Q1 2021 First Quantum Minerals Ltd Earnings Call
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This conference is being recorded so it calls for homes that don't have as you see.
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 2021 results before we begin I will advise that over the course of the call we will 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 factors.
<unk> 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 Christian Pascal Our Chief operations Officer will provide some general comments on just golf operations that Hana Maris.
F O will review the financial results after that we'll open up the lines to take questions. So with that I'll turn the call over to interest them.
Thanks, Lisa Hello, everyone and thanks for joining.
Quarter, one was a very strong quarter for the company operations performed in line with plan and we continue to benefit from alloyed cost structure on stronger copper prices.
Operations at Sentinel was strong throughout the course of 2020 and this continued in the first quarter of this year. Despite the heavy seasonal range in Zambia.
Central production grew by 3% from Q1 last year.
Yeah, its high grades and fresh ore from the stage two pit, but throughput was lower as a result regular maintenance activities in particular, the repairs completed on the train one ball mill Trunnion and also from the impact for the heavy rainy season.
As for the remainder of this year at Sentinel is on maintaining consistent all supply on the development of a pocket for the fourth in pit crusher, which is expected to be commissioned during the second half for 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 starting in 2022.
Consensus production was also impacted by the heavy rains in the quarter as well as lower grades than we were expected in all three circuits production declined by 12%. The lower production also resulted in increased costs. Despite the challenge of grade continuing to decline at Constancia until a decision on.
On the S. Three expansion has made throughput and grades are expected to remain on plan to meet production guidance for the full year 2021.
We continue to look to advance a decision towards the S. Three expansion of consultancy that would ensure production levels remained 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 early May we do not consider decision will be made until.
The election on the 12th of August.
Cobre, Panama had a very good first quarter with record quarterly production for copper and gold copper production was up 46% from Q1, 2020, and 25 per cent from Q4 last year.
Mining rights throughput and grades all increased on costs came down from Q1 2020.
Despite the addition of about $8 million into costs related with the COVID-19 protocols, which we didn't have last year in 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 tonnes the focus in Q1.
In this regard was on developing excess along the overland conveyor corridor to the cleaner pit.
Our group costs were low in the quarter driven by strong cost performance across our three large mines, although costs at our smaller mines generally increase their contribution to production with smaller relative to the growth in 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 in different geographies, along with the rest of the world.
The health and wellbeing of our work force and the surrounding communities continues to be a priority in this regard we.
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 in all the regions, we operate to reduce transmission of the virus and to deal without breaks in infections as I could.
We have seen some impact on other aspects of our business bottlenecks at trade 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 are intent to deliver meaningful change in our business based on the implementation of step change improvement projects.
The first quantum approach to climate change in keeping with a results driven culture is to sit tangible targets and focus on the identification execution of projects, which produce real outcomes.
We recognize the need to identify integrate climate change and energy considerations into our strategic planning.
Further to this we have now committed in 2021, we will report in alignment with the task force on climate related financial disclosures for Tcf the framework.
Net tangible and realistic targets with an identified pathway to achievement for absolute emission levels and the carbon intensity of the company's operations and to integrate an internal carbon price and the expected determine impacts on the commodity prices and the evaluation of on new projects.
I look forward to reporting for the on our progress on these aspects throughout the year finally, I want to on behalf of the entire company think how people once again, our workforce continues to demonstrate the depth stability commitment and resilience and make significant contributions to the success of this business.
In the ongoing pandemic.
And with that I'll turn things over to Hannes Meyer CFO.
Thanks, Kristen and good day to day everyone.
I'd like to direct you to the slides titled overview.
A couple of production for the quarter alternative odd thousand tons was 5% higher than the 2020.
Record copper production at Cobre, Panama from strong operational performance in the quarter with 82000 tons produced a 46% increase from the first quarter in 2020.
Total gold production for the quarter of 78000 ounces.
A 13% increase from the corresponding quarter last year, mainly due to high record production at Cobre, Panama 36000 ounces for.
<unk> performance in the quarter was driven by strong sales with increased metal prices and lower overall operating cost, resulting in a significant increase in comparative EBITDA and net earnings as well as a notable reduction in net debt.
Gross profit of $514 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 in the realized copper price.
