First Quantum Minerals Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 26, 2023

There are 13 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the First Quantum Minerals Limited Second Quarter 2023 Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask

Speaker 1

I would now like to

Operator

turn the conference over to Benita Toh, Director, Investor Relations, please go ahead.

Speaker 2

Thank you, Kayleen, and thank you, everyone, for joining us today to discuss our 2nd quarter results. During the call, we will be making forward looking statements and as such, I encourage you to read the cautionary notes that accompany this presentation, our MD and A and the related news release. As a reminder, the presentation is available on our website and that all dollar references are in U. S. Dollars unless otherwise noted.

Speaker 2

On today's call will be Tristan Pascal, our Chief Executive Officer, with opening remarks followed by Rudy Badenhorst, our Chief Operating Officer, who will provide an overview of our operations. Ryan McWilliam, our Chief Financial Officer, will review our financial results And Tristan will then wrap things up, after which we will open up the lines to take questions. And with that, I will now hand it over to Tristan.

Speaker 3

Thank you, Benita, and thank you, everybody, for joining us on our conference call today to discuss our Q2 results. After what was a challenging start to the year, it is pleasing to report improvements in the Q2, which Rudy will speak to Ini's review of operations. As a result of our focus on productivity and costs, to which we continue to seek to improve, Our 2nd quarter EBITDA of $568,000,000 increased from the Q1 despite the weakness in the copper price, which Ryan will provide more details in his financial review. Overall, I am pleased with our 2nd quarter results With our 3 largest operations hitting daily production records during the period, and I am confident that our 3 main operations are set up well for the remainder of the year. We do expect a stronger performance in the second half of the year, and we remain comfortable with our guidance, although production will likely be at the bottom end of the range.

Speaker 3

I would like to give an update on the concession contract in Panama. As you are aware, we reached an agreement with the government of Panama earlier this year. Since this agreement, the concession contract has successfully gone through the public consultation process in April and has been signed by both the government and MPSA in June. It is currently under normal course review with the National Controller, which is the final stage before the contract is presented to the National Assembly. We do expect endorsement from the National Controller in short order and continue to expect the concession contract to be put in front of the National Assembly in the currently absolute term.

Speaker 3

The Cobre Panama team continued to work closely with government to support the passage of the contract into law for the mutual benefit to Cobre Panama and the people of Panama. Before I hand over the call to Rudy to review operational results, I would like to highlight that during the quarter, we published our 2022 ESG report, which was our 7th annual report on our sustainability performance. Following the publication of this report, we hosted our inaugural virtual ESG Day that outlined our practical and pragmatic approach on a number of ESG areas that are key to our business. I'm very proud of the work we do across our business and the commitment of all our operations to the surrounding communities If you were unable to attend this event, I encourage you to view the replay, which is available on our website. And with that, I would like to hand the call over to Rudy.

Speaker 4

Thank you, Tristan. After a difficult first quarter, It is pleasing to see operations back on track in the 2nd quarter with Sentinel achieving its highest monthly production for the year in May And Cobre Panama and Kansanshi achieved the same records in June. Total copper production for the 2nd quarter was approximately 187,000 tonnes, up over 48,000 tonnes from the Q1 as grades increased at each of our 3 largest operations and throughput improved at both Cobre Panama and Sentinel. At Cobre Panama, the operation delivered a strong performance in the 2nd quarter with copper production of just over 90,000 tonnes, 38% higher than the Q1 as grades improved and mill throughput continues to ramp up towards the 100,000,000 tonnes per annum rate. At Kansanshi, copper production of approximately 35,000 tonnes was nearly 6,000 tonnes higher than the 1st quarter.

Speaker 4

Production during the Q2 focused on mining cutbacks at elevated benches that have historically had higher grades. As a result, grades across all three circuits were higher quarter over quarter. During the quarter, we encountered harder ore in the Main 11 area with high carbon content, which impacted crushing and milling rates. This is being addressed by blending with softer oils from stockpile and by continued acceleration of ore from the main 15 17 areas. Sentinel reported copper production of 54,000 tonnes in the 2nd quarter, approximately 18,000 tonnes higher than Q1.

