8th Aug 2006 08:01
First Quantum Minerals Ld08 August 2006 NEWS RELEASE 06-17 August 08, 2006 www.first-quantum.com FIRST QUANTUM REPORTS OPERATIONAL AND FINANCIAL RESULTS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 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 six months endedJune 30, 2006. The complete financial statements and management discussion andanalysis are available for review at www.first-quantum.com and should be read inconjunction with this news release. Highlights - Second Quarter, 2006 • Net earnings of $150.5 million ($2.33 per share) in the secondquarter, an increase of 419 % compared to the second quarter of 2005. • Cash flow from operating activities, before working capital movements,of $215.2 million ($3.33 per share) in the second quarter, an increase of 400 %compared with the second quarter of 2005. • Copper production in the second quarter of 48,153 tonnes (106.1million pounds), an increase of 68% compared with the second quarter of 2005. • Gross copper selling price of $3.77 in the second quarter versus LMEaverage of $3.29, and a realized copper price of $3.44. • Guelb Moghrein commissioning commenced, with commercial productionexpected to be achieved during the third quarter. • The High Pressure Leach Project at Kansanshi is nearing completion. • Civil construction is underway at Frontier. • Acquisition of 75% of the shares of Adastra Minerals Inc. whichcontrols the Kolwezi tailings project in the DRC. Financial Results (see attached financial statements) Three months Second quarter revenues were $362.5 million, which included copper revenues of$356.3 million ($251.8m at Kansanshi and $104.5m at Bwana/Lonshi) and goldrevenues of $6.1 million. Copper revenues at Kansanshi comprised $142.3 millionfrom copper cathodes and $109.5 million from copper concentrates. Copperrevenues increased from the comparative period in 2005 due to an increase inboth the market price for copper and a 68% increase in copper production as aresult of the ramp up in production at Kansanshi. Second quarter copper revenues also benefited from provisional price adjustmentson 31,506 tonnes of contained copper, that had been provisionally priced at theend of the first quarter of 2006 at an average LME price of $2.48 per pound.The realized copper price for the second quarter was $3.44 per pound, which hasresulted in favorable pricing adjustments being included in second quartercopper revenues. The realized copper price is calculated by deducting TC/RCs(tolling and refining costs) and freight parity charges from the gross sellingprice achieved. The gross copper selling price achieved, before realizationcharges, for the quarter was $3.77 per pound, which was higher than the averageLME cash price due to favourable pricing adjustments. Copper production for the quarter was 48,153 tonnes which included 34,584 tonnesfrom Kansanshi (18,687 tonnes of cathode (including 1,186 tonnes produced fromconcentrates that were toll treated) and 15,897 tonnes of concentrate) and13,569 tonnes from Bwana/Lonshi. The Company also produced 71,421 tonnes ofacid, which represents a 3% increase over the second quarter of 2005. During the second quarter, the Company sold 32,402 tonnes of copper cathode(including 1,186 tonnes produced from concentrates that were toll treated) and14,528 tonnes of contained copper in the form of concentrates. Certain copper sales agreements entered into by the Company call for "provisional pricing" based on the average applicable cash copper price for aspecified future monthly period. Included within copper revenue as at June 30,2006 was 45,541 tonnes of contained copper that has been provisionally pricedusing a provisional average LME copper price of $3.36 per pound. Of this amount17,448 tonnes will have their final price determined in July 2006, 12,678 tonnesin August 2006, and 15,415 tonnes thereafter. This equates to approximately$337.3 million worth of gross revenue (before realization charges) that may besubject to adjustment as a result of copper price fluctuations between July 2006and March 2007. The average LME cash price for July 2006 was $3.50 per pound. Gold revenues arise from the sale of gold contained in copper concentrates atKansanshi. Each tonne of concentrate generally contains between 3 and 10 gramsof gold for which a net credit is received by the Company after the deduction ofthe gold realization charges. For the second quarter, gold revenues totalled$6.1 million for 9,611 ounces of gold. The average realized gold price for thequarter was $631 per ounce compared to the average gold price of $627 per ounce. Cost of sales as a percentage of revenue decreased to 18% in the second quarterof 2006. Although unit costs have risen from 2005, the cost of sales hasdecreased as a percentage of revenue as a result of the rising copper price andthe increased proportion of copper concentrate in sales. Group cash costs and total costs for the second quarter of 2006 were $0.87 perpound and $1.07 per pound respectively compared with $0.60 per pound and $0.80per pound for the second quarter of 2005. This increase from the second quarterof 2005 is principally due to the price participation component of the TC/RCsand an increase in the concentrate freight costs (as a result of having toexport concentrates). Compared with the first quarter of 2006, the average