11th May 2005 07:00
First Quantum Minerals Ld11 May 2005 NEWS RELEASE 05-06 May 10, 2005 www.first-quantum.com FIRST QUANTUM REPORTS OPERATIONAL AND FINANCIAL RESULTS FOR THREE MONTHS ENDED MARCH 31, 2005 (All figures expressed in US dollars) First Quantum Minerals Ltd. (TSE Symbol "FM", LSE Symbol "FQM") is pleased toannounce its results for the three months ended March 31, 2005. The completefinancial statements are available for review at www.first-quantum.com. Highlights - Three Months Ended March 31, 2005 • Bwana / Lonshi copper production of 11,963 tonnes of cathode with a cash cost (C1) of $0.60 per pound • Pre-commercial production at Kansanshi was 518 tonnes of copper cathode and 5,810 tonnes of contained copper from concentrates • Net earnings of $27.2 million or $0.44 per share including a gain on sale of Anvil of $16.1 million or $0.26 per share • Cash flow from operations before operating working capital movements was $19.7 million or $0.32 per share • Cash flow from operations after operating working capital movements was $22.9 million or $0.37 per share Financial Results (see attached financial statements) For reporting purposes, there are no revenues and expenses shown from Kansanshiin the Statement of Earnings and Deficit as commercial production for reportingpurposes was only achieved in April 2005. During the first quarter, $5.4 millionworth of revenue was charged against pre-production costs at Kansanshi. Revenues for the quarter were a record $38.2 million (Q1 04: $25.3m), themajority of which came from copper proceeds as the high acid consumption atBwana meant that acid revenues were limited. Copper revenues were up 73% on thecomparative period in 2004 due to improved copper prices and a 23% increase incopper sales volumes at Bwana. Acid revenues decreased $3.2m from Q4 2004 dueto the increase in acid consumption. The realized copper price rose to $1.45 per pound (Q1 04: $1.03/lb). Therealized copper price was significantly up from last year and previous quartersas all copper sales were at unhedged market prices. The average LME price forthe first quarter of 2005 was $1.44 per pound (2004: $1.24/lb) Cost of sales for the first quarter ended March 31, 2005 was $16.2 million(2004: $12.1m). The 34% increase in cost of sales was primarily due to the 23%increase in copper cathode sold. Other expenses (income) of $(8.9 million)(2004: $4.3m) included a one time gain from the disposal of the company'sinvestment in Anvil. Net earnings for the quarter increased to $27.2 million(2004: $6.7m) or $0.44 per share (2004: $0.11). The cash inflow from operating activities was $22.9 million (2004: $6.6m) or$0.37 per share (2004: $0.11). The significant turnaround in cash flow fromoperations is attributable to the improvement in revenue resulting fromincreased copper production and improved copper prices. The cash flow fromoperating activities before non-cash working capital movements was $19.7 million(2004: $12.1m) or $0.32 per share (2004: $0.20). Bwana / Lonshi Mining For the first quarter ended March 31, 2005, 152,000 tonnes of ore (Q1 2004:66,000t) grading 5.3% (Q1 04: 5.4%) and 2,596,000 tonnes of waste (Q1 2004:1,036,000t) were mined. Mid-way through 2004, the company increased the size ofits mining fleet at Lonshi to meet the additional ore requirements of theincreased copper production, which has meant that more material has been minedthan in the comparative period last year. Although heavy rain fell duringJanuary and February, road improvements made during the dry season meant thatproduction continued throughout the rains but at lower levels than in morerecent quarters. The mining in the wet did however result in higher costs due tolower production and operating in less than ideal conditions. Processing Processing initiatives such as the two new CCDs and the increased electricalcurrent flow implemented after the first quarter 2004 have meant that copperproduction has increased 23% from Q1 2004 to 11,963 tonnes. Q4 2004 productionwas lower than Q1 2005 due to non-recurring production related matters in 2004. Cash costs (C1) for the quarter were $0.60 per pound (Q1 04: $0.39) and totalcosts (C3) were $0.77 per pound (Q1 04: $0.53). Cash costs (C1) have increasedprincipally due to the higher acid consumption as a result of dolomite containedin the ore processed. Compared with Q4 2004 acid costs per pound of copperproduced are up $0.06 and the acid credit is down $0.03 per pound. This coupledwith a $0.02 increase in ore costs due to the increased mining costs