First Quantum Minerals Reports Operational and Financial Results for the Three Months and Year Ended December 31, 2012
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 03/05/13 -- (In United States dollars, tabular amounts in millions, except where noted) -
First Quantum Minerals Ltd. ("First Quantum" or the "Company") (TSX: FM)(LSE: FQM) today announced its results for the three months and year ended December 31, 2012. The complete audited financial statements and management's discussion and analysis are available for review at www.first-quantum.com and should be read in conjunction with this news release.
First Quantum's President, Clive Newall, will host a conference call and live webcast to discuss the results on Wednesday, March 6, 2013 at 6:00 am (PST); 9:00 am (EST); 2:00 pm (GMT). The call and webcast will be available on www.first-quantum.com and by dialing 416-340-8530 or toll free in North America on 877-240-9772.
First Quantum's results have been prepared in accordance with International Financial Reporting Standards ("IFRS").
SUMMARIZED OPERATING AND FINANCIAL RESULTS
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(USD millions unless otherwise
noted) Q4 2012 Q3 2012 Q4 2011 2012 2011
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Copper production (tonnes) 84,918 84,144 67,316 307,115 265,576
Copper sales (tonnes) 77,570 77,396 65,638 295,466 273,257
Cash cost of copper production
(C1)(1) (per lb) $ 1.42 $ 1.44 $ 1.53 $ 1.49 $ 1.41
Realized copper price (per lb) $ 3.46 $ 3.45 $ 3.33 $ 3.51 $ 3.87
Nickel production (contained
tonnes) 10,096 9,916 5,666 36,759 5,666
Nickel sales (contained tonnes) 8,081 7,120 1,388 30,379 1,388
Cash cost of nickel production
(C1)(1) (per lb) $ 6.12 $ 6.24 - $ 5.92 -
Realized nickel price (per
payable lb) $ 7.74 $ 7.69 - $ 7.96 -
Gold production (ounces) 64,383 50,784 43,524 201,942 175,225
Gold sales (ounces) 61,350 48,889 49,209 202,303 180,442
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Sales revenues 774.6 724.8 567.3 2,950.4 2,583.5
Gross profit 295.0 261.0 182.7 1,101.0 1,308.0
EBITDA(1) 309.7 276.2 180.6 2,361.2 1,232.1
Net earnings attributable to
shareholders of the Company 186.7 107.3 76.0 1,772.9 528.9
Earnings per share $ 0.39 $ 0.23 $ 0.16 $ 3.74 $ 1.18
Diluted earnings per share $ 0.39 $ 0.23 $ 0.16 $ 3.72 $ 1.18
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Comparative earnings(2) 186.7 107.3 78.9 555.0 580.5
Comparative earnings per
share(2) $ 0.39 $ 0.23 $ 0.17 $ 1.17 $ 1.30
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(1) Cash costs (C1) and earnings before interest, tax, depreciation and
amortization ("EBITDA") are not recognized under IFRS. See "Regulatory
Disclosures" for further information.
(2) Earnings attributable to shareholders of the Company have been adjusted
to remove the effect of unusual items to arrive at comparative earnings.
Comparative earnings and comparative earnings per share are not measures
recognized under IFRS and do not have a standardized meaning prescribed by
IFRS. The Company has disclosed these measures to assist with the
understanding of results and to provide further financial information about
the results to investors. See "Regulatory Disclosures" for a reconciliation
of comparative earnings.
Results for full year 2012
Production
Copper production 16% higher than 2011; new annual production record set at Kansanshi
-- Copper production of 307,115 tonnes included record production at
Kansanshi, primarily due to an increase in sulphide grades and
throughput, and the contribution from Kevitsa which achieved commercial
production in August 2012 following a successful commissioning and rapid
ramp-up phase at the nickel and copper operation. This is the second
project successfully commissioned by the Company during the past year.
Nickel production of 36,759 tonnes after first full year of production from Ravensthorpe
-- Results from the new nickel business included Ravensthorpe's first full
year of production and the commencement of production from Kevitsa.
Gold production 15% higher than 2011
-- Gold production of 201,942 ounces resulting from gold circuit
enhancements at Kansanshi which yielded higher recoveries and the first
contribution from Kevitsa.
Copper production cash costs increased 6%
-- Average copper production cash cost of $1.49 per pound reflects a
downward trend throughout the year as increased sulphuric acid cost was
partially offset by higher by-product credits.
Sales revenues 14% higher than 2011
-- Sales revenues rose to $2,950.4 million from increased copper and gold
sales volumes and commercial production at Ravensthorpe and Kevitsa.
Positive volume contributions were partially offset by lower average
realized copper prices.
Gross profit 16% lower than 2011
-- Gross profit of $1,101.0 million was negatively impacted by the 9% lower
average realized copper price and inflationary increases in operating
costs which outweighed higher sales volumes and the contribution from
Ravensthorpe and Kevitsa.
Net earnings attributable to shareholders of the Company increased to $1,772.9 million
-- Earnings included a $1,217.9 million gain on disposal of Republique
democratique du Congo ("RDC") residual claims and assets. 2012
comparative earnings were lower than 2011 predominately due to the lower
year-over-year average realized copper price and inflationary cost
pressures which were partially offset by the contribution from
Ravensthorpe and Kevitsa.
Results for Q4 2012
Production
-- Total copper production improved 26% over Q4 2011 with higher sulphide
grades and higher throughput as a result of the continued expansion of
the oxide circuit at Kansanshi, higher throughput rates at Guelb
Moghrein and the contribution from Kevitsa.
-- Total nickel production improved 78% over Q4 2011 with a full quarter of
commercial production at both the Ravensthorpe and Kevitsa operations.
-- Total gold production improved 48% over Q4 2011 with higher grades and
recovery rates at Kansanshi together with the contribution from Kevitsa.
Copper production cash costs
-- Copper production cash costs decreased from Q4 2011 due to lower mining
and freight costs and higher by-product credits.
Sales revenues
-- Sales revenues increased by 37% from Q4 2011 with increased copper and
gold sales volumes, higher average realized copper and gold prices and
the contribution from Ravensthorpe and Kevitsa.
Gross profit
-- Q4 2012 gross profit of $295.0 million was 61% higher than Q4 2011 with
higher sales volumes, higher average realized copper and gold prices,
lower copper production cash costs and the contribution from
Ravensthorpe and Kevitsa.
Net earnings
-- Q4 2012 net earnings attributable to shareholders of the Company were
higher than Q4 2011 due to higher copper and gold average realized
prices, higher sales volumes, lower copper production cash costs and the
contribution of Ravensthorpe and Kevitsa.
-- Reduction of the effective income tax rate for the quarter as a result
of a number of non-recurring factors that include the recognition of
previously unrecognized tax losses.
Significant advancement of development projects and exploration activities
-- Benefit from expansion of the oxide processing circuit at Kansanshi to
7.2 million tonnes per annum ("Mtpa") was seen in the oxide throughput
during Q4 2012. The stage two expansion to 14.5 Mtpa is scheduled for
completion and commencement of commissioning from mid-2013.
-- Detailed design work and construction on the Kansanshi smelter is
progressing well and all major equipment has been ordered. The project
remains on schedule for construction completion in mid-2014 followed by
commissioning and ramp up.
-- Construction of the Sentinel project is on schedule. Board approval was
received to increase the plant throughput from 40 Mtpa to 55 Mtpa.
-- Board approval was granted for the expansion of the sulphide treatment
facilities at Kansanshi by construction of a new section of plant
capable of treating up to 25 Mtpa of sulphide ore. Construction of this
new plant is to commence in the first half of 2013.
-- A significant resource and reserve upgrade was announced at Kansanshi
with initial comparative estimates showing the mineral resource tonnage
has increased by approximately 121% and total contained copper increased
by 74%.
-- Maiden resource estimates for the Enterprise project confirmed the
potential for an operation capable of producing on average 38,000 tonnes
nickel per annum with scope to increase to 60,000 tonnes when nickel
market conditions allow. On the strength of this resource estimate,
Board approval was granted for the development of this project.