LMEprice has increased by $1.05 which contributes approximately $0.11 toconcentrate costs due to price participation. The operating cash inflow for the quarter, before working capital movements, was$215.2 million or $3.33 per share. The operating cash inflow after workingcapital movements was $150.6 million or $2.33 per share. Net earnings for the quarter, increased to $150.5 million or $2.33 per share,compared with the second quarter of 2005 net earnings of $29.0 million or$0.47 per share, and were up from the first quarter by $95.7 million, as aresult of improved production, an increase in the LME copper price andprovisional price adjustments from prior periods, offset by the derivativelosses. Six Months Six month revenues were $549.7 million, which included copper revenues of $538.7million ($372.2m at Kansanshi and $166.5m at Bwana/Lonshi) and gold revenues of$10.6 million. Copper revenues at Kansanshi comprised $227.1 million fromcopper cathodes and $145.1 million from copper concentrates. Copper revenuesincreased from the comparative period in 2005 due to an increase in both themarket price for copper and a 120% increase in copper production. The realized copper price was $2.92 per pound for the six months. Thesignificant increase from 2005 is principally due to the increased LME price forcopper. The average LME cash copper price for the six months was $2.75 versus$1.51 for the first six months of 2005. The realized copper price is calculatedby deducting TC/RCs and freight parity charges from the gross selling priceachieved. The gross copper selling price achieved, before realization charges,for the six months was $3.21 per pound, which was higher than the average LMEcash price due to favourable pricing adjustments. Copper revenues could have been approximately $32.1 million higher were it notfor the requirement to stockpile an additional 5,860 tonnes of copper inconcentrate at Kansanshi due to a lack of treatment capacity on the Zambiancopperbelt until the smelter rebuild at Mufulira is completed. It is currentlyanticipated that the rebuild will be completed during the third quarter of thisyear, which will reduce concentrate stockpiles to normal operational levels bythe end of 2006. This concentrate inventory is carried at cost as at June 30,2006. Copper production was 89,418 tonnes which included 64,131 tonnes from Kansanshi(34,483 tonnes of cathode (including 1,186 tonnes produced from concentratesthat were toll treated) and 29,648 tonnes of concentrate) and 25,287 tonnes fromBwana/Lonshi. The Company also produced 139,616 tonnes of acid, whichrepresents a 12% increase over the six months ending June 30, 2005 as a resultof the inclusion of the Solwezi Acid Plant. For the six months ended June 30, 2006, the Company sold 59,755 tonnes of coppercathode and 23,810 tonnes of contained copper in the form of concentrates. Included within copper revenue as at June 30, 2006 was 45,541 tonnes ofcontained copper that has been provisionally priced using a provisional averageLME cash copper price of $3.36 per pound. This equates to approximately $337.3million worth of gross revenue, (before realization charges) that may be subjectto adjustment as a result of copper price fluctuations between July 2006 andMarch, 2007. The average LME cash price for July 2006 was $3.50 per pound. For the six months ended June 30, 2006, gold revenues totalled $10.6 million for17,690 ounces of gold. The average realized gold price of $600 per ouncecompared to the average gold price of $590 per ounce for the six months. Cost of sales as a percentage of revenue decreased to 21%. Although unit costshave risen from 2005, the cost of sales has decreased as a percentage of revenueas a result of the rising copper price and the increased proportion of copperconcentrate in sales. Group cash costs and total costs were $0.85 per pound and $1.05 per poundrespectively compared with $0.60 per pound and $0.78 per pound for 2005. Thisincrease from 2005 is as a result of higher cash costs at Bwana/Lonshi and theinclusion of production at Kansanshi. The increased costs at Bwana/Lonshiresult from the increased mining costs (including the increase in strip ratio inJuly 2005), the appreciation of the Kwacha and an increase in the cost of oilbased consumables. The costs are higher at Kansanshi due to the production ofcopper in concentrate that requires additional processing by third parties.These processing costs are included in the cash costs. The operating cash inflow, before working capital movements, was $318.6 millionor $5.04 per share. The operating cash inflow after working capital movementswas $232.9 million or $3.68 per share. Net earnings for the six months increased to $205.3 million or $3.25 per share. Kansanshi Three months During the quarter, 2,552,000 tonnes of ore and 5,516,000 tonnes of waste weremined. In the second quarter, the total material mined increased, from thefirst quarter of 2006, from a total of 3,970,000 tonnes to 8,068,000 tonnes.The significant improvement can be attributed to the end of the wet season,which was unusually long and wet this year. The improvement in availability ofhaul trucks, arrival of additional trucks, and additional artisan workers shouldresult in improved mining performance in the future. For the second quarter,contained copper production was 34,584 tonnes which