explainsthe majority of the increase in C costs from Q4 2004. Kansanshi Copper-Gold Operation Mining During the quarter, 2,120,000 tonnes of ore (Q4 04: 1,346,000) and 1,651,000tonnes of waste (Q4 04: 2,857,000) had been mined. Consistent with the Lonshimining operations, heavy rain fell during January and early February, althoughmining continued when access to the pit permitted. As with other miningoperations around the world, the shortage of mining truck tyres is provingproblematic, with up to 50% of the 100 tonnes trucks being unavailable due tothe lack of tyres. The company is presently working at minimizing the impact ofthe ongoing tyre shortage by investing in smaller size vehicles that wouldreduce the dependency on the Euclids. Processing: For the quarter, copper production increased to 6,328 tonnes including 5,810tonnes of copper in concentrate and 518 tonnes of copper cathode. Due to thephased start-up and commissioning at Kansanshi the sulphide circuit was runningat commercial levels during the quarter but as the oxide circuit had not reachedcommercial production the costs and revenue associated with all productioncontinue to be deferred. Commercial production for reporting purposes wasreached in April 2005. Acid production at Solwezi was 22,329 tonnes, of which 4,429 tonnes was consumedinternally and 8,365 tonnes were transferred to the Bwana/ Lonshi operation.8,851 tonnes were sold externally but as the rest of the plant had not reachedcommercial production, the revenues were charged against pre-production costs. Guelb Moghrein Copper-Gold Deposit Guelb is located 250 kilometres northeast of the nation's capital, Nouakchott,near the town of Akjoujt in Mauritania. It consists of an open pit mineable,copper/gold deposit. In January 2005, the detailed design and engineeringcontract was awarded with site establishment commencing in March 2005. Thecompany expects to develop Guelb in 2005 with production start-up expected inthe fourth quarter of 2005. Production will be initially targeted atapproximately 30,000 tonnes of copper and 50,000 ounces of gold per year in theform of a copper-gold concentrate which will be trucked to the port ofNouakchott and exported to international smelters. As at March 31, 2005, the company had capitalized acquisition and developmentcosts totaling $13.8 million (2004: $10.3m). Of the capitalized amount $7.5million relates to the discounted value of two future acquisition payments whichare due to be paid in 2005 and 2006 respectively. Frontier Copper Deposit, In May 2004, First Quantum announced the results of an independent copper-cobaltresource estimate completed at its wholly owned Frontier Project located in HautKatanga Province, Democratic Republic of Congo (DRC). As at March 31, 2005 aproject engineering study is substantially complete and a final report isexpected in the second quarter of 2005. As at March 31, 2005, the company had spent $4.2 million (2004: $3.7m) on thisproject. Geological work is continuing with a further 2000 new soil samplesbeing taken to expand the geochemical database. An updated resource is expectedto be published in Q2 2005. Work is ongoing on an environmental impactassessment at Frontier as well as considering aspects such as power supply. Kashime Copper Prospect In December 2004, the company announced the results of a reverse circulationdrill program completed at the Kashime copper prospect (Kashime).Mineralization at Kashime occurs as disseminated to semi massive bornite andchalcopyrite, oxidized in part, and is hosted by an altered, schistose,carbonaceous sandstone unit overlain by a barren hanging wall dolomitic marble.The mineralized unit dips southwards at 10 - 20 degrees, and depth of oxidationis controlled by proximity to faulting. The drill program tested the mostanomalous 1000 metre long section of a 2000 metre long, +300 parts per millioncopper soil anomaly. Highlights from the 13 hole drill program included 56metres grading 2.08% copper; 55 metres grading 1.20% copper and 101 metersgrading 0.92% copper. Follow up drilling to further test the prospect isplanned for 2005. As at March 31, 2005, no costs associated with this exploration property hadbeen deferred. During the quarter, 14 core holes were drilled over a strike ofapproximately 4,000 metres, results are pending. The company currently has twodrill rigs operating at Kashime. Investments -Carlisa The Company holds an 18.8% interest in Carlisa Investment Corporation (Carlisa),which holds a 90% interest in Mopani Copper Mines Plc (Mopani). Mopani