Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Clive Newall - President

Hannes Meyer - CFO

Juliet Wall - General Manager, Finance

Emma Cowdrey - Senior Manager, Financial Reporting

Sharon Loung - Director of Investor Relations.

Analysts

Tom Meyer - CIBC World Markets

Alex Terentiew - Raymond James Ltd

Oscar Cabrera - Bank of America Merrill Lynch

Steve Bristo - RBC Capital Markets

Ralph Profiti - Credit Suisse

Kerry Smith - Haywood Securities

Jean Devevey - Exane BNP Paribas

Sasha Bukacheva - BMO Capital Markets

Zach Zolinierz - GMP Securities

First Quantum Minerals Ltd. (OTCPK:FQVLF) Q3 2013 Earnings Conference Call October 31, 2013 9:00 AM ET

Operator

Ladies and gentlemen thank you for standing by and welcome to the First Quantum Minerals Third Quarter Results Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a remainder, this conference is being recorded today Thursday October 31, 2013.

I’d now like to turn the conference over to the President of First Quantum Minerals, Mr. Clive Newall. You may begin sir.

Clive Newall

Thank you operator and thanks to everyone for joining us today. Apologies for the short delay, but we wanted to give those who are on the Lundin call an opportunity to get off that line and on to this one.

Available on the call with me today are Hannes Meyer, CFO; Juliet Wall, General Manager, Finance; Emma Cowdrey, Senior Manager, Financial Reporting; and Sharon Loung, Director of Investor Relations.

As usual following a few housekeeping items, some opening comments, Juliet will go through the financial results, which were published yesterday after the close of the Toronto market. A remainder especially for participants on the phone line, there are slides that accompany this presentation, including recent photos of our Sentinel and Cobre Panama projects. They’re available on our website, www.first-quantum.com and can be accessed either on the event section or on the Q3 conference call button under the news section.

Following the review of the financials, as usual we will open the lines to take the questions. Before I begin, I must note over the course of this conference call we will be making several forward-looking statements and as such I encourage you to note the risk factors particular to our Company which are detailed in our annual information form, also available on our website at www.first-quantum.com and on www.sedar.com.

Now to begin the review, this was an outstanding quarter for all aspects of the Company. Comparative net earnings for the quarter totaled a $143.6 million or $0.24 on a per share basis. That was net of almost $22 million or $0.04 per share of unfavorable recurring acquisition-related adjustments. Altogether, the operations generated $410.3 million of cash flow or $0.70 per share and we ended the year with $617 million of unrestricted cash and cash equivalents.

We are very pleased with the results, which are ahead of last year’s comparative earnings, despite lower metal prices that impacted our gross profits by roughly a $113 million. Our mines all performed well. Production at all the operations either surpassed or was just shy of the same period last year, with new quarterly record set at Las Cruces and Ravensthorpe. These are both special accomplishments. If you recall, Las Cruces was just recovering from a fire, the preceding quarter that caused a 15 day shutdown, but by capital planning and some process improvement initiatives it produced a very good outcome.

We have several other initiatives, both underway and planned at Las Cruces, that we’re confident will enable the mine to turn out similar results going forward. These include improvements to filtration and the addition of a second leach feed surge tank. At Ravensthorpe the good steady performance from the start of operations reflects the sound management there, but has kept the focus on operating efficiencies.

From the start Ravensthorpe has had to manage the distraction in cost of very high turnover in a tight western Australian labor market. Recently there has been some easing this. Not only we’re experiencing a significant reduction in resignations, but positions are becoming easier to fill and we’re having a better pool of talent from which to hire.

Kansanshi continues to perform well in the midst of the various expansions. Stripping is well ahead of mining that are providing good ore availability. Sale of concentrate however, concentrate production has been restricted by the capacity limitations of local smelters. Currently we’ve got about 85,000 tons of concentrate inventory on the site, which we don’t expect will reduce significantly before our own smelter starts up next year.

