First Quantum swings to Q1 loss on increased tax charge

VANCOUVER (miningweekly.com) – Base metals producer First Quantum Minerals has swung to an adjusted loss of $29-million, or $0.04 a share, during the first quarter ended March 31, as no tax credit was recognised regarding losses realised under a sales hedge programme.

Headline earnings fell short of analyst forecasts calling for earnings of $0.05 a share.

The Toronto-headquartered miner reported a net loss from continuing operations attributable to shareholders of $114-million, or $0.17 a share, compared with earnings of $49-million, or $0.07 a share in the comparable quarter a year earlier, which included losses under the sales hedge programme and costs incurred for the early redemption of the 2019 and 2020 senior notes, for which no tax credit has been recognised.

The copper sales hedging programme, initiated in 2015 to ensure stability of cash flows, reduced sales revenues for the quarter by $128-million and decreased the net realised copper price by $0.42/lb, the company said late Thursday.

As at March 31, First Quantum had unsettled and unmargined sales hedges for 402 000 t of copper, with maturities to February 2018 at an average price of $2.29/lb. Further to the above unmargined sales hedges, the company had zero cost collar unmargined sales hedges for 16 000 t at the price range of $2.62/lb to $2.83/lb, with maturities from July 2017 to February 2018.

Cash flows from continuing operating activities fell slightly year-over-year to $239-million in the quarter, or $0.35 a share.

First Quantum realised sales revenues of $766-million for the period, up $46-million compared to the same period in 2016 on the back of the Sentinel mine, in Zambia, being in commercial production since November 2016. This was offset, to some extent, by lower net realised copper prices attributable to the copper sales hedging programme, and lower nickel sales volumes attributable to the impact of significant flooding at the Ravensthorpe mine, in Australia.

Copper output totalled 132 356 t in the quarter, up 11% year-on-year primarily as a result of increased output at Sentinel and Kansanshi, also in Zambia.

At Sentinel, copper output totalled 36 274 t for the quarter, compared with 20 902 t for the same period in 2016. Copper production was lower compared to the fourth quarter of 2016 owing to the Zambia rainy season and the transition to a terrace mining plan at Sentinel, First Quantum stated.

The Kansanshi smelter processed 327 095 t of concentrate, up from 244 144 t in the 2016 period, produced 83 070 t of copper anode , up from 52 506 t and 307 000 t of sulphuric acid, compared with 239 000 t in the comparable period last year. The smelter recorded overall copper recovery of 97%, one per cent lower year-on-year.

First quantum reported that equipment maintenance and flooding impacted operations at Ravensthorpe, resulting in a 21% drop in nickel output at 5 592 t for the quarter, compared with 7 106 t for the comparable period in 2016.

Gold output totalled 50 579 oz, a 10% year-on-year decline, driven by lower output at Guelb Moghrein, in Mauritania, on the back of lower gold feed grade and throughput.

Copper sales volumes climbed 7% to 139 810 t, reflecting an almost doubling of sales volumes from Sentinel, attributable to sales of copper anode.

Copper C1 cash cost was $1.26/lb, up $0.23/lb and reflecting the first full quarter of commercial production at Sentinel.

First Quantum ended the period with $449-million of net unrestricted cash and net cash equivalents in addition to $938-million of committed undrawn facilities and was in compliance with all financial covenants.

Meanwhile, First Quantum reported “steady progress” at the $5.48-billion Cobre Panama project, advancing the overall project progress just over 50% completion. Detailed engineering and design is 85% complete and continues to focus on completing the process plant and secondary infrastructure.

At full production, Cobre Panama is expected to yield 320 000 t of copper a year. That will result in First Quantum producing about 910 000 t/y of copper by 2020, besting producers such as Rio Tinto Group and KGHM, according to a February investor presentation.

Despite the earnings miss, the company’s TSX-listed stock traded in positive territory late in the Friday trading session, adding 1.25% at C$12.98 a share.