Speaker 4

While mining activities continue to be impacted by excess water from the heavy rains in the Q1, by mid May, Operations steadily improved once the pit was dewatered, thereby allowing operations to regain access to higher grade ore. Overall, it was good to see an increase in production in the Q2, and we expect to see these improvements continue over the remainder of the year, which Tristan will address in the guidance section of his closing remarks. Thank you. And I will now hand the call over to Ryan to review the financials.

Speaker 5

Thank you, Rudy. The copper price averaged $3.84 per pound in the 2nd quarter, down 5% from Q1. This fall was as a result of the weak global industrial activity and accompanying recession concerns as interest rates continue to rise. However, this broader demand softness was balanced by reasonable electric grid and electric vehicle spending, particularly in China. As such, commodities like copper, which are tied to the energy transition, outperform traditional industrial commodities.

Speaker 5

Despite the weaker copper price in the Q2, total revenue increased 6% from Q1. This was driven by increased copper sales of 27,000 tonnes due to the higher production, which Rudy described. Sales were lower than production during the quarter, partly due to inventory levels returning to normal following a low Q1 as well as the timing of shipments, which will catch up over time. As can be seen on Slide 15, copper C1 cash costs of $1.98 per pound were 12% lower than Q1. This decrease was driven by higher production and lower fuel and explosive costs in the quarter.

Speaker 5

This was partially offset by higher maintenance costs And lower byproduct credits due to the lower gold grades at Cobre Panama. Our costs generally fall into 3 categories. The first category include costs directly linked to commodity markets, such as fuel, freight and explosives. This category makes up roughly 25% of our costs and is an area where we have seen strong cost improvements through the first half of this year. The 2nd category includes items such as grinding media and reagents, where the cost base is partially linked to commodity prices built into the cost base, but with a lagging effect.

Speaker 5

These make up roughly 15% of our costs, and improvements so far have been muted due to this lagging effect. The last category includes labor, services and fixed costs. These fixed costs include items such as Electricity, which is generally based on multiyear contracts and items such as treatment charges, which are priced off annual contracts. These costs make up roughly 60% of our cost base, and it is in this category where costs remain sticky. Slide 16 highlights that Q2 EBITDA increased by 10% to $568,000,000 driven by higher revenues.

Speaker 5

Net earnings attributable to shareholders increased to $93,000,000 and adjusted earnings per share increased to $0.12 Moving on to our balance sheet. During the quarter, we announced the offering of our 1st standalone 8 year senior notes. This $1,300,000,000 issuance resulted in a 50% increase in our weighted average debt maturity. The proceeds were used Pay down $970,000,000 in the existing revolving credit facility and $300,000,000 of redemption of the company's outstanding 2025 senior notes. This provides us with a continued strong liquidity buffer, which is important given the global macro uncertainty.

Speaker 5

Our net debt decreased by $130,000,000 to $5,650,000,000 due to higher EBITDA and favorable working capital movements. Also during the quarter, it was pleasing to see the government of Zambia reach a $6,300,000,000 debt restructuring deal with external government creditors. This unlocks another tranche of IMF funding and is expected to benefit the fiscal and monetary environment in Zambia and therefore its sovereign credit rating. This benefits Zambia and First Quantum as an improvement in the Zambian rating decreases the country risk component of our corporate credit rating. Lastly, our continued confidence in our underlying business has led to the declaration of an interim dividend of $0.08 per share based on our 15% of cash flow dividend policy.

Speaker 5

This will be paid out on September 19. That brings the finance section to an end. I'll now hand the call back to Tristan.

Speaker 3

Thanks, Ryan. As Rudy noted, The Q2 saw production improvements and we are well set up for this to continue in the second half of the year. At Cobre Panama, the CP100 expansion project is ramping up well, already achieving brief periods at Full design capacity and on track to exit the year at a consistent rate of 100,000,000 tonnes per annum. In addition, we continue to expect grades to continue to improve over the course of the year. As such, we are maintaining our copper production guidance for Cobre Panama at 350 to 380,000 tonnes.