In the meantime, we’re looking at ways to increase the grade of some of our concentrates and to produce a low grade concentrate which could be treated at the H-pile. This we expect will enable us to reduce the rate of dollar. Guelb Moghrein had a decent quarter and is on track to achieve that production guidance for the year. Its two main projects being the reconfiguration of the grinding mill to a conventional SAG mill and the magnetite recovery project plan to start construction this quarter with completion expected next year.

The public hearing and inspection required to obtain expansion permit for Kevitsa to operate at the 10 million tonnes a year throughput rate was held in September on the site. We are hopeful of a decision in our favor within the next few months with our good environmental performance is evident and was reflected in the fact that only a limited amount of public comment was received by the authorities.

Both Cayeli and Pyhasalmi had good quarters with higher year-over-year production and solid contributions to the company’s profitability and cash flow. We are conducting near mine exploration around both of these mines and hope of expanding our mine life. At Pyhasalmi some follow-up drilling is required following geophysical surveys, which shows some good potential. At Cayeli we’ve assigned some exploration stuff to assist the local site team with a program of mapping systematic geochem sampling.

Turning to our projects, and I remind you there are some pictures of these on the website. Our Zambian projects are advancing well towards an on-time construction completion and commissioning. Detailed design work on the smelter is essentially complete 30% of the total plant equipment has been delivered to site. The Isasmelt furnace installed and waste heat boiler prepared for erection.

(Indiscernible) our experience to date, especially recently we’ve conducted a detailed examination of the Zambian smelting capacity and identify technical operational and economic benefits of expanding our smelting facility. At our most recent Board meeting, the Board of Directors approved in principle a proposal to add additional smelting capacity. The detail of how we might do this is still under consideration. We will keep you posted on developments in this regard as planning progresses.

Sentinel is moving on very well. Detailed design engineering is over 98% complete. Also mills have been erected and three mill motors already installed and assembly of the initial mining fleet well underway. Additionally work has begun on the Lumwana-Kalumbila power line. Approximately 30 kilometers of easement has been cleared and 20 towers are due to arrive this quarter. Completion of this section of the power line is expected in time for commissioning of Sentinel.

At Cobre Panama we’re in the later stages of our project review and expect to disclose our full findings from plan in December. I realize this may be a bit later than some of you’ve had expected, but it is the large and complex project. We also encountered a number of inherited shortcomings that required immediate corrective action and this took time to get done.

Nevertheless, we’ve made and continue to make substantial progress. Productivity is up and this is very obvious on the site. Site access has much improved as is rock availability which of course is critical on this project. Our social programs are ongoing and during the quarter we were honored to be recognized for our contributions for the improvement of the quality of Panamanian education and to the health, nutrition, and well-being of children in the projects neighboring communities.

So with that, I will now ask Juliet to take you through the financials.

Juliet Wall

Thanks, Clive and good day, everyone. First of all, going to the presentation and turning to the first slide, which is Page 9 of the presentation, Q3 2013 highlights.

Group revenue for the quarter of $885 million was up $161 million or 22% from Q3 2012, benefiting from a $243 million contribution from the newly acquired operation, which more than offset the impact of lower commodity prices. Realized prices decreased from an average LME price of copper of 321 versus 330 in Q3 2012 and nickel 632 versus 741 in Q3 2012 and gold $1,327 an ounce versus $1,651 an ounce for Q3 2012.

Copper production increased with a total of 114.5 thousand tonnes produced for Q3 2013, up 30.3 thousand tonnes or 36% versus Q3 2012. The quarters results include an additional 30.8 thousand tonnes from the acquired operations, each of which achieved high copper production -- higher copper production from the same quarter last year. Nickel production for Q3 2013 increased 2.6 thousand tonnes or 26% and includes a record quarter production at Ravensthorpe.

Gold production also increased 29% against Q3 2012, benefiting from enhancement from the gold circuit at Kansanshi and includes 5,000 ounces of production from acquired operations. The increase in comparative EBITDA to $394 million is 43% of our Q3 2012. Gross profit before fair value adjustments for Q3 2013 is $335 million or 29% higher than Q3 2012. The increase is driven by a $125 million contribution from the newly acquired operations as well as our higher gold sales at Kansanshi, and higher nickel and cobalt sales at Ravensthorpe, which more than offset lower average market prices.

