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On back of strong 2014, First Quantum disappoints with 2015 outlook

Kansanshi, Zambia

Kansanshi, Zambia

Photo by First Quantum Minerals

27th January 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Base metals miner First Quantum Minerals late on Monday reported record copper output during 2014, noting that the current year would see its Zambia operations benefit from increased synergies as its new smelter was being commissioned and its new Sentinel mine started first production during the fourth quarter.

However, the Vancouver-based company disappointed investors with its full-year 2015 guidance, expecting lower output for each of its key products, comprising copper, nickel, gold and zinc.

First Quantum’s TSX-listed stock fell more than 11% to a new multiyear low of C$10.83 a share soon after the morning bell on Tuesday.

The company expected to produce between 410 000 t and 440 000 t of copper from its global operations this year, down from guidance of 418 000 t to 444 000 t for 2014. It expected between 32 000 t and 40 000 t of nickel this year, as opposed to 42 000 t to 47 000 t last year.

First Quantum’s gold output outlook was for between 218 000 oz and 247 000 oz compared with guidance of 221 000 oz to 246 000 oz in 2014, while the zinc outlook for this year was 40 000 t to 45 000 t compared with last year’s 59 000 t to 65 000 t.

First Quantum stressed that despite production constraints in Zambia and a structural failure in an atmospheric leach tank at Ravensthorpe, in Australia, having suspended operations there in mid-December, copper, nickel, gold and zinc output were all within guidance.

First Quantum reported full-year copper output of 427 655 t, up 4% over 2013. Nickel output was down 3% to 45 879 t, gold was down 7% at 229 813 oz and zinc output was up 12% to 55 980 t. Platinum output was 12% higher year-on-year at 34 090 oz and palladium increased 5% to 25 990 oz.

Sales of copper and zinc were higher, while nickel and gold sales were lower compared with 2013.

First Quantum said limited local smelter capacity in Zambia persisted and affected Kansanshi's performance and sales. The company reported that the acid spill at Ravensthorpe was contained within the plant's protective area, and that there were no environmental effects or injuries. It expected the mine to be back in production “shortly”.

"2015 is an important year for First Quantum. Our smelter in Zambia is being commissioned with first anodes [having been] poured during December. First concentrate was also successfully produced at Sentinel during the fourth quarter of 2014.

“The smelter's ramp-up will influence the rate of production build-up of our new Sentinel mine. This will also influence, as more acid becomes available, the level and mix of operations and unit cost of production at Kansanshi,” CEO and chairperson Philip Pascall noted.

He explained that the financial and commodity markets experienced high volatility so far this year, prompting the company to be “mindful of the current concerns” and pay close attention to the company's financial position to make sure that there was enough flexibility despite having an active project development pipeline.

Total capital expenditure for 2015, excluding capitalisation of any precommercial production costs and capitalised interest, was estimated to be between $1.2-billion and $1.4-billion.

At Cobre Panama, in Panama, First Quantum highlighted that it had substantially reduced the planned capital expenditure for 2015 to $600-million, without compromising the project's progress.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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