14th Mar 2007 08:01
First Quantum Minerals Ld14 March 2007 NEWS RELEASE 07-03 March 14, 2007 www.first-quantum.com FIRST QUANTUM MINERALS REPORTS OPERATIONAL AND FINANCIAL RESULTS FOR THE THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 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 twelve months endedDecember 31, 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 • Record net sales of $1,094.5 million in 2006, an increase of 146% compared to 2005 • Record net earnings of $414.4 million ($6.37 per share) in 2006, an increase of 171% compared to 2005 • Net earnings of $70.0 million ($1.04 per share) in the fourth quarter of 2006, an increase of 22% compared to the fourth quarter of 2005 • Record cash flows from operating activities, before working capital movements, of $588.2 million ($9.04 per share) in 2006, an increase of 149% compared to 2005 • Cash flow from operating activities, before working capital movements, of $85.0 million ($1.26 per share) in the fourth quarter of 2006, a decrease of 16% compared to the fourth quarter of 2005 • Copper production for the year of 183,277 tonnes (403.9 million pounds), an increase of 54% compared to 2005 • Copper sales for the year of 172,487 tonnes (380.2 million pounds), an increase of 45% compared to 2005 • Contained copper in concentrate inventory at December 31 of approximately 15,000 tonnes (33.1 million pounds) • Guelb Moghrein in Mauritania achieved commercial production on October 5, 2006 • Acquired Adastra Minerals Inc. during the year • New $400 million corporate credit facility entered into with a syndicate of international banks in October 2006 • Dividends of $20.1 million paid to Company shareholders during the year • The Company's Board of Directors approved development of the Frontier Copper Project; construction is well advanced; commercial production targeted for third quarter of 2007 • Commissioning of High pressure leach project at Kansanshi commenced in November 2006 Financial Results (see attached financial statements & summary tables) Three months Fourth quarter revenues totalled $216.4 million, which included copper revenuesof $212.0 million and gold revenues of $4.4 million. This was an increase of22% over the same period in 2005. This increase was the result of an increase inthe average LME cash copper price of 65% and an increase in the tonnes of coppersold by 3% over the same period in 2005. However, the Company recognizednegative sales adjustments of $31.7 million related to prior period's coppersales that were provisionally priced at September 30, 2006. The realized copper price was $2.32 per pound compared to $1.97 per pound duringthe same period in 2005. The average LME cash copper price for the fourthquarter was $3.21 per pound as compared to $1.95 per pound during the sameperiod in 2005. The gross copper selling price achieved for the quarter was$2.54 per pound, including a negative provisional pricing adjustment of $0.34per pound and excluding tolling and refining costs ("TC RCs") and freight paritycharges of $0.22 per pound. The Company received final price determination on its sales of copper based onprices prevailing up to between three and nine months subsequent to the actualmonth of shipment. Consequently, the final price for sales which have been madeduring the latter months of the period is not known with certainty at the end ofthe period. At the end of each period, a positive or negative adjustment isrecorded to reflect the difference in the price initially recorded at the timeof shipment and the forward LME copper price until final settlement is made. As at December 31, 2006 there were 43,440 tonnes of contained copper that havebeen provisionally priced at an average LME copper price of $2.87 per pound.This revenue will be subject to future adjustments as a result of movements inthe copper price. Of this amount, 11,124 tonnes had the final price determinedin January 2007 at $2.57 per pound, 14,089 tonnes determined in February 2007 at$2.57 per pound, 9,252 tonnes will be determined in March 2007, and 8,975 tonnesthereafter. As the majority of Kansanshi's copper in concentrate production from January 1,2007 onwards will be treated at the Mopani's Mufulira smelter rather than havingto be exported, provisional pricing earnings volatility may be reduced asshipment periods will be significantly reduced. Fourth quarter copper production was 46,531 tonnes, of which, 62% was fromKansanshi, 27% was from Bwana, and 11% was from Guelb. Combined copperproduction increased by 2% over the third quarter of 2006, which was principallydue to Guelb achieving commercial production on October 5, 2006. Kansanshi andBwana fourth quarter copper production decreased from the third quarter of 2006by 10% and 6%, respectively, due to the processing of lower grade ore. During the fourth quarter, the Company sold 41,454 