See one on cash cost of $1 24 per pound was 5% lower than the first quarter in 2020 with all major copper operations delivering a reduction in cash cost.
Net debt decreased during the quarter on nearly $350 million.
$7 billion and 62.
As at March 31st and further reduction remains a key priority with continued strong future cash flow anticipated.
In addition, the company's credit rating agency.
Agency recently.
Upgrade it.
Turning to the next slide on production.
As previously highlighted record production of 82000 tons was achieved that COVID-19 Panama.
St to non produced 58000.
Tons of copper in Q3 I'm sorry.
This quarter, 3% higher than Q1 2020 with a strong performance following successful completion of for face to the ball mill Trunnion during February.
Essentially performed consistently in the quarter up a production of 49000 tons for the quarter was impacted by lower grades and the rainy season.
In Zambia.
And a notable.
And as noted previously total gold production for the quarter of 78000 ounces is at a record high production at Cobre Panama.
Quarterly unit cash cost.
Total C. One cost for the quarter of $1 24 per pound was six sales per pound or 5% lower than Q1 for 2020, Cobre, Panama C. One cash cost of $1 15 per pound was 23 cents per pound lower than Q1 2020, reflecting the increase in production.
Same thing on cash 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 2020.
The increase in all in sustaining costs reflect higher royalty payment.
Due to the higher metal prices of the step up in Zambia royalty rate increasing to 10% for the month of March.
The royalty expense accounted for nine sales per pound increase in total all in sustaining costs compared to Q1 2020.
This is being partially offset by lower seaborne cash costs.
Turning to the next slide financial overview.
Gross profit of $514 million on comparative EBITDA of eight from $11 million for the first quarter of 2020 with significantly higher than the first quarter of 2020.
Attributable to 27% increase in realized copper price.
Increased sales volumes at Cobre, Panama and lower cash cost.
Comparative earnings for the first quarter of $150 million is an increase of $225 million compared to Q1 'twenty 'twenty.
Comparative earnings per share.
22 sales and basic earnings per share of <unk> 21 sales.
On 33, and <unk> <unk> higher than Q1 last year, respectively net.
Interest reduced by nearly $350 million during the quarter and further reduction remains a key priority.
The next slide increase in gross profit.
Mm 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 in April 2021 available for 12 months from the date of signing.
Net debt reduced.
By approximately $600 million in 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 for Maine, a full compliance with financial covenants, we continue to take action to manage operational process and further strengthen the balance sheet.
As previously stated the company's credit.
Writing a two agencies for a recently upgraded on April 6th Fitch upgraded the previous B minus rating to B with a stable outlook.
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 in 2020.
Continued improvements on the company's 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>, Moody's Investor services announced the withdrawal of the Companys unsolicited non.
On 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 flows and confidence in copper prices. We will continue to review the level of hedging and act Opportunistically EBITA.
Over time the level of sales.
As expected to decline.
Approximately a third of our expected copper sales in the next 12 months IH.
At April 27th.
'twenty one the company had margined copper forward sales contracts for <unk>.
Just over 89000 tonnes at an average price of $2 88 per pound outstanding with.
With periods of maturity to December 21.
In addition, the company has zero cost collar and.
On margin sales contracts for <unk>.
Just on the 213000 tons.
Weighted average prices of $3 10 per pound.
For the $3 67 per pound outstanding with maturities to March 'twenty two.
The company also on margin nickel forward sales contracts for just over 1000 tonnes at an average price of $7.30 per pound with maturities to October 21.
In addition, the company has zero cost nickel.
On margin sales contracts for 500 tonnes.
The average price of $7 50 per pound to $2 55 per pound outstanding with maturities to August 21.
Thank you Ed with that on hand back over to Lisa.
Thanks for your next and Thanks, Kristen operator can you. Please open the line to take questions.
Certainly 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. It looks like we may be facing appeared here pretty strong copper prices and I'd be interested in 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 in time for bonds versus bank debt given the potential for rates to rise.
Okay.
Thanks, Carl look just to comment on on on growth and balancing that longer term Sydney as.
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.
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 pipeline in that regard hennis. Thanks. Thanks, Jason.
Hold on I mean, we are generating.
Good cash flow debt amendments of the priority remains the debt reduction.
As you state at least on serious data outstanding in bank and homes as bonds are callable and look we will look at applying.
