The New Leader in Global Copper. August 1, Second Quarter 2013

Transcription

1 The New Leader in Global Copper August 1, 2013 Second Quarter 2013

2 Cautionary Note Regarding Forward-Looking Statement Certain statements and information contained in this presentation, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include but are not limited to statements or information with respect to the anticipated commencement, completion and terms of the proposed offer and the anticipated strategic and operational benefits of the offer. 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, projects, 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 in this presentation, First Quantum has made numerous assumptions including among other things, assumptions about the price of copper, gold, cobalt, nickel, zinc, pyrite, PGE, and sulphuric acid, anticipated costs and expenditures, and First Quantum's ability to achieve its goals. Although management of First Quantum 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 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 risks, uncertainties and other factors include, but are not limited to, uncertainties surrounding the ability to realize operational synergies following completion of the offer, reliance on Inmet s publicly available information which may not fully identify all risks related to its performance, success in integrating the retail distribution systems, and the integration of supply chain management processes, future production volumes and costs, costs for inputs such as oil, power and sulphur, political stability in Zambia, Peru, Mauritania, Finland, Turkey, Spain, Panama and Australia, adverse weather conditions in any of the foregoing countries, labor disruptions, mechanical failures, water supply, procurement and delivery of parts and supplies to the operations and the production of off-spec material. See First Quantum s 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, many of which are beyond the control of First Quantum, that might cause actual results, performances, achievements or events not to be anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements or information. While First Quantum may elect to update the forward-looking statements at any time, First Quantum does not undertake to update them at any particular time or in response to any particular event, other than as may be required by applicable securities laws. Investors and others should not assume that any forward-looking statement contained in this presentation represents management's estimate as of any date other than the date of this presentation. Neither First Quantum nor any of its directors or officers has verified the accuracy or completeness of information or statements contained herein which are made by or derived from third-party sources (including any projections or estimates made by third-party research analysts). Such third-party sources may have failed to identify events or facts which may have occurred or which may affect the significance or accuracy of any such information or statements. First Quantum has no means of verifying the accuracy or completeness of such information or statements made by or derived from third-party sources or whether there has been any failure by such sources to identify events that may have occurred or may affect the significance or accuracy of any information or statements. This presentation does not constitute an offer to buy or an invitation to sell, or the solicitation of an offer to buy or invitation to sell, any securities of First Quantum or Inmet. Such an offer may only be made pursuant to the offer and takeover bid circular First Quantum has filed with the Canadian securities regulators and pursuant to registration or qualification under the securities laws of any other such jurisdiction. In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates disclosed herein have been prepared in accordance with Canadian National Instrument Standards of Disclosure for Mineral Projects ("NI "), classified in accordance with Canadian Institute of Mining Metallurgy and Petroleum's "CIM Standards on Mineral Resources and Reserves Definitions and Guidelines" (the "CIM Guidelines"). The terms "mineral resources", "measured mineral resources", "indicated mineral resources" and "inferred mineral resources" are recognized by Canadian securities regulatory authorities, however, they may not be recognized by the securities regulatory authorities of other jurisdictions. Pursuant to the CIM Guidelines, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with measured or indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an inferred mineral resource will be upgraded to an indicated or measured mineral resource as a result of continued exploration. Pursuant to NI , inferred mineral resources may not form the basis of any economic analysis, including any feasibility study. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered. Note: all dollar amounts in US dollars unless otherwise indicated; C$ indicates Canadian dollars 2

