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Executives

Philip K. R. Pascall - Executive Chairman of the Board &Chief Executive Officer

Hannes O. Meyer - Chief Financial Officer

Juliet Wall - General Manager, Finance

Sharon Loung - Director of Investor Relations

Clive Newall - President and Director

Analysts

Ralph Profiti - Credit Suisse Securities

Matt Murphy - UBS Securities

Oscar Cabrera - Bank of America Merrill Lynch

John Hughes - Desjardins Securities

Alex Terentiew - Raymond James

Alain Gabriel - Morgan Stanley

Michael Flitton - Citigroup

Matt Vittorioso - Barclays Capital

Bruce Klein - Credit Suisse

Cailey Barker - Numis Securities Ltd

First Quantum Minerals Ltd. (OTCPK:FQVLF) Q1 2013 Earnings Call May 7, 2013 8:00 PM ET

Operator

Good morning, ladies and gentlemen. Welcome to the First Quantum Minerals First Quarter Results Conference Call.

I would now like to turn the meeting over to Mr. Clive Newall, President. Please go ahead, Mr. Newall.

Clive Newall

Thank you operator, and thanks everybody for joining us today. On the call with me from our finance department, Hannes Meyer, CFO; Juliet Wall, General Manager of Finance; Juliet Wall General Manager, Finance; Philip K. R. Pascall, CEO and Chairman; and Sharon Loung, Director of IR.

Following my opening comments, Hannes will give a review of the financial results for the quarter, which were published yesterday. They include the results of the acquired Inmet operations for the 10 days from the acquisition to the close of the quarter, together with the consolidated balance sheet. Note that the financial and operating results for Inmet for the full quarter is available on the website, www. Inmetmining.com. Also there are some slides to accompany Hannes’ review. They’re available on our website www.first-quantum.com and can be accessed either on the events section or on the Q4 conference call button under the news section. Following the review of the financials, we'll open the lines to take your questions as usual.

Before we begin I must note that over the course of this conference call, we'll be making several forward-looking statements. As such, I encourage you to note the risk factors particular to our company which are detailed in our annual information form and available on our website at www.first-quantum.com and on www.sedar.com.

Now to begin the review. Comparative net earnings from the quarter totaled $153.8 million, or $0.32 on a per share basis. As Hannes will explain in more detail, this excludes the costs associated with the acquisition of Inmet and an impairment charge on our investments in at an early stage exploration company which has experienced a steep decline in share price.

Cash generated before investment activities which $16.4 million. The company ended the quarter with over $1.7 billion in cash. These solid results reflect good all-around performance, which includes higher year on year throughput at Kansanshi, quarterly production record at Ravensthorpe, steady operations at Kevitsa and a very respectable quarter at Guelb Moghrein and of course the 10 day contribution from Las Cruces is only entirely the Inmet operating assets.

At Kansanshi, production benefited from the capacity expansion and work done in the pit to improve our availability and as a result, such as easily met its targeted throughput rate. Special recoveries in the mixed and oxide circuits and higher grade oxide ore offset the effect of lower grade and recoveries of sulphide circuits. Overall this year the wet season has not been particularly severe. There was quite a lot of dry weather as well as brief periods of rain. So it’s actually quite manageable.

The stockpiling of high grade, high acid-consuming ore continues as third party supply of sulphuric acid remains constrained and the cost to import sulphur is still pretty high. This high grade material we have mixed in with the other stockpile material and process over time when our smelter is in operation.

Construction of that smelter is progressing very well and on track to be complete by the middle of next year. but the main reason for building the smelter was to address the issue of insufficient smelter capacity in Zambia, which is only going to get worse with the completion of Sentinel and the S3 expansion at Kansanshi. Already the situation is quite tight and Kansanshi is concentrating inventory builds from the second half of last year is not expected to be materially reduced for the balance of the year. so needless to say the completion of our own smelter, copper smelter is highly anticipated. We’re also pushing ahead with the project to expand the sulphide circuit. Design work is underway, the applications for environmental approvals. Long lead items were ordered some time ago.

As I mentioned at the beginning, Guelb Moghrein had a very respectable quarter with the best recoveries in the history of its operation. The stronger, more sustained performance over the past 12 months or so really reflects the very high quality of management and the workforce there and a focus on improving plant availability. The team is also evaluating the feasibility of extracting magnetite from ore feed and from stored tailings. As you know, the deposit is considered to be an IOCG type deposit in terms of its structure mineralogy has common features with other IOCG deposits elsewhere in the world. This iron ore project was given board approval at yesterday’s board meeting.