Some of that cash against.
The various states are the repaying revolver or calling some of the bonds. So.
So that will certainly be a priority on the next in the 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 I'm just interested on your take on on where that sits in the priority queue. If that's still something reasons.
To think about it as an option for you.
And then if there's any relation between that and the Zambia elections.
Sure Karl I'll take that one look the diversification aside and notwithstanding the impact of diversification on our business.
On the we're happy in 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 the.
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 principal Lawsky of BMO capital markets. Please go ahead. Your line is now open.
Hi, Thanks, very much just maybe to follow up on that last question on the on the Q4 earnings call true.
And you talked about wanting to see stability in Zambia and and related to the.
Deductibility of our royalties from Texas, but has 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 served satisfied on.
Yeah, Hi, Jackie.
Jackie Yeah, we were hoping for some progress day 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 leap day portfolio.
Two months in advance of the election, and that's really now that the hard.
On a cliff debt, we're up against in terms of making progress day in and that's why we say its more likely to come after the election.
Got it okay. Thanks, Thanks for that and and then maybe just a question on.
Cobre Panama.
Production 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 talked about this before that some of the goals is difficult to predict I think more specifically the gravity gold. It's difficult for you guys to predict is that is that what happened in the quarter did you just have bad.
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 continuing 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 it associated with the and correlate it to copper grades, but they will be talks with a day.
For the gone up and down different to the way the copper grades go up and down. So it was a good period a good quarter in terms of.
Producing gold into the copper concentrate.
And that's what came through.
Great. Thanks, very much I'll leave it there. Thanks true so very much on congrats on a great quarter.
Thank you.
The next question is from you on this muscle of Morgan Stanley. Please go ahead. Your line is now open.
I just said.
Morning, and thanks for taking my questions.
A good free at this stage the first one on Ravensthorpe it continues to face to ramp up challenges.
You don't care about it quicker.
A quick operational update on how you see things playing out over the next couple of quarters.
And what stage do you think you'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 in March could you give us some indication on that run rate just to get an idea for the exit grateful for that mine 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 questions, but I'll see how we go so right and so yeah in terms of an operational update.
Yeah, what I'd say is we continue to face headwinds in the Io book and and <unk> deposit, where we focus on the moment and we look forward to getting into shoemaker Levy our debt.
It remains on track in terms of pulling.
Pulling all across on the new can buy a line in the second half of the year.
And there, we do see bit of material handling characteristics and indeed improved grades. So Io book these characterized by clay material.
Hangs up and so on.
And that's been the challenge and lower grade.
In terms of the process plant. However, we think good signs coming through the quarter debt is that we did too.
Good repair work in February as I stated on the last call in that total in good standing.
And we've seen good performance have been beneficiary I shouldn't at the front end of the circuit, so that all bodes well and we really just looking forward to getting into shoemaker Levy.
At Ravensthorpe in net fits up.
No.
That loan losses 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 process is in good order at Sentinel in terms of the run rates I believe we said on the last call 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 in.
About 60 million tonnes towards 62 million tonnes. So sentinel.
<unk> is on track this year for the guidance, we provided and performing well as it did last year.
In terms of loan on.
Yeah, there isn't really much to add to the process is continuing and I realize.
The timetable there.
People looking for ounces, it's a bureaucratic process with government in terms of the process, we have with the.
The high level ministerial commission, it's in good order and constructive we will be back across the.
Early my early next month.
And in 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 from the National Assembly, but thats sort of guidance on timing 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 Goldman so on integrating a carbon price and project evaluation.
Could you share your thoughts on the framework around it and what sort of carbon price are we talking about and how that could differ by region unless you're on.
Operator across different jurisdictions.
Thanks, Jonas 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 for finding the fate and finding their way forward on this there is a broad range.
<unk>, but what we're saying is we we interest that to set an internal price, particularly as we look at the Greenfield projects are and we will give more detail around that is as we develop it 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 one interest in just a question for you more of a hypothetical one.
First quantum just didn't seem as a target perpetually for a long time in terms of takeover, but do.
Do you see an opportunity for you to become more of a consolidator in the industry given your increasing financial strength.
Okay.
Yeah. Thanks, Greg in Sydney look we are right now we're focused on debt reduction and as we look at.