represents a 104% increase,from the second quarter of 2005, as a result of having a full quarter'sproduction included in the quarter (previously only production after commercialproduction was included in reported production figures). Compared with the firstquarter of 2006 copper production increased by 17% in part due to the completionof the four million tonne sulphide circuit expansion in February, 2006. During the quarter, Kansanshi produced 18,687 tonnes of copper cathode at a cashcost of $0.70 per pound and a total cost of $0.87 per pound. Included withinthe cathode production are 17,501 tonnes from the SX/EW process and 1,186 tonnesproduced from the tolling of copper concentrates. Cathode costs are higher thanthe comparable period in 2005 by $0.09. A lower processed ore grade has resultedin ore costs rising by $0.02. Efficiencies through higher throughput havedecreased processing costs but this has been offset by higher repairs andmaintenance costs associated with the hardness of the ore. Cash costs are alsohigher than the first quarter by $0.06, as a result of lower ore grades ($0.03)and toll treatment charges associated with the further processing of copperconcentrates. During the quarter, Kansanshi produced 15,897 tonnes of contained copper in theform of concentrates at a cash cost of $1.23 per pound and a total cost of $1.40per pound. Concentrate cash costs were up $0.58 per pound from the secondquarter of 2005. TC/RCs and freight charges combined to attribute $0.52 of thisincrease, with the price participation and the need to export a majority of theconcentrates principally contributing to this increase. Concentrate costs arealso higher than the first quarter by $0.30 per pound. The $1.05 per poundincrease in the average LME cash copper price has attributed to the significantincrease in the TC/RCs because of price participation for the quarter. The restof the increase in cost, can be explained by increased processing costsassociated with repairs and maintenance (due to hardness of the ore) offset byan increase in the gold credit. The combined cash cost for both concentrate and cathode was $0.94 per pound witha total cash cost of $1.11 per pound. Six Months For the six months ended June 30, 2006, 4,493,000 tonnes of ore and 8,104,000tonnes of waste were mined. Total material mined increased from 2005 from atotal of 9,007,000 tonnes to 12,597,000 tonnes. During the first six months of2005, the world shortage of mining truck tires had significantly impaired theavailability of the Company's haul trucks at Solwezi; the 40% increase this yearcompared with the same period last year is reflective of the easing of the tireshortages and the larger haul truck fleet. The previous shortfalls in miningproduction did not result in any shortfall in ore availability but did result inthe deferral of some waste stripping. To address these historical shortfalls thefleet is being augmented with the purchase of additional excavators and haultrucks. For the six months ended June 30, 2006, contained copper production increased by278% to 64,131 tonnes. This increase is due to the start of commercialproduction at Kansanshi during April 2005, the continuing ramp up of productionand the commissioning of the four million tonne sulphide circuit expansion thatwas completed in February 2006. For the six months ended June 30, 2006, Kansanshi produced 34,483 tonnes ofcopper cathode at a cash cost of $0.68 per pound and a total cost of $0.84 perpound. Cathode cash costs were up $0.07 per pound principally due to highercrushing and milling costs associated with the additional mill ball requirementdue to the hardness of the ore, higher loads of balls in the mills and the useof higher cost high chrome mill balls. In addition, ore costs are higher due toslightly lower ore grades. Kansanshi produced 29,648 tonnes of contained copper in the form of concentratesat a cash cost of $1.09 per pound and a total cost of $1.25 per pound.Concentrate cash costs were up $0.44 per pound from the first six months of 2005as a result of increased ore costs due to rehandling requirements in the wet andlower ore grades ($0.04) and higher TC/RCs ($0.17) and freight charges ($0.25).These were partially offset by an improved gold credit. The increased TC/RCsstem principally from a benchmark 10% price participation clause above a copperprice of $0.90 per pound which is added to the refining charges (RC). With therising LME price of copper, the RC has therefore increased. This charge isreally a reduction against revenue but to comply with industry standards formeasurement of cash costs, it is added to unit costs. The higher freight chargearises from the need to use international smelters as an interim measure untilthe Mufulira smelter upgrade is completed in the second half of this year. Thecombined cash cost for both concentrate and cathode was $0.87 per pound with atotal cash cost of $1.03 per pound. Bwana/Lonshi Three months During the second quarter, approximately 183,000 tonnes of ore and approximately5,607,000 tonnes of waste were mined from Lonshi. The strip ratio for thequarter was 31:1. Total material mined increased 33% compared with the sameperiod last year, principally due to the larger mining fleet operating atLonshi. Although the total material mined has increased, the portion of ore hasdecreased by 43%, due to the