Ravensthorpe continues to operate very well, with steady improvements a year into its commercial operations. The work done in Q4 of last year as we exposed higher grade ore was the main contributor to the achievement of new quarterly production record, just over 9,000 tons of contained nickel. The cost of production is an area of focus at Ravensthorpe and the team there is doing a great job in managing at one of the highest operating cost regions in the world. Its lowest unit cost to date of $5.36 a pound benefited from higher production in the quarter, as well as work done in Q4 to open up new mining areas for future use. I think it’s fair to say those months in that quarter costs were as low as I think $4.50 or even lower. That shows you what we can achieve. The Ravensthorpe team work very closely with our Metal Corp division to source the most economical supply of sulphur which is a very significant component of Ravensthorpe’s process cost structure.

The ramp up of Kevitsa is going very well. However we’re still in the weathered material which does affect recoveries. We expect this will be less of an issue by mid-year. already post the end of the quarter there’s been significant improvement there. As part of the ramp up, the mine is now operating on a full seven day a week shift roster. In terms of further improvements going forward, the team is looking at further process optimizations and continues to work with the relevant authorities on the permits to increase the throughput to a maximum of 10 million tons a year.

Now moving on to the Inmet recently acquired assets, Las Cruces had a good quarter. Consistent ore grades of 6.7% copper and higher throughput and recoveries. A nine day planned maintenance shutdown and a one day national strike did however affect production. Subsequent to the quarter end, there was a fire at one of the plant’s eight leach reactors which led to all eight reactors being shut down to allow for a thorough assessment of the damage and investigation on the cause of the fire. On April 23, seven of the eight reactors were re-commissioned and the final one is expected to come online by mid-May. We estimate the loss of production is going to be approximately 3,300 tons of cathode, which management is confident can be made up during the balance of the year. so there’s no change to our estimated production guidance for the full year of 2013.

At Çayeli, the deferral of several high grade copper stopes to later in the year did affect copper production. The zinc lower grades were also processed but partially offset by favorable blending controlled throughput which resulted in higher zinc recovery. A key area of focus at Çayeli is a negotiation of new labor agreement which was initially delayed due to changes to government labor regulations. The process is underway with the objective of retaining the operation’s cost competitiveness.

At Pyhäsalmi, a very good quarter as higher than planned copper and zinc ore grades were processed from areas outside of the mine plan. For the remainder of the year the grades are expected to return to plan levels of around 1% copper and 1.7% zinc. I must say Pyhäsalmi are extremely good at extracting every last ounce of value out of their relatively low grade ore.

On the project side, construction at Sentinel continues to progress well with several milestones achieved. Most notably we achieved 3 million man hours work without a lost time injury which at a construction project of this scale is quite remarkable. As we noted in our release, we currently have a dispute with the power transmission and supply company, ZESCO regarding the tender selection for the contracts to build the transmission line. While we believe the matter can be resolved in good time, in the event it is not, the connection of power for the Sentinel project could be delayed. It’s worth noting that the first stage of the power line to Sentinel is relatively short, that being the link of approximately 68 kilometers from the [Lamona] mine and this will enable the commissioning of the first train at least.

In addition, the award of the substation works which is a critical path item is that all agreed with ZESCO and the contractor is moving forward. In the meantime we continue project development with our ongoing commitment to social responsibility within the complete license area. But needless to say this has been a very busy and transformative quarter for First Quantum and one which could not have been achieved without the support of our shareholders and our employees. We are very appreciative of all your support and you have our assurance that we’ll continue to strive to set and execute a strategy for the company that will earn your continued trust and support.

Now if I could ask Hannes to take you through the financials. So if you have access to a computer you can get it on our website.

Hannes Meyer

Thanks Clive and good day everyone. Turning to the first slide, Q1 2013 highlights and that’s on page 2 of the presentation. Good revenue for the quarter of $901 million was up $173 million or 24% from Q1 2012, benefiting from a $40 million contribution from Kevitsa and a $50 million contribution from the newly acquired operations and an increase in sales volume at Kansanshi and Ravensthorpe, partially offset by copper prices decreasing from an average LME price of $2.77 per pound to $3.60 in the last quarter.

Copper production increased 20% compared to Q1 2012. Nickel production increased 29% including an additional 2,000 tons from Kevitsa. Gold production also increased 32% against Q1 2012 as Kansanshi benefited from announcements in the gold circuit.

Gross profit increased against Q1 2012 due mainly to higher sales volumes at Kansanshi and Ravensthorpe and the contribution of Kevitsa, partially offset by lower copper and coal prices and higher depreciation at Kansanshi.

Turning to the next slide, as shown in the graph on the side, the group delivered production growth against Q1 2012 for each of copper, nickel and gold. Overall copper production at Kansanshi was higher than quarter last year as expansion works continues to benefit throughout the oxide circuit. Guelb Moghrein copper production increased in the quarter as higher recovery rates more than offset lower throughput. Note that the 3,300 tons contribution of copper production by the newly acquired Çayeli, Las Cruces and Pyhäsalmi operations.