tonnes of copper (31,931tonnes of copper cathode and 9,523 tonnes of copper contained in concentrate)compared to 40,203 tonnes of copper in the same period in 2005. Gold revenues for the quarter totalled $4.4 million. The average realized goldprice for the quarter was $628 per ounce compared to the average market goldprice of $614 per ounce. Fourth quarter group cash costs and total costs were $1.00 per pound and $1.24per pound, respectively, compared with $0.89 per pound and $0.71 per pound forthe same period in 2005. The operating cash inflow for the fourth quarter, before working capitalmovements, was $85.0 million or $1.26 per share and after working capitalmovements was $146.4 million or $2.18 per share. Net earnings for the fourth quarter were $70.0 million or $1.04 per share(weighted average common shares - 67,286,631) as compared to $57.1 million or$0.93 per share (weighted average common shares - 61,638,650) for 2005. Thisnet income increase of 22% was due to a 65% increase in the average LME cashcopper price compared to the same period in 2005, which was in part offset by aloss as a result of provisional pricing due to a decrease in the average LMEcash copper price between September 30, 2006 to December 31, 2006. Twelve Months The twelve month's revenues totalled $1,094.5 million, which included copperrevenues of $1,073.9 million, gold revenues of $20.1 million and acid revenuesof $0.4 million. This was an increase of 146% over the same period in 2005,resulting from an increase in both copper production and the realized copperprice. The realized copper price was $2.82 per pound as compared to $1.66 per poundduring the same period in 2005. The average LME cash copper price for thetwelve months was $3.05 per pound as compared to $1.67 per pound during the sameperiod in 2005. Excluding TC RCs and freight parity charges of $0.30, and apositive provisional pricing adjustment of $0.08 per pound, the gross copperselling price achieved for the period was $3.12 per pound. Copper production in 2006 was 183,277 tonnes, of which, 69% was from Kansanshi,28% was from Bwana, and 3% was from Guelb. Combined copper production increasedby 54% over the 2005 year, which was principally due to Kansanshi productionincreasing 83% compared to the same period of 2005; the 2006 year wasKansanshi's first full twelve month period with commercial production achievedin the second quarter of 2005. The Company sold 172,487 tonnes of copper (124,857 tonnes of copper cathode and47,630 tonnes of contained copper in concentrate) as compared to 118,602 tonnesof copper in the same period in 2005. Gold revenues for the twelve months totalled $20.1 million. The averagerealized gold price for the period was $601 per ounce compared to the averagemarket gold price of $604 per ounce. Twelve month group cash costs and total costs were $0.87 per pound and $1.09 perpound, respectively, compared with $0.67 per pound and $0.86 per pound for thesame period in 2005. The operating cash inflow for the twelve month period, before working capitalmovements, was $588.2 million or $9.04 per share and after working capitalmovements was $512.0 million or $7.87 per share. Net earnings for 2006 were $414.4 million or $6.37 per share (weighted averagecommon shares - 65,087,605) as compared to $152.8 million or $2.48 per share(weighted average common shares - 61,498,338) during the 2005 year. This netincome increase of 171% was due to an 83% increase in the average LME cashcopper price and a 54% increase in copper production. Kansanshi (see attached production statistics summary table) Three Months The total material mined increased 41% over the same period in 2005. Thisincrease was attributable to the arrival of additional drilling units, mediumsized excavators and trucks. As well, major haul roads and pit ramps wereupgraded which significantly minimized delays by rain. Training was alsointensified on operating in slippery conditions, which also had a significanteffect on production during the wet season. Cathode total costs increased 71% per pound compared to the same period in 2005due to increased ore costs, processing costs and tolling charges. The increasein ore costs was due to the processing of lower grade ore and higher fuel andwage costs. The processing of lower grade ore also led to increased leachcosts as the acid consumption increased 46% due to the increase and type of oreprocessed. In addition, acid prices increased due to a shortage of surplus acidfrom the Bwana acid plant requiring Kansanshi to purchase acid from othervendors at higher prices. Tolling charges from processing copper inconcentrates at the Mufulira smelter returned as cathodes were not incurred inthe same period in 2005. The balance of the increase is explained by highermaintenance costs associated with the processing of higher volumes of harderore. Included within the