Moving on to the next slide, on production, slide 10, page 10 rather, as shown in the graph to the side you will see the group developed -- delivered production growth against Q3 2012 reach of copper, nickel and gold. New operations Cayeli, Las Cruces and Pyhasalmi operations each recorded higher production than the same quarter last year, contributing a total of 30.8 thousand tonnes with a record quarter’s production at Las Cruces.

Overall, copper production at Kansanshi was relatively in line with the third quarter last year with the mine benefiting from expansion work, partially offset by processing lower oxide ore feed grade. Guelb Moghrein’s copper production was also in line with Q3 2012 with higher feed grade offset by lower recovery.

Group nickel production is 12.5 thousand tonnes included a record quarter’s production at Ravensthorpe. Ravensthorpe’s record was achieved as a result of higher beneficiated feed and grade with recoveries returning to normal levels from Q2 2013. The contribution from Kevista was 2.6 thousand tonnes.

Gold production increased 14.6 thousand ounces over Q3 2012 with Kansanshi production 25% higher than Q3 2012 as a result of gold circuit enhancements and the reprocessing of tailings containing gold. Kevista gold production increased against last quarter due to throughput and grade improvements, contributing 3.4 thousand ounces to the quarter’s production. Acquired operations contributed 5,000 ounces accounted to the Group production.

So turning to the next slide on copper C cost. Overall, Group copper C1 cost of the quarter of $1.16 per pound is $0.28 or 19% lower in Q3 2012. C1 cost of pre-acquisition operations was $0.12 or 8% lower than Q3 2012, mainly as a result of lower processing cost from treating lower volumes of high acid consuming ore at Kansanshi and a higher byproduct credit due to an increase in gold sales volumes.

Group C1 costs were also driven lower through inclusion of the lower costs acquired operation. Las Cruces C1 costs were lower mainly due to improvements made in the processing plant and a favorable cathode premium. This is partially offset by higher C1 costs at Cayeli and Pyhasalmi due mainly to lower byproduct credit as a result of lower realized metal prices.

So then moving on and turning to the next slide on nickel C cost. Group nickel C1 cost was $1.34 lower than Q3 2012. Ravensthorpe nickel C1 costs of $4.85 per pound is $1.58 lower than the same quarter last year with processing efficiencies, lower sulfur costs and a higher cobalt byproduct credit. Kevitsa’s nickel C1 costs of $5.51 per pound is $0.80 per pound higher than Q2 2013 due to a lower byproduct credit combined with increased freight, treatment and refining charges from a change in customer mix.

The next slide, moving to that, financial overview. Comparative EBITDA increased 43% over Q3 2012 despite lower commodity prices. Gross profit excluding fair value adjustments of $335 million was $74 million or 29% higher and include a $125 million contribution from the acquired operations. The comparative effective tax rate of 37% is in line with expectations with an increase in earnings contribution from lower tax newly acquired operations. Closing net debt of $2,576 million reflects expansion rate and development capital expenditure during the quarter in line with expectations.

Moving on to the next slide, gross profit for the quarter versus Q3 2012. The waterfall chart details the Group’s gross profit in the quarter compared to Q3 2012. As mentioned previously the impact of declining prices reduced gross profit of pre-acquisition operations by $113 million with reduction in prices across our main metals. The tight cost control continued across the Group with the largest savings in the quarter seen at Kansanshi and Ravensthorpe.

Kansanshi’s costs were lower as the mine treated less high acid consuming ore, while costs at Ravensthorpe continues to benefit from the downward trend in sulfur prices as well as processing improvements. There was upside on sales volume with higher gold sales at Kansanshi and much higher nickel -- and very high nickel sales at both Ravensthorpe and Kevista more than offsetting lower copper sales at Kansanshi.

