First Quantum Minerals Ltd. · TSX:FM
First Quantum Minerals — Investor Presentation (June 2014)
46 slides from First Quantum Minerals's investor presentation, June 2014
Slide 1: Turning Vision Into Reality
TURNING VISION INTO REALITY JUNE 2014 TSX: FM; LSE: FQM
Slide 2: Cautionary Note Regarding Forward-Looking Statement
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENT Some of the statements contained in the following material are forward-looking statements and not statement of facts. Such statements are based on the current beliefs of management, as well as assumptions based on management information currently a
Slide 3: First Quantum Minerals at a Glance
FIRST QUANTUM MINERALS AT A GLANCE • A Global Company • Industry-Leading Growth – Operations and projects in 8 countries – 5 major projects under development – Production capacities to rise to 1.1 Mtpa • Efficient Operations for copper and 110 ktpa for nickel by 2018 – 7 operations – 2013 production
Slide 4: Good Operating Performance Continues into 2014
GOOD OPERATING PERFORMANCE CONTINUES INTO 2014 • Production up • Comparative net earnings of $126.8 – Copper up 43% to 113,118 tonnes million or $0.22 per share including: – Nickel up 7% to 11,838 tonnes – $26.7 million or $0.05 per share of unfavorable, recurring acquisition- – Gold up 8% to 60,164
Slide 5: Our Priorities
OUR PIORITIES Build a leading copper-focused company Maintain an optimal capital and financing structure Operate efficiently 5
Slide 6: Building a Leading Copper-Focused Company: Cobre Panama
BUILDING A LEADING COPPER-FOCUSED COMPANY Cobre Panama – A Tier 1 Copper Project Acquired March 2013 Critical review following acquisition – Focused mainly on Engineering, Contracts and Construction initially – Copied major areas of the design of the almost-complete Sentinel process plant Made
Slide 7: Cobre Panama – A Tier 1 Copper Project
BUILDING A LEADING COPPER-FOCUSED COMPANY Cobre Panama – A Tier 1 Copper Project A larger, more robust project – Installed capacity Yrs 1-10 = ~70 Mtpa 17% higher than prior Expansion up to 100 Mtpa beyond Yr 10 – Average annual LOM* copper production of 320,000 tonnes ~ 20% higher than prio
Slide 8: Cobre Panama – Capex and Timeframe
BUILDING A LEADING COPPER-FOCUSED COMPANY Cobre Panama – A Tier 1 Copper Project Capex estimate of $6.4 billion – inclusive of $913 million incurred prior to acquisition Capital per installed tonne of capacity of $17,125 – ~25% lower than prior A realistic and well-defined timeframe – 230 KV o
Slide 9: Cobre Panama Project – Process Plant Site Earthworks
COBRE PANAMA PROJECT – PROCESS PLANT SITE EARTHWORKS 9
Slide 10: Cobre Panama Project – Mill Pad Earthworks
COBRE PANAMA PROJECT – MILL PAD EARTHWORKS 10
Slide 11: Cobre Panama Project – Process Plant Stockpile Pad
COBRE PANAMA PROJECT – PROCESS PLANT STOCKPILE PAD 11
Slide 12: Cobre Panama Project – Power Station Area
COBRE PANAMA PROJECT – POWER STATION AREA 12
Slide 13: Cobre Panama Project Breakwater and Material Offloading Facility
COBRE PANAMA PROJECT BREAKWATER AND MATERIAL OFFLOADING FACILITY 13
Slide 14: Copper Smelting Complex
BUILDING A LEADING COPPER-FOCUSED COMPANY Copper Smelting Complex Phase 1 – Processing capacity of 1.2 Mtpa – Combination of concentrate from Kansanshi & Sentinel – Average copper grade 26% Copper production 300,000 Tpa; acid production 1.0 Mtpa Commissioning from 2H2014 Estimated savings: –
Slide 15: Copper Smelting Complex – Phase 1 Smelter Cold Box Lifts
BUILDING A LEADING COPPER-FOCUSED COMPANY Copper Smelting Complex - Phase 1 Smelter – Cold Box Lifts – April 2014 15
Slide 16: Trident Project
BUILDING A LEADING COPPER-FOCUSED COMPANY Trident Project Located ~ 140 km northwest of Solwezi, northern Zambia Includes Sentinel copper and Enterprise nickel Sentinel’s M&I resource of 1,027 Mt at 0.51% Cu grade, containing 5.2 Mt Cu Estimates: – 2.2:1 LOM strip ratio – >15 years mine life
Slide 17: Trident Project – Facilities
