First Quantum Minerals Reports First Quarter 2021 Results
First Quantum Minerals Ltd. (“First Quantum” or the “Company”) (TSX:FM) today reported for the three months ended March 31, 2021 (“Q1”) comparative earnings1 of $150 million ($0.22 per share1), net earnings attributable to shareholders of the Company1 of $142 million ($0.21 per share1) and cash flows from operating activities of $743 million ($1.08 per share1).
“Our operations performed very well with Cobre Panama delivering record quarterly production. Our Zambian business delivered in line with plan despite the heavy rains experienced in the quarter. With our continued low costs and the strong copper price, we generated significant cash flow, which in turn, enabled us to further reduce our debt level,” commented Philip Pascall, Chairman and CEO. “I continue to recognize and be thankful for the dedication and resilience of our entire workforce as the challenges associated with COVID-19 persist. We remain committed to protecting our workforce, with their health and safety and that of the surrounding communities a top priority.”
FIRST QUARTER SUMMARY:
- Operational Highlights:
- Total copper production2 was 205,064 tonnes in Q1, an increase of 5% from Q1 2020 as a result of record production at Cobre Panama and consistent production in Zambia despite heavy rainfall.
- Cobre Panama had record production of 82,042 tonnes, an increase of 46% from Q1 2020.
- Sentinel produced 58,252 tonnes, an increase of 3% from Q1 2020 despite repair work on the ball mill limiting throughput and the heavier rainfall in Zambia.
- Total copper production2 was 205,064 tonnes in Q1, an increase of 5% from Q1 2020 as a result of record production at Cobre Panama and consistent production in Zambia despite heavy rainfall.
- Total copper sales volumes of 210,734 tonnes exceeded production in the quarter, driven by sales volumes at Cobre Panama and Sentinel which increased by 33% and 45%, respectively, from Q1 2020.
- Q1 copper production3 costs: cash cost (“C1”) of $1.24 per lb, and all-in sustaining cost (“AISC”) of $1.72 per lb, a decrease of $0.06 and increase of $0.08, respectively from Q1 2020. Lower C1 costs were driven by increased production, favourable foreign exchange and lower fuel costs. AISC was impacted by higher Zambian royalties, more than offsetting the lower C1 costs.
- Realized copper price6 was $3.25 per lb in the quarter.
- Total gold production was 78,048 ounces in Q1, an increase of 13% from Q1 2020, attributable to record production of 35,898 ounces at Cobre Panama.
- Nickel production was 4,642 tonnes in Q1 at Ravensthorpe while construction of Shoemaker Levy continued to advance with the completion of 9 km of the conveyor including the erection of the conveyer highway overpass.
| Three months ended March 31 | ||||
| (U.S. dollars where applicable) | 2021 | 2020 | ||
| COPPER | ||||
| – Production2 (tonnes) | 205,064 | 195,285 | ||
| – Sales (tonnes) | 210,734 | 189,953 | ||
| – Cost of production3 | ||||
| º AISC (per lb) | $1.72 | $1.64 | ||
| º C1 (per lb) | $1.24 | $1.30 | ||
| – Realized price (per lb) 6 | $3.25 | $2.56 | ||
| GOLD | ||||
| – Production (ounces) | 78,048 | 68,788 | ||
| – Sales (ounces)4 | 77,391 | 73,782 | ||
| NICKEL | ||||
| – Production (tonnes) | 4,642 | – | ||
| – Sales (tonnes) | 2,357 | – |
- Financial Highlights
- Gross profit of $540 million and comparative EBITDA of $811 million for the first quarter of 2021 were significantly higher than the first quarter of 2020, attributable to increased sales volumes at Cobre Panama, lower cash costs and a 27% increase in the realized copper price to $3.25 per lb.
- Sales revenues for the quarter of $1,678 million, an increase of $496 million or 42% from the comparable period of 2020 reflecting increased sales volumes, an increase in the realized copper price, and nickel sales of $29 million following the restart of Ravensthorpe.
