Q1 2021 First Quantum Minerals Ltd Earnings Call
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This conference is being recorded.
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All participants please standby your conference is ready to begin.
Good morning, ladies and gentlemen, and welcome to the first quantum minerals quarterly results conference call I would now like to turn the meeting over to Lisa Doddridge Director of Investor Relations. Please go ahead Mr. <unk>.
Thank you Melanie and thank you everybody for joining us today to discuss our first quarter 2020. One results before we begin I will advise that over the course of the call and you'll be making several forward looking statements and as such I encourage you to read the cautionary note that accompanies our most recent MD&A and the related results news release as well as the risk factor.
Particular to our company, which are detailed in our most recent Aif and available on our website and on on SEDAR. A reminder, that the presentation, which accompanies this conference call is available on our website on today's call, Chris and Pascal Our Chief operations Officer will provide some general comments and discuss operations.
And as mayor our CFO will review the financial results after that we'll open up the likes to take questions. So with that I'll turn the call over and interesting.
Thanks, Lisa and Hello, everyone and thanks for joining.
And one was a very strong quarter for the company. Our operations performed in line with plan and we continue to benefit from our low cost structure and stronger copper prices.
Operations at Sentinel was strong throughout the course of 2020 and this continued and the first quarter of this year. Despite the heavy seasonal range in Zambia.
Central production grew by 3% from Q1 last year, we processed high grades and fresh ore from the stage stupid, but throughput was lower as a result of regular maintenance activities and particularly the repairs completed on the train one ball mill Trunnion and also from the impact of the heavy rainy season.
The focus for the remainder of this year at Sentinel is on maintaining consistent oil supply and the development on the pocket for the force in pit Crusher, which is expected to be commissioned during the second half of the year.
The new 63, 130 primary crusher is larger than the three existing units and together they will enable higher throughput of about six 2 million tonnes per annum study and 2022.
Yes.
Consensus production was also impacted by the heavy rains in the quarter as well as lower grades and were expected and all three circles production declined by 12%. The low production also resulted in increased costs. Despite the challenge of grade continuing to decline at Constancia until a decision on the S. Three expansion.
And as my throughput and grades are expected to remain on plan to meet production guidance for the full year 2021, we.
We continue to look to advance a decision towards the S. Three expansion of consultancy that would ensure production levels remain steady for a period of more than 20 years. We continue to work with the Zambian government to formulate a framework to move the expansion forward. However, with the country entering into election season from Ellie Mae we do not consider decision will be made until.
After the election and the talk of August.
Cobra, Panama and had a very good first quarter with record quarterly production for copper and gold production was up 46% from Q1, and 2020 and 25 per cent from Q4 last year.
Mining rights throughput and grades all increased well costs came down from Q1, 2020.
Despite the addition of about $8 million into cost related with the COVID-19 protocols, which we didn't have last year and the first quarter.
We expect to achieve a throughput of about 85 million tons. This year with improved throughput quarter on quarter as all characteristics improve throughout the year.
Cobre, Panama also continues to advance the expansion to 100 million tons and the focus and Q1.
And this regard was on developing excess along the overland conveyor corridor to the cleaner pit.
And our group costs were low and the quarter driven by strong cost performance across our three large mines, although costs at our smaller mines generally increase the contribution to production with smaller relative to the growth and production from the rest of the portfolio where costs are lower.
The strong operating performance has been achieved despite the challenges but posed by the global pandemic. We continued to deal with the various waves of contagion and different geographies along with the rest of the world.
And the health and wellbeing of our work force and the surrounding communities continues to be a priority. In this regard we have maintained all of our established COVID-19 protocols at all of our mines. We continue to work closely with the various levels of government.
And the health authorities and all the regions, we operate to reduce transmission of the virus and to deal without breaks and infections as I could.
We have seen some impact on other aspects of our business bottlenecks and tried borders port restrictions and some additional costs on on price as a result of COVID-19 restrictions.
So we haven't experienced any other major disruptions and besides the shipping delays and possible high freight costs, we don't expect to.
Before I turn over the call I would like to highlight one more area last quarter I indicated that during our call. We published for the first on that approach to climate change, making public guarantee and to deliver meaningful change and that business based on the implementation of step change improvement projects.
The first quantum approach to climate change and keeping with our results driven culture is to sit tangible targets and focus on the identification and execution of projects, which produce real outcomes.
We recognize the need to identify and integrate climate change and energy considerations into our strategic planning.
Further to this we have now committed and in 2020, one and we will report and alignment with the task force on climate related financial disclosures the Tcf the framework.
Net tangible and realistic targets with and identified pathway to achievement.
