First Quantum Minerals Reports Operational and Financial Results for the Three Months and Nine Months Ended September 30, 2007
Posted on: Monday, 12 November 2007, 03:00 CST
(All figures expressed in US dollars) -
First Quantum Minerals Ltd. ("First Quantum" or the "Company", (TSX: FM)(LSE: FQM) is pleased to announce its results for the three months and nine months ended September 30, 2007. The complete financial statements and management discussion and analysis are available for review at www.first-quantum.com and should be read in conjunction with this news release.
Key features for the quarter
- Record earnings of $183.6 million or $2.71 per share
- Record operating cash flow before working capital of $256.9 million or $3.80 per share
- Record copper production of 57,565 tonnes increases 27% compared to Q3 2006
- Record copper sales of 60,904 tonnes increases 32% compared to Q3 2006
- C1 costs reduce by 12% to $0.98/lb compared to Q2 2007
- Guelb Moghrein segmented earnings increase 108% over Q2 2007
- Bwana/Lonshi improves over Q2 2007, but remains below last year's production levels
- Contained copper metal in concentrate inventory decreases by 3,200 tonnes to 18,200 tonnes
- Kansanshi high pressure leach project becomes operational and produces 1,291 tonnes of copper
- Frontier plant commissioning continues with production of first copper in concentrate
Key features for the year to date
- Record earnings of $385.0 million or $5.70 per share
- Record operating cash flow before working capital of $551.0 million or $8.16 per share
- Copper production increases 13% to over 153,900 tonnes compared to YTD 2006
- Net sales increase 21% compared to YTD 2006
- Net earnings increase 14% compared to YTD 2006
Outlook
- Commercial production began at Frontier on November 2
- Stockpiled copper in concentrate expected to reduce to normal operational inventory levels by year end and have a positive one-off impact on earnings
- Kolwezi project continues to move forward, with the initial engineering study nearing completion
- Kashime resource update and engineering study underway
Key Group results
-------------------------------------------------- Third quarter (Q3) Q3 2006 Q3 2005 Q3 2007 (Restated) (Restated) -------------------------------------------------- % of % of % of sales sales sales --------------------------------------------------------------------------- Production t Cu 57,565 95 45,480 98 36,196 91 Sales t Cu 60,904 100 46,302 100 39,864 100 --------------------------------------------------------------------------- Net sales USDM 470.4 100 328.4 100 143.0 100 Operating profit USDM 308.1 66 233.0 71 79.7 56 Net profit USDM 183.6 39 133.2 41 41.5 29 --------------------------------------------------------------------------- Basic EPS USD $ 2.71 $ 2.00 $ 0.67 --------------------------------------------------------------------------- --------------------------------------------------- Year to date (YTD) YTD 2006 YTD 2005 YTD 2007 (Restated) (Restated) --------------------------------------------------- % of % of % of sales sales sales --------------------------------------------------------------------------- Production t Cu 153,947 102 136,746 104 76,897 98 Sales t Cu 150,585 100 131,031 100 78,399 100 --------------------------------------------------------------------------- Net sales USDM 1,064.1 100 878.1 100 267.7 100 Operating profit USDM 664.7 62 638.0 73 142.5 53 Net profit USDM 385.0 36 338.5 39 97.8 37 --------------------------------------------------------------------------- Basic EPS USD $ 5.70 $ 5.26 $ 1.59 ---------------------------------------------------------------------------
Q3 2007 net sales
--------------------------- Q3 2007 Q3 2006 Q3 2005 --------------------------- (After TC/RC charges) USD M USD M USD M -------------------------------------------------------------------------- Kansanshi - copper 309.8 223.9 88.8 - gold 6.3 5.2 3.4 Bwana/Lonshi - copper 66.1 99.2 49.6 - acid - 0.1 1.2 Guelb Moghrein - copper 74.1 - - - gold 14.1 - - -------------------------------------------------------------------------- Net sales 470.4 328.4 143.0 -------------------------------------------------------------------------- Provisional pricing adjustment included above 3.2 11.7 7.2 -------------------------------------------------------------------------- Copper selling price USD/lb USD/lb USD/lb Current period sales 3.58 3.37 1.69 Prior period provisional pricing adjustment 0.02 0.11 0.08 TC/RC and freight parity charges (0.25) (0.31) (0.19) -------------------------------------------------------------------------- Realized copper price 3.35 3.17 1.58 --------------------------------------------------------------------------
Group net sales increase 43% to $470.4 million due to record copper production and higher copper price
Record net sales were achieved due to an increase in the tonnes of copper sold (up 32% to 60,904 tonnes of copper) and an increase in the realized copper price recognized during the quarter. Group copper production reached record levels and was 27% higher than the comparative period of 2006. In addition, the copper in concentrate stockpiles were reduced by approximately 3,200 tonnes during the quarter.
The higher realized copper price and the decrease in the tolling and refining charge (TC RC) rates also contributed to the record net sales. The increasing LME copper price resulted in positive provisional pricing adjustments, however, less than the comparative period of 2006 due to higher price increases in the comparative period.
Kansanshi net sales increase 38% to $316.1 million on the back of record copper production
Net sales, compared to the same period in 2006, increased as a result of a 26% increase in the tonnes of copper sold and an increase in the realized copper price. Kansanshi, again, reached record production levels this quarter with copper output of 41,159 tonnes. Copper production increased 28% compared to the same period in 2006 due, primarily, to an increase of 5% in oxide and 38% in sulphide ore processed as a result of the throughput expansions at Kansanshi. In addition to the positive impact of these expansions, the high pressure leach system became operational during the quarter, which contributed 1,291 tonnes of cathode production. Total sales volume was higher than production at 41,919 tonnes primarily due to 845 tonnes of sales from copper in concentrate stockpiles.
Net revenue was positively impacted by decreased TC RC and freight parity charges as the TC RC terms for the majority of Kansanshi's concentrate off-take agreements are based on annual benchmark terms, which for 2007 were lower than 2006 and included the removal of price participation as a refining cost.