Speaker 3

Construction of the Moly plant is progressing well with completion and commissioning expected by the end of 2023 The first molybdenum concentrate production in the Q1 of 2024. At Kansanshi, the 2nd quarter started See the benefits of changes in mining fleet deployment and mining on the upper elevations of Main 15 17, which have had historically higher grades. As well, our extensive drilling campaign has allowed for better visibility of the mining areas as well as the grades in our stockpiles. As such, we continue to expect copper production to be within our guidance range of 130,000 to 150,000 tonnes, albeit the bottom end of the range is more likely. Production will remain at these lower levels until the 3 expansion project comes online in 2025.

Speaker 3

Overall procurement for this project is Approximately 33% committed. Several long lead items are on track for delivery in the coming weeks, including the first haul trucks And the construction works already underway are expected to accelerate into next year. We are confident That we remain on schedule for 1st production from the S3 expansion in the second half of twenty twenty five. At Sentinel, with the groundwater now under control, we have already begun accessing the higher grade ore at the bottom of the pit. As well, we have deployed a drilling contractor for July to work alongside our own drill rigs to increase stocks of broken material.

Speaker 3

We expect milling rates and grades to continue to improve for a stronger second half of the year. However, taking into account the challenges we encountered in the Q1, Production for the year will likely come in at the lower end of our guidance range of 260,000 to 280,000 tonnes. At Enterprise, an important milestone was achieved with 1st production of nickel concentrate achieved in the 2nd quarter. As well, the process plant temporarily demonstrated nameplate capacity during the quarter. The remaining focus will be to ramp up to commercial production over the remainder of this year and with full ramp up in 2024.

Speaker 3

At the Las Cruces underground project, while all necessary permits are now in place for project approval, technical and study work continues. The project continues to be evaluated, taking into account the current economic conditions and the company's debt reduction objectives. This brings to an end my prepared remarks. However, before I open the lines for Q and A, I would like to take this This has resulted in an improved second quarter and I believe places the company in a position for a stronger second half of the year. With that, we will be happy to take questions now.

Speaker 3

Thank you.

Operator

Thank you. We'll now begin the analyst question and answer session. Analysts are permitted to ask one question and one follow-up and are welcome to rejoin the queue if they have more. The first question is from Orest Wowkodaw with Scotiabank. Please go ahead.

Speaker 6

Hi, good morning. Question is around Sentinel. Can you maybe walk us through what gives you confidence that that operation can still meet The low end of guidance expectations for this year just based on the weak first half.

Speaker 3

Sure, Orest. Well, let me give you the high level and then Rudy can jump in with some detail. So As we said on the last call, we still had water in the pit in Sentinel really towards the end of April and into early May. So what we've seen so far this quarter and the production results of 54,000 tonnes Reflects really a strong operation from the 2 months May June. And July, we've seen that we're very much on track.

Speaker 3

As we said in the Q1 call, the lack of access to the lower areas of the pit really meant that we were focused on lower grade areas In the Phase 2 area of the pit and now and we were on-site just in the last couple of weeks, The working areas, the benches and the roads are now in very, very good condition, particularly in the bottom of the pit and we now have very good grades there. So up to 1%, 1.5% copper in the bottom of the pit, and that was always intended to come out this year. It's just that the proportion the sequence across the year is now shifted, so we'll see the majority of that in the second half. Rudy, do you want to add anything to that?

Speaker 4

No, I'll just concur, Tristan. The important thing is that, as we said at the end of the first quarter, Pre stripping or the stripping in those areas associated with high grade was already done. It was just a matter of getting rid of the water. We already, as Thurston highlighted, seeing very, very positive results into the 1st month of Q3, and we have absolutely no The reason not to be positive about the production coming out of Sentinel for the remainder of this year. Certainly, as far as preparations are concerned for the upcoming wet season in November, Additional pumping capacity has been employed last year where we couldn't pump any of the contact water To the environment without doing the necessary utilization, that's principally been removed by Installing a facility to pump all of that water to the process plant, so we won't have any restrictions in pumping water there.

Speaker 4

And the efforts around opening up the northern wall for setting us up for 2024 Has progressed exceptionally well. So, Orest, there's absolutely no reason for us not to believe that we will get there this year. We are in the ore All the shuttles are all bound and things are looking good there.

Speaker 6

Thanks, Rudy. And just as a follow-up, those changes that you've made with respect to water treatment, does that Suggest that you expect a more balanced profile next year with respect to production through the first half of the year versus second? Exactly that.