- $743 million of cash flows from operating activities ($1.08 per share1) generated during the quarter, an increase of $270 million from the comparable period of 2020.
- At April 27 2021, the Company had unmargined copper forward sales contracts for 89,125 tonnes at an average price of $2.88 per lb outstanding with periods of maturity to December 2021. In addition, the Company has zero cost copper collar unmargined sales contracts for 212,950 tonnes at weighted average prices of $3.10 per lb to $3.67 per lb outstanding with maturities to March 2022. The Company also had unmargined nickel forward sales contracts for 1,092 tonnes at an average price of $7.13 per lb outstanding with maturities to October 2021. In addition, the Company has zero cost nickel collar unmargined sales contracts for 500 tonnes at weighted average prices of $7.50 per lb to $8.55 per lb outstanding with maturities to August 2021.
- Net debt decreased during the quarter by $347 million to $7,062 million as at March 31, 2021 and further reduction remains a key priority.
- The Company ended the quarter with $988 million in net unrestricted cash and cash equivalents and in full compliance with all financial covenants.
| Three months ended March 31 | ||||
| (U.S. dollars millions, except where noted otherwise) | 2021 | 2020 | ||
| Sales revenues | 1,678 | 1,182 | ||
| Gross profit | 540 | 147 | ||
| Net earnings (loss) attributable to shareholders of the Company | 142 | (62 | ) | |
| Basic and diluted earnings (loss) per share | $0.21 | ($0.09 | ) | |
| Comparative EBITDA1 | 811 | 434 | ||
| Comparative earnings (loss)1 | 150 | (79 | ) | |
| Comparative earnings (loss) per share1 | $0.22 | ($0.11 | ) | |
| Cash flow from operating activities | 743 | 473 | ||
| Cash flow from operating activities per share1 | $1.08 | $0.69 |
1 Comparative earnings (loss) have been adjusted to exclude items from the corresponding IFRS measure, net earnings (loss) attributable to shareholders of the Company, which are not considered by management to be not reflective of underlying performance. 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 quarter ended March 31, 2021 for further information. The use of comparative earnings (loss) and comparative EBITDA represents the Company’s adjusted earnings (loss) metrics.
2 Production is presented on a copper contained basis and is presented prior to processing through the Kansanshi smelter.
3 AISC and C1 costs per pound are not recognized under IFRS. Refer to the “Regulatory Disclosures” section in the MD&A for the quarter ended March 31, 2021 for further information.
4 Excludes refinery-backed gold credits purchased and delivered under the precious metal streaming arrangement. Refer to MD&A for the quarter ended March 31, 2021.
5 Adjustments to comparative EBITDA in the first quarter of 2021 relate principally to foreign exchange revaluations (foreign exchange revaluations in the first quarter of 2020).
6 Realized metal prices are not recognized under IFRS and defined within the “Regulatory Disclosures” section of MD&A.
GUIDANCE
Market guidance for production, cash costs and capital expenditure remains unchanged from expectations previously disclosed by the Company.
Guidance provided below is based on a number of assumptions and estimates as of March 31, 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.