Bwana/Lonshi net sales decrease 33% to $66.1 million due to low ore availability from Lonshi
Similar to the previous quarters of 2007, net sales fell compared to the same period in 2006 as a result of the low availability of high grade ore from the Lonshi pit and the exhaustion of run-of-mine grade ore in stockpiles at the Bwana treatment plant. The effects of the mining delays during the first half of the year continued to impact production resulting in limited high grade ore available for processing. As a result, copper production was down 38% compared to the same period in 2006, but has recovered from the second quarter with a 24% increase in copper output.
Guelb Moghrein net sales increase 81% to $88.2 million over the prior quarter on increased shipments
Copper sales revenue increased 80% due to higher production, increased concentrate shipments and an increase in the realized copper price over the second quarter of 2007. Production increased 15% to 8,101 tonnes of copper in concentrate over the second quarter due to a 10% increase in the tonnes of ore processed and the processing of higher grade ore. Production continued to streamline since achieving commercial production in the fourth quarter of 2006 with design capacities being met during the current period. With copper in concentrate sales of 10,514 tonnes exceeding production, the copper in concentrate stockpile was reduced by 2,414 tonnes since the second quarter. These improvements also resulted in an 86% increase in the gold sales credit from the prior quarter.
Provisional pricing adjustment positive following increase in copper price during final settlement periods
Included in the above net sales numbers was a total of $3.2 million or $0.02/lb for positive provisional pricing adjustments related to prior period sales as final copper settlements in the third quarter were at average LME prices of $3.50/lb compared to the June 30, 2007 provisional forward average LME price of $3.43/lb.
As at September 30, 2007, there were 44,239 tonnes of contained copper that were provisionally priced at an average LME copper price of $3.68/lb. This revenue will be subject to future adjustments as a result of movements in the copper price. Of this amount, 19,532 tonnes had the final price determined in October 2007 at $3.63/lb, 21,286 tonnes will be determined in November 2007, 952 tonnes in December 2007, and 2,469 tonnes thereafter.
Q3 2007 operating profit
-------------------------------------------------------- Q3 2006 Q3 2005 Q3 2007 (Restated) (Restated) -------------------------------------------------------- % of % of % of USD M sales USD M sales USD M sales -------------------------------------------------------------------------- Kansanshi 222.3 47 168.2 51 53.9 38 Bwana/Lonshi 22.3 5 64.8 20 25.8 18 Guelb Moghrein 63.5 13 - - - - -------------------------------------------------------------------------- Total operating profit 308.1 65 233.0 71 79.7 56 -------------------------------------------------------------------------- % of % of % of Unit costs USD/lb sales(1) USD/lb sales(1) USD/lb sales(1) Cash costs (C1) $ 0.98 29 $ 0.90 28 $ 0.64 41 Total costs (C3) $ 1.22 36 $ 1.13 36 $ 0.87 55 -------------------------------------------------------------------------- (1) Calculated as the % of current period selling price
Group operating profit increases 32% to $308.1 million on the back of record sales
Record operating profit resulted from record sales. The profit margin benefited from the increased realized copper price but was partially offset by the unfavourable movement in the average cash unit cost of production (C1) by 9% to $0.98/lb. Profit margin per pound of copper sold averaged $2.30, which was a small increase from the comparative period (2006: $2.28/lb). Cash unit costs were negatively affected by the increased costs of mining and processing at Kansanshi and the poor results at Bwana/Lonshi.
Kansanshi operating profit increases 32% to $222.3 million despite higher operating costs
Kansanshi's average cash unit cost of production (C1) decreased by 1% to $0.94/lb and the average total unit cost of production (C3) decreased by 3% to $1.13/lb compared to the same period in 2006. The decrease in the average cash unit cost was due, primarily, to a decrease in TC RC and freight parity charges of 52%, which was offset by an increase in mining costs of 41% and an increase in processing unit costs of 18%. The original Kansanshi Definitive Feasibility Study was based on a $0.80/lb copper price, and revisions in the reserve model for higher current prices resulted in a reduction of the grade of ore treated through the two process routes. The decision to process lower grade ore and higher acid consuming mixed ores through the leach circuit resulted in the need for external purchases of a significant quantity of acid at a much higher marginal cost, increased ore and processing costs. Increases in oil-based consumables, electricity and wage costs all contributed to the increased mining and processing costs. In addition, ore costs were negatively impacted by the adoption of a new deferred stripping policy from January 1, 2007.
Bwana/Lonshi operating profit of $22.3 million as operation begins recovery from extreme wet season
Bwana copper production continued to be significantly affected by the lack of available high grade ore for processing due to the previous heavy rainy season and the related delays in mining. This resulted in an increase of the average cash unit cost of production (C1) by 145% to $1.81/lb and the average total unit cost of production (C3) by 125% to $2.25/lb as compared to the same period in 2006. The lack of available high grade ore resulted in a 225% increase in mining costs and reduced the copper output. This reduction in output and the increase in oil based consumables, electricity and wage costs resulted in a 71% increase in processing costs. However, the average cash unit cost (C1) decreased from the prior quarter by 24% as the mining of ore from the Lonshi pit improved compared to the first half of the current year.
Guelb Moghrein operating profit of $63.5 million on higher sales and decreasing costs
In addition to Guelb Moghrein increasing its concentrate shipments to buyers, costs continued to decrease as the average cash unit cost of production (C1) decreased by 63% to $0.26/lb and the average total unit cost of production (C3) decreased by 30% to $0.76/lb compared to the previous quarter. The largest contributors to the decrease in the unit costs were an increase in the realized gold credit of 63% mainly due to extra concentrate shipments from inventory and a decrease in mining costs of 29% due to lower waste stripping and improved mining efficiencies. In addition, unit processing costs decreased by 10% due to the increase in copper output.