cathode production were 17,201 tonnes from the SX/EWprocess and 1,805 tonnes produced from the tolling of copper concentrates at theMufulira smelter. There was no tolled copper cathode production in the sameperiod of 2005. Production increased 4% over the same period in 2005; however10% of this production was due to the tolling of copper in concentratesresulting in a production decrease of 6% in the SX/EW process. This decreasein production was due to the processing of lower grade ore as compared to thesame period in 2005. Concentrate production was 11% lower than the same period in 2005 primarily dueto the processing of lower grade ore during the quarter. Concentrate totalcosts increased 50% per pound as compared to the same period in 2005 due,principally, to increased ore costs and processing costs. The increase in orecosts was due to the processing of lower grade ore and higher fuel and wagecosts. Maintenance costs also increased due to the increase in the volume oflower grade, harder ore processed. As well, freight charges increased due,principally, to the delay in completion of the Mopani smelter requiring theCompany to export the concentrates. Twelve Months During the 2005 year, the world shortage of mining truck tires had impaired theavailability of the Company's haul trucks at Solwezi. The 34% increase thisyear compared with 2005 was reflective of the easing of the tire shortages,accompanied by the improved equipment availability and the larger drilling andhaul truck fleet. Cathode total costs increased 33% per pound over 2005 due, principally, toincreased ore costs, processing costs and tolling charges, which were incurredfor the first time due to the production of cathode from concentrate. Theincrease in ore costs was due to the processing of lower grade ore and higherfuel and wage costs. The processing of lower grade ore also led to increasedleach costs due to increased acid consumption and higher acid prices. Tollingcharges resulted from the processing of copper in concentrates at the Mufulirasmelter returned as cathodes. The balance of the increase is explained byhigher maintenance costs associated with the processing of higher volumes ofharder ore. Included within cathode production were 67,656 tonnes from the SX/EW process and6,027 tonnes produced from the tolling of copper concentrates at the Mufulirasmelter. Production increased by 77% over 2005 as Kansanshi continued to rampup after achieving commercial production during April 2005, as well as cathodeproduction from the toll treatment of concentrate production commenced in 2006. Concentrate production was up by 91% over 2005 as Kansanshi continued to ramp upafter achieving commercial production during April 2005. Concentrate totalcosts increased 42% per pound as compared to 2005 due to increased ore costs andprocessing costs, including TC RCs, price participation and higher freightparity charges. The increase in ore costs was due to the processing of lowergrade ore and higher fuel and wage costs. Maintenance costs also increased dueto the increase in the volume of lower grade, harder ore processed. Inaddition, TC RCs increased by $0.13 per pound due to price participation and theincreased average copper price compared to 2005. As well, freight chargesincreased by $0.13 per pound due, principally, to the delay in completion of theMopani smelter requiring the Company to export concentrates. Bwana/Lonshi (see attached production statistics summary table) Three months The strip ratio for the quarter was 51:1. Total material mined decreased 32%over the same period of 2005, principally due to the high water levels anddifficult mining conditions typically associated with dolomite rock formations.Ore mined decreased 62%, due to the mining of waste in the North pushback andincreased drill and blast in the pit due to dolomite rock. Notwithstanding this,copper production has been maintained as a result of the significant increase inthe high grade ore mined from an average of 6.1% to 10.4%. This high grade orewas blended with low grade ore, previously stockpiled at Lonshi, to bring theprocessed ore grade down to approximately 4.3%. Production remained comparable with the same period in 2005; however total costsdecreased by 14% per pound as compared to the same period in 2005 due to lowerore costs and depreciation charges. Ore costs decreased by 30% due to theprocessing of higher grade ore in the fourth quarter of 2006. This was offsetby an increase in processing costs of 28% due, principally, to increased oilbased consumables, sulphur, and electricity costs. In addition, depreciationcharges decreased by 32% as the depreciable capital base of Bwana/Lonshi waslower than during the same period in 2005. Twelve Months The strip ratio for the year was 36.2:1. The ore grade mined was 10.3% copper.The decrease in ore mined compared to 2005 was due