Operator

The next question is from Jackie Przybylowski with BMO Capital Markets. Please go ahead.

Speaker 1

Thank you very much. Actually, I'll ask my first question as a follow-up to Orest's question. In the MD and A that you put out last night, You talked about fragmentation issues at Trident and that you're deploying a contractor to help with some of the drilling and mining. Can you talk a little bit about how you expect that Contractor will impact the costs at Sentinel and I guess at Enterprise as well. And You see in the release that you're expecting that will start in July.

Speaker 1

Can you talk about how long you expect that contractor will be deployed for?

Speaker 3

Rudy, do you want to take that one?

Speaker 4

Yes, no worries. Hi, Jackie. Yes. We decided to go the route of additional drill rigs in the Sentinel Pertenas really Primarily to give the operations an opportunity to get ahead of some broken stock. And We are planning to only utilize the additional fleet rigs for a period of about 6 to 9 months, and then we will let them go.

Speaker 4

It's really just to help our own existing fleet come ahead of the game where we lost a bit of opportunity with Orion last Or the beginning of the year when it was quite late and we couldn't get those drill rigs in. And As far as costs are concerned, the contractor that we brought in are drilling at similar rates and, in some cases, Slightly lower costs than ourselves. So we don't expect to see any real increase in drilling costs. But what What's more important is that we will see a substantial increase in broken stock, which will allow for the more efficient feeding of the crushers And I think the money back, which is essential.

Speaker 1

Thanks very much, Rudy. Appreciate that. And maybe as a second question, Can I ask if you can comment at all on the progress in the Panamanian Government of Panamanian National Assembly to approve your proposed changes to the mining code? Do you have any sense on when that comes up in the debate or discussion or when we might

Speaker 3

The contract is currently sitting with a National Comptroller, and that's an administrative process to validate the The counter signatured by the government on the contract that was signed, and that's the last step before it does go into the National Assembly. The current sitting of parliament commenced on the 1st July, and our understanding is that in the last 3, 4 weeks, they've been Working on the establishment of the various committees, so the Finance Committee and so on. And the process is the contract goes into the committee for a reading, And then it passes from the committee into the full house in the National Assembly. So that's the sequence. We believe, Susan, signed by the National Controller, which we believe will happen in short order, that it would then go Into the National Assembly, read by the committee and then for debate and voicing in the House.

Speaker 3

So there's no reason to expect that wouldn't Occur, as we said, in this current sitting of Parliament.

Operator

The next question is from Ralph Profiti with 8 Capital. Please go ahead.

Speaker 7

Thanks, operator. Good morning. Tristan, two questions. The first one is on Cobre Panama.

Speaker 5

It looks like

Speaker 7

just a shade under 92,000,000 tons per annum as the run rate as The average for Q2, just wondering where you are at the exit rate of Q2 or even in today's terms and just How close are we to getting to 100 on a steady state basis even before the year end target?

Speaker 3

Yes. Thanks, Ralph. So really that's a combination question at the front end of the circuit around the efficiencies generated by the screening plant. And that's the focus and the optimization work that's going on. We're very, very happy with The contribution that Ball Mill 6 is already making, the process water upgrades have Since the last of year end of last year had meant that even at these high throughput rates, we've seen very good recoveries.

Speaker 3

And so really it's around the optimization of that screening plant with secondary and pebble crushing. So that's going well. We have seen days where we exceed the normal throughput rates and that target of 100,000,000 tonnes per annum, and it's now a matter of Stringing that sequence together and alongside the grade coming out of the pit. We do see variations across the pit. Some areas are harder than others.

Speaker 3

Some are more confident than others. And also we have areas where there's some clay content It has an impact on that screening plant. So that's why the optimization is important and takes that time. We're very confident of hitting that 100,000,000 ton per annum. We are not saying that we will achieve that anytime sooner, but if we do that, then that would be a bonus.

Speaker 3

But at this stage, we continue to hold to what we said, which is by the end of the year.

Speaker 7

Okay. Yes, got it. And if I can ask a second question, maybe for Ryan. Just on the Zambia IMF deal, you talked about corporate credit advantages. I'm just wondering if you're seeing some of those Savings on the recent senior notes refinancing, where you're seeing that savings on the jurisdictional component on the terms of those notes.