3 Q HIGHLIGHTS Strong production against Q with financials impacted by weaker prices Revenue $869m, including $230m contribution from Kevitsa and acquired sites (up 20% vs. Q2 2012) Copper production 103.7k tonnes (up 44% or 31.5k tonnes vs. Q2 2012) with 29.0k tonnes from Kevitsa and acquired operations (1) Nickel production 10.9k tonnes including 2.0k tonnes from Kevitsa (up 33% vs. Q2 2012) (1) Gold production 63.6k ounces (up 44% vs. Q2 2012) (1) C1 copper $1.34/lb; lower than $1.53/lb Q (2) C1 nickel $5.45/lb; lower than $5.70/lb Q Comparative EBITDA of $332m is 20% above Q Gross Profit before fair value adjustments (3) is 4% lower than Q2 2012, with: Lower average market prices: copper ($3.24/lb vs. $3.57/lb Q2 2012) nickel ($6.78/lb vs. $7.78/lb Q2 2012) and gold ($1,419/oz vs. $1,491/oz Q2 2012) Lower copper sales at Kansanshi partially offset by higher copper sales at Guelb Moghrein and higher gold sales Impact of lower prices and sales almost fully offset by $71m benefit from acquired operations before fair value acquisition adjustments (3) as well as a full quarter contribution from Kevitsa (4) (1) Includes 25.4k tonnes Cu and 2.2k ounces Au from acquired operations, and 3.6k tonnes Cu, 2.0k tonnes Ni and 2.7k ounces Au from Kevitsa. (2) C1 costs for pre-acquisition group is $1.47/lb for Q (3) Q gross profit before fair value adjustments removes $27.6m for depreciation and $35.6m for inventory. (4) Kevitsa operation commercial production declared on August 18,

4 PRODUCTION Copper Production ( 000 tonnes) Up 31.5k tonnes from Q Kansanshi 1.1k tonnes higher with oxide and mixed circuit benefiting from plant expansions partially offset by lower sulphide ore grade processed. Guelb Moghrein higher than Q from higher grade and recoveries. Kevitsa (1) production of 3.6k tonnes is higher than Q as recoveries continue to improve. 25.4k tonnes production attributable to newly acquired mines Las Cruces, Çayeli and Pyhäsalmi operations. Excluding the 3.5k tonne impact of the fire at Las Cruces, copper production at the newly acquired operations is broadly in line with Q Nickel Production ( 000 tonnes) Up 2.7k tonnes from Q Ravensthorpe production increased from Q driven by increased throughput. Kevitsa (1) production of 2.0k tonnes was marginally lower than Q driven by lower throughput and plant recoveries. Gold Production ( 000 ounces) Up 19.3k ounces from Q Kansanshi production 53% higher than Q as a result of gold circuit enhancements and the re-processing of tailings containing gold. Guelb Moghrein consistent with Q Kevitsa (1) production of 2.7k ounces increased from Q due to grade improvements. 2.2k ounces attributable to acquired operations for Q (1) Kevitsa operation commercial production declared on August 18,

5 COPPER C1 COST Group Copper C1 reduced by 12% to $1.34/lb for quarter $/lb Group Pre-acquisition Operations Kansanshi Guelb Moghrein Kevitsa (1) 1.78 n/a 1.94 Acquired Operations Las Cruces (2) Çayeli (2) Pyhäsalmi (2) 0.30 (0.81) (0.55) Commentary vs. Q2 2012: Q Q Q Lower Copper C1 of $1.47/lb at pre-acquisition operations Kansanshi lower with higher mining costs outweighed by a higher gold credit, following improvements in the gold circuit with a 34% increase in gold sales volumes offset by a lower net realized gold price. Guelb Moghrein 16% lower than Q and Kevitsa (1) 8% lower than Q driven by lower processing costs on reduced throughput as well as the benefit from pre-stripping activities in stage 2 offsetting the increased costs associated with the planned maintenance shutdown. Impact of acquired operations drives Group C1 lower Las Cruces higher due to impact of the reactor fire and resulting plant shutdown in April with repairs running for the majority of April and ramp-up to full capacity continuing through the second quarter. Çayeli lower primarily due to higher by-product credits from improved zinc production partially offset by lower net realized prices. Pyhäsalmi higher due to lower by-product credits due to timing of pyrite sales. (1) Kevitsa operation compared to Q with commercial production declared on August 18, (2) Acquired operations C Costs shown are proforma for each comparative quarter. The method of calculation has been aligned to other FQM operations. 5