And emission levels and the carbon intensity of the company's operations and to integrate and internal carbon price and the expected determined impacts on commodity prices and the evaluation of our new projects and I look forward to reporting further on our progress on these aspects throughout the year.
Finally, I want to on behalf of the entire company think out people. Once again, our workforce continues to demonstrate the depth ability commitment and resilience and make significant contributions to the success of this business.
And the ongoing pandemic.
And with that I'll turn things over to Hannes Meyer CFO.
Thanks, Kristen and good day to everyone.
To direct you to the slides titled overview.
Total copper production for the quarter of 205000 tons was 5% higher than 2020.
Record copper production at Cobre, Panama and drove strong operational performance and the quarter with 82000 tons produced a 46% increase from the first quarter and 2020.
Total gold production for the quarter of 78000 ounces.
The 13% increase from the corresponding quarter last year.
Finally, due to high record on production at Cobre, Panama 36000 ounces.
Actual performance and the quarter was driven by strong sales with increased metal process and low overall operating cost, resulting in a significant increase and comparative EBITDA and net earnings as well as a notable reduction in net debt.
Gross profit of 500, and a $14 million and comparative EBITDA of $811 million for the quarter was significantly higher than Q1 2020.
Attributable to increased sales volumes at Cobre, Panama as well as a 27% increase and the realized copper price.
C. One on cash cost of $1 24 per pound was 5% lower than the first quarter and 2020 with all major copper operations, delivering a reduction and cash cost.
Net debt decreased during the quarter on nearly $350 million.
Two seven.
7 billion and 62.
Is it as at March 31st and further reduction remains a key priority with continued strong future cash flow and anticipated.
In addition, the company's credit rating agency.
Agency was recently.
Upgrade it.
Turning to the next slide on production.
As previously highlighted record production of 82000 tons was achieved that COVID-19 panel.
Uh huh.
St and all produced 58000.
Tons of copper and Q3 and.
And this quarter, 3% higher than Q1, 2020 with a strong performance following successful completion of from face to the ball mill Trunnion during February.
And essentially performed consistently in the quarter copper production of 49000 tons for the quarter was impacted by lower grades and the rainy season.
And in Zambia.
And a notable.
And as noted previously.
Total gold production for the quarter of 78000 ounces into the first with higher production at Cobre Panama.
Quarterly unit cash cost.
Total <unk> cost for the quarter of $1 24 per pound was six sales per pound or 5% lower than Q1, and 2020 Cobre Panama.
Q1 cash cost of $1 15 per pound was 23 cents per pound lower than Q1, 'twenty, 'twenty and reflecting the increase and production.
And can Sanchez cone cash cost benefited from favorable foreign exchange impacts and lower fuel costs.
All in sustaining costs for the quarter of $1 72 per pound was <unk> higher than Q1 and 2020.
The increase and all in sustaining costs reflect higher royalty payment.
Due to the higher metal prices of the step up and Zambia royalty rate increasing to 10% for the month of March.
And the royalty expense accounted for nine sales per pound increase and total all in sustaining costs compared to Q1 2020.
This is being partially offset by lower seaborne and cash costs.
Turning to the next slide financial overview.
Gross profit of $514 million and comparative EBITDA of 811 million and for the first quarter of 2020 was significantly higher than the first quarter of 2020.
Attributable to 27% increase and realized copper price.
Increased sales volumes at Cobre, Panama and lower cash cost.
Pattern of earnings for the first quarter of $150 million is an increase of $225 million compared to Q1, 2020.
Comparative earnings per share.
<unk> reduced sales and basic earnings per share of <unk> 21 sales on.
33, and <unk> <unk> higher than Q1 last year, respectively.
Net.
First by any standard of $50 million during the quarter and further reduction remains a key priority.
The next slides and increase in gross profit.
And at 393 increase in gross profit from higher revenues higher cobre, Panama sales volumes and lower cash costs.
Turning to the next slide on data and liquidity profile company ended.
With the $1 billion of net unrestricted cash and cash equivalents and was on full compliance with all its financial covenants.
The company signed a bilateral borrowing facility of $175 million.
And April 2021 available for 12 months from the date of signing.
Net debt has reduced.
By approximately $600 million and the last three quarters.
Taking into account forecast of cash flow capital expenditure outflows.
Available cash and committed facilities the company expects to have sufficient liquidity through the next 12 months to carry out its operating and capital expenditure plan.
And remain in full compliance with financial covenants, and we continue to take action to manage operational process and further strengthen the balance sheet.
As previously stated the company's credit.
Rating agencies, who have recently upgraded.
And on April six Fitch upgraded the previous B minus rating to B with a stable outlook and.
And so on the ninth of April S&P global ratings upgraded the previous Triple C plus rating to be with stable outlooks.
The upgrades at both agencies were attributed to the company's mitigation of the impacts of COVID-19 and 2020.