Q3 2007 net profit
---------------------------------------------- Q3 2006 Q3 2005 Q3 2007 (Restated) (Restated) ---------------------------------------------- % of % of % of USD M sales USD M sales USD M sales -------------------------------------------------------------------------- Operating profit 308.1 66 233.0 71 79.7 56 Corporate costs (10.6) (2) (7.7) (2) (3.6) (3) Derivative gains/(losses) (3.7) (1) (6.6) (2) (5.7) (4) Gain on sale of investment 0.1 - 1.6 - - - Exploration (5.2) (1) (5.2) (2) (1.5) (1) Interest (net) (3.2) (1) (4.3) (1) (4.9) (3) Tax expense (59.3) (14) (56.6) (17) (15.7) (11) Minority interests (42.6) (9) (21.0) (6) (6.8) (5) -------------------------------------------------------------------------- Net profit 183.6 38 133.2 41 41.5 29 -------------------------------------------------------------------------- Earnings per share - basic $ 2.71 $ 2.00 $ 0.67 - diluted $ 2.66 $ 1.96 $ 0.66 Weighted average shares outstanding - basic 67.7 66.6 61.6 - diluted 69.0 68.0 63.1 --------------------------------------------------------------------------
Group net profit increases 38% to set Company record at $183.6 million for a quarter
The record net profit was the result of record sales and production at Kansanshi and the increased profitability of Guelb Moghrein. In addition, Guelb Moghrein's current tax exempt status resulted in a lower group tax expense percentage of net income. There was an offset from higher minority interest share of profit compared to the same period in 2006.
Corporate costs rise on increasing administrative and support costs
With the increase in operations and capital projects, the administrative and support function continued to grow resulting in increased costs. In addition, stock based compensation expense increased as a result of appreciation in the Company's share price and continued grants under the long-term incentive plan.
Derivative losses decrease due to less contractual obligations
Following the closing of virtually all of the Company's commodity-based derivatives in 2006, the Company was no longer exposed to derivative losses resulting from an increasing copper price.
Interest expense, net of interest income, decreases 26% to $3.2 million due to capitalization of project related interest costs
The Company capitalized interest costs on facility funds drawn for the development of Frontier, which reduced the interest expense compared with the same period in 2006 despite the higher comparative debt level.
Q3 2007 cash flow
------------------------------------- Q3 2006 Q3 2005 Q3 2007 (Restated) (Restated) ------------------------------------- USD M USD M USD M -------------------------------------------------------------------------- Cash flow from operating activities - before working capital 256.9 176.3 78.2 - after working capital 201.6 118.3 64.4 Cash flow from financing activities (42.8) (58.6) (5.9) Cash flow from investing activities (96.2) (60.1) (51.3) -------------------------------------------------------------------------- Net cash flow 62.6 (0.4) 7.2 -------------------------------------------------------------------------- Cash flow per share - before working capital $ 3.80 $ 2.65 $ 1.27 - after working capital $ 2.98 $ 1.77 $ 1.04 --------------------------------------------------------------------------
Cash inflow from operating activities increases 70% to $201.6 million on record net profits
Operating cash flow before working capital movements continued to be driven by the Company's operating results with an increase of 46% over the same period in 2006.
Operating cash flow after working capital movements for the quarter was impacted by an increase in accounts receivable of approximately $59.5 million, a build up in inventory of approximately $17.5 million and an increase in accounts payables of $22.0 million. The increase in accounts receivable was due to the increase in the volume of sales during the third quarter of 2007 and an increase in the provisional price at quarter end. Inventory was impacted by an increase in ore stockpiles and higher stores and consumables. The payables increase was due, primarily, to the timing of tax payments.
The increase in operating cash flow after working capital movements compared to the comparative period in 2006 was due to the increase in net cash earnings. Working capital movements for the quarter were similar in aggregate to last year.
Cash outflow from financing activities decreases 27% to $42.8 million due to lower debt repayments
Financing activities included scheduled long-term debt repayments totalling $25.5 million on the corporate revolving credit and term loan facility and the Kansanshi project completion facility. These repayments were lower than in the same period in 2006 on debt facilities outstanding at that time. This was partly offset by an increase in dividend payments during the current quarter as compared to the same period in 2006.
Cash outflow from investing activities increases 60% to $96.2 million due to continued capital investment
Investing activities included $95.1 million of capital investment on the Frontier project, Kansanshi expansion projects, and the Kolwezi project, which was an increase of $16.2 million compared to the same period in 2006. In addition, the Company acquired an additional $12.3 million of marketable securities and $11.3 million of asset backed commercial paper was reclassified from cash to available-for-sale investments during the quarter.
YTD 2007 net sales
---------------------------- YTD 2007 YTD 2006 YTD 2005 ---------------------------- (After TC/RC charges) USD M USD M USD M -------------------------------------------------------------------------- Kansanshi - copper 765.7 596.2 133.3 - gold 15.8 15.7 4.0 Bwana/Lonshi - copper 129.4 265.7 126.7 - acid 0.3 0.5 3.7 Guelb Moghrein - copper 128.1 - - - gold 24.8 - - -------------------------------------------------------------------------- Net sales 1,064.1 878.1 267.7 -------------------------------------------------------------------------- Provisional pricing adjustment included above (9.7) 30.9 - -------------------------------------------------------------------------- Copper selling price USD/lb USD/lb USD/lb Current period sales 3.36 3.19 1.63 Prior period provisional pricing adjustment (0.03) 0.11 - TC/RC and freight parity charges (0.25) (0.32) (0.12) -------------------------------------------------------------------------- Realized copper price 3.08 2.98 1.51 --------------------------------------------------------------------------
Group net sales increase 21% to $1,064.1 million on higher copper production and copper price
Sales volume increased (up 15% to 150,585 tonnes of copper) as a result of higher copper production (up 13% to 153,947 tonnes of copper). Net sales further increased as a result of a higher average copper price for the period of $3.36/lb compared to $3.19/lb in the same period in 2006. In addition, TC RC and freight parity charges were lower under 2007 annual contract terms. However, provisional pricing adjustments to prior period sales had a negative impact in the current period due to the final settlement of copper sold in 2006 at prices lower than the December 31, 2006 provisional price.
The increase in copper production was the result of Kansanshi's increased copper cathode output and increased copper in concentrate shipments to the Mufulira smelter as well as the achievement of commercial production at Guelb Moghrein in October 2006. These increases were offset by a decrease in production at Bwana/Lonshi due to problems associated with the availability of high grade ore for processing.