How the market ex Avi this is something that we look at it comes across the table, we what we see in our own portfolio is very strong growth 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 long term growth.
And then just on the Greenfield opportunities, namely Paclitaxel and take care of I understand what attack attack is for it.
Where it's been.
Wandering around for a long time not much going on you talked on 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 questionnaire and overriding community question, we talk to so those communities are in several groups in.
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 the ranking as to how we see it would be developed.
And as we said we wouldn't be making a decision on that in the next three to four years because of that that ranking.
And unless that we would.
Two resolution with the community in the meantime, we watching developments in Peru.
And.
The.
Watson followed the elections are carefully as well in that regard.
Okay. Thank you.
Yeah.
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 for me so with the recent ratings upgrades from Fitch and S&P and then Moody's dropped with the rating you're you're fully single B now are kind of from sitting in the Triple C range.
Prior so I you know, it's a decent milestone, but I wonder if you would be able to explain to us kind of the reasoning behind the Moody's dropping the rating.
Dennis just to touch on one of them.
Look it's been a unsolicited right 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.
Eventually that.
That came true.
Got it on my next one is is kind of going back to the gross debt versus net debt question that's always been.
Alright on the mind of some of the credit investors, but it's the bank debt and the maturities are in 2023, and 2020 for becoming callable kind of 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'll still kind of reduce the net debt number just with the pulling it catches on.
Yeah.
No, we'll will start producing the garage state number as well.
Got it thank you very much.
Yeah.
Okay.
Thank you.
The next question is from Matthew fields of Bank of America. Please go ahead. Your line is now open.
Hey, Justin honestly used to actually great timing to continue on that sort of gross debt question. So.
You know 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 another kind 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 the timberland further.
Of course additional cash coming in.
We've got various options off but they're going to revolver, all day and starting to look at some of the bonds.
To call it so okay.
It will evolve as the cash flow set of guidance.
Continues to flow in.
Okay, and then 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.
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.
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 on a long time why the need for the $175 million facility.
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.
That's out there that's on 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 marrying that timeframe.
Those are subject to margin calls so with the rise on the copper price because they sort of margin calls on debt. So what I've done this.
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 unwind as S.
Copper price stress stays at these labor levels for longer.
And.
That sort of margin calls.
As you settled at the sale.
Did you realize in the price so there is.
That whole for the margin calls disappear then.
Okay, and then is that a is an unsecured facility.
Yes on ticket.
And then and the need for it will basically go away as your hedged position declines over the next 12 months.
Yeah, and it's not it's not tied to the hedges that we mentioned that just on all normal operational sort of quotation on peer rotation because what we do is we hedge the quotation period for when we sell sell the product until the sales closed we age that portion of it as well, but thats 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 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 no. It's in line with the block model and what we see over the years.
On the guidance, we've given debt remains absolutely valid.
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.
In April we have seen.
Some more maintenance this month.
And really that's built off the higher throughput right, we've seen we port for the.
Planned maintenance shuts on mill relaunch and so on into April I really on what that says listen 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 line with.
The book model and reconcile very well voice to block model and then also to the plant 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 in place for ratio was about half.
Or is there a 0.5 times in the quarter is it.
Is it turning out better than your expectations or rather have there been some adjustments in the mine plan that caused that to run potentially lower than than the original plan and then what's the outlook for that for the remainder of the year.
Sure losses, Yes 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 side of the particular pit where there's some waste a day. The reason to do that is to prepare the new.
A new position for the next box cut the next move of the in pit crushes and that will be the prepaid of imputed rent 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 in the quarter.
Okay. That's great and then maybe just one final question on <unk>.
On Sentinel.
You guys guided to slightly lower grades in the quarter in Q2 that is thank you and thank you for that guidance very helpful.
Historically.
We've seen.
Or could we expect for Q2 grades to sort of be in line with sort of historical low quarterly lows or.
We're looking for something sort of.
Outside of what.
What historically has been.
Quarterly low there.
So no I don't think we have the concern that it would be outside historical lows.
April at Sentinel, 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 lower as we say, but no nothing sort of beyond historical.
Low point.
Great. Thank you so much tristan much appreciate it take care.
Thanks.
Thank you.
The next question is from Abby I gave all of Deutsche Bank. Please go ahead. Your line is now open.