Group nickel production of 11,100 tons was achieved in the quarter, with a record production at Ravensthorpe as a result of improved operation of the beneficiation plant resulting in higher beneficiated grades. Nickel production at Kevitsa has increased against last quarter. This works to optimize production processes, including improving that mine’s nickel recovery rates.

Gold production also increased against Q1 2012 gold circuit increased Kansanshi’s production and Guelb had some, also some increases there. Kevitsa gold increased against last quarter’s throughput and gold recovery rates both improved.

Turning to slide 5, the financial overview. when compared to Q4 2012 quarter, gross profit benefited from higher copper sales volumes at Kansanshi, higher nickel sales at Ravensthorpe, partially offset by additional maintenance work performed at Guelb. The newly acquired operations contributed $3 million in gross profit as a group in the 10 days to the end of the quarter since they were acquired. Closing net debt of $794 million includes the acquisition of Inmet.

Group C1 copper costs, C1 nickel costs of $1.52 per pound and $5.34 respectively are both lower than the same quarter last year. Q1 2013 effective tax rate is in line with our expectations.

Turning to the next slide, comparative operating profits, slide 6. A (inaudible) comparative operating profits for the quarter compared to Q1 2012. Notice the benefits received from higher copper and nickel sales volume, more than offsetting the decline in the prices. Cash costs are relatively stable at Kansanshi while Guelb Moghrein benefited from sale of lower cost inventory completed that sold in the same quarter last year. In Zambia, the royalty rights increased from the start of April 2012, resulting in additional $16 million in royalty cost in this quarter when compared to last year.

Depreciation expense increased mainly at Kansanshi as projects, including the 7.2 million oxide expansion was capitalized during 2012. This contributed $15 million in operating profits in the quarter on a comparative basis. The newly acquired operations contributed $19 million in operating profits for the 10 days since the acquisition.

Turning to the next slide of copper C costs. Copper C1 costs for the quarter of $1.52 per pound is $0.07 lower than Q1 2012. Kansanshi’s copper C1 cost was about the same as last year. Guelb Moghrein copper C1 cost was 41% lower than Q1 2012 , benefiting from selling down of higher inventory in the same quarter last year compared to that sold in the current quarter, combined with higher gold (inaudible).

The nickel C1 costs on the next slide. Group nickel C1 costs were $0.35 lower than Q1 2012 and $0.78 lower than the last quarter. Ravensthorpe nickel C1 costs were $0.69 lower than the same quarter last year since the mine benefited from a favorable mix of refining charges, decrease in administration costs and high production. Kevitsa nickel C1 cost of $5.29 per pound is $1.08 per pound lower than Q4 2012 due to favorable by product criteria and a decrease in treatment charges and freight, in line with higher nickel and concentrated grades.

Moving to the next slide to quarterly net cash flow movement. The group net balance at the beginning of the quarter was $88 million, including the acquisition of Inmet group end of the quarter and a net debt position of $794 million. Working capital inflow was as the result of lower EBITDA balances, increase in copper finished goods and stockpiles. Tax paid for the quarter was $25 million. $358 million was spent on capital expenditure in the quarter, which included $149 million in Sentinel, $39 million on Kansanshi’s smelter, $36 on the oxide expansion at Kansanshi and $10 million at Kansanshi’s sulphide expansion. Acquisition of the Inmet Group acquired $1.4 million in net cash paid approximately $2.1 billion in cash for 85.5% of the Inmet shares at the end of the quarter.

Turning to the next slide on market guidance, we have copper production guidance has increased as a result of the newly acquired operations to be between 384,000 and 416,000 tons of copper. Copper production guidance for the three acquisitions First Quantum mines remains unchanged at between 302,000 and 327,000 tons, a small narrowing of the range at Kevitsa.

Nickel production guidance remains unchanged at both Ravensthorpe and Kevitsa. The group has now added zinc production guidance related to the newly acquired mines. On the post-acquisition portion of the year remaining, zinc production is expected to be between 41,000 and 48,000 tons.

On the slide and that’s slide 11 of C1 cost of capital guidance groups, copper C1 cost guidance has been lowered by $0.1o to be between $1.40 to $1.50 per pound of copper. The reduction relates to the incorporating the newly acquired Inmet operations into the group. Excluding these new mines, copper C1 cost guidance on Kansanshi, Guelb and Kevitsa mines remains unchanged.

Nickel C1 cost guidance remains unchanged at between $5.50 to $6 per pound of nickel. CapEx spend for 2013 on the pre-acquisition First Quantum side capital expenditure and development projects remains unchanged at $2 billion. Then on Cobre Panama, it’s under review and revised guidance will be given in due course. Full year 12 months CapEx guidance on the acquired operations is between $70 million and $85 million.