6 NICKEL C1 COST Group Nickel C1 for the quarter below full year market guidance $/lb Q Q Q Group Ravensthorpe Kevitsa 4.71 n/a 5.29 Ravensthorpe: C1 Costs is lower than Q with processing efficiencies, lower cost of sulphur and a higher cobalt by-product credit more than offsetting increases in mining costs, increased refining charges and the costs associated with the planned maintenance shutdown. C1 Cost at Ravensthorpe is higher than Q1 2013, with Q benefiting from lower refining charges from the sales mix for the quarter, lower ore costs and limonite processing costs. Kevitsa (1) : Reduction 11% lower than in Q driven by lower processing costs on reduced throughput as well as the benefit from pre-stripping activities in stage 2 offsetting the costs associated with the planned maintenance shutdown. (1) Kevitsa operation commercial production declared on August 18,

7 FINANCIAL OVERVIEW $ millions Q Q Q (3) Revenue Gross Profit excluding fair value adjustments (1) Gross Profit Operating Profit EBITDA Comparative EBITDA (2) Comparative Earnings (2) Comparative EPS (Basic) (2) Comparative Effective Tax Rate (%) (2) Closing Net Cash/(Net Debt) (1,818) 817 (794) Copper C1 Cost ($/lb) Nickel C1 Cost ($/lb) Performance against Q Comparative EBITDA up 20% showing strong cashflow generation from operations despite falling prices. Gross profit excluding fair value adjustments (1) 4% lower as a result of weaker commodity prices and lower copper sales volumes from pre-acquisition operations partially offset by the contribution from Kevitsa and the newly acquired operations. Copper C1 Cost excluding acquired operations is $1.47/lb. Group Copper C1 Cost reduced to $1.34/lb benefiting from lower C costs at acquired operations with a higher proportion of by-product credits. Nickel C1 cost broadly in line with Q and lower against Q Comparative effective tax rate of 41% is in line with guidance. The increase to the 45% non-comparative effective tax rate is attributable to non-deductible, non-recurring costs and charges. The rate for Q is relatively in line with the 33% full year 2012 comparative effective tax rate. (1) Excludes fair value adjustments on acquisition of mineral properties $27.6m and $35.6m fair value stock adjustment. (2) Comparative results adjusted for $35.6m fair value stock adjustment and $12.4m impairment of investment. (3) Q operational and financial results include 10 days post acquisition results for Çayeli mine (100%), Las Cruces mine (100%) and Pyhäsalmi mine (100%) acquired on March 22,

8 GROSS PROFIT Q VS. Q Price Sales Volume Costs Lower copper prices (Q LME average $3.24/lb vs. Q $3.57/lb), nickel ($6.78/lb vs. Q $7.78/lb) and gold prices ($1,419/ounce vs.$1,491/ounce Q2 2012). Pre-acquisition operations: lower copper concentrate sales volumes at Kansanshi partially offset by higher copper cathode sales at Kansanshi, higher copper sales at Guelb Moghrein and consistent nickel sales at Ravensthorpe Pre-acquisition operations: strong focus on cost control and processing efficiencies. Quarter includes planned maintenance shutdown costs at Ravensthorpe and some increase in mining costs and treatment charges at Kansanshi Depreciation Kevitsa Acquired Operations Fair Value Adjustments Mainly due to commencing use of projects at Kansanshi. Kevitsa commercial production declared August 18 th, 2012 contributing a full quarter to Q results. Reflects a full quarter of results from acquired operations before acquisition accounting fair value adjustments. The additional depreciation over the life of the relevant mines resulting from fair value uplift to mineral properties and plant and equipment recognized at acquisition date will continue at similar levels in future quarters. Substantially all of the fair value adjustment related to finished goods inventory has been unwound during Q

9 QUARTERLY NET CASH (DEBT) FLOW MOVEMENT $m Opening Net Cash (Debt) at start of Quarter (794) EBITDA 284 Working capital and other 31 Taxes paid (84) Dividends to shareholders (66) Capital expenditure (740) Net Interest paid (1) (106) Inmet acquisition (2) (343) Net cash (debt) movement (1,024) Closing Net Cash (Debt) at end of Quarter (1,818) Comprising: Closing Cash (3) 881 Closing Debt (4) (2,699) Available committed debt facilities at end of Quarter 3,582 (1) Includes $60m of capitalized interest. (2) Cash paid to acquire the remaining 14.5% of Inmet in Q Total cash paid to acquire 100% share of Inmet is $2.5b.Includes cash and cash equivalents ($698m), restricted cash ($81m) and short term investments held for sale ($103m). (3) Includes cash and cash equivalents ($698m), restricted cash ($80m) and short term investments held for sale ($103m) (4) Includes senior notes issued ($2.5b), revolving debt facility ($130m) and other short term debt ($41m) 9