Balance sheet positioned to support growth initiatives
-- On October 10, 2012, the Company completed the offering of $350.0
million of Senior Notes due 2019. Interest will accrue at the rate of
7.25% per annum, payable semi-annually.
-- On January 30, 2012, a five-year $1.0 billion senior term and revolving
facility was signed for Kansanshi Mining PLC to enable the execution of
planned capital projects at Kansanshi.
-- On January 5, 2012, the Company reached an agreement with Eurasian
Natural Resources Corporation PLC ("ENRC") to dispose of its residual
RDC claims and assets for $1.25 billion. The agreement closed on March
2, 2012 with the Company receiving payment of $750.0 million and a
three-year promissory note for $500.0 million.
Other corporate developments
-- On January 9, 2013, the Company announced that it has formally commenced
an offer to acquire all of the outstanding shares of Inmet Mining
Corporation ("Inmet") for total consideration of approximately C$5.1
billion. Inmet shareholders have the opportunity to elect shares in the
Company, cash, or a combination thereof, subject to an overall
consideration mix of approximately 50% in shares and 50% in cash. The
offer is open until March 11, 2013.
-- The Company has declared a final dividend of C$0.1147 per share in
respect of the financial year ended December 31, 2012. The final
dividend of C$0.1147, together with the interim dividend of C$0.0603, is
a total of C$0.1750 for the 2012 financial year. This total dividend
paid for the 2012 financial year is 15% of net earnings attributable to
shareholders of the Company (adjusted for unusual items) which is in
line with the 15% of net earnings attributable to shareholders of the
Company used as guidance in 2011.
Operational outlook for 2013
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Guelb
Production Group Kansanshi Moghrein Ravensthorpe Kevitsa
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Copper (000's
tonnes) 302 - 330 250 - 270 37 - 41 - 15 - 19
Nickel (000's
contained
tonnes) 40 - 45 - - 31 - 35 9 -10
Gold (000's
ounces) 190 - 215 126 - 140 52 - 61 - 12 - 14
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-- Expected average cash cost of approximately; $1.50 to $1.60 per pound of
copper.
-- Expected average cash cost of approximately; $5.50 to $6.00 per pound of
nickel.
-- Expected total capital expenditure of approximately $2.0 billion in
2013.
OPERATIONS
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Kansanshi Copper and Gold
Operation Q4 2012 Q3 2012 Q4 2011 2012 2011
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Sulphide ore tonnes milled
(000's) 2,679 2,763 1,628 9,254 8,855
Sulphide ore grade processed
(%) 1.0 0.9 0.6 1.0 0.7
Sulphide copper recovery (%) 92 92 92 93 91
Mixed ore tonnes milled (000's) 1,951 1,955 2,986 8,561 8,377
Mixed ore grade processed (%) 1.1 1.0 1.0 1.1 1.0
Mixed copper recovery (%) 74 77 64 69 63
Oxide ore tonnes milled (000's) 1,738 1,500 1,492 6,210 6,072
Oxide ore grade processed (%) 2.0 2.6 2.3 2.2 2.3
Oxide copper recovery (%) 90 84 88 86 86
Copper production (tonnes) 70,431 71,484 59,163 261,351 230,295
Copper sales (tonnes) 61,758 65,830 54,036 249,884 235,832
Gold production (ounces) 45,410 35,245 29,580 136,056 112,286
Gold sales (ounces) 38,179 33,510 27,742 131,159 114,488
Cash costs (C1) (per lb)(1) $ 1.45 $ 1.46 $ 1.52 $ 1.49 $ 1.41
Total costs (C3) (per lb)(1) $ 1.90 $ 1.86 $ 1.90 $ 1.88 $ 1.70
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Sales revenues 494.3 507.1 405.7 1,979.9 2,048.3
Gross profit 238.0 223.8 186.2 929.4 1,187.1
EBITDA(1) 251.1 240.4 202.3 995.9 1,263.0
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(1) C1 and C3 costs and EBITDA are not recognized under IFRS. See
"Regulatory Disclosures" for further information.
Full year operating results
Full year copper production increased by 13% from 2011 to a record of 261,351 tonnes in 2012. This was achieved mainly through an increase in grade, specifically in sulphide ore, as well as increases in throughput and recovery. Throughput increased as a result of plant expansions completed as part of Kansanshi's multi-stage plant upgrade to an annual production capacity of 400,000 tonnes of copper metal.
Annual production from the sulphide circuit was significantly higher than in 2011 due to higher ore grades processed during the year. Ongoing mine pit development work has established significantly wider pits and improved access to various ore types at target grades to coincide with the plant expansions underway. Specifically, this work led to an increase in the availability of sulphide ore at target grades in addition to the circuits being reconfigured during Q2 2012 to the current capacity of 12 Mtpa for sulphide and 6.5 Mtpa for mixed ore treatment.
The mixed ore circuit achieved increased recoveries and grade, while throughput remained consistent with the prior year. Following the circuit interchange in Q2 2012, the reduced throughput on the mixed circuit allowed longer residence time in flotation resulting in improved recoveries. In the second half of the year, throughput significantly exceeded capacity of 6.5 Mtpa due to optimization of the front end, improving plant availability and utilization.
Year-on-year the oxide circuit achieved slightly higher throughput, which has been offset by lower grades. The effect of completion of the oxide expansion works to 7.2 Mtpa allowed increased throughput in Q4 2012. The limited availability of locally-sourced sulphuric acid meant that most of the high grade, higher acid consuming oxide ore was stockpiled in 2012.
Gold production was 21% higher than in 2011 as a result of gold circuit enhancements and improvements resulting in higher recoveries.
Year-on-year cash costs have increased by 6% from 2011, however there has been a downward trend throughout the year with cash costs decreasing each quarter to $1.45 per lb in Q4 2012. An increase in the gold credit in 2012 was largely offset by an increase in treatment and refining charges. The increase in costs compared to 2011 is mainly due to an increase in processing costs including higher acid costs.
Full year sales revenues decreased by 3% compared to the prior year despite an increase in copper sales volumes of 6% and an increase in gold sales volumes of 15%. These increases in sales volumes were offset by a decrease in net realized copper prices of 9%. The effect of these lower realized copper prices is also seen at the gross profit level which fell 22% to $929.4 million from $1,187.1 million in 2011.
Q4 operating results
Copper production increased by 19% from Q4 2011 due to increased throughput, grades and recoveries. Throughput in Q4 2012 increased as a result of the oxide circuit expansion works and benefited from a later than usual start to the Zambian rainy season.
The exposure of sulphide ore faces at target grades, as a result of the mine pit development work, led to the increased sulphide grades in Q4 2012 compared to the prior year.
Mixed ore throughput in Q4 2012 continued to exceed the 6.5 Mtpa design capacity. Increased recoveries compared to Q4 2011 resulted from the longer residence time in flotation.
Oxide throughput has increased 16% from Q4 2011 as a result of the completion of the oxide expansion to 7.2 Mtpa capacity in Q3 2012. This increase in throughput has been offset by a decrease in grade as high-grade, high-acid consuming ore was stockpiled in the quarter.
Gold production was 54% higher than Q4 2011 as a result of gold circuit enhancements resulting in higher recoveries.
Q4 2012 C1 costs decreased by $0.07 per lb from Q4 2011. C1 costs benefited from lower mining costs and an increased gold credit as a result of higher gold sales volumes and a higher net realized gold price. This benefit outweighed higher acid costs.
Sales revenues and gross profit increased by 22% and 28% respectively in Q4 2012 compared to Q4 2011. The increase in sales revenues reflects both an increase in sales volumes and higher realized prices. Gross profit was higher than Q4 2011 due primarily to higher realized copper prices offset partially by higher royalty rates. The Zambian copper royalty rate was increased from 3% to 6%, effective April 2012, being the principal reason for the increase of $18.6 million in the royalty expense in Q4 2012 compared to Q4 2011.
Smelters in Zambia are at or near capacity, and as a result of increased copper in concentrate production at Kansanshi, this has meant that inventory has increased at the end of Q4 2012.