Continued improvements on our Companys financial profile and deleveraging.
Strong operational performance and a positive outlook on copper process driven by robust demand forecast.
In addition on April the <unk> low to Moody's Investor services announced that withdrawal of the companies and solicited and non participating writing the writing has been unsolicited non non participating for over three years.
Turning to the last slide on hedging.
Hedging was undertaken with cobre, Panama was being bulks to ensure consistent and sufficient cash flow.
We look forward to certainty of cash flow and confidence and copper prices. We will continue to review the level of hedging and act opportunistically.
Other times the level of sales is.
As expected to decline.
Approximately a third of our expected copper as a sales and the next 12 months are hedged.
At April 27th.
21, the company had and margin copper forward sales contracts for <unk>.
Just over 89000 tonnes at an average price of $2 88 per pound outstanding.
With periods of maturity to December 'twenty one.
In addition, the company has zero cost collar and.
And margin sales contracts for <unk>.
Just on the 213000 tons.
At weighted average prices of $3 10 per pound.
Two to $3 67 per pound outstanding with maturities to March 'twenty two.
The company also and margin nickel forward sales contracts for just over 1000 tonnes at an average price of $7 13 per pound with maturities to October 21.
In addition, the company has zero cost nickel.
And module sales contracts for 500 tonnes.
The average price of $7 50 per pound to <unk> dollars 55 per pound outstanding.
With maturities to August 21.
Thank you and with that I'll hand back over to Lisa.
Thanks, Alex and thanks, Tristan operator can you. Please open the line to take questions.
We will now take questions from the telephone lines. If you have a question and you're using a speaker phone. Please lift your handset before making your selection.
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Okay.
Yeah.
The first question is from Karl Blunden of Goldman Sachs. Please go ahead. Your line is now open.
Hi, good morning, Thanks for the time and congrats on the strong results this quarter.
With regard to priorities with cash flow and it looks like we may be facing a period here of pretty strong copper prices and I'd be interested and your take about how you'd like to balance debt reduction with organic investment and then just on the debt reduction side is there a preference at this point and time for bonds versus bank debt given the potential for rates to rise.
Uh huh.
Thanks, Carl look just to comment on on on growth and and balancing that longer term Sydney.
As we've said numerous times the focus is remains on on debt reduction and I'll get hands to make some comments in that regard.
Certainly the business has a strong.
Greenfield portfolio, but at the moment, we're very much focused on brownfields and in particular, the cobre, Panama 100 million tonne expansion the work at Sentinel on the fourth crusher and indeed, when we get.
And to.
Some agreement with the Zambian government on the S. Three expansion at Constancia.
But no decision yet on Greenfield projects, although there is a strong part one in that regard hennis. Thanks. Thanks, Jason.
And we are generating.
Good cash flow debt amendments and our priority remains the debt reduction.
And as you state at least on serious data outstanding and bank and <unk>.
Homes as bonds are callable and.
Look we will look at.
Lying.
Some of that cash against.
And the various states are the repaying revolver or calling some of the bonds. So that will sit and be a priority and the next and that's coming future.
Fair enough Theres, just one on one other item on the balance sheet I wanted to follow up on a couple of quarters ago. There was some discussion around potentially raising liquidity in Zambia through a JV and I know theres been less discussion of that recently and just be interested and your take on on where that sits and the priority queue. If that's still something and reasons.
And both to think about it as an opportunity for you.
And then if there's any relation between that and this and the elections.
Yeah.
Sure Karl I'll take that one look the diversification aside and notwithstanding the impact of diversification and on our business.
On the we're happy and Zambia.
It's a good place to do business the bid ask spread at the moment I think he is challenging to overcome.
And so that's where we stand at the moment on Zambia, we have a good constructive arrangement with government relationship would come on and as we look forward to the election, they probably will be some noise as there always is but Zambia has good strong democracy and will come through as we've been through many times in terms of election and.
And as I said, we look forward to making decisions on on Ace III expansion after the election.
Thanks very much.
Thank you.
The next question is from Jackie your principal Lawsky of BMO capital markets. Please go ahead. Your line is now open.
Alright, thanks, very much just maybe to follow up on that last question on the on the Q4 earnings call Tricia and you talked about wanting to see stability and Zambia and and related to the.
Duct ability.
Royalties from taxes.
And there been any movement, there or are you more I'm more comfortable with that or is that something that you still have to wait until after the election to be to be satisfied on.
Yeah, Hi.
Jackie Yeah, we were hoping for some progress there and I think what's happened is the timetable for the election has caught us now and so early my the government goes into recess and that means all the ministers and leave the portfolio.
And two months in advance of the election, and that's really now that the hard cliff that were up against in terms of making progress there and and that's why we say its more likely to come after the election.