Good morning, Thanks for the presentation.
My question is on costs. So seasonally first quarter is weakest in terms of both production and costs.
So should we assume.
Net cost stepping down as they historically have or are you starting to see inflationary pressures, which could be a headwind for costs. Thank you.
Yeah, Hi.
No I think the cost performance was <unk>.
Reasonably sound.
Q in Q1.
Looking back on last year, we suddenly there is an improvement over Q4 and really that's on the high unit production 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 a little bit haul out on diesel prices are hitting higher.
So.
The expectation is we will start to see some of that washed through in the second half for you that's the expectation, but at this stage no we haven't seen those.
Come through in terms of the impact of the business on the <unk>.
<unk>.
And with the higher copper production 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 see sit down 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've guided to overall.
In the range of $1 $20 30 that kind of number overall for the group and 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 higher steel costs, and so on wash through.
Got it thank you very much.
Thank you.
The next question is from Emily Chang of Goldman Sachs. Please go ahead. Your line is now open.
Good morning, just in Harris, Thanks for you.
Yeah, I wanted to ask about your leverage targets of interest.
Capital return plans thereafter, I think you mentioned previously that you were looking to take $2 billion all debt, maybe could you give us a sense as to what we should expect thereafter should it be an acceleration of growth spend I know you outlined a couple of brownfield projects that are all well should we be thinking about a pivot to <unk>.
Tracing shareholder accounts.
Interest in July on for that sure.
Sure Joe.
Sure.
I just wanted to address the point that Greg made originally.
Because it comes into this our aim is to reduce our debt.
I will spend the next few years.
As in some study work on a per.
<unk> debt.
You referred to which was Tucker Tucker.
Which primarily requires some negotiation with the Argentinian government.
That has been making progress because they want projects to happen.
On the same situation, there's obviously kind of per mile and okay. So how keira we need to.
Do you have on should deal with those communities during this COVID-19 period.
When Peru.
As particularly suffered.
From high levels of.
On the infection, it's been quite difficult to engage as well as we'd like because you can imagine interest for more remote areas.
But those studies have advanced and we will keep them going on that will take us a while.
And.
That gives us the opportunity true to.
Our focus on reducing on debt.
Moving to a situation where we can.
Provide returns to our shareholders.
And for dividends and.
And the next.
[noise] quarter statements.
Probably.
On this will make some statements about what we will aim to try and do just a modest.
And not too long into the future on dividends would be.
Modest but.
Something that can be absorbed within the debt repayment schedule.
So it's a it's a mixed.
Exercise on reducing debt.
On returns to shareholders.
On preparing ourselves.
Nothing more than the studies various shorts for.
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.
Elements in the future.
And then I think your question was what would we then do with the funding that kept.
Using all debt.
And obviously it will be.
The mixture of what we returned to shareholders.
For the.
Net.
In the longer term kind of a central.
You picked up.
Great. That's that's true.
For color and then one just follow up if I may can you or what's the latest update with the did Yang she copper shell holding it in first quantum is there anything.
That's true.
Thank you.
Hi, Emily I can answer that and no nothing new.
We are constructive dialogue and we spoke to.
To Shaanxi.
After Chinese new year on will follow up after the Q1 results as well so it's a it's an orderly conversation in a constructive dialogue.
Really just at the moment see them as long term shareholders, who is very happy with the rise in 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 on good afternoon, just a question a slight follow up on the previous one regarding a junk. She is the minority stake sale still an active dialogue or is it a more.
More on the background know because it looks like with copper price rise.
For us to do it.
You can probably lived without it but from your perspective is it still an active dialogue and.
How does the election, but any bidding on it in terms of where the discussion goes on.
Just trying to understand you're stuck minority stakes and he's an isolator dialogue or is the stability agreement in Zambia, and as three or enterprise development on par.
On the same person that you would want us all on at one go. Thank you.
Sure Justin Thank you Luke.
Or are they separate and you know the answer in terms of the stake sale process as I said earlier.
Notwithstanding the diversification side of things there.
We just did.
The challenges on the bid ask spread and I think it's too too far to cover so we're happy in Zambia.
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 mining indaba in Zambia and that's.
A constructive dialogue around the the ongoing investment climate into Zambia.
The opportunities for from wanting to develop in the country.
But in terms of the.