Compared to Q3 2012, Kansanshi has achieved a steady state with the exception of the oxide circuit, where oxide expansions have increased throughput in Q4 2012 offset by a decrease in ore grade as high grade, high acid consuming ore was stockpiled. Mixed ore recoveries have decreased due to a less favourable blend of sulphide and oxide ore processed. Cash costs were consistent with Q3 2012.
Outlook
Production in 2013 is expected to be between 250,000 and 270,000 tonnes of copper, and 126,000 and 140,000 ounces of gold.
The reduction in mining rates during the wet season will impact on progress in opening up mining areas and hence oxide ore availability. This, in turn, is expected to result in on-going variation in feed quality with respect to copper grade and gangue acid consumption (GAC). Two mobile screening plants, received and commissioned in Q4 2012 will continue to assist in reducing the GAC of ore ahead of processing.
The construction of the fifth acid plant was completed and commissioning occurred during Q4 2012 with minor process changes planned for Q1 2013. In the medium term, some of Kansanshi's mining areas for oxide ore are characterized as high grade, high acid-consuming ore. Currently the supply of sulphuric acid from acid plants requires the import of sulphur at high costs. Consideration will be given to withholding the high grade, high acid-consuming ore from production until acid is available at minimal cost from the Kansanshi smelter. If this decision is made, the capacity of the oxide expansions and fifth acid plant may not be fully exploited.
Copper in concentrate inventory levels may remain at year-end levels in the short term unless there is a change in smelter capacity levels or a temporary export permit can be obtained.
Sulphide ore processing is expected to remain strong. Refinements to the process control systems across mill and float are expected to maintain and further enhance metallurgical performance in the sulphide circuit through increased circuit stability and rapid automated response to mineralogical and process variations.
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Guelb Moghrein Copper and Gold
Operation Q4 2012 Q3 2012 Q4 2011 2012 2011
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Sulphide ore tonnes milled
(000's) 825 687 634 3,062 2,691
Sulphide ore grade processed
(%) 1.4 1.3 1.4 1.3 1.4
Sulphide copper recovery (%) 93 94 91 91 91
Copper production (tonnes) 11,038 8,656 8,155 37,670 35,281
Copper sales (tonnes) 13,007 8,962 11,601 40,174 35,774
Gold production (ounces) 16,802 12,827 13,943 60,519 62,938
Gold sales (ounces) 20,864 13,631 21,467 67,089 65,954
Cash costs (C1) (per lb)(1) $ 1.13 $ 1.43 $ 1.63 $ 1.48 $ 1.46
Total costs (C3) (per lb)(1) $ 1.69 $ 1.93 $ 2.45 $ 2.04 $ 2.20
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Sales revenues 127.3 85.6 97.2 394.4 346.2
Gross profit 47.5 24.3 3.5 117.7 127.8
EBITDA(1) 54.2 29.6 20.9 142.4 157.7
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(1) C1 and C3 costs and EBITDA are not recognized under IFRS. See
"Regulatory Disclosures" for further information.
Full year operating results
2012 copper production was 7% higher than in the prior year. Efforts are ongoing to maintain steady state operations and throughput has increased by 14% year-on-year. The better throughput performance in 2012 is a result of the mill optimization works and improved blast fragmentation.
There was a slight decrease in copper grades, year-on-year, however there was an increase in the last quarter of 2012 reflecting the current ore profile in the pit.
Cash costs increased by $0.02 per lb to $1.48 per lb compared to the prior year. A larger gold credit has been offset by an increase in mining costs specifically for explosives, contractors and equipment hire.
2012 sales revenues increased by 14% compared to 2011 reflecting an increase in copper sales volumes of 12% offset by a lower net realized price. 2012 sales revenues also benefited from higher gold sales volumes. Gross profit fell by 8% due to increased costs for personnel, maintenance and consumables partially offset by the increase in sales revenues.
Q4 operating results
Q4 2012 copper production increased by 35% from Q4 2011, mainly as a result of increased throughput rates. A record quarterly throughput rate of 825,000 tonnes was achieved in Q4 2012 due to ball mill optimization work and better fragmentation of ore. Copper recovery in Q4 2012 increased following a circuit reconfiguration in Q3 2012 allowing longer flotation residence time which has increased recoveries.
Gold production increased by 21% from Q4 2011 with higher throughput partially offset by slightly lower grade and recovery.
Cash costs in Q4 2012 are 31% lower than Q4 2011 as a result of lower processing costs, site administration costs and treatment and refining charges. Cash costs also benefited from the unit cost effect of producing 35% more copper.
Sales revenues and gross profit have both increased in comparison to Q4 with a 40% increase in copper sales revenues and a 12% increase in gold sales revenues. The increase in sales revenues reflects both an increase in copper sales volumes and higher realized prices. This increase in revenues and lower cash operating costs drove the increase in gross profit.
Increases in throughput and grade drove the 28% increase in copper production in Q4 2012 compared to Q3 2012. Gold production increased by 31% from Q3 2012.
Outlook
Production in 2013 is expected to be between 37,000 and 41,000 tonnes of copper and between 52,000 and 61,000 ounces of gold. Production is expected to benefit from higher volumes of material mined exposing ore in two additional cutbacks.
Process plant enhancements continue with a focus on better availability in the grinding circuit to achieve more consistent operation at steady state to maintain throughput rates as ore grades are expected to be slightly lower than those in 2012. The project to install an additional mill from the mothballed Bwana Mkubwa copper plant that was planned for Q4 2012 has been replaced by a new SAG mill project which is now under design and planning. Commissioning is expected in mid-2014.
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Ravensthorpe Nickel Operation Q4 2012 Q3 2012 Q4 2011 2012 2011
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Beneficiated ore tonnes processed
(000's) 687 733 645 2,811 645
Beneficiated ore grade processed (%) 1.5 1.4 1.3 1.5 1.3
Nickel recovery (%) 78 77 68 77 68
Nickel production (contained tonnes) 8,227 8,032 5,666 32,884 5,666
Nickel sales (contained tonnes) 7,288 6,272 1,388 28,738 1,388
Nickel production (payable tonnes) 6,338 6,188 4,189 25,347 4,189
Nickel sales (payable tonnes) 5,425 4,790 1,110 21,857 1,110
Cash costs (C1) (per lb)(1) $ 6.05 $ 6.43 - $ 5.97 -
Total costs (C3) (per lb)(1) $ 7.33 $ 7.84 - $ 7.25 -
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Sales revenues 94.3 81.3 - 387.7 -
Gross profit (loss) 2.8 (1.6) - 42.5 -
EBITDA 14.6 6.4 - 82.3 -
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(1) C1 and C3 costs and EBITDA are not recognized under IFRS. See
"Regulatory Disclosures" for further information.
Full year operating results
2012 was Ravensthorpe's first full year of production after reaching commercial production on December 28, 2011. The year has seen Ravensthorpe ramp up to design capacity in the earlier months of the year and commencing in-pit mining in Q2 2012. By Q3 2012, the majority of the ore feed was being sourced from the pit and nickel production for the full year was in-line with plan as a result of steady state operation of the complete circuit. Nickel grades and recoveries have remained consistent through the year.
C1 costs for the year consistently beat guidance and ended the year at $5.97 per lb against original full year guidance in Q1 2012 of $6.60 per lb to $6.80 per lb. At the beginning of the year, low cost sulphur inventory contributed to a lower cost of production. Throughout the year, the consistent operation of the sulphuric acid plant which generates power as a by-product, provided for sufficient and stable power generation for the operation and reduced diesel costs. Ore costs increased as the mining operations moved to the main pit in the second half of 2012.
Q4 operating results
Limonite ore availability was limited early in Q4 2012 which resulted in new mining areas being opened up to provide a future source of ore. Mining activity continued to feed ore to the crushers with a limited amount of material stockpiled to accommodate crusher availability.
C1 costs have decreased in Q4 2012 compared to Q3 2012. Lower processing costs in the quarter were driven by lower sulphur costs as well as processing circuit improvements which have resulted in savings in flocculant consumption. A lower C1 cost was achieved despite a $0.07 per lb increase in mining costs resulting from additional waste being mined.
Outlook
Production in 2013 is expected to be between 31,000 and 35,000 tonnes of nickel.