Got it okay. Thanks, and thanks for that and and then maybe just a question on cobre.
Cobre Panama.
And there was really good congrats on on a great quarter, there and I just wanted to ask specifically on the gold.
I know you guys and talked about this before that some of the goals is difficult to predict I think more specifically the gravity gold is difficult for you guys to predict is that is that what happened in the quarter did you just have.
A good quarter for gravity gold or or is it something that you think is structurally going to be a little bit stronger going forward the gold grade.
Yes, Jackie no the production from the gravity gold, we continue to optimize it but it's not a major portion of the gold production as yet so it really boils down to grades and the grades vary in the ore body and are associated with the and correlated to copper grades, but they will be talks with a day.
They go up and down different to the way the copper grades go up and down and so it was a good period, a good quarter in terms of producing.
Producing gold into the copper concentrate.
And that's what came through.
Great. Thanks, very much I'll leave it there, thanks, Trish and very much and congrats on a great quarter.
Thank you.
The next question is from you on SMS Lewis of Morgan Stanley. Please go ahead. Your line is now open.
And just say good.
Good morning, and thanks for taking my questions.
On a good three at this stage the first one on Ravensthorpe it.
And it continues to face to ramp up challenges.
And you don't care about it.
A quick operational update on how you see things playing out over the next couple of quarters.
And what else, we'd stage and you think it'll be able to make a decision around.
Bringing in a partner.
Secondly on Centinela.
Despite the issues you had during the quarter you mentioned that you.
You've reached a record monthly throughput and March could you give us an indication on that run rate just to get an idea on the exit grateful for that mine and and thirdly.
The language around the low nine review hasn't really changed is there any any update you can share with us on this.
Thank you.
Hi, you on this.
<unk> tried a couple of other questions, but I'll.
And I'll see how we go and so right and so yeah in terms of and operational update.
Yeah, what I'd say is we continue to face headwinds and in the <unk> book and and <unk> deposit, where we focus on the moment and we look forward to getting into shoemaker Levy.
That remains on track in terms of pulling.
Pulling all across on the new can buy a law and and the second half of the year.
And there, we do see bit of material handling characteristics and and indeed improved grades. So Io book these characterized by clay material.
Hangs up and so on and debt that's been the challenge and low grade.
And <unk>.
In terms of the process plant. However, we seen good signs coming through the quarter debt is that we did too.
Good repair work in February as I stated on the last call and that total in good standing.
And we've seen good performance have been beneficiary I shouldn't at the front end and the circuit. So that all bodes well and we really just looking forward to getting into shoemaker Levy at Ravensthorpe and net sits up.
The loan loss going forward at the mine in terms of a partner that that process is continuing.
And I would really add much more at the moment there but.
That processes and good order at Sentinel in terms of the run rates I believe we said on the last call and in terms of the guidance for the year. The run rate. This year was expected to be around 57 million tons.
And then that will step up next year as we add the fourth crusher and.
About 60 million tonnes towards 62 million tonnes. So sentinel.
And is on track this year for the guidance, we provided and and performing well as it did last year.
And in terms of low non.
Yeah, there isn't really much to add to the price. This is continuing and I realize.
And the timetable there.
People looking for ounces, it's a bureaucratic process with government in terms of the process, we have with the.
And the high level ministerial commission, it's in good order and constructive we will be back across the.
Early my early next month, continuing those discussions we will be going we expect to go into the next session of Parliament, which I think is post July in terms of a process and the National Assembly, but that's all.
Guidance on timing and I can give it for the time day.
Great and so if I can squeeze in the last one I was really intrigued about the comments on integrating a carbon price and project evaluation.
Could you share your thoughts on the same work around it and what sort of carbon price are we talking about and how that could differ by region unless you're on.
Of course, the different jurisdictions.
Yeah. Thanks, you on this I think thats work in progress for US obviously, we're having a look at what's in the industry and I think many groups are finding their feet and finding their way forward on this there is a.
Road range, but what we're saying is we we interested to sit and internal price, particularly as we look at the Greenfield projects.
And we will give more detail around that is as we develop and and and we will communicate fully in that regard.
Okay fair enough. Thanks, so much.
Thank you.
The next question is from Greg Barnes from TD Securities. Please go ahead. Your line is now open.
Yes. Thank you are more interested and just a question for you more of a hypothetical one.
First quantum and just didn't seem as a target perpetually for a long time and cause a takeover, but do you see and opportunity for you to become more of a consolidator in the industry given your increasing financial strength.
Yeah.
Yeah, Thanks, Greg and Sydney look we are you know right now and we're focused on debt reduction and as we look at.
