By Robb M. Stewart
First Quantum Minerals shares advanced despite a fourth-quarter earnings miss after the Canadian miner flagged progress on talks to sell assets and pay down debt.
In morning trading, the shares were 1.8% higher at C$11.82. The stock is now up 8.9% in the new year, though remains 56% lower than a year ago.
First Quantum late Tuesday said it has signed a three-year, $500 million prepayment agreement with Jiangxi Copper that provides for the delivery of 50,000 metric tons of copper anode a year from First Quantum’s Kansanshi operation, payable at market prices.
With the forced suspension of operations at First Quantum’s flagship Cobre Panama mining operations, the company has warned its ability to generate earnings has been at risk and it may not be able to meet the net debt-to-earnings before interest, taxes, depreciation and amortization covenant under its current senior banking facilities. The uncertainty may cast a significant doubt about its ability to continue as a going concern.
First Quantum said it has scaled back or rescheduled capital spending across the company by about $400 million this year and $250 million in 2025, though it remains committed to the expansion of at Kansanshi.
It said talks with banking partners are advanced, and an agreement on amendments is expected in the near term, and the company is assessing a range of alternatives across capital markets. The company said its sales process for its Las Cruces mine in Spain is well advanced and, following expressions of interest, it is evaluating the possibility of a minority investment by strategic investors in its Zambian business.
Farooq Hamed, an analyst at Raymond James, said proceeds from the copper prepay agreement and asset sale discussions would help First Quantum is repaying about $1.05 billion in debt maturing in the second quarter of 2025. The discussions on financing could remove near-term uncertainty about a potential breach of the covenant, he added.
First Quantum swung to a loss of $1.45 billion, or $2.09 a share, in the final quarter of last year, from a year-earlier profit attributable to shareholders of $117 million, or 17 cents.
On an adjusted basis, per-share earnings swung to a loss of 37 cents, much wider than the 11 cent loss forecast by analysts polled by FactSet.
Sales revenue for the quarter fell 40% on the prior quarter and 34% on a year earlier to $1.22 billion, just ahead of the $1.2 billion expected.
Production at Cobre Panama was disrupted by blockades last year and the company moved to suspend operations at the mine after Panama’s top court in late-November ruled against a contract between the miner and the country’s government. The court had received about 10 challenges on constitutional grounds to a law that provided the legal framework allowing First Quantum to operate what is one of the world’s largest copper mines.
The company has launched international arbitration processes including notification under the Free Trade Agreement between Canada and Panama, and under the International Court of Arbitration relating to the concession agreement.
First Quantum forecast copper production this year of between 370,000 and 420,000 metric tons, increasing to 400,000 to 460,000 tons in 2025 and 2026 as the expansion at Kansanshi comes online. Output in 2023 fell 8.8% to 707,678 tons.
Write to Robb M. Stewart at [email protected]