Crushing plants and beneficiation are expected to continue to operate well in 2013. A number of circuit improvements in beneficiation during Q1 2013 are expected to result in improvements in plant utilization. Processing circuit enhancements in Q4 2012 have already resulted in savings and the same focus will now be extended to the operation of the CCD's.
The sulphuric acid plant is expected to continue to have stable operations with efficient use of power distribution, significantly reduced diesel fuel consumption and associated savings. Taking advantage of lower cost sulphur opportunities with associated logistical improvements will remain a focus for Ravensthorpe.
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Post- Pre-
commercial commercial
production production
Kevitsa Nickel-Copper-PGE(1)
Operation Q4 2012 Q3 2012 Q3 2012 2012 2011
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Ore tonnes milled (000's) 1,413 687 720 3,138 -
-
Nickel ore grade processed (%) 0.2 0.2 0.2 0.2 -
Nickel recovery (%) 59 60 54 56 -
Nickel production (tonnes) 1,870 1,041 843 3,875 -
Nickel sales (tonnes) 792 848 - 1,640 -
- -
Copper ore grade processed (%) 0.3 0.3 0.3 0.3 -
Copper recovery (%) 84 84 87 83 -
Copper production (tonnes) 3,448 1,874 2,130 8,094 -
Copper sales (tonnes) 2,805 2,604 1,040 6,448 -
- -
Gold production (ounces) 2,172 1,431 1,282 5,367 -
Platinum production (ounces) 6,123 3,926 3,174 13,808 -
Palladium production (ounces) 5,419 3,373 2,827 12,183 -
- -
Nickel cash costs (C1) (per
lb)(2) $ 6.37 $ 3.79 - $ 5.47 -
Nickel total costs (C3) (per
lb)(2) $ 7.19 $ 5.35 - $ 6.54 -
Copper cash costs (C1) (per
lb)(2) $ 1.75 $ 0.11 - $ 1.28 -
Copper total costs (C3) (per
lb)(2) $ 3.06 $ 1.49 - $ 2.61 -
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Sales revenues 36.5 35.6 - 72.1 -
Gross profit 6.4 17.5 - 23.9 -
EBITDA 11.2 23.6 - 34.8 -
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(1) Platinum-group elements ("PGE")
(2) C1 and C3 costs and EBITDA are not recognized under IFRS. See
"Regulatory Disclosures" for further information.
Q4 2012 marked the first full quarter of commercial production for Kevitsa. Throughput rates exceeded expectations whilst recoveries were below life of mine targets due to the weathered nature of the initial ore processed. Slightly lower feed grades in line with life of mine plans have resulted in lower output of copper and nickel compared to Q3 2012.
There has been steady improvement in both mining capacity and the efficiency of machinery operations, the latter of which has been affected during the first period of commercial production in the Arctic winter.
Nickel and copper cash costs increased over Q3 2012 with a ramp up in contractor usage and maintenance costs in line with plan and higher electricity costs due to an increase in electricity tariffs which is normal for the time of year. Copper by-product credits decreased from Q3 2012 as Q3 2012 benefited from the sale of production from the commissioning phase. Nickel by-product credits were unfavorably impacted by some stockpiling of nickel concentrate in the quarter.
Outlook
Production in 2013 is expected to be between 15,000 and 19,000 tonnes of copper, between 9,000 and 10,000 tonnes of nickel and 12,000 to 14,000 ounces of gold.
In Q1 2013 mining is planned to ramp up to a full seven days per week shift roster as opposed to the five days per week system implemented for the majority of 2012. Mining volumes have been set at 12.9 Mt of waste and 7.3 Mt of ore equating to a strip ratio of 1.8. The amount of weathered ore going into the plant is expected to reduce in the first half of 2013. Pre-stripping the Stage 2 cutback will commence in the first half of 2013.
A focus on improving nickel recoveries and achieving pilot study levels has been ongoing for several months. Different scenarios of flotation kinetics are being trialed and sampled during Q1 2013 for further optimization work.
The Company has submitted an environmental assessment and application to increase the plant throughput rate from the current approved 5.5 Mtpa up to a maximum of 10 Mtpa. Liaison with the relevant authorities is in progress with respect to granting of the upgraded permit.
DEVELOPMENT ACTIVITIES
Kansanshi expansions, Zambia
The multi-stage Kansanshi plant upgrade to an annual production capacity of 400,000 tonnes of copper continues into 2013. The stage one oxide circuit expansion to 7.2 Mtpa was completed in Q2 2012 and optimized during Q3 2012 with the benefits being seen in the oxide throughput of Q4 2012. Progress on the stage two oxide capacity expansion to 14.5 Mtpa continued with a phased commissioning commencing from mid-2013. The expansion encompasses additional crushing, flotation, leach tanks, CCD thickeners, solvent extraction, electro-winning and associated ancillary systems and equipment. Acid supply and economics will dictate the rate of oxide treatment until the smelter is commissioned in mid-2014 however the output of the five acid plants as well as the current volume of acid that can be externally sourced will allow for interim treatment rates of approximately 10 Mtpa.
The second phase of the 400,000 tonne annual production capacity expansion project is an expansion of the sulphide treatment facilities by construction of a new section of plant capable of treating up to 25 Mtpa of sulphide ore. Board approval has been granted for the project and construction of this new plant is planned to commence in the first half of 2013.
Copper smelter project, Zambia
Kansanshi's concentrate is currently treated at smelters in Zambia, however, existing domestic smelting capacity will be insufficient to process the substantial increase in production resulting from the Kansanshi expansion and the Sentinel project. The new copper smelter is designed to process 1.2 million tonnes of concentrate to produce over 300,000 tonnes of copper metal annually. The smelter is also expected to produce 1.0 million tonnes of sulphuric acid as a by-product at a low cost which will benefit Kansanshi by allowing the treatment of high acid-consuming oxide ores and the leaching of some mixed ores. The additional acid is also expected to optimize the expansion of the oxide leach facilities and allow improved recoveries of leachable minerals in material now classified and treated as mixed ore.
Detailed design works on the smelter are well progressed and all of the major equipment packages have been ordered. On site, earthworks construction is approximately 85% complete and concrete pouring is 20% complete. Mechanical installation commenced in January 2013. The project is scheduled for construction completion in mid-2014 followed by commissioning and ramp up.
Sentinel project, Zambia
A mineral resource and reserve estimate for the Sentinel copper project was released in March 2012. An estimated measured and indicated resource of 1,027 Mt at 0.51% copper grade, containing 5.2 Mt of copper has been delineated, inclusive of an estimated recoverable proven and probable mineral reserve of 774 Mt at 0.50% copper grade, containing 3.9 Mt of copper. The life of mine strip ratio is anticipated to be 2.2 and the estimated mine life is in excess of 15 years. An infill drilling programme has commenced to identify further detail of the geological resources that will be encountered during the initial years of operation.
The project is expected to produce between 270,000 and 300,000 tonnes of copper in concentrate annually.
Sentinel construction activities continued to ramp up in Q4 2012 following the approval from the Company's Board of Directors. Project milestones to the end of December 2012 include detailed design engineering 70% complete; construction completion of process plant earthworks for the major equipment areas; over 30,000 cubic metres of concrete poured on site; and approximately 3,000 tonnes of structural steel fabricated with approximately 1,500 tonnes of steel already received on site and being erected. The development of project infrastructure continues: the major tenders for the Zambia Electricity Supply Corporation Limited 330kV transmission line and substation works have been released; the first senior houses are complete and ready for occupation; the visitor guesthouse is complete; and a further 20 houses are on schedule for completion in Q1 2013.
The Company will continue project development with an on-going commitment to social responsibility within the complete license area.
Project capital costs were estimated at approximately $1.72 billion with project completion unchanged and expected during 2014. However a throughput increase from 40 Mtpa to 55 Mtpa, plus the addition of a nickel processing plant (Enterprise development) has been added to the project development which increased the total capital cost estimate to $2.0 billion.
Enterprise project, Zambia
The maiden mineral resource estimate for the Enterprise nickel deposit has been identified at 40.1 Mt at 1.07% nickel. This supports proved and probable mineral reserves of 32.7 Mt at 1.10% nickel and based on a 4 Mtpa operation, the mine life would be approximately eight years producing 38,000 to 40,000 tonnes of nickel per annum. There is further potential to increase both the mineral resource and reserve as drilling continues in the adjacent Enterprise South West Zone. The Enterprise deposit is located approximately 12 kilometres north west of the Sentinel development.