And how the market sector. It is something that we look at it comes across the table, we what we see and our own portfolio is very strong growth and and that's important that we deliver that for shareholders.
And always in the past we've looked at we have looked at opportunities, but it needs to fit into where we can add value.
And bring something meaningful to shareholders in terms of incremental earnings per share and and and long term growth.
And then just on the Greenfield opportunities, namely talk attack and take care.
Standard we attack attack is to occur it's been.
Wandering around for a long time and not much going on and you talk in the press release about a resettlement process, but just can you give us any clear idea of where that fits what's going on.
And how that could evolve over the next three to five years.
Yeah look it is a community question the and overriding community question, we talk to so those communities are and several groups and we.
We're talking closely to the groups that are the principal focus of the operations, but really hickey receipts at beyond tech attack or in terms of.
The ranking as to how we see it would be developed.
And as we said, we wouldn't be making a decision on that and the next two to three to four years because of that debt ranking.
And unless that we would get to resolution with the community in the meantime, we watching developments in Peru.
And.
And the.
We'll watch and follow the elections are carefully as well in that regard.
Okay. Thank you.
Uh huh.
Thank you.
The next question is from Ed Brucker with Barclays. Please go ahead. Your line is now open.
Hey, Thanks for taking my question just two quick ones from me so with the recent ratings upgrades from Fitch and S&P and Moody's drop and the rating you're you're fully single B now kind of from sitting in the Triple C range.
Prior so I you know, it's a milestone, but I wonder if you would be able to explain to us kind of the reasoning behind the Moody's are dropping the rating.
Dennis.
And look it's been an unsolicited right and we've dropped.
Moody's from our solicited by some three years ago. So they continued on an unsolicited basis.
Luckily for requested them to drop that on a few occasions and.
And I of Vinci debt.
And that came true.
Got it and then my next one is is kind of going back to the gross debt versus net debt question. That's always been high on the mind of some of the credit investors, but with the bank debt and and the maturities are in 2020, three and 2024, becoming callable.
And are at low prices do you think you could use that as an opportunity to take out some gross debt or do you think you could you you'll still kind of reduce the net debt number just with our billing and cash reserves.
No, we'll will start reducing the gross state number as well.
Got it thank you very much.
Okay.
Thank you.
The next question is from Matthew fields of Bank of America. Please go ahead. Your line is now open.
Hey, Justin honest, Lisa actually great timing to continue on that sort of gross debt question. So.
225 of the term loan.
Payable this quarter.
Do you anticipate kind of paying down revolver as well.
And that sort of continue on the trend that we've seen.
And then sort of are we still kind of on track for.
You know that $2 billion of overall debt reduction, which would imply and other kinds of billion three from here over the next however, many quarters.
Yes.
Yeah. So we've got the timberland.
Instalment due in June so that.
That will reduce that timna and further.
And of course additional cash coming in.
And we could various options on the going to revolver, all day and starting to look at some other bonds.
Two cold and so.
And it will evolve as the cash flow set of guidance.
Continues to flow in.
Okay, and it and I'm sorry, but is that are you.
You know another 1 billion three from from here or still kind of the bogey that we're that you're targeting.
Yeah, I mean, that's yeah.
And you can run the numbers say, but that's quite achievable.
And not too distant future.
Okay and then the the.
On the bilateral facility that you signed in April and I'm just.
Curious you know Whit.
The cash that you're generating now the cash you have on balance sheet. The liquidity the revolver availability that you have which is bigger than you've had and a long time and why the need for the $175 million facility.
And if even if only for 12 months.
Yes.
So al.
So I'll deal with the hedges first on to two components.
Yeah, Hey, just that we quote and.
That's out there and margins that the normal hedges that we have on net.
For the <unk> period, so we do sell to our customers and then there's a hitch and marrying that timeframe.
And those are subject to margin calls and so with the rise and the copper price because they sort of margin calls on debt. So what I've done this and it.
Quite a quick process is probably a week is just to ask one of our banks.
On a bilateral basis day to provide a facility just to cover that not to erode any other.
Liquidity that we have so that was put in place pretty quickly.
Of course that and wines as S.
Copper price stress stays at these labor levels for longer.
And then that sort of margin calls.
And as you settled at the sale.
And did you realize and the price so there's.
That whole for the margin calls disappear then.
Okay, and then is that a is an unsecured facility.
Yep and ticket.
And then and the need for it will basically go away as your hedged position declines over the next 12 months.
Yeah, and and it's not it's not tied to the hedges that we mentioned and that's just a non normal operational and sort of quotation on peer rotation because what we do is we hedge the quotation period for when we sell and sell the product until the sales closed we age that portion of it as well, but that's subject to margin calls.
Okay got it alright, thanks, very much honasan and good luck for the rest of the year.
Thank you.