higher strip ratio. Notwithstanding, copperproduction has been able to be maintained as a result of the significantincrease in the ore grade from an average of 5.5% to 10.7%. This higher gradeore is being blended with low grade ore, previously stockpiled at Lonshi, tobring the processed ore grade down to approximately 5%. With the eventual end ofone of the wettest rainy seasons in April, the total material mined alsoincreased 71% from the first quarter of 2006. During the second quarter, copper production was 13,569 tonnes. Cash costs were$0.69 per pound and total costs were $0.98 per pound of copper. Cash costs atBwana/Lonshi have risen $0.12 per pound from the comparable quarter of 2005, dueto the increased ore costs associated with the higher strip ratio and anincrease in processing costs associated with the appreciation of the Kwacha andan increase in oil based consumables and sulphur. Notwithstanding, cash costshave decreased by $0.21 per pound from the first quarter due to a $0.19 perpound reduction in ore costs associated with mining higher ore grades and theend of the wet season. Acid production increased to 71,421 tonnes, of which 34,216 tonnes were producedat Ndola and 37,205 tonnes at Solwezi. Of the total acid produced, 910 tonneswere sold externally, 40,824 tonnes consumed at Kansanshi with the balanceconsumed at Bwana/Lonshi. Six Months For the six months ended June 30, 2006, approximately 330,000 tonnes of ore andapproximately 8,847,000 tonnes of waste were mined from Lonshi. The strip ratiofor the six months was 27:1. The ore grade was significantly higher than bothcomparative periods and was 9.7% for the six months. The improvement inmaterial mined from 2005 can be principally attributed to the larger miningfleet that was built up during the course of 2005. Copper production was 25,287 tonnes. Cash costs were $0.79 per pound and totalcosts were $1.08 per pound of copper. Cash costs at Bwana/Lonshi have risen$0.22 per pound from the previous year due to increases in both ore costs andprocessing costs. Ore costs are up $0.15 per pound from 2005 and have beenimpacted by the increasing price of fuel, the appreciation of the Kwacha and thehigher strip ratio at Lonshi. These costs have been partially offset by thehigher ore grade being processed as a result of the improved ore grades out ofthe pit. Processing costs have increased by $0.05 per pound from 2005 as aresult of the appreciation in the Kwacha and an increase in oil basedconsumables and sulphur. The improved ore grade processed and reduction ingangue acid consumption have helped offset these increases. Overall theappreciation of the Kwacha has added approximately $0.04 per pound to the cashcosts since the comparative period of 2005. Acid production increased to 139,616 tonnes, of which 65,985 tonnes wereproduced at Ndola and 73,631 tonnes at Solwezi. Of the total acid produced,1,847 tonnes were sold externally, 77,328 tonnes consumed at Kansanshi with thebalance consumed at Bwana/Lonshi. Guelb Moghrein Copper-Gold Deposit, Mauritania Guelb Moghrein is located 250 kilometres northeast of the nation's capital,Nouakchott, near the town of Akjoujt, in Mauritania. It consists of an open pitmineable copper/gold deposit. Logistical and supply difficulties in Mauritaniahave delayed the commissioning from the first quarter of 2006 until late in thesecond quarter of 2006, with commercial production now expected during the thirdquarter of 2006. Copper concentrate production from commissioning hascommenced.The Company remains unable to release an engineering report as theCompany is not treating the current resource statement as compliant withNational Instrument 43-101. During the quarter, 144,000 tonnes of sulphide ore and 1,721,000 tonnes of wastewere mined. As at June 30, 2006, the Company had capitalized acquisition anddevelopment costs totalling $93.5 million (2005: $66.0m). Included within thisfigure are acquisition costs of $10.0 million. Frontier Copper Deposit, DRC In May 2004, the Company announced the results of an independent copper-cobaltresource estimate completed at Frontier project located in Haut KatangaProvince, DRC. As at June 30, 2006, the Company had capitalized $33.1 million (2005: $9.9m) indevelopment costs, civil construction and plant construction and design forFrontier. The current scoping study envisages an average annual production of80,000 tonnes of contained copper. In January 2006, the Frontier EnvironmentalImpact Assessment and Environmental Management Plan were formally approved bythe Congolese Ministry of Mines and the Exploitation Permit was granted inFebruary 2006. Kashime Copper Prospect, Zambia A preliminary inferred oxide resource has been completed by independentconsultants, Digital Mining Services, and in February 2006, a program ofcombined reverse circulation and diamond drilling was initiated to improvedefinition. A programme of induced polarization is now underway which will becarried out over the eastern and central portion of the target where significantcopper sulphides have been intersected at depth in some holes. During the six months ended June 30, 2006, the Company expensed $7.0 million(2005: $2.2m; 2004: $1.0m) on other exploration targets that were predominantlylocated within the DRC and Zambia. Of this amount, $1.6 million was related tothe Kashime Copper Prospect. As at June 30, 2006, no costs associated with thisexploration 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. A total of the 25 reverse circulation drill holestotalling 2,430 meters and 9 diamond drill holes totalling 1,863 meters weredrilled between October and December 2005. Highlights from the 25 hole drillprogram included 80 meters grading 2.20% copper and 0.25% cobalt. Results fromadditional drilling at Kimbamba are being reviewed and will be released in duecourse. 