to the increased stripping.Total material mined increased 6% from 2005 despite difficult mining conditionsand can principally be attributed to the larger mining fleet utilized during thecourse of 2006. Production achieved was 3% more than 2005 as Bwana processed more ore at ahigher grade in 2006. Total costs increased by 11% per pound over the 2005 yeardue to increased processing costs which were impacted by increased oil basedconsumables, sulphur, and electricity costs. Guelb Moghrein Copper-Gold Deposit, Mauritania (see attached productionstatistics summary table) Twelve 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. Guelb produced 5,031 tonnes of copper in concentrate in the period fromachieving commercial production on October 5, 2006 to year end. Productioncosts were higher than planned primarily due to initial start up processingcosts and the continued ramp up of production. 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. Averagelife-of-mine cash costs including TC RCs and freight parity charges are expectedto be $1.04 per pound of finished copper, based on the most recent engineeringstudy. Construction activities began in April of 2006 and commercial productionis forecast to begin in the third quarter of 2007. As at December 31, 2006, the Company had capitalized $116.4 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 commenceas soon as all assay data has been received and validated to determine theeconomics of this project. Kibamba Copper Prospect, DRC 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 December 31, 2006 was $9.5 million, unchanged since 2002. During the 2006year, Mopani produced approximately 135,000 tonnes of finished copper and 1,400tonnes of cobalt. Mopani is currently carrying out important capital upgradesat the mine including the construction of a new smelter at Mufulira, which willincrease its handling capacity from 420,000 tonnes to initially 720,000 tonnesof copper concentrate per year and eventually 850,000 tonnes of copperconcentrate per year. The smelter began commissioning in September and isexpected be fully operational during the first quarter of 2007. The Mufulirasmelter will provide smelting offtake for all Kansanshi and Frontierconcentrates. As at December 31, 2006, Mopani had total assets of over $1billion. 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 was alisted international 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. The acquisition of Adastra has been accounted for as an asset purchasewith the total consideration paid being $273.3 million. Outlook Production Forecast On a group basis, the Company expects to produce approximately 240,000 - 250,000tonnes of copper in 2007, which is an increase of 32% to 38% over 2006 copperproduction. This expected production includes approximately 145,000 tonnes fromKansanshi, approximately 45,000 tonnes from Bwana/Lonshi, approximately 30,000tonnes from Guelb Moghrein, and approximately 30,000 tonnes from Frontier.Group cash costs are expected to be in the range of $0.90 to $0.95 per pound ofcopper for 2007 before considering the impact of the accounting change for theremoval of deferred stripping. As of December 31, 2006, due to the continued lack of smelter capacity on theZambian Copperbelt, the Company had stockpiled approximately 9,000 tonnes ofcontained copper in concentrates. In addition, approximately 6,000 tonnes ofcontained copper has been stockpiled at Guelb Moghrein. These stockpiles areexpected to be fully processed in 2007. TC and RC terms for the majority of concentrate treatment are based on annualJapanese Smelter Pool benchmarks and for 2007 have been settled at $60 per tonneof concentrate (TC), and 6.0 cents per pound of copper (RC) with no priceparticipation. Kansanshi During the first two months of 2007, Kansanshi produced approximately 24,000tonnes of copper, which included 15,500 tonnes of copper cathode and 8,500tonnes of copper in concentrate. In 2007, the Mufulira smelter will process themajority of Kansanshi's concentrate. Kansanshi cash costs for 2007 areforecast in the range of $0.90 to $0.95 per pound of copper before consideringthe impact of the accounting change for the removal of deferred stripping. Construction of a second sulphide crushing and milling circuit expansion iscurrently underway. Design work is well progressed and the majority of majorequipment and long lead items have been purchased. Site works will begin in thedry season (April). The expansion will increase sulphide throughput to 12million tonnes per year beginning in 2008 and assist in treating the harder oreexpected over the next few years. The expansion will result in increases incopper production from 2008 onwards. The total capital cost for the throughputexpansion is expected to be approximately $60 million, excluding miningequipment. During the 2006 year, orders were placed for more mining equipment. It wasdiscovered that more ore blending for both the oxide and sulphide ores wereneeded to accommodate variations in grade, hardness and acid consumption. Theintention of the additional mining equipment was to improve the flexibility inthe pit by enabling additional ore exposure. Some of this equipment arrived inmid 2006, which has already increased the exposure of additional high grade oreand has offset the continuing impact of lower grade sulphide ore on copperproduction in January and February of 2007. 