The next question is from Lawson Winder of Bank of America Securities. Please go ahead. Your line is now open.
Hello, and thank you for your time today.
And gentlemen.
Just a couple of questions from me I wanted to hopefully get some clearer guidance or direction on cobre, Panama for the rest of the here vis vis the first quarter. So.
The grades and in Q1 at that point for sex or relatively strong.
It is is that in line with your block model or our great day actually running a little better than expected.
Yeah, Hi loss and no. It's in line with the block model and what we see over the years.
The guidance, we've given debt remains absolutely valid.
And we Q1 was strong and we had a lot of.
Good reason on the production side to be very very happy and very pleased with the progress there.
In April we have seen.
Some more maintenance this month and really that's built off the higher throughput right. We've seen we put forward.
Planned maintenance shuts on mill relaunch and so on into April I really on what that says loss and as you know over the year, we will see ups and downs and the guidance. We provided remains valid the grades that we've seen are in la and we've book model and reconcile very well on both to block model and then also to the <unk>.
<unk> feed and so we did the guidance remains very current.
Okay. Thanks, so much Chris and then on the strip ratio.
That seems to be running a little low and perhaps even a little lower than plan. So so and place ripped ratio was about half.
0.5 times in the quarter is is it turning out better than your expectations or rather have there been some adjustments in the mine plan and that caused that to run and potentially lower than that in the original plan and then what's the outlook for that for the remainder of the year.
Sure loss and Yeah look with strip ratio. We gave is really across the year, what we need to do is to getting to the northern area and that's the so that's really a pushback on the northern and sort of the potato pit, where there's some waste there. The reason to do that is to prepare the day.
New position for the next box cut and the next move of the in pit crushes and that will be the prepaid other Peter to ramp two to three years.
So we're looking to get a shovel into that area and that will pick up wise for the rest of the year. So we are on plan, but yes, it was a bit lower and the quarter.
Okay. That's great and then maybe just one final question on on.
On Sentinel.
You guys guided to slightly lower grades in the quarter and Q2 that is thank you and thank you for that guidance very helpful.
Historically.
And we've seen.
Or could we expect the Q2 grades to sort of be in line with sort of historical low quarterly low or no are we looking for something sort of.
Outside of what.
And what historically has been a quarterly low debt.
Low so no I don't think we have the concern that it would be outside historical lows.
And you know April at Sentinel, and we've also had some some maintenance and heavy rains they are and so that will come through in Q2.
But the grades and the grades are a bit low Roes, we say, but no nothing sort of beyond historical.
And low points.
Great. Thank you so much tristan much appreciate it take care.
Thanks.
Thank you.
The next question is from Abbvie and Gabor of Deutsche Bank. Please go ahead. Your line is now open.
And Martin and thanks for the presentation.
My question is on costs.
Really first quarter is weakest in terms of both production and costs and so should we assume.
And it costs stepping down as they historically have or are you starting to see inflationary pressures, which could be a headwind forecast. Thank you.
Yeah, Hi.
No I think the cost performance was reasonably sound.
In Q and Q1 are.
Looking back on last year, we suddenly there is an improvement over Q4 and really that's on the high unit production and from the three larger mines.
Cumulatively across the quarter.
We are seeing some cost inflationary pressure and we've mentioned that in terms of fright and also on capital equipment purchases and so on but we haven't really seen that translate into consumables as yet, but obviously you know steel prices are little bit haul out on diesel prices are hitting higher.
And so.
The expectation is we will start to see some of that washed through and the second half of the year, that's the expectation, but at this stage no we haven't seen those.
Come through in terms of the impact to the business on the <unk>.
<unk>.
And with the higher copper production and it has come off from last year.
Q3 was a standout quarter last year and really that was built off.
Well it was just better than average across the year in Q3, and I don't think really representative of the whole he's performance last year. So Q1. This year I think is much more representative and we do continue to sit down and at Cobre. Panama for example, as we continue to deliver more copper production.
Got it if I if I may squeeze another question. So at Cobre, Panama costs costs, you had a very strong cost performance book should we think about should we think 115 cents per pound as the as the base costs.
Yes.
We guided to overall.
In the range of $1 $20 30 that kind of number overall for the group and yeah. We don't see any reason to move from those costs what I'm worried about debt is just in the second half of the year, if we start to see some of that debt.
Hi, diesel price and higher steel costs and so on wash through.
Got it thank you very much.
Thank you.
Next question is from Emily Chang of Goldman Sachs. Please go ahead. Your line is now open.
Good morning, just and Harriss. Thanks Lee.
Yeah, I wanted to ask about your leverage targets and.