Kansanshi net sales increase 28% to $781.5 million as capital expansions result in increased production
Net sales, compared to the same period in 2006, rose as a result of increased copper production and higher copper prices. Despite the processing of lower grade ores, production increased (up 15% to 112,812 tonnes) due, primarily, to the 15% increase in oxide and 34% increase in sulphide ore processed as compared to the same period in 2006. This increase in ore throughput was attributable to the capital expansions at Kansanshi, including the commissioning of the new SX/EW facility during the third quarter of 2006. Sales volume increased 21% to 111,899 tonnes, with the balance of the increased sales revenue coming from the higher average price received and lower TC RC and freight parity charges. TC RC terms for the majority of Kansanshi's concentrate off-take agreements are based on annual benchmark terms, which for 2007 were lower than 2006 and included the removal of price participation as a refining cost.
Bwana/Lonshi net sales decrease 51% to $129.7 million due to low ore availability from Lonshi
Net sales fell as a result of the low availability of high grade ore from the Lonshi pit and the exhaustion of run-of-mine grade ore in stockpiles at the Bwana treatment plant. The heavy rains during the last wet season resulted in mining delays at the Lonshi pit as the Lonshi fleet was used to reconstruct pit walls and rebuild roads that were damaged from the excessive water. This together with the temporary DRC border closure in March/April, resulted in a decrease in ore production of 39% compared to the same period of 2006 and a decrease in copper cathode production (down 49% to 19,538 tonnes) at the Bwana SX/EW facility. To maintain throughput at the Bwana processing facility its low grade ore stockpiles were fully utilized and additional ore from external vendors was purchased. Sales volume, as a result, decreased 49% to 19,504 tonnes.
Guelb Moghrein net sales of $152.9 million as shipments increase significantly
Production continued to increase as the processing plant continued to improve during the period following commencement of operations in October 2006. Through better engineering and maintenance, ore mill rates increased steadily resulting in total production for the period of 21,597 tonnes. Sales volumes were 11% lower than production, however, concentrate shipments improved significantly due to sales agreements with new customers being finalised and continued improvements in the shipping logistics.
Provisional pricing adjustment negative following decrease in copper price during final settlement periods
Included in the above net sales numbers was a total of $9.7 million or $0.03/lb for negative provisional pricing adjustments related to prior period sales as the majority of provisionally priced copper at December 31, 2006 settled in January and February at average LME prices of $2.57/lb for each month compared to the December 31, 2006 provisional price of $2.87/lb.
YTD 2007 operating profit
-------------------------------------------------------- YTD 2006 YTD 2005 YTD 2007 (Restated) (Restated) -------------------------------------------------------- % of % of % of USD M sales USD M sales USD M sales -------------------------------------------------------------------------- Kansanshi 546.0 51 460.5 53 78.3 29 Bwana/Lonshi 14.0 1 177.5 20 64.2 24 Guelb Moghrein 104.7 10 - - - - -------------------------------------------------------------------------- Total operating profit 664.7 62 638.0 73 142.5 53 -------------------------------------------------------------------------- % of % of % of Unit costs USD/lb sales(1) USD/lb sales(1) USD/lb sales(1) Cash costs (C1) $ 1.05 34 $ 0.86 29 $ 0.62 41 Total costs (C3) $ 1.30 42 $ 1.08 36 $ 0.83 55 -------------------------------------------------------------------------- (1) Calculated as the % of current period selling price
Group operating profit increases 4% to $664.7 million impacted by ore availability at Bwana/Lonshi operation
Despite the 19% increase in operating profit at Kansanshi compared to the same period in 2006 and Guelb Moghrein's strong results, the combined increase in operating profit was impacted by the results from Bwana/Lonshi. The lack of high grade ore available for processing contributed to an increase in average cash unit cost of production (C1) by 22% to $1.05/lb compared to the same period in 2006. This resulted in average profit margins per pound of copper sold of $2.00, which decreased from the comparative period (2006: $2.21/lb).
Kansanshi operating profit increases 19% to $546.0 million despite the processing of lower grade ore
Kansanshi's average cash unit cost of production (C1) increased by 2% to $0.91/lb and the average total unit cost of production (C3) increased by 4% to $1.11/lb compared to the same period in 2006. This increase was due to an increase in ore costs of 77% and an increase in processing unit costs of 29%, which were offset by a decrease in TC RC and freight parity charges of 57%. The original Kansanshi Definitive Feasibility Study was based on a $0.80/lb copper price, and revisions in the reserve model for higher current prices resulted in a reduction of the grade of ore treated through the two process routes. The decision to process lower grade ore and higher acid consuming mixed ores through the leach circuit, resulted in need for external purchases of a significant quantity of acid at a much higher marginal cost, increased ore and processing costs. Increases in oil-based consumables, electricity and wage costs all contributed to the increased ore and processing costs. In addition, ore costs were negatively impacted by the adoption of a new deferred stripping policy from January 1, 2007.
Bwana/Lonshi operating profit of $14.0 million
Bwana copper production was significantly affected by the lack of available high grade ore for processing due to the heavy rainy season and a temporary border closure earlier in the year. This resulted in an increase of the average cash unit cost of production (C1) by 182% to $2.17/lb and the average total unit cost of production (C3) by 146% to $2.58/lb as compared to the same period in 2006. Mining unit costs were significantly impacted by these problems resulting in a 250% increase.
Guelb Moghrein operating profit of $104.7 million as production reaches design capacity/lower unit costs
Guelb Moghrein copper in concentrate production achieved design capacity by the end of the period with continued cost improvements since the beginning of the year with an average cash unit cost of production (C1) of $0.71/lb and an average total unit cost (C3) of $1.13/lb for the period. This improvement continued to be driven by an increase in copper output, an increase in the gold credit and improved production processes as the operation continued to stabilize since achieving commercial production in October 2006.
YTD 2007 net profit ---------------------------------------------- YTD 2006 YTD 2005 YTD 2007 (Restated) (Restated) ---------------------------------------------- % of % of % of USD M sales USD M sales USD M sales -------------------------------------------------------------------------- Operating profit 664.7 62 638.0 73 142.5 53 Corporate costs (22.0) (2) (19.1) (2) (2.7) (1) Derivative gains/(losses) (3.7) - (59.2) (7) (9.1) (3) Gain on sale of investment 0.8 - 1.6 - 16.1 6 Exploration (10.2) (1) (12.2) (1) (3.7) (1) Interest (net) (12.7) (1) (13.2) (1) (8.5) (3) Tax expense (136.0) (13) (145.7) (17) (26.6) (10) Minority interests (95.9) (9) (51.7) (6) (10.2) (4) -------------------------------------------------------------------------- Net profit 385.0 36 338.5 39 97.8 37 -------------------------------------------------------------------------- Earnings per share - basic $ 5.70 $ 5.26 $ 1.59 - diluted $ 5.60 $ 5.16 $ 1.55 Weighted average shares outstanding - basic 67.5 64.3 61.5 - diluted 68.8 65.7 63.0 --------------------------------------------------------------------------
Group net profit increases 14% to $385.0 million on lower derivative losses and tax expense
The increase in net profit was attributable to increased operating income and lower derivative losses compared to the same period in 2006. In addition, Guelb Moghrein's current tax exempt status results in a lower group tax expense proportion of profit. There was an offset from minority interests' share of profit compared to the same period in 2006.