The election and the price is really that is around a three and really the conversations.
Debt 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 the 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 thank you so much.
Okay.
Thank you.
Once again, please press star one at this time if you have a question. The next question is from Ian Rossouw of Barclays On London. Please go ahead. Your line is now open.
Thanks, Hi, guys just 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 in 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 is looking like at Constancia and just what the thinking is around them.
On the balance sheet, there should we expect some minority dividends at some stage.
Hi, Ian.
We did pay minority dividends to a concern she does.
Pay dividends, an interim dividend so we add one assignment.
And get waned recently, probably on March <unk>.
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 for that investment once we get that agreement.
Ready to go.
Once people once we get comfortable with the Zambian political situation.
On the required.
Yeah.
[noise] assurance that we need in terms of making such a decision.
So it's cash step and ready to make that investment in Zambia.
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 operation generates then obviously goes to pay down the intercompany debt at the parent and then also the external debt T. K P M C or at least 10% of that.
A shareholder.
That's correct yes.
Excess cash will be returned to.
Shareholders are there on the former plan repayments on dividends.
Okay, Alright, that's all.
Thank you.
On the last question is from our small cut out of Scotiabank. Please go ahead. Your line is now open.
Hi, Good morning, a couple of remaining questions for me first of all a trusted 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 in 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 tonnes a day in the back half of the year.
Yeah, Hi, our sites.
$5 million for the year. So the number per day is a 236000 tons per day and the answer in 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 in Q1, which is the.
And assortment material, which is tougher and takes more of a milling.
As we get into the guts of the year by the end of saw it reduces and we see softer rule coming through that's bearing out in in the mine plan and we see that sort of shifting in Q2 already so that was the reason I was really on the.
The characteristics of the ore in 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.
Running well the impact and we sit in the achieving those mineral rights per day that debt.
Debt are required to deliver the IV for across the year and so for that reason, we have confidence in the idea for us it's a big number like forest, but we have confidence.
Thank you, yes, sorry, I meant eight 5 million tons not tons per day, and then just shifting gears when it does the enterprise projects.
In your portfolio I don't think I've heard.
You've talked about it in many years and just curious if kind of where that may fit in terms of your priorities.
Yeah.
Enterprises.
Yes, Yes go ahead.
Just because it's very topical at the moment.
Enterprise.
Warrants proceeding with and then on.
Two long distant future because it's Scott.
But on a total life of about nine years.
And obviously you don't want to have it start up after the rest of central.
On a run through in Central Park.
Got it.
14 on here is to go.
So the aim that.
For that.
It would be that will start some work to do with the protection of the pitch on stripping.
On this dry season.
And then next dry season, we would do.
I'm also the stripping that's needed et cetera.
You get into production.
In the forecast for capital so those amounts are provided for.
That doesn't age of any of them on.
Expenditure on the 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.
Probably drift off on but anyway simply because we're running into the range.
On a trailing tried and true.
And we expect that that would be a little bit difficult on us.
Starting off on so that gives you some.
In other words, we havent forgotten about it.
At all but they.
We need to get moving with it.
So much of Sentinel has been focused on getting everything else to run on a steadily which it is.
No I think what Justin probably wasn't saying.
The same is true of Panama.
A large new team of people, who have already been settling down on struggled for a quite tricky.
Situation and environment for during that COVID-19.
It was not easy on them.
And so actually just assessing the operation to cut with the variables for me to do it does it just take time.
You've seen that at Sentinel.
Central is ready.
Talk a little bit more mature and it works pretty steadily.
I can I'll tackle enterprise without causing any disruption.
Oh, that's excellent to hear.
So it sounds like you may have.
Call It production starting as early as 2023.
Yep.
But we'll work on why threat now and see what we can.
Get to we don't find.
A few things out on that pit.
Oh I know what it does.
Oh I'm on.
Alright. Thank.
Thank you very much appreciate it Phil.
Thank you.
And there are no further questions registered at this time I will turn the meeting back over to Ms Doddridge.
Thank you very much Melanie and thank you everybody for your participation in the call today and your continued support of first quantum finally, if you have any follow up questions that you need anything else. Please contact me directly thanks, again and everybody have a great day.
Yes.
Please.
Please disconnect your lines at this time, we thank you for your participation.
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