Capital overtime and thereafter, I think you mentioned previously that you were looking to take $2 billion debt, maybe could you give us a sense as to what we should expect thereafter should it be and acceleration is gross spend and I know you outlined a couple of brownfield projects at all or should we be thinking about a pivot to <unk>.
Tracing shareholder accounts.
And.
And just in July on so that share.
Sure Joe.
Sure.
I just wanted to address the point that Greg made originally.
Because it comes into this our aim is to reduce on debt.
And we'll spend the next few years.
And some study work on a per.
<unk> debt.
And you referred to which was Tucker Tucker.
Which primarily requires some negotiation with the Argentinian government and.
That has been making progress because they want projects to happen.
And the same situation, there's obviously kind of per mile and okay. So how keira we need to.
Yeah, well and should deal with those communities and during this COVID-19 period.
And when Peru.
And as particularly suffered.
From high levels of.
And infection, it's been quite difficult to gauge as well as we'd like because you can imagine interests and as far more on those areas.
But those studies have advanced and we will keep them going and that will take us a while.
And.
That gives us the opportunity true to.
And to focus on reducing on debt.
And moving to a situation where we can.
Provide returns to our shareholders.
And the flow of dividends and.
And the next.
[noise] quarter statements.
Probably.
Huntsville, Mike.
Some statements about what we will aim to try and do just and a modest.
And not too long into the future on dividends and it would be.
Modest but.
Something that can be absorbed within that debt repayment schedule.
So it's a mixed.
Exercise on reducing debt.
On returns to shareholders.
And preparing ourselves.
Nothing more than the studies on various shorts.
Projects that will not.
She's a lot of day for a few years.
For different reasons.
But that would ensure that we have a pipeline of development and the future and then.
And I think your question was what would we then do with the funding that kept.
Using all debt.
And obviously it will be.
Share of what we returned to shareholders.
Fine.
Before that.
Both Chris and a longer time and kind of a central.
We have picked up.
Great. That's helpful color and then one just follow up if I may can you tell us what's the latest update with the the channel she copper shell holding and first quantum is there anything bad debt.
That's true.
Thank you.
Hi, Emily I can answer that and no nothing new.
And we.
Constructive dialogue and we spoke to.
Two to Shaanxi.
After Chinese new year, and we will follow up after the Q1 results as well so it's a it's an orderly conversation and a constructive dialogue.
Really just at the moment and see them as long term shareholders, who is very happy with the ROI and the share price.
Great. Thank you.
Thank you.
The next question is from debt tender gall of BNP Paribas. Please go ahead. Your line is now open.
Thanks, Good morning, and good afternoon, just a question a slight follow up on the previous one regarding a junk sheep east and minority stake sale still an active dialogue or is it a.
More on the background know because it looks like with the copper price.
Not pressed to do it and.
You can probably live without it but from your perspective is it still and active dialogue and.
Election got any bidding on it and tons of where the discussion goes on.
I'm, just trying to understand you're stuck and minority stakes and ease and isolate your dialogue or is the stability agreement and Zambia and as three or enterprise development on part of the same person that you would want us all on at one go. Thank you.
Sure just and to thank you Luke.
No they separate and you know the answer in terms of the stake sale process as I said earlier.
Notwithstanding the diversification and sort of things that we just.
And the challenges on the bid ask spread and I think it's too too far to cover.
So we're happy and Zambia, it's a constructive process with the Zambian government. So for instance, we were involved with the Ministry of Finance and the Ministry of mines.
This week in the morning, and DARPA in Zambia and that's.
Structured dialog around the the ongoing investment climate and to Zambia and on the opportunities from wanting to develop and the country.
But in terms of.
Yeah.
The election and the price is really that is around a three and really the conversations.
And that dialogue Ministry of Finance Ministry of mines, and the broader Zambian government is around how we can get debt to a level of fiscal stability and as I said.
With the breakup or the other resets of government from early my it's unlikely that we would get sort of a firm response back on that until after the election now I think.
And that would be separate from any price is.
Which as I said.
Yeah.
Okay, very clear to us and thank you so much.
Uh huh.
Thank you once.
Once again, please press star one at this time, if you have a question and the next question is from Ian Rossouw of Barclays and London. Please go ahead. Your line is now open.
Thanks, Hi, guys.
A couple of questions firstly on on Ken Saatchi It.
It doesn't look like you've paid any minority dividends there for at least five years I mean, obviously you guys initially to repay the smelter investment there, but presumably with strong copper prices.
The balance sheet should be and a good position obviously again.
Looking to do the expansion down the line. So I'm just sort of curious could you give a sense of what the balance sheet position and is looking like at Constancia and just what the thinking is around.
On the balance sheet, there should we expect some minority dividends at some stage.
Hi, Ian.
We do pay minority dividends to a concern she does.
Pay dividends and interim dividend, so we add one assignment.
