14th Nov 2006 08:01
First Quantum Minerals Ld14 November 2006 NEWS RELEASE 06-23 November 14, 2006 www.first-quantum.com FIRST QUANTUM MINERALS REPORTS OPERATIONAL AND FINANCIAL RESULTS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 (All figures expressed in US dollars) First Quantum Minerals Ltd. (the "Company") (TSE Symbol "FM", LSE Symbol "FQM")is pleased to announce its results for the three months and nine months endedSeptember 30, 2006. The complete financial statements and management discussionand analysis are available for review at www.first-quantum.com and should beread in conjunction with this news release. Highlights - Third Quarter, 2006 • Net earnings of $139.2 million ($2.09 per share), a net earning'sincrease of 253% compared to the third quarter of 2005 • Cash flow from operating activities, before working capital movements,of $185.5 million ($2.78 per share), an increase of 129% compared to the thirdquarter of 2005 • Copper production of 44,403 tonnes (97.9 million pounds), an increaseof 23% compared to the third quarter of 2005 • The Company's Board of Directors approved the Frontier Copper Project;construction is well advanced; commercial production targeted for third quarterof 2007 • Adastra Minerals Inc. became a wholly-owned subsidiary in August 2006 Subsequent Events • Guelb Moghrein in Mauritania achieved commercial production on October5, 2006 • New $400 million corporate credit facility entered into with asyndicate of international banks in October 2006 • High pressure leach project at Kansanshi nearing completion withcommencement of commissioning Financial Results (see attached financial statements) Three months Third quarter revenues totaled $328.4 million, which included copper revenues of$323.2 million ($223.9 million at Kansanshi and $99.3 million at Bwana/Lonshi)and gold revenues of $5.1 million. This was an increase of 130% over the sameperiod in 2005, resulting from an increase in both copper production and therealized copper price. The realized copper price was $3.17 per pound compared to $1.58 per pound duringthe same period in 2005. The average LME cash copper price for the thirdquarter was $3.48 per pound as compared to $1.71 per pound during the sameperiod in 2005. The gross copper selling price achieved for the quarter was$3.49 per pound, excluding tolling and refining costs ("TC RCs") and freightparity charges of $0.32 Certain copper sales are subject to provisional pricing with settlement datesthat range between October 2006 and May 2007. As at September 30, 2006 therewere 42,346 tonnes of contained copper that have been provisionally priced at anaverage LME copper price of $3.43 per pound, which was equal to $320.3 millionworth of gross revenue (before realization charges). This revenue was subjectto future adjustments as a result of changes in the copper price. Of thisamount, 13,001 tonnes has had the final price determined in October 2006, and13,631 tonnes will have the final price determined in November 2006, 6,625tonnes in December 2006, and 9,089 tonnes thereafter. The average LME copperprice for October 2006 was $3.40 per pound. Copper production was 44,403 tonnes in the third quarter. This productioncomprised 31,101 tonnes from Kansanshi (20,241 tonnes of cathode and 10,860tonnes of concentrate) and 13,302 tonnes from Bwana/Lonshi. The combinedproduction increased 23% over the same period in 2005, primarily resulting froman increase in the tonnes of ore processed at Kansanshi in the third quarter. During the third quarter, the Company sold 46,227 tonnes of copper (33,171tonnes of copper cathode and 13,056 tonnes of copper contained in concentrate)compared to 39,864 tonnes of copper in the same period in 2005, an increase of16%. Gold revenues for the quarter totalled $5.1 million. The average realized goldprice for the quarter was $581 per ounce compared to the average market goldprice of $622 per ounce. Third quarter 2006 group cash costs and total costs were $0.90 per pound and$1.13 per pound, respectively, compared with $0.64 per pound and $0.87 per poundfor the same period in 2005. The increase in cash costs were attributable toincreases in TC RCs and freight parity charges of $0.11 per pound and processingcosts of $0.15 per pound. Copper in concentrate and cathode production fromtoll treatment increased over the same period in 2005 resulting in increased TCRCs and freight parity costs. In addition, price participation related tocopper in concentrate sales increased due to the increase in the copper price. The operating cash inflow for the third quarter, before working capitalmovements, was $185.5 million or $2.78 per share and after working capitalmovements was $133.5 million or $2.00 per share. Net earnings for the third quarter were $139.2 million or $2.09 per share(weighted average common shares - 66,615,227) as compared to $39.5 million or$0.64 per share (weighted average common shares - 61,583,432) during the sameperiod in 2005. This increase was a direct result of the higher copperproduction of the Company and the increased average LME cash copper price. Nine Months The nine month's revenues totalled $878.1 million, which included copperrevenues of $861.9 million ($596.1 million at Kansanshi and $265.8 million atBwana/Lonshi) and gold revenues of $15.8 million. This was an increase of 232%over the same period in 2005, resulting from an increase in both copperproduction and the realized copper price. The realized copper price was $3.01 