BUILDING A LEADING COPPER-FOCUSED COMPANY Trident Project • Flexible 4 Mtpa nickel facility can augment copper capacity • 55 Mtpa copper throughput • 3 semi-mobile in pit crushers and assembly of large scale mining equipment • Large operating SAG/Ball mill trains (100MW milling power) • 265 Kt of fr
Slide 18: Trident Project – Infrastructure
BUILDING A LEADING COPPER-FOCUSED COMPANY Trident Project • Life of mine tailings storage facility • 600 km of 330kV power transmission lines from Lumwana – Kalumbila – Lusaka West • 690 staff houses plus 590 houses in resettlement • Development of a new town, airport, clinic, school etc…. 18
Slide 19: Sentinel – Feed Shuttle Conveyor Truss
SENTINEL – 80 METER FEED SHUTTLE CONVEYOR TRUSS - APRIL 2014 19
Slide 20: Sentinel – 100MW Milling
SENTINEL - 100MW MILLING – 2 X 40’SAG MILLS + 2 X 28’BALL MILLS 20
Slide 21: Sentinel – Community Development
SENTINEL – COMMUNITY DEVELOPMENT SPORTS FACILITY 04-NOV-2013 SENIOR HOUSING - SINGLES 31-MAR-2013 SENIOR HOUSING AREA 28-FEB-2013 TRIDENT PREPARATORY SCHOOL 05-NOV-2013 21
Slide 22: Sentinel – Community Development
SENTINEL – COMMUNITY DEVELOPMENT AFFORDABLE HOUSING LAYOUT TEACHER’S HOME 3-JAN-2014 TRUST SCHOOL 05-NOV-2013 COMPLETED 4-BEDROOM HOUSE 3-JAN-2014 22
Slide 23: Optimized Capital Structure & Financial Flexibility
OPTIMIZED CAPITAL STRUCTURE & FINANCIAL FLEXIBILITY • Refinanced the short-term US$2.5B revolver at FQM (Akubra) with a $1.2B Term Loan Facility five-year Term and and a $1.8B Revolving Credit Facility • Exchanged the FQM (Akubra) Inc. US$1.49B 8.75% 2020 and US$500M 7.50% 2021 notes for new 6.75% 6
Slide 24: Illustrative Pro Forma Corporate Structure Chart
Illustrative Pro Forma Corporate Structure Chart As at March 31, 2014 24
Slide 25: One of the Few Mining Companies Investing in Building Capacity
ONE OF THE FEW MINING COMPANIES INVESTING IN BUILDING CAPACITY 25
Slide 26: Current State of the Copper Industry
CURRENT STATE OF THE COPPER INDUSTRY A Small Copper Surplus Now, But….. • EXPLORATION – Majors have cut back on exploration and juniors are mainly un-financeable – It takes 12-15 years to get from discovery to production • BROWN FIELD EXPANSIONS – Should be lower capital intensity but are not – Capi
Slide 27: Current State of the Copper Industry: Looming Deficit
CURRENT STATE OF THE COPPER INDUSTRY Results in a Looming Deficit 27
Slide 28: Lack of Supply Response to Price Over 2006-2012
LACK OF SUPPLY RESPONSE TO PRICE WAS STAGGERING OVER 2006-2012 PERIOD Global copper mine supply growth and price 10% 400 Copper mine supply growth % YoY 9% 350 8% 7% 7% 7% 7% 300 Copper price, cents/lb 6% 5% 250 4% 4% 4% 200 3% 3% 3% 2% 2% 2% 150 2% 1% 1% 0% 1% 0% 100 0% 0% 0% 0% 50 -1% -1% -2% 0 19
Slide 29: The Seeds of the Next Copper Price Bubble Are Already Sown
SO THE SEEDS OF THE NEXT COPPER PRICE BUBBLE ARE ALREADY SOWN … AND IT IS COMING SOON So why is the industry cutting investment? Pressure from shareholders who have a much shorter time horizon than miners This is not going to change There is not much out there that the majors want With the cut-b
Slide 30: Why Is Capital Intensity Rising?
WHY IS CAPITAL INTENSITY RISING? Average Copper Grades Falling grades • Difficult geographies • Geopolitics Source: Brook Hunt, Freeport McMoRan 30
Slide 31: As Head Grades Fall, Capital Intensity Rises Rapidly
AS HEAD GRADES FALL, CAPITAL INTENSITY RISES RAPIDLY Weighted average copper project by year of delivery 1.8 2000-2011 2002 1.6 2007 2012-2018f 1.4 2005 Average head grade 1.2 2001 1 0.8 2012 2000 2011 2006 2008 2009 2013f 0.6 2016f 2010 0.4 2017f 2004 2018f 2014f 0.2 2015f 0 Source: 0 Wood Mackenzi
Slide 32: But It Is Possible to Build Projects Efficiently
BUT IT IS POSSIBLE TO BUILD PROJECTS EFFICIENTLY Galeno (Minmetals) Cobre Panama (First Quantum) Las Bambas (Xstrata) Tampakan (Xstrata) Toromocho (Chinalco) CAPITAL INTENSITY Sierra Gorda (KGHM) Ministro Mina Hales (Codelco) (US$/t) Oyu Tolgoi (Rio Tinto) Los Bronces (Anglo American) Las Cruces (In
Slide 33: Cobre Panama Has Substantially Lower Capital Intensity
