(In United States dollars, except where noted otherwise)
“The second quarter saw continued strong operational and financial performance. We are pleased to see the progress at Cobre Panama as it ramps up to the targeted 85 million tonnes of throughput in 2021. This will position it strongly to build to the longer term target of 100 million tonnes per annum. Debt reduction remains a focus, and we are well on our way to achieving our targeted gross debt reduction of at least
SECOND QUARTER SUMMARY:
- Operational Highlights:
- Total copper production2 was 199,689 tonnes in the quarter, an increase of 18% from Q2 2020, due to near record production at Cobre Panama of 81,686 tonnes, 276% higher than the same period in 2020, which was impacted by a COVID-19 related reduction in production.
- Similar to production, copper sales volumes increased by 27% relative to Q2 2020 as 2020 results reflected the impact of the COVID-19 related shutdown at Cobre Panama.
- Q2 copper production costs3: cash cost (“C1”) of
$1.29 , and all-in sustaining cost (“AISC”) of$1.91 per lb, an increase of$0.09 and$0.29 , respectively, from Q2 2020. Higher C1 costs were driven by lower production at both Zambian operations and cessation of open-pit mining at Las Cruces inAugust 2020 . AISC was impacted by higher royalties, higher capex related to deferrals from 2020 and the higher C1 costs. - Realized copper price6 was
$3.55 per lb in the quarter, an increase of 37% from Q2 2020 and reflecting the hedge profile in place during the quarter. - Total gold production for the quarter was 81,375 ounces, a 49% increase from the same period in 2020, attributable to record production at Cobre Panama of 36,290 ounces and consistent delivery from
Kansanshi of 32,942 ounces. - Nickel production at Ravensthorpe in Q2 was 4,543 tonnes while construction of Shoemaker Levy continued during the quarter. The mine pre-strip at Shoemaker Levy is advanced with the first mining area cleared and ready for first ore delivery which is expected to be delivered to the plant in the third quarter of 2021. Improved ore characteristics at Shoemaker Levy are expected to improve overall process plant performance.
- Sentinel continued to work through expected lower grades in the first half of 2021. Sentinel remains well on track to perform within guidance, however, guidance for
Kansanshi has been modestly reduced. TheKansanshi planned smelter shutdown proceeded as planned with the smelter returning to operation in earlyJuly 2021 . - In
May 2021 , the Company announced that it has entered into a binding agreement to sell a 30% equity interest in Ravensthorpe for cash consideration of$240 million to POSCO, one of the world's leading integrated producers of materials for the electric vehicle sector. The Company will retain a 70% interest in Ravensthorpe and continue to be the operator. The transaction is expected to complete in the third quarter of 2021.
| Three months ended | Six months ended | ||||||
( | 2021 | 2020 | 2021 | 2020 | ||||
COPPER | | | ||||||
- Production (tonnes) 2 | 199,689 | 169,059 | 404,753 | 364,344 | ||||
- Sales (tonnes) | 203,790 | 159,944 | 414,524 | 349,897 | ||||
- Cost of production3 | ||||||||
o AISC (per lb) | $ | 1.91 | $ | 1.62 | $ | 1.81 | $ | 1.63 |
o C1 (per lb) | $ | 1.29 | $ | 1.20 | $ | 1.26 | $ | 1.25 |
- Realized price (per lb)6 | $ | 3.55 | $ | 2.60 | $ | 3.39 | $ | 2.58 |
GOLD | ||||||||
- Production (ounces) | 81,375 | 54,651 | 159,423 | 123,439 | ||||
- Sales (ounces)4 | 85,291 | 54,591 | 162,682 | 128,373 | ||||
NICKEL | ||||||||
- Production (tonnes) | 4,543 | 1,979 | 9,185 | 1,979 | ||||
- Sales (tonnes) | 6,910 | 1,791 | 9,267 | 1,791 |
- Financial Highlights
- Gross profit of
$625 million and comparative EBITDA of$902 million for the second quarter of 2021 were significantly higher (343% and 156%, respectively) than the same period in 2020, attributable to increased sales volumes at Cobre Panama, as well as a 37% increase in the realized copper price. - Sales revenues for the quarter of
$1,847 million represented an increase of$833 million or 82% from the comparable period of 2020, reflecting increased sales volumes of copper, gold and nickel, and a significant increase in the realized copper price. - Cash flows from operating activities of
$679 million ($0.99 per share) for the second quarter of 2021 were$524 million higher than the same period in 2020. - At
June 30, 2021 , the Company had 44,125 tonnes of unmargined copper forward sales contracts at an average price of$2.96 per lb outstanding with periods of maturity toDecember 2021 . In addition, the Company had 152,125 tonnes of unmargined zero cost copper collar sales contracts with maturities toMarch 2022 at weighted average prices of$3.21 per lb to$3.92 per lb outstanding. Copper sales in the quarter were 52% hedged. Approximately one quarter of expected copper sales for the next 12 months are hedged to unmargined forward and zero cost collar sales contracts, at an average floor price and average ceiling price of$3.16 per lb and$3.70 per lb, respectively. - The Company also had unmargined nickel forward sales contracts for 1,110 tonnes at an average price of
$7.74 per lb outstanding, with maturities toDecember 2021 . In addition, the Company has zero cost nickel collar unmargined sales contracts for 1,299 tonnes at weighted average prices of$7.68 per lb to$8.58 per lb outstanding with maturities toMay 2022 . - Net debt decreased during the six month period by
$658 million to$6,751 million as atJune 30, 2021 , including a$311 million reduction in the second quarter. With the current strength in the copper price, a significant further reduction is expected in the second half of this year. On the basis of ongoing strong operational performance, the Company anticipates continued strong future cash flow and expects to be in a position to support increased dividend payments in 2022. - The Company ended the quarter with
$1,792 million in net unrestricted cash and cash equivalents and in full compliance with all financial covenants. - On
July 27, 2021 , the Company declared an interim dividend ofCDN$0.005 per share, in respect of the financial year endedDecember 31, 2021 (July 28, 2020 :CDN$0.005 per share), to be payable onSeptember 21, 2021 to shareholders of record onAugust 30, 2021 .