10 MARKET GUIDANCE Production guidance remains unchanged from previously disclosed guidance Copper Production Nickel Production Gold Production Tonnes ('000) Post Full Year Acquisiton (1) proforma (2) Kansanshi Guelb Moghrein Kevitsa Pre-acquisition Las Cruces Cayeli Pyhasalmi Acquired mines Total Group Copper production at pre-acquisition First Quantum Minerals mines unchanged. Production for the acquired operations in line with prior guidance. Tonnes ('000) Tonnes ('000) Full Year Ravensthorpe Kevitsa 9-10 Total Group Guidance remains unchanged for both operations. Zinc Production Post Acquistion Full Year Proforma (1) (2) Cayeli Pyhasalmi Total Group Guidance for post-acquisition portion remains unchanged from that previously released. Ounces ('000) Full Year Kansanshi Guelb Moghrein Kevitsa Total Pre Acquisition Guidance for pre acquisition operations remains unchanged. Acquired operations are estimated to produce 5-8k ounces post acquisition or 7-10k ounces on a full year 2013 proforma basis. (1) Includes production from acquired mines from date of acquisition; March 22, 2013 (2) Full year 2013 production including proforma full year production guidance for acquired operations. 10

11 MARKET GUIDANCE Copper C1 Cost guidance Nickel C1 Cost guidance Copper C1 Cost $ $1.50 / lb Nickel C1 Cost $ $6.00 / lb Copper cash costs per lb of copper remains unchanged from prior guidance. Nickel cash cost per lb of nickel unchanged from prior guidance. Capital Expenditure Pre-acquisition First Quantum site capital expenditure and development projects remains unchanged at $2.0 billion. Cobre Panama remains under review, with revised capital cost and project time table expected in Q Full year proforma (1) capex at acquired operations estimated to be between $70 - $85 million. Acquisition Fair Value Adjustments The additional depreciation to unwind the uplift to fair value at acquisition date of acquired mineral property plant and equipment will continue on a systematic basis over the life of the acquired mines. The adjustment before tax for Q is $27.6 million The sale of acquired inventory adjusted to fair value at the date of the Inmet acquisition is non-recurring as substantially all of the inventory was sold in the second quarter. The amount before tax was $35.6 million in Q (1) Proforma includes pre and post acquisition operation periods. 11

12 Appendix to Second Quarter 2013 Results

13 APPENDIX 1: FINANCIAL IMPACT OF FAIR VALUE ADJUSTMENTS ON ACQUISITION Gross profit and net earnings in the quarter impacted by fair value adjustments $m Pre Acquisition Operations Acquired Operations Total before Fair Value Adjustments Fair Value Adjustments Depreciation (1) Inventory (2) (Non- (Recurring) Recurring) Q Q Gross Profit Group Gross profit before fair value adjustments Depreciation fair value adjustments (28) - (28) - Inventory fair value adjustment (36) (36) - Group Gross Profit (28) (36) Net Earnings Net earnings before fair value and other adjustments EPS before fair value and other adjustments Comparative earnings (20) Comparative EPS (0.04) Inventory fair value adjustment (net of tax) (22) (22) - Impairment of investment (12) - (12) - - (12) - Net earnings (20) (22) EPS (0.04) (0.04) Weighted average number shares (million) (3) (1) The additional depreciation to unwind the uplift to fair value at acquisition date of acquired mineral property plant and equipment will continue on a systematic basis over the life of the acquired mines. (2) The sale of acquired inventory adjusted to fair value at the acquisition date is non-recurring as substantially all was sold in the second quarter. (3) Weighted numbers of shares increased from 474million in Q to 587million in Q