Derivative losses decrease significantly due to less contractual obligations
Following the closing of virtually all the Company's commodity-based derivatives in 2006, the Company was no longer exposed to derivative losses resulting from an increasing copper price.
Exploration costs decrease 16% to $10.2 million due to lower exploration activities
A significant portion of the comparative period's exploration costs related to the Lonshi ore body. These costs decreased in this current period.
Interest expense, net of interest income, decreases 4% to $12.7 million due to capitalization of project related interest costs
The Company capitalized interest costs on facility funds drawn for the development of Frontier, which reduced the interest expense compared with the same period in 2006 despite the higher comparative debt level.
YTD 2007 cash flow ---------------------------------- YTD 2006 YTD 2005 YTD 2007 (Restated) (Restated) ---------------------------------- USD M USD M USD M -------------------------------------------------------------------------- Cash flow from operating activities - before working capital 551.0 493.6 136.7 - after working capital 316.7 344.7 85.9 Cash flow from financing activities (30.6) (39.7) (1.5) Cash flow from investing activities (313.0) (198.0) (71.1) -------------------------------------------------------------------------- Net cash flow (26.9) 107.0 13.3 -------------------------------------------------------------------------- Cash flow per share - before working capital $ 8.16 $ 7.67 $ 2.22 - after working capital $ 4.70 $ 5.36 $ 1.39 --------------------------------------------------------------------------
Cash inflow from operating activities decreases 8% to $316.7 million due to working capital movements
Operating cash flow before working capital movements continued to be driven by the Company's operating results with a 12% increase, compared to the same period in 2006.
Operating cash flow after working capital movements for the year to date was impacted by an increase in accounts receivables of $158.1 million, a build up in inventory of $63.8 million and contributions to the long term incentive plan of $17.3 million, which all contributed to the decrease in the current period. The increase in accounts receivable was due to the increase in sales volume during the latter part of the period and the increase in the provisional price for copper at September 30, 2007.
Compared to the same period in 2006 the decrease in operating cash flow after working capital movements was due to income tax payments in the current period at a much higher level than in the comparative period and higher accounts receivable levels and the contributions to the long term incentive plan referred to above.
Cash outflow from financing activities decreases 23% to $30.6 million due to lower debt repayments
The decrease in financing cash outflow was due to lower long term debt repayments of $51.1 million compared to $95.9 million in the comparative period of 2006, partly offset by an increase in dividends paid of $31.5 million compared to last year.
Cash outflow from investing activities increases 58% to $313.0 million following capital investments
Investing activities included the purchase of $77.6 million in shares of publicly listed companies held for investment purposes and $239.1 million in continued capital expansion related to the Frontier project, the Kansanshi high pressure leach project and sulphide circuit upgrade, and initial expenditure on the Kolwezi project. In addition, $11.3 million of asset backed commercial paper was reclassified from cash to other assets during the latter part of the period.
Q3 2007 balance sheet --------------------------------- Q4 2006 Q4 2005 Q3 2007 (Restated) (Restated) --------------------------------- USD M USD M USD M -------------------------------------------------------------------------- Cash 222.6 249.5 82.9 Property, plant and equipment 1,259.9 1,068.1 471.3 Total assets 2,300.4 1,719.7 745.8 Long term debt 315.1 294.9 235.0 Total liabilities 953.4 799.9 434.7 Shareholders' equity 1,347.0 919.8 311.1 -------------------------------------------------------------------------- Net working capital 464.8 312.8 81.2 -------------------------------------------------------------------------- Net debt to net debt plus equity 6% 5% 33% --------------------------------------------------------------------------
Group assets rise 34% to $2,300.4 million
The Company's positive operating cash flow enabled continued capital expenditure and investment. Working capital also rose significantly during the period.
The Company holds $11.3 million of asset backed commercial paper (ABCP), which matured in August. Due to disruptions in the markets, the funds were not repaid when due to the Company. The defaulting issuers of this ABCP were placed in an interim standstill arrangement (Montreal Agreement) to restructure these investments and no final resolution has yet been achieved. The Company has no reason to believe at this stage that 100% of the initial investment will not be recovered in due course. The Company is monitoring the process of restructure and will review its position in the current quarter in the light of any developments.
Inventory balances increased due, mainly, to an additional $31.8 million in consumable stores and an increase of $31.5 million in ore stockpiles. In addition, finished product remained higher than the balance at December 31, 2006, but decreased by $9.5 million since the previous quarter end. The Company had stockpiles of approximately 18,200 tonnes of copper in concentrate at quarter end, which was a reduction of approximately 3,200 tonnes since June 30, 2007. Of this total, approximately 9,000 tonnes is Kansanshi copper in concentrate production that is stockpiled at the Mufulira smelter awaiting treatment, with the balance stockpiled at the Guelb Moghrein plant and the Nouakchott port awaiting shipment.
The Company continued investment in publicly traded company shares by acquiring $77.6 million of marketable securities at cost during 2007. The Company recognized an additional $129.6 million of comprehensive income before tax due to the appreciation in the fair value of these investments for the period, resulting in a closing carrying value of $240.8 million. Property, plant and equipment balances increased by $191.8 million, net of depreciation, as the Company continued developing the Frontier project, the Kansanshi high pressure leach project and sulphide circuit upgrade and began work on the Kolwezi project.
Group liabilities increase 19% to $953.4 million
Long-term debt increased by $20.2 million due to net draw downs during the year to assist in the funding of the Frontier project. Minority interests increased by $94.7 million due to the positive operating results at Kansanshi and Guelb Moghrein. In addition, future income tax liabilities increased by $20.3 million due, primarily, to the appreciation in fair value of the investments.