Depreciation expense increased mainly at Kansanshi due to commencing use of projects that was capitalized in 2012 and at Ravensthorpe in line with an increase in nickel volumes. The acquired operations contributed $125 million before fair value adjustments and this is up from their combined $71 million contribution in Q2 2013, which was impacted by the fire at Las Cruces and is driven by increases in sales volumes recorded at each operation.

As noted, the fair value acquisition adjustments in the quarter which impacted profit by -- by $32.4 million resulting in a net contribution from acquired operations of [ph] $92 million. This adjustment mainly comprised increased depreciation from fair value adjustments to the value of property, plant and equipment which will be a recurring charge of each operations remaining mine life.

Turning to the next slide, quarterly net debt movement, Page 15, the Group’s net debt balance at the beginning of the quarter was approximately $1.8 billion including cash spend to continue the development of Cobre Panama, Sentinel and Kansanshi, the Group ended the quarter in a net debt provision of just under $2.6 billion.

Tax paid for the quarter was $42 million, and $41 million in dividend were paid including interim dividends paid to shareholders. The net interest payments of $20 million includes $10 million in capitalized interest. $736 million was spent on capital expenditure in the quarter which include a $155 million on Cobre Panama, $280 million on Sentinel and $309 million at Kansanshi for expansions, smelter project and mine development costs.

At quarter end, we had $2.9 billion of committed undrawn debt facilities available. As announced yesterday, we’ve extended the maturity of our $2.5 billion revolving credit facility to the end of June 2014. The full $2.5 billion is available until maturity. This provides ample liquidity once we complete the restructure of our debt facilities to provide the long-term capital commitment.

And then moving to the next slide on market guidance, Page 16, the full year copper production guidance has been narrowed with the longer end increase to $397,000 tonnes. This change is mainly due to Kansanshi, which is forecast to be in the top two quartiles of previously given guidance. Full year nickel production guidance has been increased between 44,000 to 47,000 tonnes, mainly as a result of improved levels at Ravensthorpe. Full year gold production guidance has also been increased as a result of strong year-to-date production at Kansanshi.

Post acquisition Group guidance is now expected to be between 232,000 to 250,000 ounces. Full year zinc production guidance has been increased for both Cayeli and Pyhasalmi with total Group zinc guidance for the post acquisition full year between 46,000 to 50,000 tonnes.

Then turning to the next slide -- turning to the final slide covering C1 cost and CapEx guidance. Full year guidance of copper C1 cost has been reduced and the range narrow to between $1.37 from $1.45 per pound. Full year guidance for nickel C1 cost is also being reduced by $0.40 per pound to between $5.20 to $5.60 per pound.

CapEx spend for 2013 on the pre-acquisition First Quantum site and development projects remains unchanged at $2 billion. And then post acquisition 2013 CapEx spend on acquired operations including Cobre Panama is estimated at $650 million, bringing total estimated Group CapEx spend for 2013 to approximately $2.65 billion.

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

Clive Newall

Thanks very much Juliet. Operator, if we could open the line for questions, that will be very good.

Question-and-Answer Session

Operator

Thank you very much sir. (Operator Instructions) And our first question is from the line of Tom Meyer from CIBC. Please go ahead.

Tom Meyer - CIBC World Markets

Thank you. Good morning. Clive, I'm going to try and push the smelter concept in putting the smelter in [ph] Kansanshi up to 2 million from the 1.2 million for $500 million. What’s going to drive that? Is it the opportunities for a Sentinel expansion early on or is it another expansion at Kansanshi beyond the currently planned 25 million tonne per annum run rate?

Clive Newall

No, its -- I will say, it is still in a state of flux exactly how we’re going to do this. But its not related to any plant expansions beyond the ones we’ve already talked about at Sentinel (indiscernible) particularly at Kansanshi. It’s more about just the availability of other smelting capacity in the region and the necessity for blending throughout the region. As you know Tom, the whole of this were essentially two different types of concentrate in general in Zambia and they’ve to be blended, some of them. So its those issues that really drive the putting in additional capacity.

