FQMs’ Q1 earnings drop by over 80% due to operational challenges

First Quantum Minerals, a Canadian mining company, reported a significant drop in earnings in Q1 2023, with profits falling by over 80% to $75 million compared to $385 million in the same period last year.

The decline in earnings was attributed to a series of operational challenges affecting the company’s top three operations.

Copper production in Q1 reached almost 139,000 tonnes, down 33% from the previous quarter, mainly due to a severe rainy season in Zambia and a standoff with the government of Panama, where the company runs the vast Cobre Panama copper mine.

The Sentinel mine’s output fell by 51% due to water accumulation on the pit, while Kansanshi’s production dropped by 18% due to the rainy season and lower feed grades.

The interruption of production at Cobre Panama was due to a dispute with the country’s government over tax and royalty payments.

First Quantum reached a new deal with Panama in March, and mining operations resumed full production levels within two days, with five shipments of copper sailing during the rest of the month.

Despite the challenges faced, First Quantum Minerals maintained its full-year guidance for 2023, and the results were in line with market consensus. The company expects production to recover over the course of the year, and its CEO, Tristan Pascall, stated that they remain committed to their guidance for 2023.

BMO analyst Jackie Przybylowski believes that as operations recover from the disruptions and other projects move forward, First Quantum’s production is expected to be more weighted towards the end of the second half of the year.

However, Przybylowski noted that the market is closely monitoring the results of First Quantum’s public consultations in Panama, as the new contract must be presented before the country’s National Assembly for final approval in the legislative term starting July 1.