Shareholders' equity increase 46% to $1,347.0 million
Positive earnings of $385.0 million were offset by the payment of dividends of $51.7 million. In addition, with the adoption of the new accounting policy on financial instruments, the Company recognized $107.6 million of accumulated other comprehensive income after tax, which was directly related to the appreciation of the investments in publicly traded securities.
Growth activities
Frontier begins commercial production
At Frontier, the metallurgical plant and infrastructure is substantially complete. Mining of the Frontier ore body has made significant progress following the end of the record wet season. Approximately 500,000 tonnes of sulphide ore has been mined for plant start up. First copper in concentrate was produced in September. Full plant commissioning continues and commercial production started on November 2.
Kolwezi development in DRC
The Company continued to progress the early phases of the Kolwezi Project. Good progress has been made on development of the flow sheet and detailed designs which will form the basis of the project capital cost estimate. An updated engineering study is expected to be completed during the fourth quarter of 2007 to enable a decision to proceed. In parallel with the development of design and capital cost estimate preparation, the Company will be proceeding with some specific infrastructure works during the course of this year. The following activities are underway - construction of an access road to the site; establishment of site communications and a construction camp; construction of first phase housing, and negotiations for power requirements with SNEL. Assuming a commitment is made to proceed, the aim is to allow process plant construction to begin from the commencement of the dry season in March 2008.
Kansanshi high pressure leach ("HPL") facility autoclave #2 commissioning
Operation of the HPL facility continued during the third quarter, and some additional redesign/upgrade work was undertaken (upgrade of autoclave agitator seals to an improved design). The autoclave metallurgical performance continued to meet or exceed its design expectation. Efforts were concentrated on obtaining steady state operating data, and to continue to implement improvements which will result in maximizing continuous and reliable run time. The second autoclave was prepared for service, and curing of the refurbished internal brickwork was in process of being completed. The second autoclave is expected to be put into service in the fourth quarter, once all improvements that have been carried out to date on the first autoclave are also completed on the second autoclave. The HPL throughput will then operate above design but will be constrained by the oxygen plant capacity. At this stage both autoclaves will be operating well below their limits. Investigations have, therefore, commenced to determine ways to best exploit the underutilized capacity.
Kansanshi sulphide project construction continues
The construction works for the Kansanshi sulphide circuit expansion to a nominal annual throughput of 12 million tons are progressing well. Concrete works are nearly complete, structural erection is well progressed and mechanical installation works are underway. Electrical installation works will commence in November. Essentially all equipment items have been ordered for the project, with the majority of equipment now on site. Delivery of the main long lead items, namely the gyratory crusher, the SAG mill and the ball mill are outstanding. The delivery to site of these items will directly influence the project completion. Construction completion and commissioning is still expected in the first half of 2008.
Kansanshi to build fourth 35,000 tonne per year electrowinning tank house
The Board of Directors has approved the construction of a fourth 35,000 tonne per year electrowinning tank house at Kansanshi. This will bring on site electrowinning capacity to 140,000 tonnes of copper cathode per year. The new tank house will be based on existing designs with an estimated capital cost of $16 million. Construction will begin immediately with completion expected by the second half of 2008.
Kashime resource calculation and engineering study for 50,000 tonne copper operation underway
An updated resource estimate is currently underway on the Kashime deposit located in Zambia. Concurrently, an engineering study has been initiated to evaluate the economics of a mining operation producing approximately 50,000 tonnes of copper per year.
Outlook
Group copper production estimate for 2007 remains 215,000 tonnes
Based on nine month production figures the Company still expects to produce approximately 215,000 tonnes of copper in 2007. This expected production includes approximately 150,000 tonnes from Kansanshi, approximately 27,000 tonnes from Bwana/Lonshi, approximately 30,000 tonnes from Guelb Moghrein, and approximately 8,000 tonnes from Frontier.
During the remainder of the year, the Company anticipates group C1 cash costs to be around $1.00 per pound of copper, excluding the impact of any additional gold credits from the new gold plant at Kansanshi or any higher realization costs arising from treatment of concentrate through alternative channels referred to below. The copper in concentrate inventories held at Kansanshi (9,733 tonnes) and Guelb Moghrein (8,483 tonnes) are expected to reduce to no more than normal operating levels (Kansanshi about 7,500 tonnes and Guelb Moghrein about 2,500 tonnes) by year end.
During October, approximate total copper production from Kansanshi was 16,400 tonnes, consisting of 8,600 tonnes of oxide and 7,800 tonnes of sulphide. Bwana/Lonshi produced approximately 2,800 tonnes of copper cathode and Guelb Moghrein produced approximately 2,700 tonnes of copper in concentrate. In total, the Company produced approximately 21,900 tonnes and recognized sales of approximately 20,000 tonnes of copper in October.
Mufulira smelter continues to experience operating difficulties
The Mufulira smelter continues to have operating issues which have limited its concentrate treatment capacity. These operating issues are expected to continue into 2008. The Company has recently been advised by Mopani that it will be unable to treat all of the Company's anticipated concentrate production from Kansanshi and Frontier for the balance of 2007. Resulting from this advice the Company will arrange to treat surplus concentrates from Kansanshi and Frontier through alternative channels including other Copperbelt and overseas smelters. Depending on the final terms negotiated this may result in slightly higher realization costs for some of the concentrate sold due to higher freight charges for export. In addition, as much tonnage of concentrates as possible will continue to be treated via HPL at Kansanshi.
Kansanshi focused on HPL, sulphide expansion and gold plant commissioning
Kansanshi continues to operate at a steady rate of production of approximately 12,500 tonnes of copper metal per month. During the fourth quarter, attention will continue to focus on both the HPL facility, targeting steady state production from autoclave #1 and autoclave #2, and on construction activities for the sulphide circuit expansion.