is apublic company registered in Zambia. The carrying value of this investment asat March 31, 2005 is $9.5 million (2004: $9.5m; 2003: $9.5m). In 2004, Mopaniincreased its finished copper production to approximately 160,000 tonnes from134,000 tonnes and cobalt production rose marginally to 2,000 tonnes. Investments -Anvil On February 28, 2005 the Company disposed of all of its 4,029,617 common sharesin Anvil at a net price of CA$6.75 per share. In the first quarter of 2005, theCompany recognized a gain of approximately $16.1 million on the Anvil Sale. The36,996,171 ordinary shares that were previously listed on the ASX were convertedinto 3,699,617 common shares of Anvil and re-registered on the TSX. The Companycontinues to hold 296,631 warrants in Anvil at an exercise price of CA$1.13. Outlook In the second quarter of 2005, with commercial production at Kansanshi achievedin April 2005, the income statement will benefit from the revenues associatedwith production that are no longer being capitalized. It is anticipated thatunit costs in the short term, will be higher than those indicated in the ARCameron Report as the plant gradually works up to full design capacity. Fromthe date of commercial production, April 19 to April 30, approximately 958tonnes of contained copper in concentrate had been produced and 1,100 tonnes ofcopper cathode. In addition, a $29 million capital program in 2005 will expand the sulphidecircuit again to eight million tonnes of treatment capacity which will result inan average of 145,000 tonnes of finished copper production per year during2006-2009. An additional expansion of the sulphide circuit is also underconsideration to increase the sulphide treatment capacity to 12 million tonnesof sulphide ore to maintain annual finished copper production of 145,000 tonnesas oxide ore is depleted and sulphide ore grades begin to fall. First Quantum has also been investigating alternative processing routes for aportion of the increased copper concentrate production. To this end, theCompany has purchased a complete "second-hand" pressure oxidation facility. Thepressure oxidation facility is currently being dismantled and over the nextseveral months will be transported to Kansanshi. Once on site, the pressureoxidation facility and ancillary equipment will be reconstructed andcommissioned for use. An additional advantage of this technology at Kansanshiis that it will generate much of the acid required for oxide leaching. It willalso enable the leach circuit to operate at elevated temperatures and hencesubstantially improve copper recovery in mixed ores. A full report of theimpact of this process route is being prepared by independent consultants,Bateman Engineering Pty Ltd. With a strong start to the year the Bwana / Lonshi operation is currently ontrack to exceed its initial production estimates of between 40,000 to 45,000tonnes of copper cathode in 2005 with 11,963 tonnes of copper cathode alreadyproduced in the first quarter. C1 (cash) costs for the first quarter haveexceeded the expected range of between $0.50 and $0.55 per pound of finishedcopper due to the gangue acid consumption averaging 3.4:1 for the quarter. Forthe remainder of 2005 it is expected that the high gangue acid consumption willdecrease as ore is sourced from a different area of the Lonshi pit, this shouldimprove the C1 cost from the first quarter. In April, the Bwana/ Lonshioperation produced approximately 3,826 tonnes of copper cathode. At Guelb a National Instrument 43-101 compliant Reserve / Resource statement isexpected after the completion of some in-fill drilling in the second quarter of2005. A Project Engineering Report has been completed and the results areexpected to be published in the second quarter of 2005. The contracts for theplant engineering and construction have been awarded. Construction activitiesare underway. Guelb is expected to be financed through a combination of cash onhand, project debt and end user/supplier finance. At Frontier, the project engineering study is substantially complete. Thiscoupled with an updated resource / reserve statement is expected to be publishedin the second quarter of 2005. At the newly discovered Kashime prospectexploration drilling recommenced in February, 2005 and is ongoing. On Behalf of the Board of Directors 12g3-2b-82-4461of First Quantum Minerals Ltd. Listed in Standard and Poor's"G. Clive Newall" Sedar Profile #00006237G. Clive Newall For further information visit our web site at www.first-quantum.com United Kingdom contact: Clive