Base metals miner First Quantum Minerals on Tuesday reported substantially lower third-quarter financial results, citing margin compression because of a declining copper price and cost inflation.
The Canada-headquartered company’s adjusted earnings fell from $337-million in the second quarter, to $96-million in the third quarter, while copper C1 cash costs increased by $0.08/lb to $1.82/lb.
“The headwinds from recessionary concerns and broad cost inflation have led to substantial margin compression across the industry. In the longer term, we continue to see structural upside in our markets from the ongoing challenges of bringing on new copper supply,” said CEO Tristan Pascall.
Total copper production for the third quarter was 194 974 t, an increase of 2 306 t from the second quarter. The increase was mainly attributable to Sentinel, in Zambia, which achieved record output. However, challenges at Kansanshi, also in Zambia, resulted in First Quantum lowering its guidance for 2022.
Kansanshi’s production fell by 25% quarter-on-quarter to 29 862 t, owing to lower grades across all three circuits and the resulting impact on recoveries.
First Quantum explained that access to the M12 cutback was restricted until the end of the third quarter, owing to accumulation of water in the main pit. Dewatering of the M12 area has been completed and planned mining activities resumed toward the end of the third quarter. Kansanshi’s copper C1 cash cost surged 60% to $2.93/lb.
As a result of the challenges, the mine is now expected to only produce between 140 000 t and 150 000 t this year. Production volumes are expected to continue at lower levels until the completion of the S3 Expansion project.
Overall, First Quantum’s guidance for 2022 has been reduced to between 755 000 t and 785 000 t, compared with the previous target of 790 000 t to 855 000 t.
First Quantum also increased its copper C1 cash cost guidance from between $1.45/lb and $1.60/lb, to between $1.70/lb and $1.80/lb, citing broad cost inflation and lower production from the Zambian operations.