Construction of a carbon-in-leach ("CIL") gold facility is complete. Water commissioning of the gold facility was successfully completed in early October. Process commissioning is expected to occur in early November. The CIL facility will be used in combination with the HPL facility on a campaign basis to treat gold rich gravity concentrates. The gold plant project comprises a one ton per day Pressure Zadra circuit designed to treat gravity concentrate and leach residue from the HPL plant to produce gold/silver dore. Currently, the Company has stockpiled gold rich gravity concentrates containing approximately 27,000 ounces of gold. Realizing the value of this will result in a significant credit to earnings and C1 costs. Realization of the value of these concentrates is expected to occur during the first quarter of 2008.
Continuing build-up of the mining fleet is expected to result in increased production in the fourth quarter and 2008.
Bwana/Lonshi focused on stockpiling ore ahead of the wet season
The supply of ore from the Lonshi operation returned to normal levels during the third quarter. Mining activities will focus on establishing a stockpile of ore at the Bwana processing facility ahead of the wet season (November-March)
The Lonshi oxide reserve should be exhausted in mid 2008. It is anticipated that about 27,000 tonnes of cathode will be produced at Bwana during 2007 with the operation producing at an average rate of approximately 2,500 tonnes of cathode copper per month for the remainder of 2007 and then declining in the first part of 2008. The Company continues to assess alternative and most beneficial uses for the Bwana processing plant after the Lonshi ore is exhausted.
Guelb Moghrein producing copper concentrates above design levels
During the third quarter, the process plant at Guelb Moghrein operated at above design throughput capacity attaining steady operations while improving and optimizing the flotation circuit.
The average production for the remainder of the year is expected to be approximately 2,500 tonnes of contained copper per month with planned sales of 4,500 tonnes of copper per month for the last quarter. It is expected that the concentrate stockpile at site will be reduced to an operating level of about 2,500 tonnes of contained copper (approximately one month's production) by year end.
The CIL circuit was taken off line at the beginning of January due to CIL tailings storage facility (TSF) constraints. The construction of a new CIL TSF is expected to be completed in November. At present, CIL feed is being stored in a temporary impoundment for future treatment. Gold production at Guelb Moghrein is expected to be about 65,000 ounces in 2007.
A NI 43-101 compliant resource is expected before year end and initial investigations into expanding the processing facility to 45,000 tonnes of copper year are underway. An exploration program to test coincident magnetic and induced polarization anomalies surrounding Guelb Moghrein with three drill rigs has commenced.
Frontier project to produce approximately 8,000 tonnes of copper in 2007
Commissioning of the Frontier process plant continues. Estimated copper production for 2007 is 8,000 tonnes of copper metal and 75,000 tonnes of copper metal in 2008.
Production in the first quarter of 2008 is expected to be particularly impacted by the rains because, at this early stage, limited opportunity has been available to pre-empt the effect of the wet season.
Kolwezi tailings project feasibility study nears completion
Updated capital estimates for the revised process plant will be available in time to make major plant commitments prior to the end of 2007. Preparatory site works have commenced to meet a schedule for start-up in 2009. The plant is expected to start at a production level of 35,000 tonnes copper cathode per annum and about 5,000 tonnes per annum of cobalt. It will be designed for immediate doubling of capacity and a staged increase to triple the output.
The Government of the Democratic Republic of Congo are currently conducting a review of all agreements involving formerly State-owned mining assets. This review has been undertaken to ensure the final terms of all agreements have been agreed after a rigorous and transparent process with the interests of the Government fairly represented in the final terms. The company acquired its interest in the Kolwezi Tailings Project through the on market acquisition of Adastra Minerals Inc. As a former state owned asset, the Kolwezi tailings project has been included in this review, the results of which are expected in early 2008.
On Behalf of the Board of Directors of First Quantum Minerals Ltd.
G. Clive Newall
12g3-2b-82-4461
Listed in Standard and Poor's
Certain information contained in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and forward-looking information under applicable Canadian securities legislation. Such forward-looking statements or information, including but not limited to those with respect to the prices of gold, copper, cobalt and sulphuric acid, estimated future production, estimated costs of future production, the Company's hedging policy and permitting time lines, involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. Such factors include, among others, the actual prices of copper, gold, cobalt and sulphuric acid, the factual results of current exploration, development and mining activities, changes in project parameters as plans continue to be evaluated, as well as those factors disclosed in the Company's documents filed from time to time with the Alberta, British Columbia, and Ontario Securities Commissions, the Autorite des marches financiers in Quebec, the United States Securities and Exchange Commission and the London Stock Exchange. The preceding discussion and analysis and financial review should be read in conjunction with management's discussion of critical accounting policies, risk factors and comments regarding forward looking statements contained in the unaudited consolidated financial statements for the period ended June 30, 2007. The discussion and analysis of the Company's results of operations should also be read in conjunction with the audited consolidated financial statements and related notes.