- Gross profit of
Three months ended | Six months ended | |||||||||
( | 2021 | 2020 | 2021 | 2020 | ||||||
Sales revenues | 1,847 | 1,014 | 3,525 | 2,196 | ||||||
Gross profit | 625 | 141 | 1,165 | 288 | ||||||
Net earnings (loss) attributable to shareholders of the Company | 140 | (156 | ) | 282 | (218 | ) | ||||
Basic and diluted earnings (loss) per share | $ | 0.20 | $ | (0.23 | ) | $ | 0.41 | $ | (0.32 | ) |
Comparative EBITDA1,5 | 902 | 352 | 1,713 | 786 | ||||||
Comparative earnings (loss)1 | 173 | (84 | ) | 323 | (163 | ) | ||||
Comparative earnings (loss) per share1 | $ | 0.25 | $ | (0.12 | ) | $ | 0.47 | $ | (0.24 | ) |
Cash flow from operating activities | 679 | 155 | 1,422 | 628 | ||||||
Cash flow from operating activities per share1 | $ | 0.99 | $ | 0.23 | $ | 2.06 | $ | 0.91 |
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 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
2 Production is presented on a contained basis and is presented prior to processing through the
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
4 Excludes refinery-backed gold credits purchased and delivered under the precious metal streaming arrangement. Refer to MD&A for the quarter ended
5Adjustments to comparative EBITDA in the second quarter of 2021 relate principally to foreign exchange revaluations (foreign exchange revaluations in the second quarter of 2021).
6 Realized metal prices are not recognized under IFRS and defined within the “Regulatory Disclosures” section of MD&A.
2021 GUIDANCE UPDATE
Guidance provided below is based on a number of assumptions and estimates as of
Total copper production guidance remains unchanged, with Cobre Panama guidance range increasing 5,000 and 10,000 tonnes to between 310,000 and 335,000 tonnes, respectively, Sentinel unchanged at 230,000 to 250,000 tonnes, while
Total gold production guidance remains unchanged, with Cobre Panama guidance range increasing 5,000 ounces to between 125,000 and 135,000 ounces, while
Whilst copper C1 costs for the second quarter and for the first six months of the year have been in the middle of guidance range, AISC has been rising, particularly in the second quarter, from higher Zambian royalty rates due to higher copper prices. Accordingly AISC guidance for 2021 has been increased by
Ravensthorpe nickel production guidance has been reduced to between 20,000 and 24,000 contained tonnes in 2021. The reduction in guidance has resulted from delays experienced for supply of key components for the Shoemaker Levy crushing and conveyor project, which has resulted in an extended period of ore feed from the Hale Bopp and Halley’s pit, as opposed to higher value Shoemaker Levy ore feed.
Based on actual equipment delivery dates achieved, the delivery of first ore from Shoemaker Levy into the RNO process plant is now expected to be in the third quarter of 2021. The reduced proportion of Shoemaker Levy ore volumes across the 2021 production profile for RNO has had a commensurate impact on nickel production and costs for the year.
