First Quantum Minerals faces severe cuts after losing Cobre Panama mine

Company News

by Glenn Dyer

Canada's First Quantum Minerals has announced significant cuts in its operations and spending as it grapples with the aftermath of losing its $US10 billion Cobre Panama copper mine due to a combination of government and court decisions.

Only hours after suspending operations and laying off more than 100 workers at its Ravensthorpe nickel mine in southern WA, First Quantum revealed further job cuts at the closed Panamanian mine and cost reductions in other parts of its business, including returns to shareholders and reduced copper production guidance.

On Monday, First Quantum Minerals unveiled its plan to conserve capital, suspend its dividend, reduce jobs, and lower costs to strengthen its financial position. The company has also been actively seeking to sell a small copper mine in Spain for several months.

In addition, the company is exploring the possibility of selling smaller mines and stakes in its larger mining assets.

The Cobre Panama project, one of the world's largest open-pit copper mines, was forced to shut down after Panama's top court ruled its contract unconstitutional. This decision followed nationwide protests opposing its continued operation, resulting in a decline in fourth-quarter copper production.

Toronto-based First Quantum reported a 22% drop in fourth-quarter copper production to 160,000 tonnes. For the current year, excluding the Panama mine, the company now anticipates copper production between 370,000 and 420,000 tons, down from 708,000 tons last year. Projections indicate an increase to 420,000 to 460,000 tonnes in 2025 and 2026, driven by the expansion of its Kansanshi mine in Zambia, but still falling short of 2023's total.

However, higher prices are unlikely to provide much relief, as Chile’s state-owned copper authority predicts that the global price won't exceed $US4 per pound this year or next. Currently, copper is priced at around $US3.76 per pound for the front month on Comex, and Chile does not foresee it reaching $US4 per pound in the near future.

The miner is actively working with banks to address and extend its loan facilities and is exploring capital market options to maintain its financial position. The decision to cut the dividend is expected to save over $C140 million annually, and planned capital expenditures have been reduced or rescheduled by approximately $C650 million over 2024 and 2025.

"This reflects a halt in capital spending at Cobre Panama and proactive initiatives to offset capital inflation in the Zambian business," the company informed investors on Monday.

First Quantum is also evaluating the possibility of strategic investments in its larger mining assets, following expressions of interest from potential investors. Its largest shareholder, China’s Jiangxi Copper, has reportedly been seeking to acquire stakes in mines in The Congo.

Cobre Panama was First Quantum's most significant asset, accounting for 78% of the company’s operating profit in the nine months leading up to September. It represents one of the world's major new mines and contributes approximately 1.5% to the annual copper output globally.

Despite the uncertainty, the company has expressed its commitment to Panama, though any developments are not expected until after the country’s presidential election in May. Cobre Panama has been a central issue in Panamanian politics for over a year.

"Recent discussions in Panama have been constructive regarding the responsible environmental stewardship of the mine," CEO Tristan Pascall said in a statement. Depending on the environmental protections at the mine, another 400 to 500 people could lose their jobs at Cobre Panama.

The environmental programs are designed to control water flows, improve mining conditions, minimize pollution and runoff, and maintain the vast mining area as well as possible while waiting to determine if a deal to restart the operation can be reached.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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