per pound as compared to $1.50 per poundduring the same period in 2005. The average LME cash copper price for the ninemonths was $3.00 per pound as compared to $1.58 per pound during the same periodin 2005. Excluding TC RCs and freight parity charges of $0.29, the gross copperselling price achieved for the period was $3.30 per pound. The nine month's copper production was 133,821 tonnes. This productioncomprised of 95,232 tonnes from Kansanshi (54,724 tonnes of cathode and 40,508tonnes of concentrate) and 38,589 tonnes from Bwana/Lonshi. The combinedproduction increased 74% over the same period in 2005, which was primarily dueto Kansanshi achieving commercial production in April 2005 and an increase inthe tonnes of ore processed at Kansanshi in 2006. The Company sold 129,793 tonnes of copper (92,926 tonnes of copper cathode and36,867 tonnes of contained copper in concentrate) as compared to 78,399 tonnesof copper in the same period in 2005, resulting from the increase in copperproduction of 74%. Gold revenues for the nine months totalled $15.8 million. The average realizedgold price for the period was $594 per ounce compared to the average market goldprice of $601 per ounce. Nine month group cash costs and total costs were $0.86 per pound and $1.08 perpound, respectively, compared with $0.62 per pound and $0.83 per pound for thesame period in 2005. Mining costs remained relatively constant over the past eight quarters. Processing costs increased over the past two quarters due to higher maintenancecosts associated with the hardness of the ore at Kansanshi. In addition,increases in costs principally associated with oil based consumables,electricity, sulphur, wages and unfavourable local exchange rate movements allcontributed to the increased processing costs over the past five quarters. TC RCs and freight parity charges increased over the last eight quarters as theywere directly related to the increased copper concentrate sold and cathodeproduction from tolled concentrates. The percentage of copper in concentrateand tolled cathode production, as a percentage of total production, increased by13%. In addition, the price participation component of the TC RCs increasedwith the rising LME copper price, which increased 126% since the Company beganproducing copper in concentrates at Kansanshi. The operating cash inflow for the nine month period, before working capitalmovements, was $503.2 million or $7.82 per share and after working capitalmovements was $365.6 million or $5.68 per share. Net earnings for the nine month period were $344.4 million or $5.35 per share(weighted average common shares - 64,346,542) as compared to $95.7 million or$1.56 per share (weighted average common shares - 61,451,054) during the sameperiod in 2005. This increase was principally due to the increased copperproduction of the Company and the increase in the average LME cash copper price. Kansanshi Three Months During the third quarter, approximately 3,220,000 tonnes of ore andapproximately 6,683,000 tonnes of waste were mined. The total material minedincreased 29% over the same period in 2005. This increase was attributable tothe improvement in the availability of haul trucks and excavators, the arrivalof additional trucks, and additional artisan workers. Training facilities atthe mine have been upgraded and there was also a ramp-up of on-the-job operatortraining on site. Major haul roads have been upgraded and re-surfaced withsuitable material to make them close to all-weather. The affect of rain onproduction is therefore expected to be less significant this year. During the third quarter, Kansanshi produced 31,101 tonnes of copper, whichconsisted of 20,241 tonnes of copper cathode and 10,860 tonnes of copper inconcentrate. The combined cash cost for both copper concentrate and cathode was$0.95 per pound with a total cost of $1.17 per pound. Copper cathode production of 20,241 tonnes had a cash cost of $0.79 per poundand a total cost of $1.00 per pound. Included within the cathode productionwere 17,205 tonnes from the SX/EW process and 3,036 tonnes produced from thetolling of copper concentrates at the Mufulira smelter. Production increased41% over the same period in 2005. 21% of this increase was due to tolledconcentrate production and the balance was related to an increase in the tonnesof ore processed, as Kansanshi continued to ramp up production through betterefficiencies since achieving commercial production in the second quarter of2005. Cathode total costs are higher than the same period in 2005 by $0.27 per pound.Ore costs increased by $0.08 per pound due to the processing of lower grade oreand higher fuel and wage costs, which also resulted in higher leach costs of$0.03 per pound. Also, as a result of toll treated copper in concentrates atthe Mufulira smelter returned as cathode, toll treatment charges accounted for$0.08 per pound, net of the gold credit associated with copper in concentrates.The balance of the increase is explained by increased processing costs due tohigher maintenance costs associated with the processing of higher volumes ofharder ore. Copper in concentrate production of 10,860 tonnes had a cash cost of $1.25 perpound and a total cost of $1.49 per pound. Production was up 60% over the sameperiod in 2005 due to an increase in the tonnes of ore processed, as Kansanshihas continued to ramp up production through better efficiencies since achievingcommercial production in the second quarter of 2005. Concentrate