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 June 30, 2006 is $9.5 million. There has been no movement in this investmentsince 2002. For the first six months of 2006, Mopani produced approximately78,746 tonnes of finished copper and 769 tonnes of cobalt. In a Reutersdispatch, Tim Henderson, Mopani's CEO forecasted "copper production to rise to200,000 tonnes in 2006." The increase in forecasted copper production can beattributed to capital upgrades at the mine including the construction of a newsmelter at Mufulira, which will increase its handling capacity from 420,000tonnes to eventually 850,000 tonnes of copper concentrate per year. As atDecember 31, 2005, Mopani had total assets over $700.0 million. As the majorityowner of Mopani is a private company not registered in Zambia, only limitedpublic information is available. Adastra Acquisition On May 1, 2006, the Company completed its initial acquisition by acquiring 75%of the issued and outstanding shares of Adastra. The second quarter resultsinclude 75% of Adastra's operating results from May 1, 2006 onwards. Adastra isan international mining company currently developing several mineral assets inCentral Africa, including the Kolwezi Copper-Cobalt Tailings Project in the DRC.The Company expects to acquire the remaining 25% of the outstanding shares ofAdastra that were not acquired during the initial acquisition on August 11,2006. Outlook As of June 30, 2006, due to the continued lack of smelter capacity on theZambian Copperbelt the Company had stockpiled approximately 9,663 tonnes ofcontained copper in concentrates. The stockpile at June 30, 2006 is expected tobe reduced significantly during the third quarter of 2006. With the completionof Mopani's Mufulira smelter expansion in the third quarter of 2006, allstockpiled concentrates are expected to be treated by the end of 2006. As aresult, the Company's revenues, cash flow and earnings are expected to be higherin the second half of 2006 compared to the first half. During the second 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 second 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 longer term benchmarks and freight charges will besubstantially reduced. The expanded Mufulira smelter is expected to beproducing at design capacity by the end of 2006. Based on production volumes achieved during the first six months of 2006 as wellas the current commissioning status of Guelb Mogrein, the Company expects toproduce about 200,000 tonnes of copper (a 68 % increase over 2005 copperproduction) which includes 140,000 to 145,000 tonnes from Kansanshi, 45,000 to50,000 tonnes from Bwana/Lonshi and 7,500 tonnes from Guelb Moghrein. Groupcash costs are expected to be in the range of $0.79 to $0.85 before the effectof price participation on refining costs. At Guelb Moghrein, the first copper concentrate was produced in July.Commercial production (i.e. 65% of design capacity) is expected to be reachedduring the third quarter. The Company remains unable to release an engineeringreport as the Company is not yet treating the current resource statement ascompliant with National Instrument 43-101. During July, Kansanshi produced 10,670 tonnes of copper which included 5,921tonnes of copper cathode and 4,749 tonnes of copper in concentrate. Name platetreatment capacity at Kansanshi currently stands at eight million tonnes ofsulphide ore per year, with oxide treatment capacity at four million tonnes peryear. Design throughputs are expected to be an average of 12,300 tonnes ofcopper per month which includes 6,000 tonnes of copper cathode and 6,300 tonnesof copper in concentrate. Cash costs for 2006 are forecast in the range of $0.80to $0.85 per pound of copper before any effect of price participation onrefining costs. Price Participation on refining costs only impacts the cash costs forconcentrate. For 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) 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 HPL facility are two autoclaves, an oxygen plant and an additional35,000 tonne per annum solvent extraction and electrowinning (SX/EW) facility.Construction of the HPL project is expected to be completed such thatpre-commissioning and commissioning will begin in October 2006. The totalcapital cost is budgeted at $100 million including an upgrade to the Zesco powersupply and increased working capital. During July 2006, Bwana/Lonshi produced 4,346 tonnes of copper cathode. Cashcosts for 2006 are forecast in the range of $0.76 to $0.83 per pound of copper.The Company is currently assessing the alternative and most beneficial uses forthe Bwana processing plant after the Lonshi ore has been exhausted. From 2006,the Company will process external ore purchased from third parties, to exploitthe full production capacity at Bwana. At Frontier, civil construction is underway in both Zambia and the DRC inanticipation of Board approval for full project funding based on an independentengineering study. Civil construction is expected to be completed ahead of therainy season (November-April) which will allow for construction to continuewithout delay. Commissioning of Frontier is expected to begin in the secondhalf of 2007. Upon Board approval, the independent engineering study will bepublished. A large exploration program began in May with several drilling programstargeting prospects identified in 2005 including Kashime and Kibamba. 