The longest lead equipment items, being the SAG mill and the ball mill, have been ordered and engineering design has commenced.
Exploration
Exploration programs continued with ongoing drilling campaigns active at Trident and Kansanshi. A maiden resource and reserve estimate was released for the Enterprise nickel project and a significant resource and reserve upgrade was announced for Kansanshi.
Trident Exploration
At Trident up to 10 drill rigs were active mostly on regional targets, but also included some infill drilling on Sentinel and additional resource drilling around Enterprise. In total, approximately 110,000 metres of drilling was completed at Trident in 2012.
Enterprise nickel project (Main and SW) Grade-Tonnage Estimate as at November 28, 2012
----------------------------------------------------------------------------
Contained
Ore tonnes Grade nickel
(million tonnes) (Nickel %) ('000 tonnes)
----------------------------------------------------------------------------
Measured resource 2.7 1.51 41
Indicated resource 37.4 1.04 390
----------------------------------------------------------------------------
Total measured and indicated 40.1 1.07 431
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Inferred resource 7.1 0.70 50
----------------------------------------------------------------------------
Note: The Mineral Resource is reported at a 0.15% nickel cut off and was
estimated as a block model within constraining mineralized wireframe.
Differences may occur due to rounding.
Several regional targets were drill tested during the Q4 2012. The target at Bream, 20 kilometres north east of Enterprise, continues to return encouraging low grade disseminated chalcopyrite intercepts in reconnaissance drilling over several hundred metres of strike within highly altered sequence.
Kansanshi
At Kansanshi, 14 core rigs continued operating on the project divided between incremental resource and reserve additions immediately around the existing pits and the district exploration program. These programs are designed to provide enhanced definition of longer term oxide and sulphide resource potential as well as to test the ultimate extents of the mineral system.
More than 120,000 metres of resource development drilling has now been completed at Kansanshi. Modeling and resource estimation of the Kansanshi and South East Dome resources were finalized during the period and released as part of the Kansanshi resource and reserve upgrade statement in December.
The mineral resource estimate for the combined Main and North West regions includes a total of 690.0 Mt at 0.86% total copper ("TCu") defined by a cut-off grade of 0.3% TCu in the measured and indicated classification plus an additional 344.5 Mt at 0.7% TCu in the inferred classification. The mineral resource for the South East Dome includes 54.0 Mt at 0.9% TCu defined at a cut-off grade of 0.3% TCu in the indicated classification plus an additional 20.8 Mt at 0.91% TCu in the inferred classification.
Initial comparative estimates show that the mineral resource tonnage has increased by approximately 121% and total contained copper metal by 74%. The inferred mineral resources has increased by greater amounts and these largely adjacent regions will now be the focus of the targeted in-fill drilling program for 2013.
Exploration drilling during the quarter continued to the northern side of South East Dome where additional intercepts suggest that the resource and potential pit may be extended into the Rocky Hill area.
Regional transect drilling has included several deep holes (700 - 1,000 metres) along the core of the Kansanshi Antiform, some of which have intercepted notable mineralization to depths of over 800 metres below surface. The context and extent of this mineralization is not yet fully understood however it further enhances the scale of the Kansanshi system.
Finland
Deep drilling targeting geophysical targets immediately to the south west of Kevitsa has demonstrated a much larger body of the Dunite/pyroxenite intrusion (host to the Kevitsa mineralization) than was previously known. Scattered chalcopyrite/pentlandite at depth in this hole suggests potential for Kevitsa style mineralization well beyond the area previously tested by drilling.
Reconnaissance drilling and ground geophysics is in progress or planned during the northern winter season on a number of Mafic nickel-copper, sediment hosted copper and IOCG copper-gold targets through Finland.
Peru
Detailed soil sampling over targets identified in the 2012 helicopter magnetic survey has confirmed porphyry style geochemistry over six main target areas within the Haquira tenure. The multi-element sampling has demonstrated a very extensive footprint halo around known mineralization that should prove useful for defining new porphyry mineralization in Southern Peru.
Exploration drilling at Haquira is likely to be postponed during 2013 while the Company concentrates on the community and environmental aspects of the project development.
In May 2012, the Company acquired a 19.99% ownership stake in Zincore Metals Inc ("Zincore"). Since then, Zincore has released results for three of the seven holes drilled to date on their early stage Dolores copper porphyry prospect, in which the Company has an option to earn 80%. The current holes are widely spaced and have encountered extensive intercepts of low grade mineralization in holes nearly 3 kilometres apart (for more details see Zincore press releases - TSX-V: ZNC).
Turkey
The Company has entered into a placement and option joint venture agreement with Empire Mining Corporation (now Columbus Copper Corporation (TSX-V: CCU)) which hold rights to a porphyry/skarn copper project at Bursa in Western Turkey. Drilling and a high resolution airborne magnetic survey commenced on the project during Q4 2012.
Mauritania & West Africa
The diamond drill program on the Oriental Hill mineralization adjacent to the current Guelb Moghrein open pit continued during Q4 2012. As part of the program five metallurgical holes have been completed for detailed metallurgical testing. Consistent thicknesses of oxide and typical Guelb Moghrein style 'FMC' mineralization have been intercepted and are somewhat wider than anticipated in the south.
Drilling on the Bou Seroual gold target east of Guelb Moghrein has intercepted quartz-ankarite-sulphide veins in an extensively altered shear zone. Assay results for gold are pending.
The first of three exploration permits in western Cote D'Ivoire has been granted to the Company's alliance partner Newgenco. These permits cover prospective nickel-copper-PGE targets in the Man region. Reconnaissance geochemistry and geophysics are now able to commence.
SALES REVENUES
----------------------------------------------------------------------------
Q4 2012 Q3 2012 Q4 2011 2012 2011
----------------------------------------------------------------------------
Kansanshi - copper 437.9 462.3 368.4 1,797.3 1,909.3
- gold 56.4 44.8 37.3 182.6 139.0
Guelb Moghrein - copper 92.5 64.1 66.2 286.7 244.4
- gold 34.8 21.5 31.0 107.7 101.8
Ravensthorpe - nickel 93.0 79.6 - 380.8 -
- cobalt 1.3 1.7 - 6.9 -
Kevitsa - nickel 6.9 8.8 - 15.7 -
- copper 20.6 18.7 - 39.3 -
- gold, PGE
and cobalt 9.0 8.1 - 17.1 -
Corporate and other 22.2 15.2 64.4 116.3 189.0
----------------------------------------------------------------------------
774.6 724.8 567.3 2,950.4 2,583.5
----------------------------------------------------------------------------
Full year 2012 sales revenues were 14% higher than 2011. Revenue in 2012 has benefited from a full year of commercial production at Ravensthorpe, contributing $387.7 million and the first full quarter of production at Kevitsa, contributing $72.1 million. Excluding the two new operations, sales revenues decreased by 4% year-on-year due to the lower net realized copper price which fell by 9%. Gold revenues increased to $296.4 million in 2012 due to higher sales volumes and higher realized prices.
Q4 2012 total sales revenues were 37% higher than the prior year quarter due to the contribution of Ravensthorpe and Kevitsa of $94.3 million and $36.5 million respectively. Excluding the two new operations, sales revenues increased by 13% from Q4 2011 from a combination of higher realized copper and gold prices and higher sales volumes of both metals. This was offset by a decrease in revenue from the Corporate segment which in 2011 benefited from a one-off sale of excess sulphur.
The Company's revenues are recognized at provisional prices when title passes to the customer. Subsequent adjustments for final pricing are materially offset by derivative adjustments and shown on a net basis in cost of sales (see "Hedging Program" for further discussion).
