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First Quantum pulls in horns after Panama setback

Cobre Panama is in a preservation and safe management state

Cobre Panama is in a preservation and safe management state

16th January 2024

By: Mariaan Webb

Creamer Media Senior Deputy Editor Online

     

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Canadian miner First Quantum is pulling in its horns after its misfortune in Panama, where the company has been ordered to permanently close its 300 000 t/y copper mine.

The Toronto-listed miner will undertake several balance sheet actions to conserve capital, CEO Tristan Pascall said on Monday, announcing the suspension of its dividend.

Capital programmes have also been reduced or rephased by about $400-million this year and $250-million next year, reflecting a halt in capital spend at Cobre Panama and initiatives to offset capital inflation in the Zambian business.

The copper and nickel miner said it had started discussions with banks to address and extend its bank loan facilities, while it was exploring the sale of smaller mines and interests in its larger mining assets.

“We are taking decisive action to conserve capital, lower costs and strengthen our financial position. This will enable the continued development of our Kansanshi S3 expansion, which will further strengthen our cash flows when commissioned next year.

“In parallel, we are advancing several initiatives to give us optionality and flexibility in respect of our balance sheet,” says Pascall.

He reiterated First Quantum’s commitment to Zambia, citing an improved investment climate. “The strong progress of the S3 Expansion project is a reflection of this.”

A recent news articles reported that First Quantum is in discussions to sell a stake in its Zambian operations to Chinese State-owned company Jiangxi Copper. According to Reuters, First Quantum started negotiations last month after the miner was forced to shut its Cobre Panama mine.

Bloomberg reported last week that Grupo Mexico is among several firms considering bids to buy the Las Cruces mine, in Spain, from First Quantum, citing unnamed people familiar with the matter.

Without the Panama operation, analysts have warned that First Quantum is at risk of breaching debt covenants.

First Quantum also confirmed that it will reduce the current headcount of Cobre Panama from about 1 400 people to run the preservation and safe management (P&SM) programme to below 1 000 workers. P&SM costs are expected to be between $15-million and $20-million a month.

In addition, First Quantum has announced that it will scale back operations at its Ravensthorpe nickel mine, in Australia, citing “significant” margin pressure.

First Quantum increased its nickel production to 26 000 t in 2023, from 22 000 t in 2022, as it also started producing nickel at its Trident Enterprise mine, in Zambia. Commercial production from Enterprise is expected during 2024.

The miner is forecasting nickel output of 22 000 t to 37 000 t in 2024, rising to between 26 000 t and 41 000 t in 2025 and between 36 000 t and 51 000 t in 2026. From next year, the Enterprise mine will be the company’s main source of nickel production.

First Quantum's copper production decreased by 9% in 2024 to 708 000 t. After the successful completion of the CP100 Expansion project, Cobre Panama delivered copper production of 331 000 t before halting operations in November.

Zambian production fell by 10% to 349 000 t, owing to a combination of lower throughput at both sites and lower grades at Kansanshi.

Excluding Cobre Panama from its guidance, First Quantum is forecasting copper production of between 370 000 t and 420 000 t in 2024. This is expected to increase to between 400 000 t and 460 000 t in 2025 and 2026 as the S3 Expansion at Kansanshi comes on line.

Edited by Creamer Media Reporter

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