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 of the information contained in this news release constitute "forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such forward-looking statements, including butnot limited to those with respect to the prices of gold, copper and sulphuricacid, estimated future production, estimated costs of future production, theCompany's hedging policy and permitting time lines, involve known and unknownrisks, uncertainties, and other factors which may cause the actual results,performance or achievements of the Company to be materially different from anyfuture results, performance or achievements expressed or implied by suchforward-looking statements. Such factors include, among others, the actualprices of copper, gold and sulphuric acid, the factual results of currentexploration, development and mining activities, changes in project parameters asplans continue to be evaluated, as well as those factors disclosed in theCompany's documents filed from time to time with the British Columbia SecuritiesCommission and the United States Securities and Exchange Commission. 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 June 30, 2006.The discussion and analysis of the Company's results of operations should alsobe read in conjunction with the audited consolidated financial statements andrelated notes. Summary of Quarterly Results (unaudited) 2004 2004 2005 2005 2005 2005 2006 2006Statement of Operations and Deficit Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2(millions, except where indicated)Total revenues $31.2 $30.7 $38.2 $86.5 $143.0 $176.9 $187.2 $362.5Cost of sales 14.1 14.5 16.2 35.0 53.8 46.9 54.5 63.5Depletion and amortization 2.6 3.0 3.9 6.9 12.5 13.2 12.0 14.4Exploration 1.1 1.0 1.0 1.1 1.5 3.8 2.1 4.9General and administrative 1.4 2.2 2.1 2.2 2.5 2.9 3.7 3.7Interest 0.8 0.7 0.8 3.4 5.8 9.3 6.2 5.7Other expenses (income) (0.3) (0.9) (0.6) (1.7) 5.9 13.5 18.8 34.7Income taxes 3.7 2.0 3.7 7.2 14.8 19.9 24.6 64.5Minority interests - - - 3.3 6.8 10.2 10.5 20.7Equity earnings 0.1 1.0 - - - - - -Net earnings 7.9 9.3 27.2 29.0 39.5 57.1 54.8 150.5Basic earnings per share $0.13 $0.16 $0.44 $0.47 $0.64 $0.93 $0.89 $2.33Diluted earnings per share $0.13 $0.15 $0.43 $0.46 $0.63 $0.90 $0.86 $2.28 Gross copper selling price (per lb) $1.19 $1.23 $1.47 $1.53 $1.77 $2.09 $2.50 $3.77Realized copper price (per lb) $1.16 $1.20 $1.44 $1.42 $1.58 $1.97 $2.26 $3.44Average LME cash copper price (per lb) $1.24 $1.40 $1.44 $1.54 $1.71 $1.95 $2.24 $3.29Realized gold price (per oz) - - - $427 $482 $467 $563 $631Average gold price (per oz) $401 $434 $427 $427 $440 $485 $554 $627 Total copper sold (tonnes)(2) 11,374 10,872 12,000 26,535 39,864 40,203 36,635 46,930Total copper produced (tonnes) (3) 11,330 10,942 12,028 28,673 36,196 42,220 41,265 48,153Total gold sold (ounces) - - - 1,370 7,130 5,766 8,079 9,611Total acid sold (tonnes) 16,884 9,664 49 14,939 7,120 219 937 910 Cash Costs (C1) (per lb) (1) $0.45 $0.48 $0.58 $0.60 $0.64 $0.71 $0.81 $0.87Total Costs (C3) (per lb) (1) $0.68 $0.59 $0.75 $0.80 $0.87 $0.89 $1.01 $1.07 Financial Position (millions)Working capital $51.8 $33.9 $61.4 $47.1 $32.2 $76.2 $102.0 $234.6Total assets $385.0 $473.1 $523.1 $561.9 $641.5 $746.5 $842.4 $1,401.2Weighted average # shares (000's) 60,668 60,942 61,267 61,499 61,583 61,639 61,808 64,564 Cash Flows from (millions)Operating activitiesBefore working capital movements $12.9 $9.8 $19.7 $43.0 $81.1 $101.0 $105.7 $215.2After working capital movements 10.4 2.9 22.9 2.3 69.8 115.5 84.6 150.6Financing activities 76.6 49.0 24.8 (22.8) (5.1) (1.6) (17.7) 27.1Investing activities (69.7) (52.5) (19.0) (2.3) (57.8) (94.4) (42.4) (94.6)Cash Flows from Operating activities per share(3)Before working capital movements 0.21 0.16 0.32 0.70 1.32 1.64 1.71 3.33After working capital movements 0.17 0.05 0.37 0.04 1.13 1.87 1.37 2.33 Kansanshi Production StatisticsMining:Waste mined (000's tonnes) 1,175 2,857 1,651 3,185 6,064 5,240 2,588 5,516Ore mined (000's tonnes) - 1,346 2,119 2,050 1,621 1,499 1,382 2,552Ore grade (%) - 2.4 1.7 2.0 2.0 1.9 1.7 1.4Processing:Sulphide Ore processed (000's tonnes) (3) - - - 434 507 580 782 1,140Oxide Ore processed (000's tonnes) (3) - - - 696 955 1,039 1,044 1,246Contained copper (tonnes) (3) - - - 19,917 27,510 30,934 32,213 36,981Sulphide ore grade processed (%) - - - 2.0 2.0 2.0 1.9 1.6Oxide ore grade processed (%) - - - 1.8 1.8 1.9 1.7 1.5Recovery (3) (%) - - - 86 84 96 92 94Copper cathode produced (tonnes) (3) - - - 8,802 14,395 18,324 15,796 18,687Copper in concentrate produced (tonnes) - - - 8,154 8,670 11,234 13,751 15,897(3)Concentrate grade (%) - - - 28.9 29.5 28.7 29.3 25.8Costs:Cost of sales (millions) - - - $20.1 $26.4 $20.8 $31.9 $45.3 Summary of Quarterly Results (unaudited) (continued) 2004 2004 2005 2005 2005 2005 