Summary of quarterly and current year to date results The following table sets out a summary of the quarterly results for the Company for the last seven quarters and the current year to date: -------------------------------------------------------------------------- Summary of Quarterly and Current Year to Date Results (unaudited) -------------------------------------------------------------------------- 2006 2006 2006 2006 Statement of Operations and Retained Earnings Q1 Q2 Q3 Q4 (millions, except where indicated) Revenues Current period copper sales (1) $ 165.6 $ 295.9 $ 311.4 $ 243.7 Prior period provisional copper adjustments (2) 16.9 60.4 11.7 (31.7) Other revenues 4.7 6.2 5.3 4.4 Total revenues 187.2 362.5 328.4 216.4 Cost of sales (restated) 53.2 65.2 81.7 88.5 Net earnings (restated) 55.8 149.5 133.2 60.9 Basic earnings per share (restated) $ 0.90 $ 2.32 $ 2.00 $ 0.93 Diluted earnings per share (restated) $ 0.88 $ 2.27 $ 1.96 $ 0.91 Copper selling price Current period copper sales (per lb) $ 2.32 $ 3.14 $ 3.37 $ 2.89 Prior period provisional adjustments (per lb) 0.21 0.57 0.11 (0.35) Gross copper selling price (per lb) 2.53 3.71 3.48 2.54 Tolling and refining charges (per lb) (0.12) (0.19) (0.19) (0.08) Freight parity charges (per lb) (0.15) (0.16) (0.12) (0.14) Realized copper price (per lb) 2.26 3.36 3.17 2.32 Average LME cash copper price (per lb) 2.24 3.29 3.48 3.21 Realized gold price (per oz) $ 563 $ 631 $ 581 $ 628 Average gold price (per oz) $ 554 $ 627 $ 622 $ 614 Total copper sold (tonnes) (3) 36,635 48,094 46,302 41,454 Total copper produced (tonnes) (3) 42,086 49,180 45,480 46,531 Total gold sold (ounces) (3) 8,079 9,611 8,864 6,944 Cash Costs (C1) (per lb) (4) $ 0.81 $ 0.87 $ 0.90 $ 1.00 Total Costs (C3) (per lb) (4) $ 1.01 $ 1.07 $ 1.13 $ 1.24 -------------------------------------------------------------------------- Financial Position Working capital (restated) $ 106.9 $ 245.6 $ 308.0 $ 312.8 Copper in concentrate inventory (tonnes) Kansanshi 7,157 8,389 7,242 9,046 Guelb Moghrein - - 2,345 6,068 Total copper in concentrate inventory (tonnes) 7,157 8,389 9,587 15,114 Total assets (restated) $ 839.5 $ 1,398.1 $ 1,574.0 $ 1,719.7 Weighted average # shares (000's) 61,808 64,564 66,615 67,287 -------------------------------------------------------------------------- Cash Flows from Operating activities Before working capital movements (restated) $ 103.8 $ 213.5 $ 176.3 $ 70.6 After working capital movements (restated) 83.9 142.5 118.3 129.3 Financing activities (restated) (13.2) 32.1 (58.6) 53.1 Investing activities (restated) (46.1) (91.8) (60.1) (122.8) Cash Flows from Operating activities per share Before working capital movements (restated) $ 1.68 $ 3.31 $ 2.65 $ 1.05 After working capital movements (restated) $ 1.36 $ 2.21 $ 1.77 $ 1.92 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Kansanshi Production Statistics Mining Waste mined (000's tonnes) 2,588 5,516 6,683 7,123 Ore mined (000's tonnes) 1,382 2,552 3,220 2,380 Ore grade (%) 1.7 1.4 1.4 1.4 Processing (3) Sulphide Ore processed (000's tonnes) 782 1,140 1,277 1,212 Oxide Ore processed (000's tonnes) 1,044 1,246 1,401 1,080 Contained copper (tonnes) 32,213 36,981 32,882 31,545 Sulphide ore grade processed (%) 1.9 1.6 1.2 0.9 Oxide ore grade processed (%) 1.7 1.5 1.2 1.6 Recovery (%) 92 94 95 92 Copper cathode produced (tonnes) 15,796 17,501 17,158 17,201 Copper cathode tolled produced (tonnes) - 1,186 3,036 1,805 Copper in concentrate produced (tonnes) 14,572 16,924 11,984 10,015 Total copper production 30,368 35,611 32,178 29,021 Concentrate grade (%) 29.3 25.8 26.4 26.9 Combined Costs (per lb) (4) Mining $ 0.10 $ 0.12 $ 0.17 $ 0.14 Processing 0.41 0.44 0.50 0.62 Site Administration 0.03 0.04 0.04 0.04 TC RCs and freight parity charges 0.31 0.42 0.31 0.27 Gold / Acid credit (0.07) (0.08) (0.07) (0.05) Combined Total Cash Costs (C1) $ 0.78 $ 0.94 $ 0.95 $ 1.02 Combined Total Costs (C3) $ 0.93 $ 1.11 $ 1.17 $ 1.21 Oxide Circuit Costs (per lb) (4) Mining $ 0.10 $ 0.12 $ 0.15 $ 0.11 Processing 0.51 0.52 0.54 0.70 Site Administration 0.03 0.01 0.02 0.04 Oxide Circuit Total Cash Costs (C1) $ 0.64 $ 0.65 $ 0.71 $ 0.85 Oxide Circuit Total Costs (C3) $ 0.80 $ 0.83 $ 0.92 $ 1.01 Sulphide Circuit Costs (per lb) (4) Mining $ 0.09 $ 0.12 $ 0.18 $ 0.18 Processing 0.28 0.35 0.45 0.52 Site Administration 0.04 0.02 0.02 0.04 TC RCs and freight parity charges 0.68 0.89 0.73 0.62 Gold / Acid credit (0.16) (0.17) (0.16) (0.13) Sulphide Circuit Total Cash Costs (C1) $ 0.93 $ 1.21 $ 1.22 $ 1.23 Sulphide Circuit Total Costs (C3) $ 1.08 $ 1.38 $ 1.45 $ 1.47 Revenues (3) Copper cathodes $ 84.8 $ 142.3 $ 158.6 $ 110.9 Copper in concentrates 35.6 109.6 65.3 20.1 Gold 4.5 6.0 5.2 2.8 Total revenues $ 124.9 $ 257.9 $ 229.1 $ 133.8 Copper cathode sold (tonnes) 15,556 17,568 17,181 17,360 Copper tolled cathode sold (tonnes) - 1,186 3,036 1,805 Copper in concentrate sold (tonnes) 9,282 15,692 13,131 8,215 Gold sold (ounces) 8,079 9,611 8,864 4,427 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Bwana/Lonshi Production Statistics Mining Waste mined (000's tonnes) 3,241 5,607 5,915 4,081 Ore mined (000's tonnes) 147 183 110 80 Ore grade (%) 8.4 10.7 11.9 10.4 ProcessiSource: MARKET WIRE
Related Articles
- Small Business Research Board eCommerce Study: Nearly 30% of Small Businesses Expect Internet Sales to Increase Next 12 - 24 Months According to Latest SBRB Study
- Vision Point of Sale Announces Increase in Demand for Maintenance of POS Systems
- Arena Resources, Inc. Announces Record Fourth Quarter and Annual Production for 2006
- Health Cash Product Profiles 2006 Offers a Profile of Every Known Health Cash Product in the UK Health Cash Market From a Customer Perspective
- Plan to Increase Oil Production in 2006
- Retail sales group sees "subdued" sales growth in 2006
- Retail sales group sees 'subdued' sales growth in 2006
- Iraq Hopes to Increase Oil Production in 2006
- Zambia's Copper Output Expected to Increase Next Year
- Oilgear Reports Record Sales and Increased Earnings for Second Quarter
 |
 |
User Comments (0)
RSS Feeds