Thank you and I’ll hand it back to Clive.

Clive Newall

Thanks very much, Hannes. Operator, could we turn it over to questions now?

Question-and-Answer session

Operator

(Operator instructions). The first question is from Ralph Profiti of Credit Suisse. Please go ahead.

Ralph Profiti - Credit Suisse Securities

Clive, at Las Cruces there’s always been or there was always a fairly wide range between the mine copper grades at 6% to 7% in the reserve grade which is only about 5.5. so just wondering, how much of a fall in grades are you expecting in the second half of the year and 2014? And in some of the net benefit tests that you’re looking at running that operation, are you looking at maintaining 72,000 tons per year as the operating rate?

Philip Pascall

On the first question, Ralph, it’s Phil Pascall. We totally have to come back to you on that because I think our familiarity with it at the moment isn’t enough to answering that. But certainly what we are looking at is some changes and investigation in some changes in the plant so that we can maintain that production level of 72,000 tons going forward. So that’s certainly our intent and there will be means by which lower grade material is to be handled at that production outfit.

Ralph Profiti - Credit Suisse Securities

If I can ask a follow on, with the potential arbitration at Sentinel, is ZESCO seeking for you to start the tender selection process over? And if that is the case, how long could that process take in and if that were the option, would that impact the project timeline? Thank you.

Philip Pascall

I don’t think it’s probably appropriate at the moment with pending legal steps for us to discuss much on that and particularly I don’t think we would actually know what ZESCO’s view or intentions are. But certainly if it goes down the line of going to arbitration, it could lead to delays in the delivery of the -- particularly of the longer power line. We think it would take some considerable delay before impact to the short line that enables us to proceed with commissioning. So we think it’s unlikely that it will delay the commissioning, whatever route it goes. If it gets extended it won’t impact the supply of the higher levels or power that are needed for the full running of the plant.

Operator

The next question is from Matt Murphy of UBS. Please go ahead.

Matt Murphy - UBS Securities

I know it’s still early days, but regarding Cobre Panama, can you talk about what’s actually going on at site right now? Is it still site clearing and when you talk about workforce rationalization, can you quantify what you’re looking at?

Philip Pascall

What’s going on in site and what is going on inside is providing access and the facilities needed to move forward into the construction of the main aspects of that project. With the changes that we brought about which essentially was to rationalize or reduce significantly the number of people that had supervisory roles and really could not get there in any event to implement them. But with those changes it’s already noticeable that the level of output and productivity has improved and there’s a considerable increase in the progress towards those various things, which is rows, camps and the like needed to go forward.

One of the other aspects of our work has been as you’d probably be aware there was very little design already completed on the process plant. We intend to change that completely at least because the designs that we have for Sentinel have stood the scrutiny and are a long way down the line in terms of construction and are quite obviously more appropriate. So we will move to implement that fairly quickly because it’s very easy to us to take great hunks of the detail of that design that we already have. But before we do that we wanted to select a slightly more suitable plant location. The plant location previously provided for we thought was going to be too restrictive and had a number of other problems.

But before we choose that plant site, we wanted to make sure we had a very good idea of the profile of the high rock. As you may know the base is all pretty hard rock overlaying the [supralite] and the easiest way to do that is aerial geophysics and that is underway right at this moment. And it’s pretty important for us for defining all of the next stages of what we then have to do. So in other words, to summarize it, we’ve increased the rate of progress in what was actually happening there providing what we needed and we’re moving very quickly so that we can answer the questions for the main aspects of the project.

Matt Murphy - UBS Securities

And it had been out in the media that a contract had been canceled with the Italian earthworks contract in Presidio -- I don’t know how you say that name, but does that mean that some of the earthworks is going to be delayed while you decide on the plant site?

Philip Pascall

There were eight different earthworks contractors. Some are still working on restricted versions of what they were originally contracted to do and the others we either stopped or suspended while we resolved exactly what they will do later. And the answer on the earthworks contract for the plant, we think that the selection of the plant site that we have in mind through this process we’re talking about will require considerably less earth works in any event.

Matt Murphy - UBS Securities

Thanks for that color, Philip. Clive, did I hear you say that the Guelb iron ore project was approved or just the study was approved?

Clive Newall

The study was approved, but that will go forward.

Matt Murphy - UBS Securities

And maybe just on Las Cruces, the recovery from the shutdown, has that gone fine? I know it’s a bit of a tricky point with respect to chemistry, but are the seven reactors running smoothly already?

Philip Pascall

What I know is of course you have to build it up fairly steadily because you have to introduce ferric material, which has been happening and the recovery has come up. It was anticipated when I last spoke with them that they would be getting up to the full levels of recovery by the end of this week I think. But in other words it’s more or less very close to back to where it was operating before.

