First Quantum Minerals Ltd. · TSX:FM
First Quantum Minerals — Investor Presentation (November 2014)
46 slides from First Quantum Minerals's investor presentation, November 2014
Slide 1: Turning Vision Into Reality
TURNING VISION INTO REALITY NOVEMBER 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 9 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: Nine Months 2014 Operating and Financial Performance
NINE MONTHS 2014 OPERATING AND FINANCIAL PERFORMANCE • Production mostly up • Realized metal prices – Copper up 8% to 322,479 tonnes – Copper down 5% – Nickel up 4% to 35,945 tonnes – Nickel up 10% – Gold down 7% to 172,333 ounces – Platinum and palladium up 15% to • Comparative net earnings of 38,3
Slide 5: Our Priorities
OUR PRIORITIES Build a leading copper-focused company Maintain an optimal capital and financing structure Operate efficiently 5
Slide 6: Building a Leading Copper-Focused Company: 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 7: Trident Project
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 8: Trident Project
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…. 8
Slide 9: 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% Estimates: – Production 300,000 Tpa copper; 1.0 Mtpa sulphuric acid – Commissioning from 2H2014 – Savings
Slide 10: Copper Smelting Complex
BUILDING A LEADING COPPER-FOCUSED COMPANY Copper Smelting Complex Phase 1 ~ 92% complete Commissioning activities underway alongside construction completion Phase 2 being planned to increase processing capacity to between 2 to 2.4 Mtpa in 2017 10
Slide 11: Phase 1 Smelter - Reagents Building and Oxygen Plant
Phase 1 Smelter - Reagents Building and Oxygen Plant 11
Slide 12: Phase 1 Smelter - Isasmelt Tower and Feed Conveyor
Phase 1 Smelter - Isasmelt Tower and Feed Conveyor 12
Slide 13: Phase 1 Smelter – Control Room
Phase 1 Smelter – Control Room 13
Slide 14: Phase 1 Smelter – Converter Aisle
Phase 1 Smelter – Converter Aisle 14
Slide 15: Phase 1 Smelter – Anode Casting Area
Phase 1 Smelter – Anode Casting Area 15
Slide 16: Phase 1 Smelter – Acid Plant
Phase 1 Smelter – Acid Plant 16
Slide 17: Cobre Panama – A Tier 1 Copper Project
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 18: 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 19: Cobre Panama – A Tier 1 Copper Project
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 20: Haquira Copper Project
BUILDING A LEADING COPPER-FOCUSED COMPANY Haquira Copper Project Acquired in December 2010 • Large-scale copper project located in Apurimac Department, Peru M&I resource of 3.7 Mt of copper equivalent and an inferred resource of 2.4 Mt of copper equivalent Currently focused on community and en
Slide 21: Taca Taca Copper Project
BUILDING A LEADING COPPER-FOCUSED COMPANY Taca Taca Copper Project Acquired in August 2014 for ~ $470M Located in the Puna region of Salta Province, Argentina NI 43-101 compliant indicated mineral resource estimate: – 21.15B pounds of copper (9.6M tonnes of copper) contained in 2.17B tonnes gr
Slide 22: 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 5-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-ye
Slide 23: Corporate Structure Chart
Corporate Structure Chart $1,800M Revolving Credit Facility due 2019 $1,200M Term Facility due 2019 $1,121M 6.75% Senior Notes due 2020 $1,121M 7.00% Senior Notes due 2021 $850M 7.25% Senior Notes due 2022 $350M 7.25% Senior Notes due 2019 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 100% FQM FQ
Slide 24: One of the Few Mining Companies Investing in Building Capacity
ONE OF THE FEW MINING COMPANIES INVESTING IN BUILDING CAPACITY 24
Slide 25: Current State of the Copper Industry: A Small Copper Surplus Now, But…
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 26: Current State of the Copper Industry: Results in a Looming Deficit
CURRENT STATE OF THE COPPER INDUSTRY Results in a Looming Deficit 26
Slide 27: Lack of Supply Response to Price Was Staggering 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 28: 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 29: Why Is Capital Intensity Rising?
WHY IS CAPITAL INTENSITY RISING? Average Copper Grades Falling grades • Difficult geographies • Geopolitics Source: Brook Hunt, Freeport McMoRan 29
Slide 30: 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 31: 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 32: 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 33: Impact of Emerging Economies on the Copper Market
Impact of Emerging Economies on the Copper Market Key Points Intensity of Refined Copper Consumption(1) Should China, India and Brazil all kg Cu per capita Multiple of India Brazil China grow in line with population 25 Aggregate Average Intensity of Use (x) 6.0x forecasts and reach copper use Copp
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
EFFICIENT OPERATIONS Kansanshi Cu-Au mine, Zambia 9 months 2014 Estimate Production – 200 kt of copper Project Capacity Status Cost Impact – 118 kozs of gold (US$M) – $1.61/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 Cop
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 9 months 2014 – 56 Kt of copper; $0.96/lb copper C1 cash cost 2014 Outlook – 69 to 72 kt of copper 3
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, Mauritania
EFFICIENT OPERATIONS Guelb Moghrein Cu-Au mine, Mauritania 9 months 2014 – 23 kt tonnes of copper – 35 kozs of gold – $1.83/lb copper C1 cash cost 2014 Outlook – 33 to 36 kt of copper – 47 to 50 kozs of gold Magnetite plant project: – Commissioning to expected start up by year-end 2014 – Estim
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 9 months 2014 – 29 kt of nickel @ $4.36/lb C1 cash cost
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 – Increase thro
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 9 months 2014 – 22 kt of copper; 28 kt of zinc – $0.85/lb copper C1 cash cost
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 9 Months 2014 – 10 kt of copper; 16 kt of zinc – $0.28
Slide 44: Full Year 2014 Guidance
FULL YEAR 2014 GUIDANCE • Production ranges • C1 cash cost ranges – Copper 419,000 - 436,000 tonnes – Copper $1.32 - $1.48/lb. – Nickel 45,000 - 48,000 tonnes – Nickel $4.40 - $4.90/lb – Gold 218,000 - 237,000 ounces • Capital expenditures – Zinc 55,000 - 60,000 tonnes – $2.2B to $2.4B – Platinum 26
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 9 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 NOVEMBER 2014 TSX: FM; LSE: FQM
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