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 total HPL capital cost is budgeted at $100 million includingan upgrade to the Zesco power supply to Kansanshi and working capitalrequirements. The new SX/EW facility has been commissioned and is currently inuse. This enabled the mine to exploit higher grade oxides in January andFebruary of 2007. Construction of all remaining areas was completed in 2006,and commissioning of the autoclaves commenced in November. The commissioning of the autoclaves required a very thorough and diligentapproach to testing and proving all systems associated with the circuit. Partof the commissioning process includes the need to have a controlled curing ofthe new brickwork in the autoclave by raising the temperature and pressure in astepped manner with hold periods of time, followed by an equally careful coolingperiod, internal visual inspection, and an autoclave pressure test. Theseactivities required approximately 3 weeks, and were successfully completed inJanuary. During process testing of the high pressure circuits and the slurrycircuits, some of the high pressure valves on the autoclave exhibited anunsatisfactory amount of pressure leakage. New valves and spares, which hadbeen ordered, have not yet been received as of the date of this report.Consequently, the existing valves have been dispatched for refurbishment by aspecialist workshop. Upon receipt of the refurbished valves, processcommissioning will continue with the introduction of slurry to the autoclave. Bwana/Lonshi During the first two months of 2007, Bwana/Lonshi exhausted its exposed ore,which has impacted the early part of 2007. Hence, during the first two monthsof 2007, Bwana/Lonshi has produced approximately 3,500 tonnes of copper cathode,well below its average past production. This diminished production results fromthe need to advance the waste stripping at a time of high rainfall. However,annual production estimates remain unchanged. Cash costs for 2007 are forecastin the range of $0.75 to $0.80 per pound of copper before considering the impactof the accounting change for the removal of deferred stripping. The Companycontinues to assess the alternative and most beneficial uses for the Bwanaprocessing plant after the Lonshi ore has been exhausted in 2008. The Companyhas and will continue to process external ore purchased from third parties, toexploit the full production capacity at Bwana. Guelb Moghrein At Guelb Moghrein, the first copper in concentrate was produced in July 2006.Management determined that commercial production (i.e. 65% of design capacity)was achieved on October 5, 2006. During the first two months of 2007 GuelbMoghrein produced 4,200 tonnes of copper in concentrate and 9,200 ounces ofgold. The process plant is currently producing at a monthly rate ofapproximately 2,100 tonnes of copper in concentrate per month versus a designoutput of 2,500 tonnes of copper in concentrate per month. Gold production isapproximately 4,600 ounces per month which is approximately 82% of designoutput. Gold production will increase both with increased copper concentratevolumes and with higher recovery after the final commissioning of thecarbon-in-leach (CIL) gold plant is completed. The Company expects to provideunit cost guidance for 2007 in the publication of the first quarter financialresults. The Company remains unable to release detailed information on GuelbMoghrein as the historical resource statement is not compliant with NationalInstrument 43-101; however, the Company is currently awaiting assays from adrilling program, to comply with this instrument. Frontier At Frontier, construction is underway in both Zambia and the DRC. Progress atthe Frontier site continues with the plant construction on schedule for a Julystart of commissioning. Excessive rainfall during the wet season has delayedthe completion of the Run of Mine (ROM) pad and the 220/33kv substation base.The rains have also put the pre-strip mining behind schedule. The Companycontinues to forecast a third quarter 2007 start of commissioning at Frontier. Kolwezi and Other At the Kolwezi copper-cobalt project in the DRC, the Company has conductedmetallurgical test work and piloting program for revised process engineering.The Company is considering the construction of an initial 35,000 tonne per yearcopper facility and 5,800 tonne per year cobalt facility which would be designedto be expanded to 105,000 tonnes of copper per year and 17,400 tonnes of cobaltper year. A detailed capital estimate is currently being prepared forpresentation to the project stakeholders. A large exploration program was carried out between May and October of 2006 withseveral drilling programs targeting prospects identified in 2005 includingKashime and Kibamba. Results of this program will be published when they arereceived. The Company has adopted the strategy of making investments in public companies. The positions may be increased or decreased at any time. At December 31,2006, the Company had invested $35.6 million in this program. 