Operator

The next question is from Oscar Cabrera of Bank of America Merrill Lynch. Please go ahead.

Oscar Cabrera - Bank of America Merrill Lynch

If I may just go back to Cobre, Panama, it’s interesting in a couple of things. The first one is can you provide comments on the protection that you have gotten from the Panamanian government as well as some of the local population with respect to changes in ownership. And then along the same lines, could you also comment on what you’ve done with Petaquilla Minerals to be able to just expedite or arrange the issue that they had with Inmet with regards to the dispute in terms of land and ownership of land and right of way in the project.

Philip Pascall

The answer to the first question is excellent. And the answer to the second question is that before we were involved, a term sheet would have been signed with Petaquilla Minerals which largely resolved all of the matters that previously had been problematic. We have developed a pretty good rapport with Petaquilla. They are -- part of that original arrangement was they were providing crushed stone for example and that’s taking place and assisting our project certainly. And the final contractual version of that term sheet which was binding anyway on both parties is a document that is being resolved between the Canadian lawyers. So to answer the question on that is that we progressed it from where it had already been to a large extent resolved before we actually acquired Inmet.

Oscar Cabrera - Bank of America Merrill Lynch

Then I can appreciate you can't comment on the situation with ZESCO, but I’m just wondering, have you thought about what you’d do if the Sentinel project is delayed with respect to the excess capacity you have in your smelter?

Clive Newall

That smelter will operate to the best of my knowledge down at about 40% if we need to. So we will be able to commission that smelter with what we currently produce out of Kansanshi and what we call S3 which is the expansion of the sulphide project which is following along and expected by the end of 2014 will take up a large part of the balance of the capacity.

Oscar Cabrera - Bank of America Merrill Lynch

And then lastly just housekeeping. In terms of the number of shares fully diluted issued in the Inmet transaction. Can you provide us with that number please?

Juliet Wall

Do you have that at hand? (inaudible) I can get back to you.

Operator

The next question is from John Hughes of Desjardins Securities. Please go ahead.

John Hughes - Desjardins Securities

Maybe to start off on Cobre Panama, you know the shipping location for the processing side, does that mean there’s a potential for change in terms of the size of this project in terms of the processing footprint?

Philip Pascall

No, because what really governs the capacity of this plant and throughput is determined by the capacity of the mills and those mills were ordered I think as far back as 2008. We’ve been quite happy with the mills that were going to be supplied as we’ve said before. And that’s what we’re going to incorporate in that design.

John Hughes - Desjardins Securities

I was just wondering through the process with Inmet, anything specific to Cobre Panama? There was a rumor or talk about $1 billion potential CapEx reduction. Does that remain a target?

Philip Pascall

Certainty what remains a target is to minimize the capital expenditure. As Clive would have said, it really until we’ve been through the appreciation of that for example where we put the plant where there were costs and a variety of other things. We didn’t want to be very -- in fact we just don’t have a definitive view of the ultimate capital cost. As much as anything we’ve been seeking to get a good handle and control on expenditures that occur today. So the answer to that is it will take us probably three to six months before we can be definitive. But certainly it’s our aim to reduce a number of areas of cost and one of those obvious ones is the level of supervision and the productivity factors that apply to people, enhances them as you need, the amount of camp space you need and obviously the ultimate cost.

John Hughes - Desjardins Securities

And when we're talking variance, how should we continue to reference what Inmet was using as $6.2 billion for this project? In other words if you're saying you're looking or like through the process you were looking to save X amount, should we be measuring that differential from the $6.2?

Philip Pascall

Not sure -- in other words, whatever we’d make as a reduction or change would be on that original 6.2.

John Hughes - Desjardins Securities

And just one quick one on Kansanshi with the grade on the sulphide side. I'm wondering what we should be modeling for Q2. Should we get back to 1% at some point, or should we be continuing to model the 0.7 that was a Q1 number?

Philip Pascall

The sulphide grade in that. We just have to get back to you on what’s in there going forward.

John Hughes - Desjardins Securities

And last one housekeeping as well, does First Quantum now formally have a Toronto office?

Clive Newall

Yes.

John Hughes - Desjardins Securities

Okay. So you take over Inmet's and have a presence here in that regard?

Clive Newall

Yeah. And to come back to that first question John, it’s 0.75.

Juliet Wall

Just to get back to a previous question, the shares issues in effect of 85.5% ownership. There’s about $10 million approximately, (inaudible).

Philip Pascall

How much of the total amount?

Hannes Meyer

It was about 115 or 114.8 for the 100%. New shares you should make.

Philip Pascall

Did you get that? Okay.