Newall, President1st Floor, Mill House Mill Bay Lane Horsham West Sussex RH12 1TQ United Kingdom Tel: +44 140 327 3484 Fax: +44 140 327 3494 E-Mail: [email protected]. or Carina Corbett, 4C Communications Ltd, Tel: + 44 20 7907 4761 North American contact: Geoff Chater or Bill Iversen Suite 450-800 West Pender Street, Vancouver, British Columbia, Canada V6C 2V6 Tel: (604) 688-6577 Fax: (604) 688-3818 Toll Free: 1 (888) 688-6577 E-Mail: [email protected] SUMMARY OF QUARTERLY RESULTS 2005 2004 2004 2004 2004Statement of Operations and Deficit Q1 Q4 Q3 Q2 Q1(millions, except where indicated)Total Revenues $38.2 $30.7 $31.2 $26.3 $25.3Cost of Sales 16.2 14.5 14.1 13.1 12.1Net Earnings (Loss) 27.2 9.3 7.9 4.1 6.7Basic Earnings per share $0.44 $0.16 $0.13 $0.07 $0.11Diluted Earnings per share $0.43 $0.15 $0.13 $0.07 $0.11 Realized copper price $1.45 $1.20 $1.16 $1.11 $1.03Cash Costs (C1) $0.60 $0.48 $0.45 $0.48 $0.39Cash Costs (C3) $0.77 $0.59 $0.68 $0.67 $0.53 Financial Position (millions)Working Capital 61.4 33.9 51.8 28.0 40.2Total Assets 523.1 473.1 385.0 276.4 241.8Weighted Average # Shares (000's) 61,267 60,123 59,867 59,434 58,568 Bwana/Lonshi Production StatisticsMining:Waste Mined (000's) 2,596 2,926 4,213 2,854 1,036Ore Mined (000's) 152 261 257 85 66Ore Grade % 5.3 6.4 4.7 5.2 5.4 Processing:Ore Processed (000's) 264 256 278 237 209Contained Copper (tonnes) 13,804 12,824 12,908 10,813 10,904Grade % 5.2 5.0 4.6 4.6 5.2Recovery % 87 85 88 89 89Copper Produced (tonnes) 11,963 10,942 11,330 9,585 9,689Acid Produced (tonnes) 32,936 35,671 35,920 34,265 34,344Surplus Acid (tonnes) 49 9,664 16,884 19,149 20,763 Kansanshi Production StatisticsMining:Waste Mine (000's) 1,651 2,857 1,175 - -Ore Mined (000's) 2,120 1,346 - - -Ore Grade % 1.7 2.4 - - - Processing: - - - -Ore Processed (000's) 688 - - - -Contained Copper (tonnes) 11,541 - - - -Recovery % 55 - - - -Copper Produced (tonnes) 6,328 - - - -Acid Produced (tonnes) 22,339 - - - -Surplus Acid (tonnes) 8,851 - - - - Notes: C1 - costs are cash operating costs, including mining, processing, siteadministration and refining; net of by product credits. C3 - costs are total production costs, including mining, processing, siteadministration and refining; depreciation and amortization charges; royalties,related head office, interest costs and finance charges; net of by productcredits. Consolidated Balance SheetsAs at March 31, 2005 and December 31, 2004(expressed in thousands of US dollars)(unaudited) 2005 2004 $ $AssetsCurrent assetsCash and cash equivalents 78,989 50,356Restricted cash (note 8) 1,755 1,931Accounts receivable and prepaid expenses 21,620 21,927Inventory (note 4) 42,493 31,674 144,857 105,888Investments (note 5) 9,522 15,340Exploration properties 444 444Property, plant and equipment (note 6) 340,584 319,222Other assets and deferred charges (note 7) 27,702 32,167 523,109 473,061LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities 33,528 33,884Current taxes payable (note 9) 7,170 3,248Current portion of long-term debt (note 8) 30,391 22,865Current portion of other liabilities (note 10) 12,368 12,012 83,457 72,009Long-term debt (note 8) 207,204 191,661Asset retirement obligation 4,006 3,762Future income tax liability (note 9) 12,130 12,313Other liabilities (note 10) 30,603 33,286 337,400 313,031Minority interests 2,190 2,190 339,590 315,221Shareholders' EquityEquity accounts (note 11) 163,279 161,776Retained Earnings (Deficit) 20,240 (3,936) 183,519 157,840 523,109 473,061Commitments and contingencies (note 14) Approved by the Board of Directors Director Director The notes are an integral part of these consolidated financial statements. For a copy of the notes visit our website at www.first-quantum.com Consolidated Statements of Operations and DeficitFor three months ended March 31, 2005 and 2004(expressed in thousands of US dollars)(unaudited) Three months ended March 31, March 31, 2005 2004 $ $Revenues Copper 38,172 22,082 Acid 10 3,170 38,182 25,252 Costs and expensesCost of sales 16,166 12,091Depletion and amortization 3,905 2,332Exploration 1,012 377Foreign exchange (gain) loss (379) 129General and administrative 2,106 1,145Interest and financing fees on long-term debt 849 587Other Income (262) (256)Gain on disposal of investment (16,127) - 7,270 16,405 Earnings before income taxes and equity earnings 30,912 8,847Income Taxes (note 9) 3,736 2,614Equity earnings - 434 Net earnings for the period 27,176 6,667Deficit - Beginning of period (3,936) (31,946)Dividends declared (3,000) - Retained earnings (Deficit) - End