2006 2006 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2Kansanshi Production Statistics(continued)Combined Cash Costs:Cash Costs (per lb) (1) - - - $0.63 $0.59 $0.65 $0.77 $0.94Total Costs (per lb) (1) - - - $0.80 $0.80 $0.76 $0.93 $1.11Cathode Cash Costs:Cash Costs (per lb) (1) - - - $0.61 $0.52 $0.52 $0.64 $0.70Total Costs (per lb) (1) - - - $0.80 $0.73 $0.63 $0.80 $0.87Concentrate Cash Costs:Cash Costs (per lb) (1) - - - $0.65 $0.71 $0.87 $0.93 $1.23Total Costs (per lb) (1) - - - $0.81 $0.90 $0.98 $1.08 $1.40Revenue ($000's)Copper cathodes - - - 29,165 54,116 87,624 84,745 142,301Copper in concentrates - - - 15,309 34,668 31,850 35,611 109,517Gold - - - 585 3,438 2,692 4,545 6,068Total revenues - - - 45,059 92,222 122,166 124,901 257,887 Copper cathode sold (tonnes) - - - 8,919 14,227 18,505 15,556 18,754Copper in concentrate sold (tonnes) - - - 6,024 12,243 9,260 9,282 14,528Gold sold (ounces) - - - 1,370 7,130 5,766 8,079 9,611 Bwana/Lonshi Production StatisticsMining:Waste mined (000's tonnes) 4,213 2,926 2,596 4,025 4,707 5,918 3,241 5,607Ore mined (000's tonnes) 257 261 152 319 300 209 147 183Ore grade (%) 4.7 6.4 5.3 5.5 3.9 6.1 8.4 10.7Processing:Ore processed (000's tonnes) 278 256 264 328 363 397 335 314Contained copper (tonnes) 12,908 12,824 13,804 13,354 15,003 14,262 13,401 15,625Grade (%) 4.6 5.0 5.2 4.1 4.1 3.6 4.0 5.0Recovery (%) 88 85 87 88 88 89 87 87Copper cathode produced (tonnes) 11,330 10,942 12,028 11,717 13,131 12,662 11,718 13,569Acid produced (tonnes) 35,920 35,671 55,275 69,218 64,263 72,040 68,195 71,421Surplus acid (tonnes) 16,884 9,664 49 14,939 7,120 219 937 910Costs:Cost of sales (millions) $14.1 $14.5 $16.2 $16.5 $29.8 $31.8 $23.7 $20.7Cash Costs (per lb) (1) $0.45 $0.48 $0.58 $0.57 $0.74 $0.84 $0.90 $0.69Total Costs (per lb) (1) $0.68 $0.59 $0.75 $0.79 $1.01 $1.16 $1.20 $0.98Revenues ($000's)Copper cathodes 28,624 29,249 38,172 38,899 49,602 54,694 62,085 104,455 Copper cathodes sold (tonnes) 11,233 11,060 12,000 11,592 13,394 12,438 11,797 13,648 Guelb Production StatisticsMining:Waste mined (000's tonnes) - - - - - - 1,156 1,721Ore mined (000's tonnes) - - - - - - 41 144Ore grade (%) - - - - - - 1.9 1.9(1) For the definition of cash and total costs, reference should be made to section 7. (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 June 30, 2006 and December 31, 2005(expressed in thousands of US dollars, except where indicated) 2006 2005 $ $AssetsCurrent assetsCash and cash equivalents 190,327 82,910Restricted cash (note 7) 29,665 20,162Accounts receivable and prepaid expenses 193,443 70,444Inventory (note 4) 96,964 60,854 510,399 234,370Investments 10,183 9,522Property, plant and equipment (note 5) 841,804 471,294Other assets and deferred charges (note 6) 38,842 31,325 1,401,228 746,511LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities 86,457 63,492Current taxes payable 67,415 16,055Current portion of long-term debt (note 7) 77,155 58,255Current portion of other liabilities (note 8) 44,775 20,377 275,802 158,179Long-term debt (note 7) 197,017 176,767Future income tax liability 147,791 43,330Other liabilities (note 8) 38,043 34,340 658,653 412,616Minority interests 60,148 22,454 718,801 435,070Shareholders' EquityEquity accounts (note 9) 346,712 166,592Retained earnings 335,715 144,849 682,427 311,441 1,401,228 746,511Commitments (note 13) 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 six months ended June 30, 2006 and 2005(expressed in thousands of US dollars, except where indicated) Three months ended Six months ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 $ $ $ $ Revenues 362,506 86,515 549,659 124,697Cost of sales 63,477 35,070 117,934 51,236Depletion and amortization 14,360 6,940 26,366 10,845Operating profit 284,669 44,505 405,359 62,616Other expenses Exploration 4,855 1,140 6,989 2,152 General and administrative 3,715 2,173 7,377 4,279 Interest and financing fees on long-term 5,713 3,383 11,936 4,233debt Other expenses (income) (note 10) 34,695 (1,741) 53,492 (2,385) Gain on disposal of investment - - - (16,127) 48,978 4,955 79,794 (7,848)Earnings before income taxes and minority 235,691 39,550 325,565 70,464interestIncome taxes 64,541 7,186 89,121 10,924Minority interest 20,679 3,315 31,190 3,315Net earnings for the period 150,471 29,049 205,254 56,225Retained earnings (deficit) - beginning of 199,632 20,240 144,849 (3,936)periodDividends 14,388 - 14,388 3,000Retained earnings - end of period 335,715 49,289 335,715 49,289 Earnings per common shareBasic $2.33 $0.47 $3.25 $0.92Diluted $2.28 $0.46 $3.18 $0.90Weighted average shares outstanding (000's) 64,564 61,499 63,193 61,384 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 six months ended June 30, 2006 and 2005(expressed in thousands of US dollars, except where indicated) Three months ended Six months ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 $ $ $ $Cash flows from operating activitiesNet earnings for the period 150,471 29,049 205,254 56,225Items not affecting cashDepletion and amortization 14,360 6,940 26,366 10,845Minority interest 20,679 3,315 31,190 3,315Provision for deferred stripping - 481 845 4,384Unrealized foreign exchange (gain) loss 1,833 (4,296) 2,507 (4,859)Future income tax expense 22,444 3,150 29,109 2,967Stock-based compensation expense 1,037 716 2,057 1,369Unrealized derivative instruments loss 