Operator

The next question is from Alex Terentiew of Raymond James. Please go ahead.

Alex Terentiew - Raymond James

I just had a couple follow-up questions. On the Sentinel transmission line, can you remind me what your estimated time line for construction of this second line is?

Clive Newall

It was about 12 months.

Philip Pascall

It’s not as simple as that because obviously it makes a little difference what time of the year you’re operating. So that would be a spread of between 12 months and 14 or 15 if you get delayed because of the timing.

Clive Newall

And that was what was always a little open ended.

Philip Pascall

Plus the rainy season impacts, Alex, that’s what we talked about in scheduling.

Alex Terentiew - Raymond James

One more question on Cobre Panama. You mentioned some of the site activities. Can you give us a little bit of a development status of the port and the power plant at the project?

Philip Pascall

Yes. The progress on the port was waiting for more camp accommodation for the operations and the equipment and that camp is now I think in the last short while become fully operational so that they can make more progress with that. And in particular we needed to provide the area for the camp that would be used for the construction of the power plant itself. Part of what I referred to is that site exercise of aerial survey to determine the depth of [supralite] is one that we’re also running over what was defined for the location of the power plant. And we expect to have the answers of that shortly and we were just going to use that for final definition of some of the construction techniques we use. And in particular whether for example a bigger component can be supported on tiles rather than through a process of moving quite so much material out of the way.

Alex Terentiew - Raymond James

So I guess in general a lot of things you guys are across the door board are on pretty much most aspects of the project, doing a fairly extensive review and taking the time to do it right and according to your plan rather than sticking with Inmet's plan at the moment.

Philip Pascall

Yeah, I think the port itself with the wharf and with the ship loaders hasn’t had much change required of it, but it was always intended that all major components for the plant would be imported through that route. And one of the things we have changed and indeed to create opportunity if you’re going to drive the route that comes into the plant, start from the pan American highway. And that’s a good road. That’s probably the better than what we have at access to Kansanshi. So what we did determine was that almost everything that we’d need to bring into the plant could come in by road in any event and that then takes away any urgency for the port side itself other than for the power station equipment. So we’ve carried on working with that and it is -- they were putting in the rock for the wharf. But timing is really all determines the power plant.

Alex Terentiew - Raymond James

One last question. As Kansanshi with the sulphide expansion, I believe you have not yet received your environmental approvals to proceed with that expansion. Are there any particular issues that are holding this up? And are you still sticking with your expectation for construction to start up the first half of this year?

Philip Pascall

I wasn’t aware what you were saying about the environmental approval.

Alex Terentiew - Raymond James

Oh, sorry. Just in your MDNA here, board approval has been granted and design work is continuing while environmental approvals are being pursued. So I just wanted to do get a bit more color on that I guess. And just previously, you guys had noted that you were expecting construction to start up first half of this year, so really I'm just trying to see if that's still the target.

Philip Pascall

Yeah. What we would be starting with, that by the way is a pile support and it’s really what has given rise to our understanding of the economic benefits of doing that over moving all material you need to in respect to the Cobre Panama project. And that piling is due to start as far as I know anytime soon. We’ve had to wait for the dry season. There's been considerable earthworks already started.

Clive Newall

I think you said that you thought it was starting late of this year or next year. not this year if I heard you right.

Alex Terentiew - Raymond James

So you’re saying construction start up for the sulphide expansion. Is that still on track for this half?

Philip Pascall

Yeah, that’s what I was talking about. The earthworks certainly has started and the piling for those foundations will be eminently starting too. So our aim is that all the base support for that will be ready for the bulk concrete work before the end of this dry season.

Operator

The next question is from Alain Gabriel of Morgan Stanley. Please go ahead.

Alain Gabriel - Morgan Stanley

My question is on Enterprise and whether you can share with us if you have learned anything new through the drilling or these analysis that you have done over the last three months that could allow you to potentially change the scope or the timing on the project in terms of bringing it forward or expanding the capacity for example.

Philip Pascall

The Sentinel project …

Alain Gabriel - Morgan Stanley

Enterprise, sorry

Philip Pascall

Yeah, the enterprise project is processed in the Sentinel plant. That’s designed in the plant and that plant is very considerably advanced. I’m not sure that we publish much in the way of pictures on the progress of Sentinel. But it’s fairly dramatic and has one aspect to all of its construction will be the construction of facilities for processing enterprise. And the throughput of that is normally about 4 million tons a year and it will produce whatever nickel it does for whatever grade material we see at the time. But that same facility can be used also to process more Sentinel ore. So we can either use it to produce more copper or produce the nickel that’s contained in 4 million tons.

Operator

The next question is from Michael Flitton of Citigroup. Please go ahead.