----------------------------------------------------------------------------
Copper selling price (per lb) Q4 2012 Q3 2012 Q4 2011 2012 2011
----------------------------------------------------------------------------
Average LME cash price 3.59 3.50 3.40 3.61 4.00
Realized copper price 3.46 3.45 3.33 3.51 3.87
Treatment/refining charges ("TC/RC")
and freight charges (0.23) (0.26) (0.32) (0.25) (0.27)
----------------------------------------------------------------------------
Net realized copper price 3.23 3.19 3.01 3.26 3.60
----------------------------------------------------------------------------
The LME copper price averaged $3.59 per lb for the quarter, an increase of $0.19 per lb from the average for Q4 2011. Copper prices traded lower from the end of September (closing $3.75 per lb) to a quarter low of $3.42 per lb on November 9, 2012 when the Dow Jones Industrial Average registered its biggest one day loss in 2012.
----------------------------------------------------------------------------
Nickel selling price (per lb) Q4 2012 Q3 2012 Q4 2011 2012 2011
----------------------------------------------------------------------------
Average LME cash price 7.70 7.41 8.30 7.95 10.35
Realized nickel price per payable
pound 7.74 7.69 - 7.96 -
TC/RC charges (0.35) (0.44) - (0.25) -
----------------------------------------------------------------------------
Net realized nickel price per payable
pound 7.39 7.25 - 7.71 -
----------------------------------------------------------------------------
The LME nickel price averaged $7.70 per lb for the quarter, a decrease of $0.60 per lb from the average for Q4 2011. The rally in nickel prices that began in the final week of August and continued through September reached its peak of $8.54 per lb on October 2, 2012 and then started to fall back reaching a quarter low of $7.19 per lb on November 5, 2012. The last week of November saw a rebound to around $7.94 per lb in early December, and then to a month high of $8.05 per lb at the close on December 12, 2012.
SUMMARY FINANCIAL RESULTS
----------------------------------------------------------------------------
Q4 2012 Q3 2012 Q4 2011 2012 2011
----------------------------------------------------------------------------
Gross profit
Kansanshi 238.0 223.8 186.2 929.4 1,187.1
Guelb Moghrein 47.5 24.3 3.5 117.7 127.8
Ravensthorpe 2.8 (1.6) - 42.5 -
Kevitsa 6.4 17.5 - 23.9 -
Other 0.3 (3.0) (7.0) (12.5) (6.9)
----------------------------------------------------------------------------
Total gross profit 295.0 261.0 182.7 1,101.0 1,308.0
----------------------------------------------------------------------------
Exploration (13.4) (6.3) (19.7) (49.7) (73.0)
General and administrative (20.4) (22.5) (15.8) (76.0) (73.8)
Other income (expense) (5.0) (1.0) (3.8) (4.3) 7.3
Net finance income (costs) 1.0 1.2 (0.1) 8.3 (4.6)
Settlement of RDC claims and
sale of assets - - - 1,217.9 -
Bond inducement costs - - - - (48.4)
Income taxes (50.5) (99.7) (49.5) (327.8) (460.7)
----------------------------------------------------------------------------
Net earnings for the period 206.7 132.7 93.8 1,869.4 654.8
----------------------------------------------------------------------------
Net earnings for the period
attributable to:
Non-controlling interests 20.0 25.4 17.8 96.5 125.9
Shareholders of the Company 186.7 107.3 76.0 1,772.9 528.9
----------------------------------------------------------------------------
Comparative earnings 186.7 107.3 78.9 555.0 580.5
----------------------------------------------------------------------------
Earnings per share
Basic $0.39 $0.23 $0.16 $3.74 $1.18
Diluted $0.39 $0.23 $0.16 $3.72 $1.18
----------------------------------------------------------------------------
Comparative earnings per share $0.39 $0.23 $0.17 $1.17 $1.30
----------------------------------------------------------------------------
Full year exploration costs decreased from 2011. The prior year includes exploration expenses at Enterprise, which were capitalized in 2012 following a development decision by the Board. Full year exploration expenses comprise primarily;
-- $13.7 million in Peru
-- $8.4 million at Kansanshi
-- $9.6 million in Finland and Sweden
-- $8.7 million at Guelb Moghrein
General and administrative costs were consistent with costs in 2011. A reduction in legal expenses related to RDC matters were partially offset by an increase in personnel costs in 2012 driven by an increased complement of employees to develop and manage the Company's expanded asset base.
On January 5, 2012, the Company reached an agreement with ENRC to dispose of its residual claims and assets in respect of the Kolwezi Tailings project and the Frontier and Lonshi mines and related exploration interests, all located in the Katanga Province of the RDC and to settle all current legal matters relating to these interests for a total consideration of $1.25 billion. The transaction was completed on March 2, 2012. The total consideration was comprised of $750.0 million, paid on March 2, 2012, together with a deferred consideration of $500.0 million in the form of a three-year Promissory Note with an interest coupon of 3% payable annually in arrears. Under the terms of the acquisition, ENRC acquired, with certain limited exceptions, all of First Quantum's assets and property either physically located within the RDC or relating to the operations formerly carried out by First Quantum and its subsidiaries in the RDC. In connection with the transaction, First Quantum, ENRC, the RDC Government, International Finance Corporation and Industrial Development Corporation have also settled all disputes relating to the companies being sold and their assets and operations in the RDC and each of First Quantum, ENRC, the RDC Government, International Finance Corporation and Industrial Development Corporation have released one another in respect of all claims and judgments relating to the foregoing or to any other matter arising in the RDC on or before the date of closing.
The $1,217.9 million gain recognized on the disposal includes the fair value of proceeds received, net of transaction costs and the underlying net liabilities of subsidiaries disposed of.
Income taxes for the full year amount to an effective income tax rate of approximately 33% of earnings (excluding the $1,217.9 received in settlement of RDC claims and sale of assets) compared to 40% (based on comparative earnings) in the prior year. The decrease is due to a number of non-recurring factors that include the recognition of previously unrecognized tax losses. In future, it is expected that the effective tax rate will reduce slightly below 43% as a result of increased earnings in lower tax jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------------------------------
Q4 2012 Q4 2011(1) 2012 2011(1) 2010(1)
----------------------------------------------------------------------------
Cash flows from
operating activities
- before changes in
working capital 319.1 285.5 1,165.2 1,299.3 1,340.4
- after changes in
working capital 70.2 (5.2) 342.5 412.3 802.9
Cash flows from
investing activities
Payments for property,
plant and equipment (420.0) (294.4) (1,373.3) (1,108.7) (357.6)
Proceeds from
settlement of RDC
claims and sale of
assets - - 736.5 - -
Acquisitions - - - - (514.9)
Other investing
activities (27.3) - (41.0) 14.0 646.9
Cash flows from
financing activities 311.2 (2.8) 192.2 (210.4) (151.6)
----------------------------------------------------------------------------
Net cash flows (65.9) (302.4) (143.1) (892.8) (425.7)
Cash balance 309.0 452.1 309.0 452.1 1,344.9
----------------------------------------------------------------------------
Total assets 7,536.4 5,298.0 7,536.4 5,298.0 4,957.9
Total long-term
liabilities 1,211.4 507.6 1,211.4 507.6 853.1
----------------------------------------------------------------------------
Cash flows from
operating activities
per share(2)
before working capital
(per share) $0.67 $0.60 $2.46 $2.91 $3.34
after working capital
(per share) $0.15 $(0.01) $0.72 $0.92 $0.92
----------------------------------------------------------------------------
(1) Cash flows before changes in working capital has been adjusted from that
previously disclosed due to changes in presentation of taxes paid and
interest received in the cash flow.
(2) Cash flows per share is not recognized under IFRS. See "Regulatory
Disclosures" for further information.
2012 operating cash flows before changes in working capital decreased from 2011 due to higher non-cash expenses in 2011. Changes in working capital during 2012 resulted in a reduction of cash of $822.7 million which includes $458.8 million in Zambian taxes that the Company paid during the year. Increases in accounts receivable and inventory totalled $444.3 million during 2012, resulting in part, from the commencement of operations at Kevitsa.
Capital expenditure on the Company's key development projects totalled $1,373.3 million for the year. Capital expenditure comprised primarily;
-- $755.2 million at Kansanshi for the oxide circuit expansions, smelter
project and mine pit development costs
-- $328.2 million at Sentinel, including deposits, for site development and
long-lead plant and mine equipment
-- $171.4 million at Kevitsa for project development, completion and costs
incurred during the commissioning phase
Proceeds from settlement of RDC claims and sale of assets represents the net cash proceeds received during Q1 2012. The $500.0 million promissory note is payable by ENRC on March 2, 2015.
