First Quantum profitable (June 09, 2003)

An expansion program and higher head grades enabled First Quantum Minerals (FM-T) to pump out twice as much copper cathode in the recent first quarter as a year earlier.

The mid-tier producer mines the Lonshi copper oxide deposit in the Democratic Republic of Congo and trucks the ore across the Zambian border to its Bwana Mkubwa solvent extraction-electrowinning plant. Before October 2002, a smaller plant treated tailings left over from the historic Bwana Mkubwa open-pit mine.

During the recent quarter ended March 31, the plant processed 110,875 tonnes of stockpiled ore (stripping is done in the winter months) grading 4.6% copper to produce 4,359 tonnes of cathode. This compares with 2,080 tonnes in the fiscal first quarter ended Feb. 28, 2002, when 431,840 tonnes of Lonshi ore, averaging 0.66% copper, were blended with tailings of a similar grade.

By June, Bwana Mkubwa is expected to have achieved design output of 2,500 tonnes cathode per month. The company is also purchasing its own mining equipment (Lonshi currently employs contract miners), all of which should translate into lower costs.

In the recent quarter, cash costs averaged US44 per lb. copper sold and total costs, US69, net of surplus sulphuric acid credits. These compare with US11 and US36 in the 2002 first-quarter, reflecting the blending of tailings with Lonshi material.

First Quantum recorded a profit of US$7,459 on first-quarter revenue of US$10.3 million, compared with a loss of US$4.5 million (10 per share) on US$28.1 million in the similar period a year ago. The turnaround principally reflects the company’s reduction to 18.8% of its interest in Zambian-incorporated Mopani Copper Mines, 90%-owner of the Nkana and Mufilira mine and mill complexes.

Cash flow from operations rang in at US$1.6 million in the recent quarter, or negative US$352,000 after changes to working capital. By the period’s end, the company had reduced its cash or equivalents to US$3.8 million.

First Quantum realized an average price of US70 per lb. copper, versus US65 in the similar 2002 quarter.

On March 31, First Quantum had US$1 million in working capital and US$17.7 million in long-term debt. The company has since closed various debt facilities and arranged a $22.4-million private placement for working capital purposes and for the advanced Kansanshi copper project, northwest of Bwana Mkubwa (T.N.M., June 2/03).

By year-end, First Quantum expects to have produced 28,700 tonnes copper cathode.