Michael Flitton - Citigroup

I think most of my questions have been answered, but I'm just looking for potentially a little color on the focus there at Cobre Panama. Obviously you're looking at the flow sheet and that we are leaving management there. But are there any other areas that you've focused in cost savings potentially bringing a board a third line or optimization applying other ways. Some color on that would be great. And also just on the magnetite project as well, could you perhaps just give some parameters of what you're looking at there, capacity, volume potential? Thanks.

Philip Pascall

I wondered whether on Cobre Panama I shouldn’t actually give you a list of the things that we’re not focusing on. Certainly in the short term that aerial survey is important because it defines a number of parameters that we need to have. And included in those are some definition in the area of the tailings facility and that in addition to obviously the plant is very important. In the short term we want to get moving soon with the stripping of the pit and that is because below it is the quarry of the major supplier of rock material that we’re going to need for a variety of uses. And the stripping is a function of when we’ve determined from all of the earthmoving contractors that are there which ones are those or indeed whether we would use our own equipment to get started with. So that will give you some idea of the short term areas of focus.

Obviously it’s the mine that’s heading down in the plant which strikes one as being fairly obvious. The power station parameter we talked about earlier is important as much as anything because that is a contract that was let, it was quite separate from the one that went through SS11 and we just need to make sure that we can provide access in the form that’s going to be necessary for that to continue. So those really are the areas of current focus. For the rest of it it’s a matter of bringing to it the project control requirements that are necessary to knowing exactly what you’re going to spend in the different areas and ensuring that the productivities move upwards towards what we see as being the norm required for projects.

Michael Flitton - Citigroup

Thanks. And on the magnetite, quickly.

Philip Pascall

The magnetite will handle the current throughput of the plant. It’s about 4 million tons a year and from that produce something over 1 million tons a year of high grade magnetite.

Operator

The next question is from Matt Vittorioso of Barclays. Please go ahead.

Matt Vittorioso - Barclays Capital

Just hoping to get a little bit more clarity on the structure from maybe the perspective of Inmet bond holders here. So just to clarify I guess the Inmet bonds will now sit at this new subsidiary FQM Akubra which is I guess a separate and a subsidiary sitting below First Quantum Minerals. is that correct?

Hannes Meyer

Yes. That is correct.

Matt Vittorioso - Barclays Capital

And is it your intention to essentially repay the acquisition facility that comes due later this year and partly earlier in ‘14? Would you just use the cash that is sitting at FQM Akubra to pay that down or would you look to refinance it?

Hannes Meyer

We’ve made the offer to the Inmet bond holders. I think that expires -- I think it's about the 19th of this month. It’s a little bit less than two weeks to go. So part of that will determine what we do going forward. As part of the merger of FQM Akubra and Inmet, that new company will assume the acquisition debt of $2.5 billion. That said, the cash be used into repay some of that if it is required.

Matt Vittorioso - Barclays Capital

So then assuming that you did use some of your cash at Inmet that this previously been earmarked for the Cobre Panama investment to just repay your bridge facility, if you will to make the acquisition I guess that then at some point as you progress through your evaluation of Cobre Panama, you will eventually need to raise some more permanent financing for Cobre Panama. Would that be issued out of the same entity FQM Akubra or out of First Quantum Minerals or some other entity?

Hannes Meyer

We've already discussed with various sources of funding it. The one that we need to understand first of all is how much are we going to spend at Cobre Panama and the timing of those cash flows. Then or in the meantime we’ve got other projects for First Quantum being commissioned high Sentinel which will be producing cash at that time as well. so we’ll evaluate the various flows of funds in the next three to six months and then determine where we’ll raise the required funding.

Philip Pascall

I think probably the way to answer that question is that all of those funds are part of the pool. We’ve looked at various scenarios of cash, cash demand and funding options and as we go forward we’ll determine which exactly of those we’ll pursue. But certainly funding into First Quantum to one of a variety of different means which I think is what Hannes is talking about. I think it’s a question that we’ve already discussed with various sources of finance. So we’ve got plenty of time and we’re working on it which of those is the best arrangement.

Matt Vittorioso - Barclays Capital

So would it be fair to say then that FQM Akubra again is primarily guaranteed or supported by the previous or the legacy 3 operating assets at Inmet? Is it fair to say that that entity won't necessarily bear the entire burden of funding Cobre Panama going forward?

Hannes Meyer

Certain indentures in place in terms of those, the Inmet bonds and we’ll have to see how much you are allowed to introduce into that structure as well. so I think it’s too early now to say exactly where we’ll raise the funding.

Matt Vittorioso - Barclays Capital

And from your perspective today there are no restrictions within those indentures of the Inmet bonds that would encumber you in any way? That you're fine keeping those outstanding for now?

Hannes Meyer

Yeah.

Philip Pascall

They don’t constrain us.