Tom Meyer - CIBC World Markets

Okay. That’s helpful. And then we heard from Freeport about the power issues in the DRC and then there was a decent conversation on the Lundin call about power issues in the DRC and potential -- also issues in Zambia as well. Are you seeing any new developments on the power supply side or any issues as you rollout these big projects that you’re currently working on right now?

Clive Newall

Yes. Well there are a number of highly substantial power projects either under construction or starting very soon in Zambia. So, in the medium and long-term power is not an issue. Right now the system is running pretty well near capacity which is -- it means you do get a bit of variability, but -- I mean we don’t have the problems that they have in the DRC. So no comparison at all. But once we get our new power line completed which will create a loop from the copper belt right back down through some of these new power station to (indiscernible) and back into the copper belt we’ll have a much more reliable and steady voltage and not be so prone to power outrages in the rainy season and all those issues. So there are huge improvements coming up in the near years, over the next couple of years really.

Tom Meyer - CIBC World Markets

Okay, thanks. I’ll pass it on.

Operator

Our next question is from the line of Alex Terentiew from Raymond James. Please go ahead.

Alex Terentiew - Raymond James Ltd

Hey, good morning guys. I just got a couple questions. First on Kansanshi, your gold production there was a pretty good number this quarter. Can you just give me a little bit of details on what process improvements you have been making and you mentioned reprocessing of gold bearing tailings. Are there a lot of those tailings left? And are those contributing a big part of the high numbers here?

Clive Newall

Yes, the increased gold production is a function of adding -- over the last few years we’ve been putting in more recovery of free gold throughout the process route. And that has been -- you will have noticed over the last couple of years, it’s been a fairly steady improvement in gold production as we scavenge more and more of the free gold. So there is that aspect of it, but there are some tailing, some gold rich materials, some emanating from the H-pile which we’re being gradually feeding. But I’m not sure what the volumes are. We can try to find out, but I haven’t got those numbers unless anybody else has got them on the table.

Juliet Wall

The regrind material yields an extra kilogram a day per shift usual.

Clive Newall

The regrind, yes. Yes, so we’re getting some benefit from regrind of existing concentrates in the like. But it's a whole lot of small things rather than any one big thing.

Alex Terentiew - Raymond James Ltd

Okay, thank you. The next question, Las Cruces, cost of the quarter -- of the mine during the quarter is $0.69 a pound, which is well below the $1, $1.20 we've seen from the mine in the past. Is this any way due to a change in accounting methodology or is there just really been a radical improvement in cost structure? And if so, should we expect it to be maintained?

Clive Newall

You mean the accounting -- finance department?

Alex Terentiew - Raymond James

Well, it was so low that it just stands out that $1, $1.20 is kind of a range we saw before, and now this is pretty impressive at $0.69. So I wanted to make sure it was really driven by operations rather than a change in accounting now that you guys -- versus Inmet’s old accounting method.

Juliet Wall

Yeah, the change would really affect the other two operations because the change was -- we changed really the way that we accounted for or showed, calculated byproduct. So that wouldn’t impact Las Cruces pretty much. But they’ve had a lot of improvement project ongoing and obviously it was a project a record quarter of production for Las Cruces as well.

Alex Terentiew - Raymond James Ltd

Okay. So a last one at Pyhasalmi. So far this year sales have been above 50% of the pyrite produced. Should we expect sales to be much higher in Q4, or is there an issue selling the material?

Juliet Wall

No you should expect that, I think offhand I think at least two shipments in that plant for the first half of next quarter. So a lot of that is timing.

Alex Terentiew - Raymond James Ltd

Okay and perfect. Thank you.

Operator

Our next question is from the line of Matt Murphy with UBS. You may begin sir.

