higher net realized prices, with some offset from higher cash costs, principally fuel, freight and royalties. A loss of $902 million was recognized for the year on the corporate sales hedge program, compared to a $48 million loss in 2020.

Net Earnings

Net earnings attributable to shareholders of the Company of $832 million for the year ended December 31, 2021, was $1,012 million higher than the same period in 2020. Basic earnings per share of $1.21 compares to a loss per share of $0.26 in the prior year. Net finance expense of $660 million was $78 million lower than the prior year as debt levels continued to decrease. Net finance expense consists of interest on debt of $532 million, interest on related party debt of $119 million, accretion of deferred revenue and restoration provision of $64 million and $11 million, respectively, and other interest expense of $3 million; offset by interest capitalized of $4 million and interest income of $65 million.

Other income of $218 million includes foreign exchange gains of $159 million, principally attributable to foreign exchange gains arising on translating the Zambian VAT receivable. This compares to a loss of $225 million in the prior year ended December 31, 2020.

A $75 million share of the profit in KPMC was recognized in 2021, for which a loss of $45 million was recognized in the prior year.

A $16 million expense reflecting the expected phasing of the Zambian VAT was recognized in the year, compared with a credit of $80 million recognized in 2020, which represented the expected phasing of receipts, and the impact of foreign exchange, using a ZMW risk-free rate.

An income tax expense of $812 million was recognized in 2021, compared with an income tax expense of $256 million recognized in the prior year, reflecting applicable statutory tax rates, which range from 20% to 35% for the Company’s operations. No tax credits have been recognized with respect to losses of $902 million realized under the Company’s copper and nickel sales hedge program. The effective tax rate for the year ended December 31, 2021 excluding the impact of interest expense was 31%.

Adjusted earnings for the year ended December 31, 2021 of $826 million was a significant increase from adjusted loss of $46 million in 2020. Adjusted earnings per share of $1.20 compares to adjusted loss per share of $0.07 in 2020.

The principal items not included in adjusted earnings for the year are foreign exchange gains of $159 million, principally related to movements on the Zambian VAT receivable, impairment charge of $44 million, loss on redemption of debt of $21 million and adjustment for expected phasing of Zambian VAT of $16 million. Adjusted earnings1 is an earnings metric used by management to evaluate operating performance. The Company believes that the adjusted metrics presented are useful as the items excluded from adjusted earnings1 do not reflect the underlying operating performance of its current business and are not necessarily indicative of future operating results.

Liquidity

Net debt decreased by $1,356 million during the year ended December 31, 2021 to $6,053 million. At December 31, 2021, total debt was $7,912 million.

The Company has entered into derivative contracts to ensure that the exposure to the price of copper on future sales is managed to ensure stability of cash flows. At February 15, 2022, the Company has zero cost copper collar unmargined sales contracts for 40,000 tonnes at weighted average prices of $3.63 per lb to $4.68 per lb outstanding with maturities to June 2022.

At February 15, 2022, the Company has zero cost nickel collar unmargined sales contracts for 400 tonnes at weighted average prices of $7.71 per lb to $8.58 per lb outstanding with maturities to May 2022.

Approximately 5% of expected copper sales for the next 12 months are hedged to zero cost collar sales contracts, at an average floor price and average ceiling price of $3.63 per lb and $4.68 per lb, respectively. This compares to approximately one sixth at the reporting date of the third quarter of 2021, with an average floor price and average ceiling price of $3.41 per lb and $4.23 per lb, respectively.

References

  1. ^ https://www.first-quantum.com/English/about-us/default.aspx
  2. ^ https://www.first-quantum.com/English/our-operations/default.aspx
  3. ^ https://s24.q4cdn.com/821689673/files/doc_financial/2021/First-Quantum-2021-AR-FINAL.pdf
Tags: US:FQVLF CA:FM
Created by Asif Farooqui on 2022/04/22 14:33
     

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