total costs were higher than the same period in 2005 by $0.59 perpound. TC RCs and freight parity charges contributed $0.25 per pound of thisincrease, which was primarily due to price participation as a result of theincreased copper price compared to the same period in 2005. Ore costs increasedby $0.10 per pound due to the processing of lower grade ore and higher fuel andwage costs. The balance of the increase is explained by increased processingcosts due to higher maintenance costs associated with the processing of highervolumes of harder ore. Nine Months For the nine month period, approximately 7,154,000 tonnes of ore and 14,787,000tonnes of waste were mined. During the nine month period of 2005, the worldshortage of mining truck tires had impaired the availability of the Company'shaul trucks at Solwezi. The 31% increase this year compared with the sameperiod in 2005 was reflective of the easing of the tire shortages, accompaniedby the improved equipment availability and the larger haul truck fleet. For the nine month period, Kansanshi produced 95,232 tonnes of copper, whichconsisted of 54,724 tonnes of copper cathode and 40,508 tonnes of copper inconcentrate. The combined cash cost for both copper in concentrate and cathodewas $0.89 per pound with a total cost of $1.07 per pound. Copper cathode production of 54,724 tonnes had a cash cost of $0.72 per poundand a total cost of $0.90 per pound. Included within the cathode productionwere 50,502 tonnes from the SX/EW process and 4,222 tonnes produced from thetolling of copper in concentrate at the Mufulira smelter. Production increasedby 136% over the same period in 2005 as Kansanshi continued to ramp up afterachieving commercial production during April 2005, as well as, cathodeproduction from the toll treatment of concentrate production commenced in 2006. Cathode total costs were higher than the same period in 2005 by $0.14 per pound. Ore costs increased by $0.04 per pound due to the processing of lower gradeore and higher fuel and wage costs, which also resulted in higher leach costs of$0.03 per pound. Also, as a result of toll treating copper in concentrates atthe Mufulira smelter, toll treatment charges accounted for $0.04 per pound, netof the gold credit associated with copper in concentrates. The balance of theincrease is explained by increased processing costs due to higher maintenancecosts associated with the processing of higher volumes of harder ore. Copper in concentrate production of 40,508 tonnes had a cash cost of $1.14 perpound and a total cost of $1.32 per pound. Concentrate production was up 166%over the same period in 2005 due to Kansanshi achieving commercial production inApril 2005. Concentrate total costs are higher than the same period in 2005 by $0.46 perpound. TC RCs and freight parity charges contributed $0.36 per pound of thisincrease, which was primarily due to price participation as a result of theincreased copper price compared to the same period in 2005. Ore costs increasedby $0.05 per pound due to the processing of lower grade ore and higher fuel andwage costs. The balance of the increase is explained by increased processingcosts due to higher maintenance costs associated with the processing of highervolumes of harder ore. Bwana/Lonshi Three months During the third quarter, approximately 110,000 tonnes of ore and approximately5,915,000 tonnes of waste were mined from Lonshi. The strip ratio for thequarter was 53:1. Total material mined increased 20% over the same period of2005, principally due to the larger mining fleet operating at Lonshi. Althoughthe total material mined has increased, the portion of ore decreased 63%, due tothe mining of waste in the North pushback and increased drill and blast in thepit. Notwithstanding this, copper production has been maintained as a result ofthe significant increase in the grade of ore mined from an average of 4.3% to11.9%. This high grade ore was blended with low grade ore, previouslystockpiled at Lonshi, to bring the processed ore grade down to approximately4.7%. During the third quarter, Bwana produced 13,302 tonnes of copper cathode at acash cost of $0.74 per pound and total cost of $1.00 per pound of copper.Production remained comparable with the same period in 2005. In addition, totalcosts and cash costs remained comparable. However, ore costs decreased in thethird quarter of 2006 by $0.11 per pound compared to the same period in 2005 asBwana processed higher grade ore during the third quarter of 2006. This hasbeen offset by an increase in processing costs principally due to increased oilbased consumables, sulphur, and electricity costs. Nine Months For the nine month period, approximately 440,000 tonnes of ore and approximately14,762,000 tonnes of waste were mined from Lonshi. The strip ratio for the ninemonths was 33:1. The mined ore grade was 10.3% copper. The decrease in oremined from the same period in 2005 was due to the increased stripping. Theincrease in total material mined from 2005 is principally attributable to thelarger mining fleet that was established during the course of 2005. For the nine month period, Bwana produced 38,589 tonnes of copper cathode at acash cost of $0.77 per pound and total cost of $1.05 per pound. Productionincreased 5% over the same period in 2005 as Bwana processed more ore at ahigher grade in 2006. Cash costs were higher than the comparable period of 2005 by $0.14 per pound.Ore costs contributed $0.06 per pound of this increase as they have