Cash flows from financing activities for the year include dividend payments made to shareholders of the Company of $91.0 million as well as dividends paid to non-controlling interest of $39.0 million. Cash flows from financing activities in 2011 include dividend payments of $79.3 million and $10.8 million made to shareholders of the Company and non-controlling interest respectively. Prior year cash flows from financing activities also include bond inducement costs of $48.4 million and the final $80.7 million repayment of the $400.0 million term loan facility which was previously in place.
Cash flows from financing activities in Q4 2012 comprise primarily of the net proceeds from the $350.0 million senior notes issue which was completed on October 10, 2012. Q4 2012 also includes dividends of $23.2 million paid to non-controlling interests.
As at December 31, 2012, the Company had the following contractual obligations outstanding:
----------------------------------------------------------------------------
Carrying Contractual less than 1 - 3 3 - 5
Value Cashflows 1 year years years Thereafter
----------------------------------------------------------------------------
Debt 396.8 584.9 73.3 60.0 50.8 400.8
Trade and other
payables 355.5 355.5 355.5 - - -
Current taxes
payable 32.5 32.5 32.5 - - -
Deferred
payments 4.2 4.2 4.2 - - -
Finance leases 27.2 38.9 3.8 7.6 7.6 19.9
Commitments 897.2 897.2 897.2 - - -
Restoration
provisions 270.5 519.0 0.6 5.6 1.0 511.8
----------------------------------------------------------------------------
Total 1,983.9 2,432.2 1,367.1 73.2 59.4 932.5
----------------------------------------------------------------------------
Total commitments of $897.2 million comprise primarily of capital expenditure for property, plant and equipment related to the development of Sentinel, upgrades at Kansanshi, the smelter construction and other projects.
The significant capital expansion and development program is expected to be funded using available cash, future cash flows from operations and debt facilities. At December 31, 2012, both the $250.0 million Kevitsa debt facility and $1.0 billion Kansanshi senior term and revolving facility were undrawn and available for drawdown.
Hedging program
As at December 31, 2012, the following derivative positions were outstanding:
----------------------------------------------------------------------------
Average price
----------------------------------------------------------------------------
Open
Positions
(tonnes/ Maturities
ounces) Contract Market Through
----------------------------------------------------------------------------
Embedded derivatives in
provisional sales contracts:
Copper 50,191 $3.61/lb $3.59/lb March 2013
Nickel 3,996 7.81/lb 7.70/lb February 2013
Gold 19,462 1,705/oz 1,676/oz March 2013
----------------------------------------------------------------------------
Commodity contracts:
Copper 53,453 $3.61/lb $3.59/lb March 2013
Nickel 3,315 7.81/lb 7.70/lb February 2013
Gold 21,253 1,705/oz 1,676/oz March 2013
----------------------------------------------------------------------------
A summary of the fair values of unsettled derivative financial instruments for commodity contracts recorded on the consolidated balance sheet:
----------------------------------------------------------------------------
December 31, 2012 December 31, 2011
----------------------------------------------------------------------------
Commodity contracts:
Asset position $ 5.0 $ 5.1
Liability position (2.4) (6.0)
----------------------------------------------------------------------------
a) Provisional pricing and derivative contracts
A portion of the Company's metal sales is sold on a provisional pricing basis whereby sales are recognized at prevailing metal prices when title transfers to the customer and final pricing is not determined until a subsequent date, typically two months later. The difference between final price and provisional invoice price is recognized in net earnings. In order to mitigate the impact of these adjustments on net earnings, the Company enters into derivative contracts to directly offset the pricing exposure on the provisionally priced contracts. The provisional pricing gains or losses and offsetting derivative gains or losses are both recognized as a component of cost of sales. Derivative assets are presented in other assets and derivative liabilities are presented in other liabilities with the exception of copper, gold and nickel embedded derivatives which are included within accounts receivable.
As at December 31, 2012, substantially all of the Company's metal sales contracts subject to pricing adjustments were hedged by offsetting derivative contracts.
EQUITY
At the date of this report, the Company has 476,310,282 shares outstanding. There were no changes in common shares outstanding during 2012.
OTHER ITEMS
Zambian taxation
The Government of the Republic of Zambia ("GRZ") announced in January 2008 a number of proposed changes to the tax regime in the country in relation to mining companies. The Company, through some of its Zambian subsidiaries, is party to Development Agreements with the GRZ for its existing operations which provide an express right to full and fair compensation for any loss, damages or costs (including interest) incurred by the Company by reason of the government's failure to comply with the tax stability guarantees set out in the Development Agreements and rights of international arbitration in the event of any dispute. The Company's Zambian subsidiaries have complied with the GRZ's new tax regime without prejudice to its rights under the Development Agreement.
Following the change of government in 2011, the first Budget of the new government introduced a further increase in the copper mineral royalty tax from 3% to 6%, effective April 2012, in breach of the Development Agreements.
In the 2013 Budget, delivered in October 2012, the GRZ has decreased the rate of Capital Allowances from 100% per annum to 25% per annum. This will impact the timing of the tax benefit from the Company's significant capital programs at Kansanshi and Sentinel.
Until resolved differently with the GRZ, the Company is recognizing and paying taxes in excess of the Development Agreement, resulting in an effective tax rate of approximately 43% at Kansanshi.
On Behalf of the Board of Directors of First Quantum Minerals Ltd.
G. Clive Newall, President
12g3-2b-82-4461
Listed in Standard and Poor's
Forward-Looking Statements
Certain statements and information herein, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. These forward-looking statements are principally included in the Development activities section and are also disclosed in other sections of the document. The forward looking statements include estimates, forecasts and statements as to the Company's expectations of production and sales volumes, expected timing of completion of project development at Kansanshi, Sentinel and Enterprise, the impact of ore grades on future production, the potential of production disruptions, capital expenditure and mine production costs, the outcome of mine permitting, the outcome of legal proceedings which involve the Company, information with respect to the future price of copper, gold, cobalt, nickel, PGE, and sulphuric acid, estimated mineral reserves and mineral resources, our exploration and development program, estimated future expenses, exploration and development capital requirements, the Company's hedging policy, and our goals and strategies. Often, but not always, forward-looking statements or information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate" or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.
With respect to forward-looking statements and information contained herein, we have made numerous assumptions including among other things, assumptions about the price of copper, gold, nickel, PGE, cobalt and sulphuric acid, anticipated costs and expenditures and our ability to achieve our goals. Although our management believes that the assumptions made and the expectations represented by such statements or information are reasonable, there can be no assurance that a forward-looking statement or information herein will prove to be accurate. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. These factors include, but are not limited to, future production volumes and costs, costs for inputs such as oil, power and sulphur, political stability in Zambia, Peru, Mauritania, Finland and Australia, adverse weather conditions in Zambia, Finland and Mauritania, labour disruptions, mechanical failures, water supply, procurement and delivery of parts and supplies to the operations, the production of off-spec material.
See our Annual Information Form for additional information on risks, uncertainties and other factors relating to the forward-looking statements and information. Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actual results, performances, achievements or events not to be anticipated, estimated or intended. Also, many of these factors are beyond our control. Accordingly, readers should not place undue reliance on forward-looking statements or information. We undertake no obligation to reissue or update forward-looking statements or information as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements and information made herein are qualified by this cautionary statement.
First Quantum Minerals Ltd.