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) 2005 2005 2005 2005 2006 2006 2006 2006Statement of Operations and Retained Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Earnings(millions, except where indicated)Total revenues $38.2 $86.5 $143.0 $176.9 $187.2 $362.5 $328.4 $216.4Cost of sales 16.2 35.0 53.8 46.9 54.5 63.5 72.5 74.1Net earnings 27.2 29.0 39.5 57.1 54.8 150.5 139.2 70.0Basic earnings per share $0.44 $0.47 $0.64 $0.93 $0.89 $2.33 $2.09 $1.04Diluted earnings per share $0.43 $0.46 $0.63 $0.90 $0.86 $2.28 $2.05 $1.02 Gross copper selling price (per lb) $1.47 $1.53 $1.77 $2.09 $2.53 $3.71 $3.48 $2.54Realized copper price (per lb) $1.44 $1.42 $1.58 $1.97 $2.26 $3.36 $3.17 $2.32Average LME cash copper price (per lb) $1.44 $1.54 $1.71 $1.95 $2.24 $3.29 $3.48 $3.21Realized gold price (per oz) - $427 $482 $467 $563 $631 $581 $628Average gold price (per oz) $427 $427 $440 $485 $554 $627 $622 $614 Total copper sold (tonnes)(2) 12,000 26,535 39,864 40,203 36,635 46,930 46,227 41,454Total copper produced (tonnes) (3) 12,028 28,673 36,196 42,220 42,086 49,180 45,480 46,531Total gold sold (ounces) - 1,370 7,130 5,766 8,079 9,611 8,864 6,944 Cash Costs (C1) (per lb) (1) $0.58 $0.60 $0.64 $0.71 $0.81 $0.87 $0.90 $1.00Total Costs (C3) (per lb) (1) $0.75 $0.80 $0.87 $0.89 $1.01 $1.07 $1.13 $1.24 Financial Position (millions)Working capital $61.4 $47.1 $32.2 $76.2 $102.0 $234.6 $290.9 $292.9Total assets $523.1 $561.9 $641.5 $746.5 $842.4 $1,401.2 $1,584.5 $1,744.4Weighted average # shares (000's) 61,267 61,499 61,583 61,639 61,808 64,564 66,615 67,287 Cash Flows from (millions)Operating activitiesBefore working capital movements $19.7 $43.0 $81.1 $101.0 $105.7 $215.2 $185.5 $85.0After working capital movements 22.9 2.3 69.8 115.5 84.6 150.6 133.5 146.4Financing activities 24.8 (22.8) (5.1) (1.6) (17.7) 27.1 (41.7) 50.9Investing activities (19.0) (2.3) (57.8) (94.4) (42.4) (94.6) (92.4) (137.5)Cash Flows from Operating activities pershare(3)Before working capital movements 0.32 0.70 1.32 1.64 1.71 3.33 2.78 1.26After working capital movements 0.37 0.04 1.13 1.87 1.37 2.33 2.00 2.18 Summary of Quarterly Results (unaudited) (continued) 2005 2005 2005 2005 2006 2006 2006 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Kansanshi Production Statistics Mining: Waste mined (000's tonnes) 1,651 3,185 6,064 5,240 2,588 5,516 6,683 7,123 Ore mined (000's tonnes) 2,119 2,050 1,621 1,499 1,382 2,552 3,220 2,380 Ore grade (%) 1.7 2.0 2.0 1.9 1.7 1.4 1.4 1.4 Processing: Sulphide Ore processed (000's tonnes) - 434 507 580 782 1,140 1,277 1,212 (3) Oxide Ore processed (000's tonnes) - 696 955 1,039 1,044 1,246 1,401 1,080 (3) Contained copper (tonnes) (3) - 19,917 27,510 30,934 32,213 36,981 32,882 31,545 Sulphide ore grade processed (%) - 2.0 2.0 2.0 1.9 1.6 1.2 0.9 Oxide ore grade processed (%) - 1.8 1.8 1.9 1.7 1.5 1.2 1.6 Recovery (3) (%) - 86 84 96 92 94 95 92 Copper cathode produced (tonnes) (3) - 8,802 14,395 18,324 15,796 18,687 20,194 19,006 Copper in concentrate produced - 8,154 8,670 11,234 14,572 16,924 11,984 10,015 (tonnes) (3) Concentrate grade (%) - 28.9 29.5 28.7 29.3 25.8 26.4 26.9 Combined Costs (per lb) (1)Mining - $0.09 $0.08 $0.06 $0.10 $0.12 $0.17 $0.14Processing - $0.33 $0.36 $0.38 $0.41 $0.44 $0.50 $0.62Site Administration - $0.04 $0.04 $0.04 $0.03 $0.04 $0.04 $0.04TC RCs - $0.18 $0.18 $0.21 $0.31 $0.42 $0.31 $0.27Gold / Acid credit - $(0.01) $(0.07) $(0.04) $(0.07) $(0.08) $(0.07) $(0.05)Combined Total Cash Costs - $0.63 $0.59 $0.65 $0.78 $0.94 $0.95 $1.02Combined Total Costs - $0.80 $0.80 $0.76 $0.93 $1.11 $1.17 $1.21 Cathode Costs (per lb) (1) Mining - $0.11 $0.08 $0.06 $0.10 $0.13 $0.16 $0.12 Processing - $0.46 $0.40 $0.42 $0.51 $0.51 $0.51 $0.68 Site Administration - $0.04 $0.04 $0.04 $0.03 $0.04 $0.04 $0.04 TC RCs - - - - - $0.03 $0.10 $0.08 Gold / Acid credit - - - - $(0.01) $(0.02) $(0.02) Cathode Total Cash Costs - $0.61 $0.52 $0.52 $0.64 $0.70 $0.79 $0.90 Cathode Total Costs - $0.80 $0.73 $0.63 $0.80 $0.87 $1.00 $1.08 Concentrate Costs (per lb) (1) Mining - $0.07 $0.08 $0.06 $0.09 $0.12 $0.18 $0.18 Processing - $0.19 $0.29 $0.30 $0.28 $0.35 $0.46 $0.51 Site Administration - $0.04 $0.05 $0.05 $0.04 $0.04 $0.04 $0.04 TC RCs - $0.38 $0.48 $0.57 $0.68 $0.89 $0.73 $0.63 Gold / Acid credit - $(0.03) $(0.19) $(0.11) $(0.16) $(0.17) $(0.16) $(0.11) Concentrate Total Cash Costs - $0.65 $0.71 $0.87 $0.93 $1.23 $1.25 $1.25 Concentrate Total Costs - $0.81 $0.90 $0.98 $1.08 $1.40 $1.49 $1.47 Revenue ($000's) Copper cathodes - 29,165 54,116 87,624 84,745 142,301 158,563 110,902 Copper in concentrates - 15,309 34,668 31,850 35,611 109,517 65,331 22,256 Gold - 585 3,438 2,692 4,545 6,068 5,152 2,761 Total revenues - 45,059 92,222 122,166 124,901 257,887 229,046 135,919 Copper cathode sold (tonnes) - 8,919 14,227 18,505 15,556 18,754 20,217 19,165 Copper in concentrate sold (tonnes) - 6,024 12,243 9,260 9,282 15,692 13,131 8,215 Gold sold (ounces) - 1,370 7,130 5,766 8,079 9,611 8,864 4,427 Summary of Quarterly Results (unaudited) (continued) 2005 2005 2005 2005 2006 2006 2006 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Bwana/Lonshi Production StatisticsMining:Waste mined (000's tonnes) 2,596 4,025 4,707 5,918 3,241 5,607 5,915 4,081Ore mined (000's tonnes) 152 319 300 209 147 183 110 80Ore grade (%) 5.3 5.5 3.9 6.1 8.4 10.7 11.9 10.4Processing:Oxide Ore processed (000's tonnes) 264 328 363 397 335 314 322 294Contained copper (tonnes) 13,804 13,354 15,003 14,262 13,401 15,625 15,011 13,037Oxide ore grade processed (%) 5.2 4.1 4.1 3.6 4.0 5.0 4.7 4.3Recovery (%) 87 88 88 89 87 87 89 96Copper cathode produced (tonnes) 12,028 11,717 13,131 12,662 11,718 13,569 13,302 12,479Acid produced (tonnes) 55,275 69,218 64,263 72,040 68,195 71,421 63,830 73,901Surplus acid (tonnes) 49 14,939 7,120 219 937 910 508 8Cathode Costs (per lb) (1)Mining $0.23 $0.29 $0.43 $0.49 $0.51 $0.32 $0.32 $0.34Processing $0.31 $0.31 $0.30 $0.34 $0.38 $0.35 $0.38 $0.43Site Administration $0.06 $0.06 $0.06 $0.09 $0.10 $0.10 $0.10 $0.07TC RCs - - - - - - -Gold / Acid credit $(0.02) $(0.09) $(0.05) $(0.08) $(0.09) $(0.08) $(0.06) $(0.09)Cathode Total Cash Costs $0.58 $0.57 $0.74 $0.84 $0.90 $0.69 $0.74 $0.75Cathode Total Costs $0.75 $0.79 $1.01 $1.16 $1.20 $0.98 $1.00 $1.00Revenues ($000's)Copper cathodes 38,172 38,899 49,602 54,694 62,085 104,455 99,283 75,407 Copper cathodes sold (tonnes) 12,000 11,592 13,394 12,438 11,797 13,648 12,954 12,766 Guelb Production StatisticsMining:Waste mined (000's tonnes) - - - - 1,156 1,721 1,660 1,719Ore mined (000's tonnes) - - - - 41 144 179 400Ore grade (%) - - - - 1.9 1.9 1.8 1.5Processing:Sulphide Ore processed (000's tonnes) - - - - - - - 334(3)Contained copper (tonnes) (3) - - - - - - - 6,552Sulphide ore grade processed (%) - - - - - - - 2.0Recovery (3) (%) - - - - - - - 78Copper concentrate produced (tonnes) (3) - - - - - - - 5,031 Concentrate Costs (per lb) (1)Mining - - - - - - - $0.13Processing - - - - - - - $0.77Site Administration - - - - - - - $0.08TC RCs - - - - - - - $0.86Gold / Acid credit - - - - - - - $(0.15)Concentrate Total Cash Costs - - - - - - - $1.69Concentrate Total Costs - - - - - - - $2.18Revenues ($000's)Copper in concentrates - - - - - - - 6,807Gold - - - - - - - 1,477Total revenues - - - - - - - 8,284 Copper concentrates sold (tonnes) - - - - - - - 1,308Gold sold (ounces) - - - - - - - 2,516 (1) For the definition of cash and total costs, reference should be made to section10. (2) Copper sold doesnot include tonnes sold prior to pre-commercial production. (3) Copper produced does not include tonnes produced prior to pre-commercial production. Consolidated Balance SheetAs at December 31, 2006 and, 2005(expressed in thousands of US dollars, except where indicated) 2006 2005 $ $AssetsCurrent assetsCash and cash equivalents (note 17) 249,544 82,910Restricted cash (note 8) 15,000 20,162Accounts receivable 142,821 62,938Inventory (note 4) 147,374 60,854Current portion of other assets (note 7) 10,108 7,506 564,847 234,370Investments (note 5) 45,171 9,522Property, plant and equipment (note 6) 1,068,118 471,294Other assets (note 7) 66,287 31,325 1,744,423 746,511LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities 84,802 63,492Current taxes payable 110,039 16,055Current portion of long-term debt (note 8) 57,713 58,255Current portion of other liabilities (note 9) 19,389 20,377 271,943 158,179Long-term debt (note 8) 237,203 176,767Other liabilities (note 9) 38,211 34,340Future income tax liabilities (note 11) 173,319 43,330 720,676 412,616Minority interests 88,646 22,454 809,322 435,070Shareholders' equityEquity accounts (note 12) 396,017 166,592Retained earnings 539,084 144,849 935,101 311,441 1,744,423 746,511Commitments (note 18) 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 years ended December 31, 2006 and 2005(expressed in thousands of US dollars, except where indicated) 2006 2005 $ $Sales revenues Copper 1,073,943 434,100 Gold 20,128 6,715 Acid 412 3,799 1,094,483 444,614Cost of sales (264,600) (151,904)Depletion and