First Quantum signs $500m copper deal with shareholder, says asset and stake sales progressing

21st February 2024

By: Mariaan Webb

Creamer Media Senior Deputy Editor Online


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Canada-headquartered First Quantum Minerals, which is facing a major challenge with the closure of its flagship Panama mine, is making progress with its balance sheet initiatives.

These include, among others, selling some of the copper miner's smaller assets and minority stakes in its larger assets, as well as a $500-million arrangement with its second-biggest shareholder, reported CEO Tristan Pascall.

First Quantum has received “strong interest from highly credible counterparties”, he said on Tuesday, referring to the sales process for the Las Cruces mine, in Spain, and its Zambian business.

The Las Cruces sale is “well advanced”. First Quantum had received strong interest given its strategic location and processing capabilities, Pascall reported.

Las Cruces plant, which relies on a unique atmospheric ferric leaching process to recover copper from the rich Las Cruces chalcocite ore, produces LME-grade copper cathode with minimal water and energy use. The plant is designed to produce about 72 000 t/y of copper cathode, which is shipped as final product.

In Zambia, First Quantum is evaluating the possibility of a minority investment by strategic investors, following a number of inbound expressions of interest.

The copper mining CEO expressed his confidence in the investment climate in Zambia, and said First Quantum remained committed to the S3 Expansion at Kansanshi.

Other balance sheet initiatives include the suspension of the group’s dividend, a $400-million reduction in planned capital programmes this year, followed by a $250-million reduction next year and operating cost savings.

As a continuation of the balance sheet efforts, First Quantum also announced a $500-million copper prepay arrangement at competitive terms with Jiangxi Copper.

“This arrangement is a reminder of the strategic nature of copper as supply challenges abound across the sector,” said Pascall.

In the meantime, First Quantum is refinancing its near-term debt maturities.

Pascall reported that discussions with lenders for an amendment and extension of loan facilities were constructive and well-advanced.

“. . . there is a high degree of alignment among all parties,” he said.

First Quantum had net debt of $6.4-billion at the end of 2023 and its earnings before interest, taxes, depreciation and amortisation (Ebitda) were $2.3-billion.

The situation at Cobre Panama has impacted the company’s Ebitda generating potential, putting at risk its ability to meet the net debt to Ebitda ratio covenant.

Current forecasts for 2024, before taking into account future balance sheet initiatives, indicate that First Quantum could breach the prevailing net debt to Ebitda ratio covenant during the coming 12 months. Failure to address this would result in the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern.

“Management has a strong expectation that the balance sheet initiatives initiated earlier this year will be realised in the near term.”

Edited by Creamer Media Reporter



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