Consolidated Statements of Earnings
For the years ended December 31, 2012 and 2011
(expressed in millions of U.S. dollars, except where indicated and share and
per share amounts)
----------------------------------------------------------------------------
Note 2012 2011
----------------------------------------------------------------------------
Sales revenues 18 2,950.4 2,583.5
Cost of sales 19,20 (1,849.4) (1,275.5)
----------------------------------------------------------------------------
Gross profit 1,101.0 1,308.0
Exploration (49.7) (73.0)
General and administrative 20 (76.0) (73.8)
Settlement of RDC claims and sale of assets 21 1,217.9 -
Bond inducement costs 10 - (48.4)
Other income (expense) 22 (4.3) 7.3
----------------------------------------------------------------------------
Operating profit 2,188.9 1,120.1
Finance income 23.6 5.3
Finance costs 23 (15.3) (9.9)
----------------------------------------------------------------------------
Earnings before income taxes 2,197.2 1,115.5
Income taxes 14 (327.8) (460.7)
----------------------------------------------------------------------------
Net earnings for the year 1,869.4 654.8
----------------------------------------------------------------------------
Net earnings for the year attributable to:
Non-controlling interests 96.5 125.9
Shareholders of the Company 1,772.9 528.9
----------------------------------------------------------------------------
Earnings per common share
Basic 16 3.74 1.18
Diluted 16 3.72 1.18
Weighted average shares outstanding (000's)
Basic 16 473,893 447,224
Diluted 16 476,310 449,457
Total shares issued and outstanding (000's) 15 476,310 476,310
----------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
For a copy of the notes visit the Company's website at www.first-
quantum.com.
First Quantum Minerals Ltd.
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2012 and 2011
(expressed in millions of U.S. dollars)
----------------------------------------------------------------------------
Note 2012 2011
----------------------------------------------------------------------------
Net earnings for the year 1,869.4 654.8
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale
investments 6 (7.3) 0.2
Tax on unrealized gain (loss) on available-for-sale
investments 1.8 -
----------------------------------------------------------------------------
Comprehensive income for the year 1,863.9 655.0
----------------------------------------------------------------------------
Total comprehensive income for the year attributable
to:
Non-controlling interests 96.5 125.9
Shareholders of the Company 1,767.4 529.1
----------------------------------------------------------------------------
1,863.9 655.0
----------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
For a copy of the notes visit the Company's website at www.first-
quantum.com.
First Quantum Minerals Ltd.
Consolidated Statements of Cash Flows
For the years ended December 31, 2012 and 2011
(expressed in millions of U.S. dollars)
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Note 2012 2011
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Cash flows from operating activities
Net earnings for the year 1,869.4 654.8
Items not affecting cash
Depreciation 7 172.3 112.0
Unrealized foreign exchange (gain) loss 1.9 (2.1)
Deferred income tax expense (recovery) 290.4 (13.1)
Income tax expense 37.4 473.8
Share-based compensation expense 17 15.9 8.8
Bond inducement costs 10 - 48.4
Net finance (income) costs (8.3) 9.9
Settlement of RDC claims and sale of assets 21 (1,217.9) -
Other 4.1 6.8
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1,165.2 1,299.3
Taxes paid (458.8) (598.4)
Change in non-cash operating working capital
(Increase) decrease in trade, other receivables
and derivatives (183.0) 92.3
Increase in inventories (224.4) (241.1)
(Increase) decrease in trade and other payables 80.4 (118.9)
Long term incentive plan contributions (36.9) (20.9)
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342.5 412.3
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Cash flows from investing activities
Purchase of property, plant and equipment (1,316.7) (1,049.5)
Deposits on property, plant and equipment (56.6) (59.2)
Proceeds from sale of property, plant and
equipment 1.6 -
Acquisitions of investments (46.1) -
Interest received 3.5 4.1
Proceeds from settlement of RDC claims and sale
of assets 736.5 9.9
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(677.8) (1,094.7)
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Cash flows from financing activities
Net movement in trading facility 0.7 (14.6)
Repayments of debt (5.1) (83.6)
Proceeds from issuance of senior notes 9 338.8 -
Proceeds on issuance of common shares - 16.1
Cash paid on bond inducement 10 - (48.4)
Restricted cash - 40.4
Dividends paid (91.0) (79.3)
Dividends paid to non-controlling interests (39.0) (10.8)
Finance lease payments (3.8) (3.7)
Interest paid (8.4) (26.5)
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192.2 (210.4)
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Decrease in cash and cash equivalents (143.1) (892.8)
Cash and cash equivalents - beginning of year 452.1 1,344.9
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Cash and cash equivalents - end of year 26 309.0 452.1
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The accompanying notes are an integral part of these consolidated financial
statements.
For a copy of the notes visit the Company's website at www.first-
quantum.com.
First Quantum Minerals Ltd.
Consolidated Balance Sheets
As at December 31, 2012 and 2011
(expressed in millions of U.S. dollars)
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December 31, December 31,
Note 2012 2011
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Assets
Current assets
Cash and cash equivalents 26 309.0 452.1
Trade and other receivables 4 390.2 238.1
Inventories 5 903.7 649.9
Current portion of other assets 8 230.1 34.0
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1,833.0 1,374.1
Investments 6 55.6 18.0
Property, plant and equipment 7 4,953.6 3,824.4
Promissory note receivable 21 481.8 -
Other assets 8 212.4 81.5
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Total assets 7,536.4 5,298.0
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Liabilities
Current liabilities
Trade and other payables 355.5 273.4
Current taxes payable 32.5 289.4
Current portion of debt 9 49.1 48.1
Current portion of provisions and other
liabilities 11 6.5 11.0
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443.6 621.9
Debt 9 347.7 14.8
Provisions and other liabilities 11 299.2 286.4
Deferred income tax liabilities 14 564.5 206.4
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Total liabilities 1,655.0 1,129.5
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Equity
Share capital 1,929.6 1,950.6
Retained earnings 3,405.7 1,723.8
Accumulated other comprehensive income
(loss) (4.3) 1.2
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Total equity attributable to
shareholders of the Company 5,331.0 3,675.6
Non-controlling interests 550.4 492.9
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Total equity 5,881.4 4,168.5
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Total liabilities and equity 7,536.4 5,298.0
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Commitments 27
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Approved by the Board of Directors and authorized for issue on March 5,
2013.
Signed by Signed by
Andrew Adams, Director Peter St. George, Director
The accompanying notes are an integral part of these consolidated financial
statements.
For a copy of the notes visit the Company's website at www.first-
quantum.com.
First Quantum Minerals Ltd.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2012 and 2011
(expressed in millions of U.S. dollars)
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Note 2012 2011
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Share capital
Common shares
Balance - beginning of year 2,003.8 1,479.3
Shares issued and share options exercised - 16.1
Conversion of convertible bonds 10 - 508.4
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Balance - end of year 2,003.8 2,003.8
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Equity portion of convertible bonds
Balance - beginning of year - 48.3
Conversion of convertible bonds 10 - (48.3)
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Balance - end of year - -
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Treasury shares
Balance - beginning of year (68.0) (57.0)
Restricted and performance stock units vested 6.0 9.9
Shares purchased 15b (36.9) (20.9)
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Balance - end of year (98.9) (68.0)
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Contributed surplus
Balance - beginning of year 14.8 15.9
Share-based compensation expense for the year 17a 15.9 8.8
Restricted and performance stock units vested 17a (6.0) (9.9)
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Balance - end of year 24.7 14.8
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Total share capital 1,929.6 1,950.6
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Retained earnings
Balance - beginning of year 1,723.8 1,274.2
Earnings for the year attributable to
shareholders of the Company 1,772.9 528.9
Dividends (91.0) (79.3)
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Balance - end of year 3,405.7 1,723.8
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Accumulated other comprehensive income
Balance - beginning of year 1.2 1.0
Other comprehensive income (loss) for the year (5.5) 0.2
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Balance - end of year (4.3) 1.2
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Non-controlling interests
Balance - beginning of year 492.9 377.8
Earnings attributable to non-controlling
interests 96.5 125.9
Dividends (39.0) (10.8)
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Balance - end of year 550.4 492.9
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The accompanying notes are an integral part of these consolidated financial
statements.
For a copy of the notes visit the Company's website at www.first-
quantum.com.
Contacts:
North American contact:
Sharon Loung
Director, Investor Relations
(647) 346-3934 or Toll Free: 1 (888) 688-6577
(604) 688-3818 (FAX)
sharon.loung@fqml.com
United Kingdom contact:
Clive Newall
President
+44 140 327 3484
+44 140 327 3494 (FAX)
clive.newall@fqml.com
www.first-quantum.com