Speaker 7

Is that something that we can infer from Some of the rates that we're seeing on those coupons for that refi?

Speaker 5

Yes. Hi, Ralf. So this is the first time we've issued notes that At better rates than what the JPMorgan high yield index is. I think it's driven by a combination of factors. It's driven by the More than $2,000,000,000 in debt reduction over recent years.

Speaker 5

It's driven by the constructive relationship now in place with the government of Panama, and it's driven by The fact that we're on track with our brownfield projects. Certainly, the dynamic in Zambia and the positive part that the government Has delivered that IMF deal and continues to make progress and part of the debt restructuring is part of it. There's still more work to go there with the government and we hope that will help in the future, but I'd say the Zambia piece is a part of it, but it's together with other factors that help that bond issuance.

Operator

The next question is from Ioannis Masvoulis with Morgan Stanley. Please go ahead.

Speaker 8

Hello. Thanks for taking my questions. The first question is on Kansanshi. You mentioned in the MD and A and on the prepared remarks About the processing challenges due to the ore hardness and the fact that you had to use a stockpile material, is this something you expect to persist in the second half

Speaker 4

Yes. Yes, absolutely, Anders. Currently, we're experiencing some very hard Material in the Main 11 area of the pit. And that is offset by mining, As we stated in the MD and A and also in the call earlier, by going up into May 17 and May 15, where we have some higher grade and very, Very good material. But also, the strategy with S3 coming on in a year and a half, two years' time Has always been to also incorporate our stockpiles.

Speaker 4

And when we have the advantage to use those stockpiles And offset some throughput issues through the crushers in the mills. By using those stockpiles, we'll continue to do so. We have drilled those stockpiles in the last 6 months, and we now know quite well Where the grade is in those stockpiles and where there isn't any grade, so it's not just a haphazard feeding of stockpiles. It actually forms part of the strategy. It's working well for Constantia at the moment.

Speaker 8

Okay, great. Thanks for that. And just a follow-up on the Cobre Panama fiscal talks, what's the when does the current legislative term of the National Assembly end?

Speaker 3

Hi, Jan. So it's 1st October is when the current term ends.

Operator

The next question is from Chris Femenna from Jefferies. Please go ahead.

Speaker 9

Hey, thanks guys for taking my question. So I have a bit of a bigger picture question regarding your strategy and how that might change if commodity prices change. So it seems like strategy now is delever the balance sheet, A prudent conservative approach to growth, but you obviously have a pretty big organic growth pipeline. What if we have a period where copper prices go A lot higher than people expect. How does the strategy change?

Speaker 9

So if we think about your project pipeline, La Grania and Akira are kind of tied up with community relations Work that you need to do, takataka, there's fiscal stability that you need to focus on before you can really start putting a lot of capital there. So what happens to cash flow if you can delever more quickly in the event of higher comp prices? You develop both squeezes underground, but what about beyond that? Is it capital returns? Or is there anything you can do in the portfolio to accelerate some of the investments?

Speaker 9

And then I have a follow-up question to that as well.

Speaker 3

Sure, Chris. Thank you. I mean, the first thing to say is, Look, we certainly understand the structural shape of the copper market and the challenges on supply to what looks like Stronger and stronger demand in the future. But as Ryan said in his comments, in the near term, we also Need to plan, and it seems in the last few days that the outlook is improving, but certainly it would make prudent sense to plan for Down turn of recession or continued challenges on inflation. So look, our first Responsibilities to deliver and not to get ahead of ourselves on that in terms of making sure the plan for this year is in solid place and into next And certainly that's the focus as Rudy has said out there.

Speaker 3

But yes, beyond that, we believe that First Quantum has an enviable Brownfield and Greenfield Portfolio and certainly has the team in order to be able to put those into play. If we do see and that rosy scenario comes to bear, we have the assets and the capability to deliver that, But we would only do that, as we've said many times, from a position where the balance sheet is in strong position. So we did set out our capital allocation policy. It's in the presentation and sets out pretty clear. The focus on improving the balance sheet And then investing in the business, but also making a return to shareholders as well to share in that upside if it does come to bear.

Speaker 9

And then conversely, in a weaker market, what levers would you pull to make sure the business stays structurally intact?