beenimpacted by increased fuel costs, and the higher strip ratio at Lonshi.Processing costs increased $0.05 per pound, also, as a result of increased oilbased consumables and sulphur costs. Other administrative costs account for thebalance of the increase, including increased royalty charges related to theincreased copper price. Guelb Moghrein Copper-Gold Deposit, Mauritania Three Months Concentrate production commenced during the third quarter and commercialproduction was achieved on October 5, 2006. The Company remains unable torelease detailed information on Guelb Moghrein as the historical resourcestatement is not compliant with National Instrument 43-101. During the third quarter, approximately 179,000 tonnes of sulphide ore and1,649,000 tonnes of waste were mined. Guelb Moghrein produced 2,514 tonnes ofcopper in concentrate during the third quarter, which has been inventoried as atSeptember 30, 2006. Nine Months For the nine month period, approximately 364,000 tonnes of sulphide ore and4,526,000 tonnes of waste were mined. Since the commencement of copperproduction, Guelb Moghrein produced 2,514 tonnes of copper in concentrate duringthe nine month period, which has been inventoried as at September 30, 2006. Frontier Copper Deposit, DRC In May 2004, the Company announced the results of an independent copper-cobaltresource estimate completed at the Frontier project located in Haut KatangaProvince, DRC. In January 2006, the Frontier Environmental Impact Assessmentand Environmental Management Plan were formally approved by the CongoleseMinistry of Mines and the Exploitation Permit was granted in February 2006. In November 2006, the Company announced details of the construction of a $226million facility producing an average of 73,000 tonnes of copper in concentrateper year over a mine life of 19 years and an updated resource estimate. Totalcosts including TC RCs and freight parity charges are expected to be $1.04 perpound of finished copper. Construction activities began in April of 2006 andcommercial production is forecast to begin in the third quarter of 2007. As at September 30, 2006, the Company had capitalized $62.2 million (2005:$9.9m) in development costs, civil construction and plant construction anddesign for Frontier. Kashime Copper Prospect, Zambia A preliminary inferred oxide resource has been completed by independentconsultants and in February 2006, a program of combined reverse circulation anddiamond drilling was initiated to improve definition. Oxide resource drillingcomprising totals of 9,100 metres of core drilling and 6,500 metres of reversecirculation was completed in July and assay results for acid soluble copper arestill being received. A re-run of the oxide resource estimation will commence assoon as all assay data has been received and validated to determine theeconomics of this project. During the nine months ended September 30, 2006, the Company expensed $2.0million related to the Kashime Copper Prospect. As at September 30, 2006, nocosts associated with this exploration property have been deferred. Kibamba Copper Prospect, Zambia On March 27, 2006, the Company announced a new discovery at its Kibamba copperprospect in the DRC. Drilling is ongoing and the results will be released indue course. Investments -Carlisa The Company holds an 18.8% interest in Carlisa Investment Corp. ("Carlisa"),which holds a 90% interest in Mopani. The carrying value of this investment asat September 30, 2006 was $9.5 million, unchanged since 2002. For the firstnine months of 2006, Mopani produced approximately 110,700 tonnes of finishedcopper and 1,100 tonnes of cobalt. Mopani is currently carrying out importantcapital upgrades at the mine including the construction of a new smelter atMufulira, which will increase its handling capacity from 420,000 tonnes toinitially 720,000 tonnes of copper concentrate per year and eventually 850,000tonnes of copper concentrate per year. The smelter began commissioning inSeptember and is expected be fully operational in December 2006. The Mufulirasmelter will provide smelting offtake for all Kansanshi and Frontierconcentrates. As at December 31, 2005, Mopani had total assets of over $700.0million. As the majority owner of Mopani is a private company not registered inZambia, only limited public information is available. Adastra Acquisition The Company acquired 100% of Adastra in a two step transaction. Adastra is aninternational mining company with its principal asset being the KolweziCopper-Cobalt Tailings Project in the DRC. On May 1, 2006, the Company acquired75% of the outstanding shares of Adastra and has therefore consolidatedAdastra's operating results since May 1, 2006. On August 11, 2006, the Companywas deemed to have acquired the remaining 25% of the outstanding shares ofAdastra. Outlook Production Forecast On a group basis, based on production volumes achieved during the first ninemonth period of 2006, as well as, the current challenging ore characteristics atKansanshi and the status of production ramp up at Guelb Moghrein, the Companyexpects to produce approximately 180,000 tonnes of copper in 2006, which is anincrease of 51% over 2005 financial year's copper production. This expectedproduction includes 125,000 tonnes from Kansanshi, 50,000 tonnes from Bwana/Lonshi, and 5,000 tonnes from Guelb Moghrein. Group cash costs are expected tobe in the range of $0.85 to $0.90 per pound for 2006 Kansanshi During October, Kansanshi produced approximately 11,000 