2,817 3,189 18,829 3,626Other 1,542 449 2,434 852 Gain on disposal of investment - - - (16,127) 215,183 42,993 318,591 62,597Change in non-cash operating working capital(Increase) decrease in accounts receivable and (103,653) (26,528) (124,503) (17,938)prepaid expenses(Increase) decrease in inventory (19,890) (11,150) (35,997) (18,880)Increase (decrease) in accounts payable and accrued 58,938 (3,021) 74,774 (691)liabilities 150,578 2,294 232,865 25,088Cash flows from financing activitiesRestricted cash (5,051) (2,542) (9,504) (2,365)Proceeds from long-term debt 82,000 - 82,000 31,523Repayments of long-term debt (33,126) (10,126) (45,462) (15,434)Issuance of common shares and warrants 1,506 439 2,984 1,288Dividends paid (14,388) (3,000) (14,388) (3,000)Deferred premium obligation and finance fees (3,882) (7,582) (6,260) (9,982) 27,059 (22,811) 9,370 2,030Cash flows from investing activitiesProperty, plant and equipment (86,607) (1,256) (127,959) (39,987)Deferred exploration and stripping costs (7,770) (1,026) (6,256) (3,130)Other (230) - (498) 21,944 (94,607) (2,282) (134,713) (21,173) Effect of exchange rate changes on cash (224) 274 (105) 163Increase (decrease) in cash and cash equivalents 83,030 (22,799) 107,522 5,945Cash and cash equivalents - beginning of period 107,521 78,989 82,910 50,356Cash and cash equivalents - end of period 190,327 56,464 190,327 56,464 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 three months ended June 30, 2006 and 2005(expressed in thousands of US dollars, except where indicated) 2006 KCO BLD GMP FRO CDA Total $ $ $ $ $ $Segmented revenues 258,948 111,301 - - 3,717 373,966Less inter-segment 1,061 6,682 - - 3,717 11,460revenuesRevenues 257,887 104,619 - - - 362,506Cost of sales 42,766 20,711 - - - 63,477Depletion and amortization 7,594 6,750 - - 16 14,360Operating profit (loss) 207,527 77,158 - - (16) 284,669Interest on long-term debt 5,560 (110) - - 263 5,713Other 4,145 3,677 - - 35,443 43,265Segmented profit before 197,822 73,591 - - (35,722) 235,691 undernoted itemsIncome taxes 52,994 21,382 - - (9,835) 64,541Minority interest 20,864 - - - (185) 20,679Segmented profit 123,964 52,209 - - (25,702) 150,471Property, plant and 369,130 61,789 93,513 33,142 284,230 841,804 equipmentTotal assets 710,063 144,126 100,967 33,383 412,689 1,401,228Capital expenditures 37,639 2,121 15,817 17,167 283,481 356,225 For the three months ended June 30, 2005, segmented information is presented asfollows: 2005 KCO BLD GMP FRO CDA Total $ $ $ $ $ $Segmented revenues 45,063 44,423 - - 2,212 91,698Less inter-segment - (2,971) - - (2,212) (5,183)revenuesRevenues 45,063 41,452 - - - 86,515Cost of sales 18,538 16,532 - - - 35,070Depletion and amortization 2,927 4,002 - - 11 6,940Operating profit (loss) 23,598 20,918 - - (11) 44,505Interest on long-term debt 2,639 744 - - - 3,383Other (1,794) 547 - - 2,819 1,572Segmented profit before 22,753 19,627 - - (2,830) 39,550 undernoted itemsIncome taxes 2,729 4,457 - - - 7,186Minority interest 3,315 - - - - 3,315Segmented profit 16,709 15,170 - - (2,830) 29,049Property, plant and 274,671 65,898 22,044 3,691 921 367,225 equipmentTotal assets 373,949 108,680 22,213 3,691 53,400 561,933Capital expenditures 18,449 6,874 8,282 - 5 33,610 Kansanshi copper / gold operation ("KCO") Bwana / Lonshi division ("BLD") GuelbMoghrein project ("GMP") Frontier project ("FRO") Corporate development,administration and other ("CDA") Segmented InformationFor six months ended June 30, 2006 and 2005(expressed in thousands of US dollars, except where indicated) 2006 KCO BLD GMP FRO CDA Total $ $ $ $ $ $Segmented revenues 383,849 179,442 - - 6,016 569,307Less inter-segment 1,061 12,571 - - 6,016 19,648revenuesRevenues 382,788 166,871 - - - 549,659Cost of sales 73,567 44,367 - - - 117,934Depletion and amortization 13,838 12,492 - - 36 26,366Operating profit (loss) 295,383 110,012 - - (36) 405,359Interest on long-term debt 11,165 247 - - 525 11,937Other 12,259 5,541 - - 50,057 67,857Segmented profit before 271,959 104,224 - - (50,618) 325,565 undernoted itemsIncome taxes 65,588 29,307 - - (5,774) 89,121Minority interest 31,375 - - - (185) 31,190Segmented profit 174,996 74,917 - - (44,659) 205,254Property, plant and 369,130 61,789 93,513 33,142 284,230 841,804 equipmentTotal assets 710,063 144,126 100,967 33,383 412,689 1,401,228Capital expenditures 61,257 3,076 27,521 23,275 283,511 398,640 For six months ended June 30, 2005, segmented information is presented asfollows: 2005 KCO BLD GMP FRO CDA Total $ $ $ $ $ $Segmented revenues 45,063 83,282 - - 3,875 132,220Less inter-segment - (3,648) - - (3,875) (7,523)revenuesRevenues 45,063 79,634 - - - 124,697Cost of sales 18,538 32,698 - - - 51,236Depletion and amortization 2,927 7,861 - - 57 10,845Operating profit (loss) 23,598 39,075 - - (57) 62,616Interest on long-term debt 2,639 1,594 - - - 4,233Gain on disposal of - - - - (16,127) (16,127)investmentOther (1,794) 628 - - 5,212 4,046Segmented profit before 22,753 36,853 - - 10,858 70,464 undernoted itemsIncome taxes 2,729 8,195 - - - 10,924Minority interest 3,315 - - - - 3,315Segmented profit 16,709 28,658 - - 10,858 56,225Property, plant and 274,671 65,898 22,044 3,691 921 367,225 equipmentTotal assets 373,949 108,680 22,213 3,691 53,400 561,933Capital expenditures 43,112 9,523 11,771 - 12 64,418 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