Speaker 3

Thanks, Chris. Yes, look, I think that's an important question. As I said, it's really around delivery on the plan. If we do see significant compression, what we would say is, as Ryan said out in terms of our cost structure, We would expect some of those more sticky elements to pull back as well, that our margin we've noted the resilience of the copper price season is During this challenging time, and we would see seek to push hard on our supply and our cost control. If things get really squashed, then we would be looking at how we're spending capital in the business And that would be the next lever to Paul.

Speaker 3

But in the meantime, as I said, it's really around delivery on the production plan. Revenue And copper generation is what gets us there and achieves the balance sheet deleveraging that we want to see in the near term.

Operator

The next question is from Greg Barnes with TD Securities. Please go ahead.

Speaker 10

Yes, thank you. Tristan, just a comment from you around the risks as the concession agreement in Panama goes through the National Assembly of these various committees. Can the committees or do they have the power to change some of the terms of the agreement or is this more of a formality?

Speaker 3

Yes, Greg, I wouldn't say it's a formality, but the process is that the committees do the reading, and then it goes From the committee into the full house, but no, there's no it's just a yes or no vote. The detail of that in terms of The various the diptados and so on and so where they would line, that's part of what the government is focused on. The government And the company are aligned in terms of the PR effort and moving that forward, but it is a democratic process. I would say that we're confident, but it is a democratic process. But everything that we're seeing at the moment gives us Reason to believe that we expect it would pass, and we would like to see that in the near future.

Speaker 3

Okay. And just a

Speaker 10

follow-up question also on Cobre, but for Ryan. Your hedging on the coal for the power plant comes to an end at the end of this year. What's thinking around protecting the coal price beyond 2023.

Speaker 5

We'll certainly Consider future coal hedges. The current hedge program there has been successful and certainly protected the costs around power generation. Our Guidance for next year assumes a coal price of around $150 a tonne, and that's what's embedded in those C1 costs. If we're able to get a lower coal price as it's been more recently in the spot market, you'll see better than expected costs coming out And conversely, if the coal price is above $150 it will move the other way. It is a discussion with the suppliers, and I think that will just be we'll go into those commercial discussions.

Speaker 5

If there's a sensible contract for us and them to put in place, we'll put it in place. If there's not, We're also comfortable buying coal off the spot market. Over time, coal does become a smaller portion of the cost there, Greg, As we move to renewables, we've already got that expansion project powered by renewables and disclosed that by 2,030, we'll be fully off coal. So it's an important question, But of less importance with time.

Operator

The next question is from Ed Brooker with Barclays. Please go ahead.

Speaker 11

Thanks for taking the question today. My first one was just on the recent new deal. Historically, you've waited to look to refi bonds really kind of 12 months ahead of when they mature. So I just want to get your thoughts on why you're proactive now. What was the rationale of coming to market for that bond, Especially in the context where rates are right now.

Speaker 5

Sure. So we'd actually redeemed $850,000,000 of the 2024s before the end of the Q1, and we drew from the revolver to fund that redemption to so effectively, to some extent, this most recent redemption Was partly for the 2025, dollars 300,000,000 but the other way to think about it is the majority, the balance, the $1,000,000,000 most of that actually went to The 2024s, which we've recently redeemed. So a fairly consistent strategy with what we've done previously.

Speaker 11

Got it. And then, the LaGrange acquisition With small and I'd say prudent there's some CapEx on the back end. But it seems like there in the capital allocation plan there's Inorganic projects you could look at. I just want to get your thoughts on more acquisitions in the near, I guess, or medium term, How large you're looking or if it's more of an afterthought?

Speaker 5

So we drive a fairly consistent approach to acquisitions, where we monitor opportunities out there through the prism of Where can we add value to a situation? Where do we have the skills or experiences from what we've done before to unlock value? And certainly, with LaGrange, it's challenging project, but we think they're learnings from within our business that we can apply to it for the benefit of both us and Rio Tinto. And we will continue with that approach. That means opportunities might come up and we might do acquisitions.

Speaker 5

Similarly, if no opportunities come up, we're very comfortable not doing any acquisitions given the strong pipeline that Tristan mentioned. But where we do them, it's generally going to be focused around where can we take our existing skills and capabilities to unlock value traditionally in copper projects by investors.