Production guidance
| 000’s | 2021 | |||
| Copper (tonnes) | 785 – 850 | |||
| Gold (ounces) | 280 – 300 | |||
| Nickel (tonnes) | 23 – 27 | |||
Production guidance by operation
| Copper production guidance (000’s tonnes) | 2021 | |||
| Cobre Panama | 300 – 330 | |||
| Kansanshi | 210 – 225 | |||
| Sentinel | 230 – 250 | |||
| Other sites | 45 | |||
| Gold production guidance (000’s ounces) | 2021 | |||
| Cobre Panama | 120 – 130 | |||
| Kansanshi | 120 – 130 | |||
| Other sites | 40 | |||
| Nickel production guidance (000’s tonnes) | 2021 | |||
| Ravensthorpe | 23 – 27 | |||
Cash cost and all-in sustaining cost
| Copper | 2021 | |||
| C1 (per lb) | $1.20 – $1.40 | |||
| AISC (per lb) | $1.70 – $1.85 | |||
| Nickel | 2021 | |||
| C1 (per lb) | $5.00 – $5.50 | |||
| AISC (per lb) | $5.50 – $6.00 | |||
Capital expenditure
| 2021 | ||||
| Capitalized stripping | 250 | |||
| Sustaining capital and other projects | 700 | |||
| Total capital expenditure | 950 | |||
Capital expenditure expectation for the full year 2021 includes spend on secondary screening at Cobre Panama, the smelter expansion at Kansanshi, Shoemaker Levy development at Ravensthorpe and the fourth crusher at Sentinel. Sustaining capital expenditure is expected to be approximately $290 million including planned maintenance at the Kansanshi smelter.
Capital expenditure for the quarter ended March 31, 2021 was $180 million.
Interest
Interest expense for the quarter ended March 31, 2021 was $187 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 2021 is expected to range between $740 million and $780 million. This includes interest accrued on related party loans to Cobre Panama and a finance cost accreted on the precious metal streaming arrangement.
Cash outflow on interest paid for the quarter ended March 31, 2021 was $193 million and is expected to be approximately $525 million for the full year 2021. This figure excludes interest paid on related party loans to Cobre Panama.
Tax
Excluding the impact of interest expense, the effective tax rate for the quarter ended March 31, 2021 was 29%. Excluding the impact of interest expense, the effective tax rate for the full year 2021 is expected to be approximately 30%.
Depreciation
Depreciation expense for the quarter was $286 million. The full year 2021 depreciation expense is expected to be approximately $1,125 million.
CLIMATE CHANGE POLICY
The Company has always been committed to extracting resources responsibly and the sustainability strategy is an intrinsic part of the Company’s operations. Recently, to formalize this commitment the Company published its approach to climate change. The approach includes the integration of climate change and energy issues and impacts into the decision making and strategic planning.
In 2021, the Company is committed to:
- trial reporting in alignment with the Task Force on Climate-related Financial Disclosures (“TCFD”) framework;
- set tangible and realistic targets with an identified pathway to achievement, for absolute emissions levels and the carbon intensity of the Company’s operations; and
- integrate an internal carbon price and the expected determinant impacts on commodity prices in the evaluation of our new projects.
COVID-19
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.
In Panama, the Company has recently completed the donation of a medical laboratory to the Gorgas Institute’s Centre of Epidemiological Study. The Company works closely with the institute, sharing its COVID-19 response data for wider country analysis. Overall, the number of COVID-19 cases in Panama reduced in March and April. However, the immediate province connected to the mine site is still seeing small community outbreaks and these communities, as well as the broader province, have limited access to resources. The Company supports the Provincial Government with aerial transport, food, medical supplies and other facility-based needs. In Zambia, the Company has provided COVID-19 testing equipment and treatment and isolation facilities for the community. The Company has also 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.
The Company has worked to manage the logistical challenges presented by the closure of or bottlenecks at border crossings and ports by using alternative routes where feasible. In the fourth quarter of 2020, some sales shipments were delayed due to COVID-19 related port restrictions, and similar delays have been experienced to date in 2021. The Company has also experienced some minor disruptions and additional costs on freight shipments out of Asia. The Company has not experienced any other major disruptions to supply chains and product shipments since the onset of the pandemic and has no immediate expectation of further disruptions other than the port delays and potential for additional shipping costs as noted above.
As cases are identified amongst the workforce, they are contained and isolated according to the established protocols and in coordination with local health authorities, with limited impact to operations. The Company continues to employ measures to ensure minimal spread of the contagion, and the health and wellbeing of our workforce continues to be a priority.