And get waned recently, probably on module Sir.
And.
Okay.
With can essentially looked at the future investment that's required on a street.
And hence it's sort of a cash available day and for that investment once we get that agreement.
Ready to.
And then once the once we get comfortable with the Zambian political situation.
And that a client.
Yeah.
[noise] assurance that we need in terms of making such a decision.
So, it's cash step and ready to make that investment and <unk>.
And.
Okay, Alright, Thanks, and then just sort of relates to dwell similar on the Cobra Panama side should.
Should we assume or cash that the operations generates and then obviously goes to pay down the intercompany debt at the parent and then also the external debt T. K P. M C well at least 10% of debt.
A shareholder.
That's correct yes.
Excess cash will be and return to.
Shareholders other than the former plan repayments on dividends.
Okay, Alright, that's all.
Thank you.
And the last question is from our small cut out of Scotiabank. Please go ahead. Your line is now open.
Hi, Good morning, a couple other remaining questions from me first of all interested and on Cobre Panama.
Your release talked about still achieving 85000 tons a day throughput average at Cobre, Panama are clearly.
A really good quarter. It was still below that and Q1, it sounds like youre, having more maintenance schedule here on Q2.
Is that then does that guidance assume that you expect to do better than 85000 tons, a day and the back half of the year.
Yeah, Hi, our sites.
$5 million per the year. So the number per day is a 236000 tons per day and the answer and Q1 as we we thumped along at $19 6 million tons for the quarter that was in the release the budget over that time was $20 2 million tonnes. So we are pretty close on budget that is back ended.
And the reason for that is we've got quite a lot of material and Q1, which is.
And assortment material, which is tougher and takes more of a milling.
And as we get into the guts of the year IV and a saw it reduces and we see softer all coming through that's bearing out and in the mine plan and we see that sort of shifting in Q2 already so that was the reason I was really on the.
And the characteristics of the ore and the areas in which we mining.
For that but yes otherwise.
On the throughput rates that we are delivering and certainly.
March was excellent in that regard we had the secondary crushers running and we do see the impact of those both secondary crushers running.
And running well the impact and we sit and the achieving those mineral rights per day that debt.
Debt are required to deliver the 85 across the year and so for that reason, we have confidence and the 85, its a big number like forest, but we have confidence in it.
Thank you, yes, sorry, and I've met 85 million tons not tons per day, and then just shifting gears when it does the enterprise projects.
And your portfolio I don't think I've heard.
You've talked about it and many years and just curious if kind of where that may fit in terms of your priorities.
Yeah.
Enterprises.
Yes, Yes go ahead.
And that's just because it's very topical at the moment.
Enterprise.
Warrants proceeding with and then on.
True long distant future because it's called.
Got it on a total life of about nine years.
And obviously you don't want to have it start up after the rest of central.
Run through and central.
Got it.
The other 14 and ideas to go.
So the aim that.
For that.
It will be that will start some work to do with the protection of the pitch on stripping.
This dry season.
And then next dry season, we would do.
And also the stripping that's needed so you start to get into production and.
And in the forecast for capital and those amounts are provided for.
And it doesn't age of any expense.
On the <unk>.
Plant itself.
And so.
Towards the end of 'twenty 'twenty two you start to see some production of enterprise if all of that goes according to plan.
And it probably.
And drift off on but anyway simply because we're running into the range.
I tried and tried and true.
And we expect that that would be a little bit difficult on us.
Starting off and so that gives you some.
And in other words, we havent forgotten about it.
At all but they.
And I need to get moving with it and.
So much of Sentinel has been focused on getting everything else to run on a steadily which it is.
And I think what trust and probably wasn't saying.
The same is true of Panama.
A large new team of people, who have already been settling down and struggled through a quite tricky.
Situation and environment for true.
And that COVID-19.
And she was not easy on them.
And so actually just assessing the operations to cope with the variables that have a need to do it does it just take time.
And you've seen other Sentinel.
Central is ready.
That's a little bit more mature and it works pretty steadily.
And I can I'll tackle enterprise without causing any disruption.
That's excellent to hear and.
So it sounds like you may have.
Call It production starting as early as 2023.
Yep.
And we'll work on why threat now and see what we can.
And yet to find a few things out and that pet.
Uh huh.
Oh I'm on.
Alright.
Thank you very much appreciate it Phil.
Thank you.
And there are no further questions registered at this time and I'll turn the meeting back over to Ms Doddridge.
Thank you very much Melanie and thank you everybody for your participation and the call today and your continued support of first quantum and finally, if you have any follow up questions that you need anything else. Please contact me directly.
And again and everybody have a great day.
And it has now and again please.
Please disconnect your lines at this time, we thank you for your participation.
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