First Quantum Minerals (Zambia) records Q1 2022 improvements, gross profit up 16%, EBITDA up 9%

By Published On: May 3rd, 2022Categories: Corporate announcement, Earnings

First Quantum Minerals (FQMZ.zm) Q12022 Interim Report

First Quantum Minerals Ltd. (“First Quantum” or “the Company”) (TSX: FM) today reports results for the three months ended March 31, 2022 (“Q1 2022”) of net earnings attributable to shareholders of the Company of $385 million ($0.56 earnings per share) and adjusted earnings1 of $480 million ($0.70 adjusted earnings per share2).

“Despite the operational and inflationary challenges presented in the first quarter, First Quantum was able to deliver another quarter of strong earnings and demonstrate continued financial improvement. Cash flow generation continues to be strong in the current commodity price environment and we remain committed to improving our balance sheet with net debt1 reduction of over $200 million during the period and the early redemption of $500 million of senior notes subsequent to the quarter,” commented Philip Pascall, Chairman and CEO. “While the restrictions from the global pandemic have largely eased, recent geopolitical events have brought about new challenges and I thank the entire First Quantum team for their tireless efforts.”

FIRST QUARTER SUMMARY

In Q1 2022, First Quantum reported improvements in gross profit (16%), EBITDA1 (9%), net earnings attributable to shareholders (56%), and adjusted earnings1 (57%) relative to the fourth quarter of last year (“Q4 2021”). On a quarter-over-quarter basis, despite lower copper and gold sales volumes and the inflationary pressures on costs, the first quarter benefitted from higher realized metal prices2 as the Company’s copper hedge positions continued to decline.

Total copper production for the first quarter was 182,210 tonnes, a 10% decrease from Q4 2021. Different factors at each of the main operating mines contributed, to varying degrees, to a reduction in grade from Q4 2021 levels. Grades are expected to return to planned levels at Cobre Panama and Sentinel over the coming months, while Kansanshi’s grades are expected to be lower than 2021. Total copper production guidance for 2022 has been lowered to a range of 790,000 to 855,000 tonnes from 810,000 to 880,000 tonnes to reflect the lower production experienced in the first quarter. Guidance for gold and nickel production remains unchanged.

Copper C1 cash cost2 of $1.61 per lb for Q1 2022 was $0.22 per lb higher than the preceding quarter as global pressures on fuel, explosives and freight prices have been seen across all of the Company’s operations. The guidance range for copper C1 cash cost2 has been increased to $1.45 and $1.60 per lb, and copper all-in sustaining cost (AISC)2 guidance has increased to $2.15 and $2.30 per lb. The conflict in Ukraine and the associated wide-reaching sanctions imposed upon Russia has led to higher energy and commodity prices. These increases have further contributed to the global inflationary environment since the Company provided three-year guidance in January 2022. For the Company, various inputs and operational costs have increased and may increase further; these include costs for fuel, explosives, sulphur, freight, reagents and steel. Such inflationary pressures have currently added approximately $0.10 per lb to monthly copper C1 cash costs2 and approximately $0.50 per lb to monthly nickel C1 cash costs2
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Q1 2022 OPERATIONAL HIGHLIGHTS

Total copper production for the first quarter was 182,210 tonnes, down from the 201,823 tonnes reported in Q4 2021 as all three of the Company’s main operating sites experienced lower production. Given the current events with the Ukraine conflict and COVID-19 restrictions in China, and most recently the flooding in Durban, the shipping environment and inland logistics remain challenging and continue to impact sales volumes. Despite these constraints, copper sales volumes in the first quarter totaled 196,702 tonnes sales, exceeding production levels by 14,492 tonnes, with lower closing inventory levels at the Zambian operations in particular.

Copper C1 cash cost1 averaged $1.61 per lb for Q1 2022, up from $1.39 per lb in Q4 2021, as global inflationary pressures led to increased prices, which were felt more acutely for fuel, explosives and freight. Copper AISC1 of $2.27 per lb, up 11%quarter-over-quarter, was also impacted by higher royalties on production at the Company’s Zambian properties due to the higher copper price.

• Cobre Panama delivered copper production of 78,337 tonnes in the first quarter, down a marginal 1,693 tonnes from the previous quarter on slightly lower throughput due to planned SAG mill relines. However, March achieved record mill throughput of 7.6 million tonnes. Copper C1 cash cost1 and copper AISC1 of $1.65 per lb and $2.00 per lb, respectively, were $0.08 and $0.06 higher than the fourth quarter of last year. While costs were impacted by spot electricity purchases in January during maintenance of Unit 1 at the power plant, the cost increase was also attributable to price increases for key consumables including fuel, steel for grinding media, liners, explosives, and higher freight costs. Maintenance on Unit 1 was completed in late January 2022. A collar structure for coal purchases is currently in place with the ceiling price already exercised for July 2021 onwards, thereby limiting exposure to further increases in the coal price until the end of 2023.

• Kansanshi’s copper production of 41,899 tonnes for the quarter was approximately 10,000 tonnes lower than Q4 2021, resulting from a decline in ore grades. Kansanshi’s lower grades on the oxide and mixed circuits had a consequential further impact on recoveries. Improvement in grades at Kansanshi in future years would be reliant on approval and implementation of the S3 project. Copper C1 cash cost1 of $1.46 per lb was $0.67 higher than the fourth quarter of last year. The quarter-over-quarter increase in copper C1 cash costs1 is largely due to a one-time benefit from a ZESCO accrual reversal of approximately $0.45 per lb in the fourth quarter last year. Also impacting copper C1 cash costs1 in Q1 2022 was lower production and the underlying cost increases from higher freight, fuel and explosive prices. Copper AISC1 of $2.47 per lb was $0.80 per lb higher than the fourth quarter due to higher copper prices driving an increase in the royalty rate, higher capitalized stripping2 and higher copper C1 cash costs1 in the quarter.

• Sentinel’s copper production of 52,475 tonnes for Q1 2022 was 7,722 tonnes