amortization (56,067) (36,545)Operating profit 773,816 256,165Other expenses/income Exploration (18,889) (7,493) General and administrative (19,182) (9,724) Interest and financing fees on long-term debt (32,729) (19,385) Other expenses/income (note 14) (57,416) (16,996) Gain on disposal of investment 1,805 16,127 (126,411) (37,471)Earnings before income taxes and minority interests 647,405 218,694Income taxes (note 11) (166,845) (45,612)Minority interests (66,174) (20,264)Net earnings for the year 414,386 152,818Retained earnings (deficit) - beginning of year 144,849 (3,936)Dividends (20,151) (4,033)Retained earnings - end of year 539,084 144,849 Earnings per common share Basic $6.37 $2.48 Diluted $6.24 $2.43 Weighted average shares outstanding (000's) 65,088 61,498 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 the years ended December 31, 2006 and 2005(expressed in thousands of US dollars, except where indicated) 2006 2005 $ $Cash flows from operating activitiesNet earnings for the year 414,386 152,818Items not affecting cashDepletion and amortization 56,067 36,545Minority interests 66,174 20,264Unrealized foreign exchange loss (gain) 4,567 (7,744)Future income tax expense 22,381 26,632Stock-based compensation expense 6,660 2,656Unrealized derivative instruments loss 5,577 14,890Amortization of deferred finance fees 12,381 2,290Other 1,797 3,903Gain on disposal of investment (1,805) (16,127) 588,185 236,127Change in non-cash operating working capitalIncrease in accounts receivable (81,791) (44,518)Increase in inventory (85,339) (25,218)Increase in accounts payable and accrued liabilities 12,535 22,645Increase in current taxes payable 93,984 12,806Long term incentive plan contribution (note 12) (15,563) - 512,011 201,842Cash flows from financing activitiesProceeds from long-term debt 307,000 68,023Repayments of long-term debt (251,507) (39,819)Proceeds on issuance of common shares 3,461 2,159Dividends paid (20,151) (4,033)Deferred premium obligation, finance fees (25,443) (12,763) 13,360 13,567Cash flows from investing activitiesRestricted cash 5,162 (18,231)Acquisition of Adastra Minerals Inc., net of cash acquired (note 3) (27,829) -Property, plant and equipment (264,256) (180,195)Deferred exploration and stripping costs (37,806) (6,545)Net investments (33,843) 21,944 (358,572) (183,027)Effect of exchange rate changes on cash (165) 172Increase in cash and cash equivalents 166,634 32,554Cash and cash equivalents - beginning of year 82,910 50,356Cash and cash equivalents - end of year 249,544 82,910 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 InformationFor years ended December 31, 2006 and 2005 (expressed in thousands of US dollars, except where indicated) For the year ended December 31, 2006, segmented information is presented asfollows: 2006 Kansanshi Bwana/ Guelb Frontier Corporate Total Lonshi Moghrein $ $ $ $ $ $ Segmented revenues 745,688 374,474 7,152 - 14,712 1,142,026Less inter-segment revenues (32,831) - - (14,712) (47,543)Revenues 745,688 341,643 7,152 - - 1,094,483Cost of sales (161,549) (102,208) (843) - - (264,600)Depletion and amortization (31,079) (23,440) (1,097) - (451) (56,067)Operating profit (loss) 553,060 215,995 5,212 - (451) 773,816Interest on long-term debt (30,663) (724) (612) - (730) (32,729)Other (62,967) (13,339) (1,328) - (16,048) (93,682)Segmented profit (loss) 459,430 201,932 3,272 - (17,229) 647,405before undernoted itemsIncome taxes (117,952) (52,177) - - 3,284 (166,845)Minority interests (65,697) - (477) - - (66,174)Segmented profit 275,781 149,755 2,795 - (13,945) 414,386Property, plant and 411,327 49,123 106,045 116,368 381,709 1,064,572equipmentTotal assets 645,483 164,835 148,223 122,780 663,102 1,744,423Capital expenditures 110,969 2,384 44,938 106,500 381,062 645,853 For the year ended December 31, 2005, segmented information is presented asfollows: 2005 Kansanshi Bwana/ Guelb Frontier Corporate Total Lonshi Moghrein $ $ $ $ $ $ Segmented revenues 259,448 198,777 - - 11,986 470,211Less inter-segment revenues - (13,611) - - (11,986) (25,597)Revenues 259,448 185,166 - - - 444,614Cost of sales (67,467) (84,437) - - - (151,904)Depletion and amortization (14,987) (21,443) - - (115) (36,545)Operating profit (loss) 176,994 79,286 - - (115) 256,165Interest on long-term debt (16,140) (2,865) - - (380) (19,385)Gain on disposal of - - - - 16,127 16,127investmentOther (19,159) (6,468) - - (8,586) (34,213)Segmented profit before 141,695 69,953 - - 7,046 218,694undernoted itemsIncome taxes (31,497) (18,842) - - 4,727 (45,612)Minority interests (20,264) - - - - (20,264)Segmented profit 89,934 51,111 - - 11,773 152,818Property, plant and 323,194 71,488 65,991 9,868 753 471,294equipmentTotal assets 488,342 117,064 66,600 9,868 64,637 746,511Capital expenditures 93,099 35,073 55,719 6,177 (12) 190,056 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
FQM.L