tonnes of copper, whichincluded 6,000 tonnes of copper cathode and 5,000 tonnes of copper inconcentrate. Name plate treatment capacity at Kansanshi currently stands ateight million tonnes of sulphide ore per year, with oxide treatment capacity atfour million tonnes per year. A combination of ore hardness and lower grade orewill likely restrict copper output at Kansanshi for the remainder of 2006.Additional mining equipment has arrived at Kansanshi over recent months toaccelerate stripping and open additional working faces in the open pit. Thiswill result in greater capacity and flexibility to deliver ore to the plant.Until the plant begins to receive more amenable, higher grade ore, copper outputis expected to be an average of approximately 9,000 tonnes of copper per month,which includes 5,000 tonnes of copper cathode and 4,000 tonnes of copper inconcentrate. In September, the Board of Directors committed to bring forwardthe 2011 four million tonne sulphide circuit expansion. This will increasesulphide throughput to 12 million tonnes per year beginning in 2008 and assistin treating the harder ore expected over the next few years. The expansion willresult in increases in copper production from 2008 onwards. The total capitalcost for the throughput expansion is expected to be approximately $60 million. During the third quarter, cash costs at Kansanshi were higher than forecast.Cash costs for copper in concentrate have been impacted by smelter priceparticipation for both copper sold in the third quarter, as well as, copperprovisionally priced in previous periods. Cash costs are expected to improvewhen the Mufulira smelter begins processing all Kansanshi's concentrate as TC RCterms are based on annual benchmarks and the freight charges will besubstantially reduced. The expanded Mufulira smelter is expected to beproducing at design capacity by the end of 2006. Price participation on refining costs only impacts the cash costs forconcentrate. For 2006, every dollar increase in the copper price above $0.90 perpound, $0.10 per pound will be added to the cash cost, or approximately $0.05per pound to the combined cash costs at Kansanshi (assuming a 50/50 splitbetween cathode and concentrate production). Kansanshi cash costs for 2006 are forecast in the range of $0.90 to $0.95 perpound of copper. As of September 30, 2006, due to the continued lack of smelter capacity on theZambian Copperbelt, the Company had stockpiled approximately 7,000 tonnes ofcontained copper in concentrates. The stockpile will be reduced once Mopani'sMufulira smelter expansion reaches full capacity. At Kansanshi, the Company is investing in a high pressure leach ("HPL") facilityto treat a portion of the increased copper concentrate production. The maincomponents of the HPL facility are two autoclaves, an oxygen plant and anadditional 35,000 tonne per annum solvent extraction and electrowinning ("SX/EW") facility. The HPL facility is in various stages of commissioning. The newSX/EW facility has been commissioned and is currently in use. The coolingtowers have been water commissioned and are ready to be put into operation. Theoxygen plant is at an advanced stage of commissioning, with pressure testingcompleted. The upgrade works associated with the autoclaves has been completed,and the final piping connections to the autoclaves are currently in progress.The autoclaves are currently undergoing water testing, and commissioning of themany instrumentation processes is in progress. Commissioning of the autoclavesis expected to commence by early December. The total HPL capital cost isbudgeted at $100 million including an upgrade to the Zesco power supply toKansanshi and working capital requirements. Bwana/Lonshi During October 2006, Bwana/Lonshi produced approximately 4,500 tonnes of coppercathode. Cash costs for 2006 are forecast in the range of $0.75 to $0.80 perpound of copper. The Company continues to assess the alternative and mostbeneficial uses for the Bwana processing plant after the Lonshi ore has beenexhausted in late 2008. The Company has and will continue to process externalore purchased from third parties, to exploit the full production capacity atBwana. Guelb Moghrein At Guelb Moghrein, the first copper in concentrate was produced in July.Management has determined that commercial production (i.e. 65% of designcapacity) was achieved on October 5, 2006. The process plant is currentlyproducing at a rate of approximately 1,650 tonnes of copper in concentrate permonth versus a design output of 2,500 tonnes of copper in concentrate per month. Copper production has not yet reached design output due to the delay in thecommissioning of the No. 1 SAG mill. Current gold production is approximately2,800 ounces per month which is 52% of design output. Gold production willincrease in step with increased copper concentrate volumes and gold recoverywill increase with the final commissioning of the carbon-in-leach (CIL) goldplant. The Company remains unable to release detailed information on GuelbMoghrein as the historical resource statement is not compliant with NationalInstrument 43-101. Frontier At Frontier, construction is underway in both Zambia and the DRC after Boardapproval. Progress at the Frontier site continues with the plant andinfrastructural earthworks substantially complete on both sides of the border.Civil construction is at an advanced stage prior to the wet season, which willallow construction to continue unimpeded during the rains. Significant