Operator

The next question is from Bryce Adams with CIBC. Please go ahead.

Speaker 12

Hi all. Thanks for the call. Several questions already on the production front. My question is on cost performance. You're now guiding to the high end of costs for this year.

Speaker 12

Should we be expecting that cost pressure to impact the outlook for 2024 2025 Or not at this stage?

Speaker 5

Yes. Hi, Bryce. So the main reason to guide towards the top end of costs It's because we're guiding towards the lower end of production. So the main driver there is just less units of production embedded in that C1 cost guidance, Particularly where we've seen lower gold production through the first half of this year. As we'll go through our planning process for next year, Certainly, in some areas, as we noted, we've seen things like the oil price come down versus what we had in our planned for this year and the next 2 years.

Speaker 5

So that would be a tailwind as we think about costs in the out years, but we'll do that work through the balance of this year and then put out that guidance in early

Speaker 12

Okay, thanks. The follow-up is just a clarifier on the Panama National Assembly. Did you say Or did I hear they're sitting until October 1 or October 31?

Speaker 3

Hi, Bryce. Yes, 1st October, October 1st.

Speaker 12

Okay. Thanks so much.

Operator

The next question is from Dalton Baretto with Canaccord. Please go ahead.

Speaker 7

Thanks. Good morning, everybody. Just one question for me. Tristan, in the past, you've said that you'd like to add a 3rd leg of production somewhere, in addition to Panama and Zambia, I guess. And I'm just wondering, is that Still a priority?

Speaker 7

And then do you think it can come from your existing pipeline? Or do you think you have to look externally for it? Thank you.

Speaker 3

Thanks, Dalton. Yes, look, we see a continued rationale to diversify Operations in Zambia, operations in Panama in a 3rd leg would continue to diversify that. We think that's prudent in terms of The volatility of our earnings, but also in terms of the share price and so on as well. The Greenfield pipeline that we have is very competitive. We're particularly excited about the The deal with Rio Tinto that we expect to finalize very soon being the La Granja acquisition, and that is a world class ore body, one of the largest Exploited copper ore bodies in the world, but that will take some time to go through the validation and studies in order to deliver that project.

Speaker 3

In the meantime, we are looking and continue to look closely at Taca Taca in Argentina, and I was there During the quarter on the ground, just to understand the lay of the project, but also the country and the appetite for the investment that it may have as it comes up To the elections in October. Those questions around Argentina will be answered by Argentina. The project is in good standing and it's really about The administration that goes forward is to what how they see investment into the country. But we do think that there is a strong call for copper in the country and we note the level Of other projects and other opportunities for Argentina in that regard, and that would be very strong for the country given where the economy is at the moment. So those are very competitive.

Speaker 3

But as Ryan said, we do look at other opportunities elsewhere from time to time. But we do think we also have the people that can deliver those projects in the near term.

Speaker 7

That's great. Thank you, Tristan.

Operator

This concludes the question and answer session. I'd like to turn the call back over to Tristan Skal for closing remarks.

Speaker 3

Thanks, operator. Thank you, everyone, for joining us today, and I would like to wish you all an enjoyable and rest

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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Key Takeaways

  • First Quantum reported Q2 EBITDA of $568 million, a 10% increase from Q1, driven by higher production across its three largest operations despite a 5% drop in copper prices.
  • At Cobre Panama, Q2 copper output reached over 90,000 tonnes (up 38% sequentially) as grades improved and the CP100 expansion ramp edged towards its 100 Mtpa design capacity.
  • Kansanshi delivered approximately 35,000 tonnes of copper in Q2, benefiting from higher-grade cutbacks and stockpile blending, while the S3 expansion remains on schedule for first production in H2 2025.
  • Sentinel’s second-quarter production rose to 54,000 tonnes after dewatering the pit, restoring access to higher-grade ore and setting the stage for stronger H2 performance.
  • Despite weaker metal prices, Q2 revenue rose 6% sequentially, C1 cash costs fell 12% to $1.98/lb, net debt was reduced by $130 million, and an interim dividend of $0.08 per share was declared.
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Earnings Conference Call
First Quantum Minerals Q2 2023
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