of period 20,240 (25,279) Earnings per common shareBasic $0.44 $0.11Diluted $0.43 $0.11Weighted average number of shares outstanding 61,267 58,568(000's) The notes are an integral part of these consolidated financial statements. For a copy of the notes visit our website at www.first-quantum.com Consolidated Statements of Cash FlowsFor three months ended March 31, 2005 and 2004(expressed in thousands of US dollars)(unaudited) Three months ended March 31, March 31, 2005 2004 $ $ Cash flows from operating activities Net earnings for the period 27,176 6,667 Items not affecting cashDepletion and amortization 3,905 2,332Accretion 137 346Provision for deferred stripping 3,903 -Equity earnings - (434)Unrealized foreign exchange (gain) loss (126) 390Future income tax expense (recovery) (186) 2,614Stock-based compensation expense 654 186Other 406 44Gain on disposal of investment (16,127) - 19,742 12,145 Change in non-cash operating working capitalDecrease (increase) in accounts receivable and 8,590 (2,771)prepaid expenses(Increase) decrease in inventory (7,732) 355Increase (decrease) in accounts payable and accrued 2,330 (3,061)liabilities 22,930 6,668 Cash flows from financing activitiesMovement in restricted cash 176 -Proceeds from long-term debt 31,523 17,876Repayments of principal on long-term debt (5,308) (2,502)Proceeds from issue of common shares and warrants 849 43,325Payments for deferred premium obligation and finance (2,401) (1,330)fees 24,839 57,369 Cash flows from investing activitiesNet payments to acquire capital assets and (38,865) (34,993)investmentsPayments for deferred exploration and stripping costs (2,104) (1,164)Proceeds on disposal of investment 21,944 - (19,025) (36,157) Effect of exchange rate changes on cash (111) (494)Increase in cash and cash equivalents 28,744 27,880Cash and cash equivalents - Beginning of period 50,356 25,592Cash and cash equivalents - End of period 78,989 52,978 Segmented InformationFor three months ended March 31, 2005 and 2004(expressed in thousands of US dollars)(unaudited) For the three months ended March 31, 2005, segmented information is presented as follows: BLO KCO GMP CDA Total $ $ $ $ $ External Revenues 38,182 - - 38,182 Cost and ExpensesCost of Sales 16,166 - - - 16,166Depletion and amortization 3,859 - - 46 3,905Exploration 525 - - 487 1,012Foreign exchange loss (gain) (489) - - 110 (379)General and administrative - - - 2,106 2,106Interest and financing fees 849 - - - 849Other Income (49) (213) (262)Gain on Disposal - (16,127) (16,127) Total Cost and Expenses 20,861 - - (13,591) 7,270 Segment profit (loss) before 17,321 - - 13,591 30,912the under noted items Equity earnings - - - - Income Tax 3,736 - - - 3,736 Segment profit (loss) 13,585 - - 13,591 27,176 Property, Plant and 2,047 20,671 3,489 (62) 26,145equipment additions Total assets 185,134 348,025 14,793 204,027 751,979 Inter-company balancesincluded in total assets (62,131) - - (166,739) (228,870) Total consolidated assets 123,003 348,025 14,793 37,288 523,109 Definitions: BLO - Bwana / Lonshi Operation GMP - Guelb Moghrein Project KCO - Kansanshi Copper / Gold Operation CDA - Corporate Development and Administration which includes Frontier, Connemara and Carlisa Segmented InformationFor three months ended March 31, 2005 and 2004(expressed in thousands of US dollars)(unaudited) For the three months ended March 31, 2004, segmented information is presented as follows: BLO KCO GMP CDA Total $ $ $ $ $ External Revenues 25,252 - - - 25,252 Cost and ExpensesCost of Sales 12,091 - - - 12,091Depletion and amortization 2,296 - - 36 2,332Exploration 179 - - 198 377Foreign exchange loss (gain) (231) - - 360 129General and administrative - - - 1,145 1,145Interest and financing fees 577 - - 10 587Other income (7) - - (249) (256)Gain on disposal of investment - - - - Total Costs and Expenses 14,905 - - 1,500 16,405 Segment profit (loss) before the 10,347 - - (1,500) 8,847under noted items Equity earnings - - - 434 434Income Tax 2,614 - - - 2,614 Segment profit (loss) 7,733 - - (1,066) 6,667 Property, Plant and equipment 7,363 34,913 - 2,312 44,588additions Total assets 91,450 95,811 - 54,567 241,828Inter-company balances included in 19,656 - - 101,704 121,360total assets Total consolidated assets 111,106 95,811 - 156,271 363,188 Definitions: BLO - Bwana / Lonshi Operation GMP - Guelb Moghrein Project KCO - Kansanshi Copper / Gold Operation CDA - Corporate Development and Administration which includes Connemara This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
FQM.L