progresshas been made on buildings and workshops as well as the construction camp whichis complete and operational as is the border infrastructure which has beenhanded over to government authorities. The contract for the installation of the220kV power line and substation in Zambia has been awarded. The contractors aremobilizing to move on site. The mining pre-strip fleet is partially deliveredand commissioned which has allowed the pre-strip to start on schedule inSeptember. Currently, the majority of the overburden is good quality laterite,which is being used in the plant construction obviating the need for additionallaterite mining for construction and road building. The pre-strip is on targetto expose enough ore by July 2007 to allow full capacity at the mill. The oxidematerial, although it is to be mined as waste, will be stockpiled separately forpotential future treatment or sale. Kolwezi and Other At the Kolwezi copper-cobalt project in the DRC, the Company conducted ametallurgical test work and piloting program for revised process engineering.The Company is considering when to commence construction of a copper-cobaltfacility at Kolwezi in 2007. A large exploration program was carried out between May and October this yearwith several drilling programs targeting prospects identified in 2005 includingKashime and Kibamba. Results of this program will be published when they arereceived. In October 2006, the Company executed final documentation for a $400 millioncorporate revolving term credit facility that will be used to restructure theCompany's existing project based debt, provide financing for the Frontierproject and provide a revolving facility to be used for general purposes.Subsequent to September 30, 2006, the Company drew down the first $225.0 millionof the new corporate facility and repaid all of the Company's credit facilities,except for the subordinated Kansanshi EIB and Glencore International AGfacilities. 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 North American contact: Geoff Chater or Bill Iversen 8th Floor, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8 Tel: (604) 688-6577 Fax: (604) 688-3818 Toll Free: 1 (888) 688-6577 E-Mail: [email protected] 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-Burvale, Tel: + 44 20 7907 4761 The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. Certain information contained in this news release "forward-looking statements"within the meaning of the Private Securities Litigation Reform Act of 1995 andforward-looking information under applicable Canadian securities legislation.Such forward-looking statements or information, including but not limited tothose with respect to the prices of gold, copper, cobalt and sulphuric acid,estimated future production, estimated costs of future production, the Company'shedging policy and permitting time lines, involve known and unknown risks,uncertainties, and other factors which may cause the actual results, performanceor achievements of the Company to be materially different from any futureresults, performance or achievements expressed or implied by suchforward-looking statements or information. Such factors include, among others,the actual prices of copper, gold, cobalt and sulphuric acid, the factualresults of current exploration, development and mining activities, changes inproject parameters as plans continue to be evaluated, as well as those factorsdisclosed in the Company's documents filed from time to time with the Alberta,British Columbia, and Ontario Securities Commissions, the Autorite des marchesfinanciers in Quebec, the United States Securities and Exchange Commission andthe Alternative Investment Market operated by the London Stock Exchange. The preceding discussion and analysis and financial review should be read inconjunction with management's discussion of critical accounting policies, riskfactors and comments regarding forward looking statements contained in theunaudited consolidated financial statements for the period ended September 30,2006. The discussion and analysis of the Company's results of operations shouldalso be read in conjunction with the audited consolidated financial statementsand related notes. Summary of Quarterly Results (unaudited) 2004 2005 2005 2005 2005 2006 2006 2006 Statement of Operations and Retained Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Earnings (millions, except where indicated) Total revenues $30.7 $38.2 $86.5 $143.0 $176.9 $187.2 $362.5 $328.4 Cost of sales 14.5 16.2 35.0 53.8 46.9 54.5 63.5 72.5 Net earnings 9.3 27.2 29.0 39.5 57.1 54.8 150.5 139.2 Basic earnings per share $0.16 $0.44 $0.47 $0.64 $0.93 $0.89 $2.33 $2.09 Diluted earnings per share $0.15 $0.43 $0.46 $0.63 $0.90 $0.86 $2.28 $2.05 Gross copper selling price (per lb) $1.23 $1.47 $1.53 $1.77 $2.09 $2.50 $3.77 $3.49 Realized copper price (per lb) $1.20 $1.44 $1.42 $1.58 $1.97 $2.26 $3.44 $3.17 Average LME cash copper price (per lb) $1.40 $1.44 $1.54 $1.71 $1.95 $2.24 $3.29 $3.48 Realized gold price (per oz) - - $427 $482 $467 $563 $631 $581 Average gold price (per oz) $434 $427 $427 $440 $485 $554 $627 $622 Total copper sold (tonnes)(2) 10,872 12,000 26,535 39,864 40,203 36,635 46,930 46,227 Total copper produced (tonnes) (3) 10,942 12,028 28,673 36,196 42,220 41,265 48,153 44,403 Total gold sold (ounces) - - 1,370 7,130 5,766 8,079 9,611 8,864 Cash Costs (C1) (per lb) (1) $0.48 $0.58 $0.60 $0.64 $0.71 $0.81 $0.87 $0.90 Total Costs (C3) (per lb) (1) $0.59 $0.75 $0.80 $0.87 $0.89 $1.01 $1.07 $1.13 Financial Position (millions) Working capital $33.9 $61.4 $47.1 $32.2 $76.2 $102.0 $234.6 $290.9 Total assets $473.1 $523.1 $561.9 $641.5 $746.5 $842.4 $1,401.2 $1,584.5 Weighted average # shares (000's) 60,942 61,267 61,499 61,583 61,639 61,808 64,564 66,615 Cash Flows from (millions) Operating activities Before working capital movements $9.8 $19.7 $43.0 $81.1 $101.0 $105.7 $215.2 $185.5 After working capital movements 2.9 22.9 2.3 69.8 115.5 84.6 150.6 133.5 Financing activities 49.0 24.8 (22.8) (5.1) (1.6) (17.7) 27.1 (41.7) Investing activities (52.5) (19.0) (2.3) (57.8) (94.4) (42.4) (94.6) (92.4) Cash Flows from Operating activities per share(3) Before working capital movements 0.16 0.32 0.70 1.32 1.64 1.71 3.33 2.78 After working capital movements 0.05 0.37 0.04 1.13 1.87 1.37 2.33 2.00 Kansanshi Production Statistics Mining: Waste mined (000's tonnes) 2,857 1,651 3,185 6,064 5,240 2,588 5,516 6,683 Ore mined (000's tonnes) 1,346 2,119 2,050 1,621 1,499 1,382 2,552 3,220 Ore grade (%) 2.4 1.7 2.0 2.0 1.9 1.7 1.4 1.4 Processing: Sulphide Ore processed (000's tonnes) - - 434 507 580 782 1,140 1,277 (3) Oxide Ore processed (000's tonnes) (3) - - 696 955 1,039 1,044 1,246 1,401 Contained copper (tonnes) (3) - - 19,917 27,510 30,934 32,213 36,981 32,882 Sulphide ore grade processed (%) - - 2.0 2.0 2.0 1.9 1.6 1.2 Oxide ore grade processed (%) - - 1.8 1.8 1.9 1.7 1.5 1.2 Recovery (3) (%) - - 86 84 96 92 94 95 Copper cathode produced (tonnes) (3) - - 8,802 14,395 18,324 15,796 18,687 20,241 Copper in concentrate produced (tonnes) - - 8,154 8,670 11,234 13,751 15,897 10,860 (3) Concentrate grade (%) - - 28.9 29.5 28.7 29.3 25.8 26.4 Combined Costs (per lb) (1)Mining - - $0.09 $0.08 $0.06 $0.10 $0.12 $0.17Processing - - $0.33 $0.36 $0.37 $0.40 $0.44 $0.50Site Administration - - $0.04 $0.04 $0.04 $0.03 $0.04 $0.04TC RCs - - $0.18 $0.18 $0.22 $0.32 $0.42 $0.31Gold / Acid credit - - $(0.01) $(0.07) $(0.04) $(0.07) $(0.08) $(0.07)Combined Total Cash Costs - - $0.63 $0.59 $0.65 $0.78 $0.94 $0.95Combined Total Costs - - $0.80 $0.80 $0.76 $0.93 $1.11 $1.17 Cathode Costs (per lb) (1) Mining - - $0.11 $0.08 $0.06 $0.10 $0.13 $0.16 Processing - - $0.46 $0.40 $0.42 $0.51 $0.51 $0.51 Summary of Quarterly Results (unaudited) (continued) 2004 2005 2005 2005 2005 2006 2006 2006 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3Kansanshi Production Statistics(continued) Site Administration - - $0.04 $0.04 $0.04 $0.03 $0.04 $0.04 TC RCs - - - - - - $0.03 $0.10 Gold / Acid credit - - - - - $(0.01) $(0.02) Cathode Total Cash Costs - - $0.61 $0.52 $0.52 $0.64 $0.70 $0.79 Cathode Total Costs - - $0.80 $0.73 $0.63 $0.80 $0.87 $1.00 Concentrate Costs (per lb) (1) Mining - - $0.07 $0.08 $0.06 $0.09 $0.12 $0.18 Processing - - $0.19 $0.29 $0.30 $0.28 $0.35 $0.46 Site Administration - - $0.04 $0.05 $0.05 $0.04 $0.04 $0.04 TC RCs - - $0.38 $0.48 $0.57 $0.68 $0.89 $0.73 Gold / Acid credit - - $(0.03) $(0.19) $(0.11) $(0.16) $(0.17) $(0.16) Concentrate Total Cash Costs - - $0.65 $0.71 $0.87 $0.93 $1.23 $1.25 Concentrate Total Costs - - $0.81 $0.90 $0.98 $1.08 $1.40 $1.49 Revenue ($000's) Copper cathodes - - 29,165 54,116 87,624 84,745 142,301 158,563 Copper in concentrates - - 15,309 34,668 31,850 35,611 109,517 65,331 Gold - - 585 3,438 2,692 4,545 6,068 5,152 Total revenues - - 45,059 92,222 122,166 124,901 257,887 229,046 Copper cathode sold (tonnes) - - 8,919 14,227 18,505 15,556 18,754 20,217 Copper in concentrate sold (tonnes) - - 6,024 12,243 9,260 9,282 14,528 13,056 Gold sold (ounces) - - 1,370 7,130 5,766 8,079 9,611 8,864 Bwana/Lonshi Production Statistics Mining: Waste mined (000's tonnes) 2,926 2,596 4,025 4,707 5,918 3,241 5,607 5,915 Ore mined (000's tonnes) 261 152 319 300 209 147 183 110 Ore grade (%) 6.4 5.3 5.5 3.9 6.1 8.4 10.7 11.9 Processing: Ore processed (000's tonnes) 256 264 328 363 397 335 314 322 Contained copper (tonnes) 12,824 13,804 13,354 15,003 14,262 13,401 15,625 15,011 Grade (%) 5.0 5.2 4.1 4.1 3.6 4.0 5.0 4.7 Recovery (%) 85 87 88 88 89 87 87 89 Copper cathode produced (tonnes) 10,942 12,028 11,717 13,131 12,662 11,718 13,569 13,302 Acid produced (tonnes) 35,671 55,275 69,218 64,263 72,040 68,195 71,421 63,830 Surplus acid (tonnes) 9,664 49 14,939 7,120 219 937 910 508 Cathode Costs (per lb) (1) Mining $0.21 $0.23 $0.29 $0.43 $0.49 $0.51 $0.32 $0.32 Processing $0.26 $0.31 $0.31 $0.30 $0.34 $0.38 $0.35 $0.38 Site Administration $0.04 $0.06 $0.06 $0.06 $0.09 $0.10 $0.10 $0.10 TC RCs - - - - - - - - Gold / Acid credit $(0.03) $(0.02) $(0.09) $(0.05) $(0.08) $(0.09) $(0.08) $(0.06) Cathode Total Cash Costs $0.48 $0.58 $0.57 $0.74 $0.84 $0.90 $0.69 $0.74 Cathode Total Costs $0.59 $0.75 $0.79 $1.01 $1.16 $1.20 $0.98 $1.00 Revenues ($000's) Copper cathodes 29,249 38,172 38,899 49,602 54,694 62,085 104,455 99,283 Copper cathodes sold (tonnes) 11,060 12,000 11,592 13,394 12,438 11,797 13,648 12,954 Guelb Production Statistics Mining: Waste mined (000's tonnes) - - - - - 1,156 1,721 1,649 Ore mined (000's tonnes) - - - - - 41 144 179 Ore grade (%) - - - - - 1.9 1.9 1.8 (1) For the definition of cash and total costs, reference should be made to section 10 of the September 30, 2006 MD&A. (2) Copper sold does not include tonnes sold prior to pre-commercial production. (3) Copper produced does not include tonnes produced prior to pre-commercial production. Consolidated Balance Sheet As at September 30, 2006 and December 31, 2005 (expressed in thousands of US dollars, except