Cash costs guidance for Nickel has therefore been increased, with C1 cost range increasing to between
Guidance for total capital expenditure is unchanged at
Production guidance
000’s | 2021 Previous Guidance | 2021 Updated Guidance | |
Copper (tonnes) | 785 – 850 | 785 – 850 | |
Gold (ounces) | 280 – 300 | 280 – 300 | |
Nickel (tonnes) | 23 – 27 | 20 – 24 | |
Production guidance by operation
Copper production guidance (000’s tonnes) | 2021 Previous Guidance | 2021 Updated Guidance | |
Cobre Panama | 300 – 330 | 310 – 335 | |
210 – 225 | 200 – 215 | ||
Sentinel | 230 – 250 | 230 – 250 | |
Other sites | 45 | 45 – 50 | |
Gold production guidance (000’s ounces) | 2021 Previous Guidance | 2021 Updated Guidance | |
Cobre Panama | 120 – 130 | 125 – 135 | |
120 – 130 | 115 – 125 | ||
Other sites | 40 | 40 | |
Nickel production guidance (000’s tonnes) | 2021 Previous Guidance | 2021 Updated Guidance | |
Ravensthorpe | 23 – 27 | 20 – 24 | |
Cash cost and all-in sustaining cost
Copper | 2021 Previous Guidance | 2021 Updated Guidance | |
C1 (per lb) | |||
AISC (per lb) | |||
Nickel | 2021 Previous Guidance | 2021 Updated Guidance | |
C1 (per lb) | |||
AISC (per lb) | |||
Capital expenditure
2021 Previous Guidance | 2021 Updated Guidance | ||
Capitalized stripping | 250 | 210 | |
Sustaining capital and other projects | 700 | 740 | |
Total capital expenditure | 950 | 950 | |
Capital expenditure expectation for the full year 2021 includes spend on secondary screening at Cobre Panama, concentrate grade upgrade project at
Capital expenditure for the quarter ended
Interest
Interest expense for the quarter was
Cash outflow on interest paid for the three and six months ended
Tax
Excluding the impact of interest expense, the effective tax rate for the quarter ended
Depreciation
Depreciation expense the quarter ended
Earlier this month, the Government of
In June, the
SUSTAINABILITY
The Company recently published its primary ESG report, the annual Environment, Safety and Social Data Report (“ESSDR”), and ESG Data Summary which set out the Company’s 2020 performance in a number of key environmental, safety and social metrics. The report is now available on the Company’s website.
This year’s ESSDR highlights for the first time the significant CO2 emissions savings realized by some of the Company’s innovative mining technology in areas such as on-site smelting, trolley-assist and in-pit crushing and conveying. These initiatives saved an estimated 1.1 million tonnes CO2 emissions in 2020 and are part of First Quantum’s approach to place innovation and operational excellence at the core of our business. The scope of this year’s ESSDR has been expanded to reflect the Company’s downstream Scope 3 CO2 emissions.
The Company also published its 2020 ETSMA tax transparency report during the quarter, which is now available on the Company’s website. The 2020 ETSMA details close to
The Company continues to progress projects towards delivering on the 2021 commitments related to climate change:
- Commencement of the program for reporting in alignment with the TCFD framework;
- Our program to set tangible and realistic CO2 emissions targets is progressing and an update on decarbonisation efforts will be provided later in the year; and
- The Company’s efforts on integration of an internal carbon price and the expected determinant impacts on commodity prices in the evaluation of our new projects remains on schedule.
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
In
In addition to increased medical facility resilience initiatives at the mine clinics in
The Company has worked to manage the logistical challenges presented by the closure of, or bottlenecks at border crossings and ports due to the global pandemic 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
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 well-being of our workforce continues to be a priority.
COMPLETE FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS
The complete Consolidated Financial Statements and Management’s Discussion and Analysis for the three and six months ended
CONFERENCE CALL & WEBCAST
The Company will host a conference call and webcast to discuss the results on
Conference call and webcast details:
1-800-952-5114 | |
Toronto Local and International: | 416-406-0743 |
Toll-free UK: | 00-80042228835 |
Passcode: | 7903230# |
Webcast: | www.first-quantum.com |
Conference call replay:
1-800-408-3053 | |
Toronto Local and International: | 905-694-9451 |
Passcode: | 3301666# |
The conference call replay will be available from
For further information, visit our website at www.first-quantum.com or contact:
(416) 361-3400 Toll-free: 1 (888) 688-6577
E-Mail: info@fqml.com
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain statements and information herein, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. The forward-looking statements include estimates, forecasts and statements as to the Company’s expectations of production and sales volumes, and expected timing of completion of project development at Enterprise and post-completion construction activity at Cobre Panama and are subject to the impact of ore grades on future production, the potential of production disruptions, potential production, operational, labour or marketing disruptions as a result of the COVID-19 global pandemic (including but not limited to the temporary suspension of labour activities at Cobre Panama implemented in
With respect to forward-looking statements and information contained herein, the Company has made numerous assumptions including among other things, assumptions about continuing production at all operating facilities, the price of copper, gold, nickel, silver, iron, cobalt, pyrite, zinc and sulphuric acid, anticipated costs and expenditures and the ability to achieve the Company’s goals. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements or information. These factors include, but are not limited to, future production volumes and costs, the temporary or permanent closure of uneconomic operations, costs for inputs such as oil, power and sulphur, political stability in
See the Company’s Annual Information Form for additional information on risks, uncertainties and other factors relating to the forward-looking statements and information. Although the Company has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actual results, performances, achievements or events not to be anticipated, estimated or intended. Also, many of these factors are beyond First Quantum’s control. Accordingly, readers should not place undue reliance on forward-looking statements or information. The Company undertakes no obligation to reissue or update forward-looking statements or information as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements and information made herein are qualified by this cautionary statement.
Source:
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