Operator

The next question is from Bruce Klein of Credit Suisse. Please go ahead.

Bruce Klein - Credit Suisse

I guess the cash on the balance sheet, the closing cash $3.9 billion on Slide 9, that's the $1.4 billion you assumed at Inmet, as well as the $2 billion of marketable securities, the bulk of that?

Hannes Meyer

Equity investments, yeah.

Bruce Klein - Credit Suisse

And the rest is probably First Quantum's standalone cash prior to the merger. Right?

Hannes Meyer

Yeah.

Bruce Klein - Credit Suisse

And you used $794 million, is that -- that's in brackets. Am I just -- maybe it's my own semantics. That's actual net. Debt, a positive number, right?

Hannes Meyer

(inaudible). $794 million.

Juliet Wall

On the cash flow slides.

Hannes Meyer

On the cash flow sides. I think we’ve put the net debt there because that $2.1 billion of acquisition debt plus the Inmet bonds on the First Quantum debt.

Juliet Wall

Yeah. It’s broken down just beneath that slide to show how much is cash and how much of that will be debt (inaudible).

Hannes Meyer

So it’s $2 billion of Inmet bonds, $350 million of First Quantum bonds to get to $2.35 billion plus about $2.1 billion of the acquisition debt so that’s a bit more than $4.4 billion, probably a little bit more. And then we expect to cash in, all the cash was in the goods.

Bruce Klein - Credit Suisse

Okay. But maybe I'm just confused. The debt balance is bigger than the cash. So isn't that a positive debt figure or am I missing something.

Hannes Meyer

Yeah. It is a net debt number.

Bruce Klein - Credit Suisse

Okay. And then your latest views on just copper markets given inventory levels, etc. What's your view of the world right now?

Philip Pascall

On commodity markets?

Bruce Klein - Credit Suisse

Of the copper market?

Philip Pascall

Yeah. I think certainly turbulent markets in commodity markets generally; obviously it's seen to be gold that put the wind up. I guess a lot of that and information that flowed out of China. And our view is that despite that, the copper market has demonstrated a reasonable resilience. And one of the reasons I suspect for that is that the ongoing usage of copper is very widespread, particularly if there’s any growth in construction activity. But even when the construction activity is very low copper demand persists and that construction activity is occurring all over the place, not in China because there is still growth, but also in North America and elsewhere. And that tends to underwrite the demand. And of course the opposite side of it is supply and copper supply and its growth as far as we can tell is often disappoint.

But for the large part the decisions that we make are obviously focused on what might be the position in two, three, four, five years’ time and beyond and certainly our protection of it is that that supply demand position will be pretty beneficial to the copper market. Nickel one is a little bit harder for us to talk about in quite those terms because the supply side of that has so many other variables and because it seems that it’s use is more related to more sophisticated economies. But I think it’s with that very low price of nickel for some time we’re beginning to have views of a bounce back in nickel price for reasons which I don’t think we fully understand ourselves.

Clive Newall

Operator, ladies and gentlemen, I think we really only have time for about one more question because as you know we have an AGM starting shortly and we need to make our way over to the TMX soon. So maybe the last question please.

Operator

The last question is from Cailey Barker of Numis. Please go ahead.

Cailey Barker - Numis Securities Ltd

Just a very quick one just on the iron ore project at Guelb. Just to follow up, could just give us an idea on timing and when do you think you will give us some numbers and when do you think that project might actually start production?

Philip Pascall

I think its timing from what I remember was about 15 months and most of that is a function of the delivery of the magnetic separators. The rest of it in terms of its design and arbitration erection would fit within that. So if you work on roughly a figure, 15 months would be about right.

Cailey Barker - Numis Securities Ltd

Sorry. That's 15 months from today or from…

Philip Pascall

Yesterday.

Cailey Barker - Numis Securities Ltd

From today, okay. And when do you think you will actually release some hard numbers or will you?

Philip Pascall

For the capital cost?

Cailey Barker - Numis Securities Ltd

Yes and the operating costs, et cetera, et cetera.

Philip Pascall

We probably could fairly soon, but we haven’t thought about that.

Cailey Barker - Numis Securities Ltd

Well, it would be nice to (inaudible) just for modeling purposes.

Operator

I would now like to turn the meeting over to Mr. Newall.

Clive Newall

thanks everybody for being on the call today. As I mentioned our AGM starts at 10:00 a.m. Eastern Time. If you aren’t able to attend it will be available on our website, www.first-quantum.com under the events section. Anyway, thanks for participating. I’m sorry we have to cut it short because I know there was quite a few more questions, but just a rather busy day for us. If anything that you want to follow up, you can either call me or Sharon on the usual numbers. So thanks again. Talk to you next time.

Operator

Thank you Mr. Newell. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

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