where indicated) 2006 2005 $ $AssetsCurrent assetsCash and cash equivalents 189,928 82,910Restricted cash 12,754 20,162Accounts receivable 206,382 62,938Inventory (note 4) 114,743 60,854Current portion of other assets and deferred charges (note 6) 17,118 7,506 540,925 234,370Investments 9,939 9,522Property, plant and equipment (note 5) 993,313 471,294Other assets and deferred charges (note 6) 40,284 31,325 1,584,461 746,511LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities 80,669 63,492Current taxes payable 89,034 16,055Current portion of long-term debt (note 7) 50,652 58,255Current portion of other liabilities (note 8) 29,678 20,377 250,033 158,179Long-term debt (note 7) 173,673 176,767Future income tax liability 190,024 43,330Other liabilities (note 8) 32,716 34,340 646,446 412,616Minority interests 75,258 22,454 721,704 435,070Shareholders' EquityEquity accounts (note 9) 393,631 166,592Retained earnings 469,127 144,849 862,758 311,441 1,584,461 746,511Commitments and Subsequent event (note 14 and 15) Approved by the Board of Directors Peter St George Andrew AdamsDirector 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. Consolidated Statements of Earnings and Retained EarningsFor the three months and nine months ended September 30, 2006 and 2005(expressed in thousands of US dollars, except where indicated) Three months ended Nine months ended September 30, September 30, September 30, September 30, 2006 2005 2006 2005 $ $ $ $ Revenues 328,409 143,022 878,068 267,719Cost of sales 72,538 53,792 190,472 105,028Depletion and amortization 13,700 12,519 40,066 23,364Operating profit 242,171 76,711 647,530 139,327Other expenses Exploration 5,170 1,497 12,159 3,649 General and administrative 7,031 2,498 14,408 6,777 Interest and financing fees on long-term debt 7,119 5,821 19,056 10,054 Other expenses (note 11) 4,502 5,868 57,994 3,483 Gain on disposal of investment (1,643) - (1,643) (16,127) 22,179 15,684 101,974 7,836Earnings before income taxes and minority 219,992 61,027 545,556 131,491interestIncome taxes 59,219 14,784 148,341 25,708Minority interest 21,597 6,770 52,786 10,085Net earnings for the period 139,176 39,473 344,429 95,698Retained earnings (deficit) - beginning of 335,715 49,289 144,849 (3,936)periodDividends 5,764 1,033 20,151 4,033Retained earnings - end of period 469,127 87,729 469,127 87,729 Earnings per common shareBasic $2.09 $0.64 $5.35 $1.56Diluted $2.05 $0.63 $5.25 $1.52Weighted average shares outstanding (000's) 66,615 61,583 64,346 61,451 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. Consolidated Statements of Cash FlowsFor three months and nine months ended September 30, 2006 and 2005(expressed in thousands of US dollars, except where indicated) Three months ended Nine months ended September 30, September 30, September 30, September 30, 2006 2005 2006 2005 $ $ $ $Cash flows from operating activitiesNet earnings for the period 139,176 39,473 344,429 95,698Items not affecting cashDepletion and amortization 13,700 12,519 40,066 23,364Minority interest 21,597 6,771 52,786 10,086Provision for deferred stripping - 5,901 - 2,772Unrealized foreign exchange loss (gain) 351 (475) 2,858 (5,334)Future income tax expense 12,769 9,681 41,879 12,648Stock-based compensation expense 2,643 672 4,700 2,041Unrealized derivative instruments (gain) loss (3,804) 4,935 15,025 8,561Other 666 1,658 3,101 2,505Gain on disposal of investment (1,643) - (1,643) (16,127) 185,455 81,135 503,201 136,214Change in non-cash operating working capitalIncrease in accounts receivable and prepaid (19,240) (25,998) (143,743) (43,932)expensesIncrease in inventory (17,144) (2,617) (53,141) (21,497)Increase in accounts payable and accrued 34 17,314 74,809 16,623liabilities Long term incentive plan contribution (note (15,563) - (15,563) -10) 133,542 69,834 365,563 87,408Cash flows from financing activitiesRestricted cash 16,911 827 7,408 (1,538)Proceeds from long-term debt - 11,500 82,000 43,023Repayments of long-term debt (50,523) (15,260) (95,986) (30,694)Issuance of common shares 476 235 3,460 1,523Dividends paid (5,764) (1,033) (20,151) (4,033)Deferred premium obligation and finance fees (2,801) (1,390) (9,062) (11,372) (41,701) (5,121) (32,331) (3,091)Cash flows from investing activitiesProperty, plant and equipment (78,872) (52,168) (206,832) (92,155)Deferred exploration and stripping costs (15,368) (5,665) (20,780) (1,281)Other 1,886 - 1,389 21,944 (92,354) (57,833) (226,223) (71,492) Effect of exchange rate changes on cash 114 279 9 442(Decrease) increase in cash and cash equivalents (513) 6,880 107,009 12,825Cash and cash equivalents - beginning of period 190,327 56,464 82,910 50,356Cash and cash equivalents - end of period 189,928 63,623 189,928 63,623 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. Segmented Information For three months ended September 30, 2006 and 2005 (expressed in thousands of US dollars, except where indicated) Kansanshi copper / gold operation ("KCO") Bwana / Lonshi division ("BLD") GuelbMoghrein project ("GMP") Frontier project ("FRO") Corporate development,administration and other ("CDA") Segmented Information For nine months ended September 30, 2006 and 2005 (expressed in thousands of US dollars, except where indicated) Kansanshi copper / gold operation ("KCO") Bwana / Lonshi division ("BLD") GuelbMoghrein project ("GMP") Frontier project ("FRO") Corporate development,administration and other ("CDA") This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
FQM.L