COBRE PANAMA HAS SUBSTANTIALLY LOWER CAPITAL INTENSITY COMPARED TO OTHER PROJECTS WITH SIMILAR START-UP HORIZONS Weighted average copper project by year of delivery 1.8 2000-2011 2002 1.6 2007 2012-2018f 1.4 2005 Average head grade 1.2 2001 1 COBRE PANAMA 0.8 2012 2000 2011 2006 2008 2009 2013f 0.6
Slide 34: Efficient Operations
EFFICIENT OPERATIONS 34
Slide 35: Kansanshi Cu-Au Mine, Zambia
EFFICIENT OPERATIONS Kansanshi Cu-Au mine, Zambia Located near Solwezi in the north western Province of Zambia First production in 2005 Open pit mining Flexible ore treatment to allow for variation in ore type : – sulphide circuit; oxide circuit; gold facility As at December 31, 2013, the
Slide 36: Kansanshi Cu-Au Mine, Zambia – Production and Expansion
EFFICIENT OPERATIONS Kansanshi Cu-Au mine, Zambia Q1 2014 Estimate Production – 71 kt of copper Project Capacity Status Cost Impact – 40 kozs of gold (US$M) – $1.57/lb copper C1 cash cost Oxide 7.2 Mtpa Complete 34 Copper: 10,000 - 15,000 Tpa 2014 outlook Oxide 14.5 Mtpa Complete 280 Copper: 60,
Slide 37: Las Cruces Cu Mine, Spain
EFFICIENT OPERATIONS Las Cruces Cu mine, Spain Acquired in March 2013 Estimated mine life of 9 years; potential for extension Current average reserve grade of 5.4% copper Workforce = ~254 Q1 2014 – 19 Kt of copper; $0.98/lb copper C1 cash cost 2014 Outlook – 69 to 72 kt of copper 37
Slide 38: Guelb Moghrein Cu-Au Mine, Mauritania
EFFICIENT OPERATIONS Guelb Moghrein Cu-Au mine, Mauritania 100% ownership Located 250 kilometres northeast of the nation’s capital, Nouakchott As at December 31, 2013, the estimated mine life was ~ 8 years (including stockpiles) based on current operations First production in 2006 Workforc
Slide 39: Guelb Moghrein Cu-Au Mine – Q1 and Outlook
EFFICIENT OPERATIONS Guelb Moghrein Cu-Au mine, Mauritania Q1 2014 – 9 kt tonnes of copper – 14 kozs of gold – $1.56/lb copper C1 cash cost 2014 Outlook – 36 to 39 kt of copper – 55 to 60 k ozs of gold Magnetite plant project: – In detailed design stage – Estimated capex of $50M – Expected pro
Slide 40: Ravensthorpe Ni Mine, Australia
EFFICIENT OPERATIONS Ravensthorpe Ni mine, Australia Acquired as a decommissioned plant in 2010 First production within 20 months of purchase Estimated mine life of 32 years Commercial production declared Dec 2011 Workforce = ~428 Q1 2014 – 9 kt of nickel @ $4.02/lb C1 cash cost 2014 O
Slide 41: Kevitsa Ni-Cu-PGE Mine, Finland
EFFICIENT OPERATIONS Kevitsa Ni-Cu-PGE mine, Finland Built, commissioned and started commercial operations within 36 months of board approval Estimated mine life of 29 years Commercial production declared August 2012 Workforce = ~337 Further potential – Process optimization – Approval to i
Slide 42: Çayeli Cu-Zn Mine, Turkey
EFFICIENT OPERATIONS Çayeli Cu-Zn mine, Turkey Acquired in March 2013 Estimated mine life of 6 years with potential for an additional 3 years Average grade of 3.1% copper and 3.6% zinc Workforce = ~520 employees Q1 2014 – 7 kt of copper; 10 kt of zinc – $0.76/lb copper C1 cash cost 2014
Slide 43: Pyhäsalmi Cu-Zn Mine, Finland
EFFICIENT OPERATIONS Pyhäsalmi Cu-Zn mine, Finland Acquired in March 2013 One of the most efficient underground mines in the world Estimated mine life of 6 years Average grade of 1.05% copper and 1.79% zinc Workforce = ~228 employees Q1 2014 – 4 kt of copper; 5 kt of zinc – $0.52/lb copp
Slide 44: Full Year 2014 Guidance
FULL YEAR 2014 GUIDANCE • Production • C1 cash cost – Copper between 418,000 - 444,000 – Copper between $1.32 - tonnes $1.48/lb. – Nickel between 42,000 - 47,000 – Nickel between $4.40 - $4.90/lb tonnes • Capital expenditures – Gold between 221,000 - 246,000 – $2.1B to $2.2B ounces – Zinc between 59
Slide 45: A Copper-Focused, Global Company
Revenues A COPPER-FOCUSED, GLOBAL COMPANY Zinc Other Gold 2% Signifiant Nickel and Gold Production 3% 6% Operations and Projects in 8 countries Nickel High-Quality, Stable, Efficient Operations 16% Strong Liquidity & Cash Flow Industry-Leading Growth Unique Core Strength of In-House Project De
Slide 46: Turning Vision Into Reality
TURNING VISION INTO REALITY JUNE 2014 TSX: FM; LSE: FQM
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