Matt Murphy - UBS Securities

Hi. Just following up on the smelter, I know detail is lacking now, but does the expansion plan change the way you’re doing things right now? Is this just going to be purely a second module? And maybe just a bit of background on how you come to a $500 million estimate. It's a little bit higher capital intensity. Are there no savings on infrastructure you've already put in? And then maybe just some color on the smelter progress. Right now it sounds like you're adding some personnel, it maybe a little behind Sentinel with respect to steel erection and concrete, et cetera?

Clive Newall

Yes, I mean there’s no changes to the first smelter plan that’s ongoing, the construction is on going according to plan. So -- no really the addition of the more capacity there is still very much under review and we have a one route is just a simple smelter alongside. The first one on that really is where the $500 million comes from, but there are other ways of dealing with that as well and we’re looking into the number of options still. So it's not finalized yet.

Matt Murphy - UBS Securities

Okay. And I guess at Kansanshi, strip ratio was pretty high this quarter. Do you see that continuing into the rainy season or is that kind of a one-off?

Clive Newall

I think we just focused a fair amount on waste this quarter. These are the dry quarters when we can really get into the waste and move rock, everything is very dry. The rainy season is approaching so that’s probably a driver, yes.

Matt Murphy - UBS Securities

Yes, okay. And then on Kevista, I saw there was some mention of a change in the customer mix driving up TCRCs. Is that a permanent change or is there something you can do to seek better terms?

Clive Newall

Well, we’re continuously trying to improve the terms, but maybe if we should get a better answer probably from metal trading guy.

Hannes Meyer

Clive, if I can maybe cut in there. As we started up and we saw this happen at Ravensthorpe initially we only had a few customers and as we start selling more and getting more production too we try different routes as well. So we're selling some of the material to different off-tankers as well. So there’s a bit of change in the TCRCs.

Matt Murphy - UBS Securities

Okay. Thanks a lot.

Operator

Our next question comes from the line of Oscar Cabrera with Bank of America Merrill Lynch. You may proceed.

Oscar Cabrera - Bank of America Merrill Lynch

Thanks operator, good morning everyone. Just, I want to start with Cobre Panama. Can you please tell us what the CapEx for the project has been spent in 2013 and then from inception of the project?

Clive Newall

This is by us alone or including what had been spent already?

Oscar Cabrera - Bank of America Merrill Lynch

Yes, both; if you have those figures available that would be helpful. So that would be the project itself.

Juliet Wall

Yes. The spend as opposed CapEx spend we’ve included in the $650 million guidance. Guidance is unchanged on the acquired operations about 70 so that would leave Las Cruces spend post acquisition for this year at 570. I don’t have got the number immediately to hand.

Oscar Cabrera - Bank of America Merrill Lynch

I can probably call you.

Juliet Wall

We’ll let you know that shortly.

Oscar Cabrera - Bank of America Merrill Lynch

Okay, well thank you. And then the other thing is we're starring to see more planned projects over the next couple of years. And I would just like to hear context around how you're thinking about your capital structure. So, like we know the decision on Cobre Panama's coming in December, but an additional $500 million for new smelter possibly, $50 million for the magnetite in wells. So how should we think about that capital structure and I don't know if, have debt to equity in mind or -- can you help us with that, please?

Clive Newall

Yes, I think the planning on the – we paid $500 million for the new smelter, but that’s still early days and we have to look at scheduling and timing of that spend. So that spend is not going to be immediate. We’ve flagged that our peak expenditure and peak days levels would be sort if towards the end of next year, end of 2014 and early 2015. So we still also see that as the peak (indiscernible).

Hannes Meyer

We’ll still have to tie the smelter into the new plant at Cobre Panama, we will have a look at it (indiscernible) December exactly when we’re spending that money and scheduling of that. Debt to equity, we’re probably looking at a maximum sort of 35 percentage to a market capped out there and debt to market cap. Now that’s sort of a rough number that we’re working towards. Now we’ve got, we will spend quite a bit in the next four, five, six quarters but then at that time that debt will improve, that (indiscernible) will produce.

Oscar Cabrera - Bank of America Merrill Lynch

Right. Now, that’s very helpful. Thank you.

Operator

Our next question is from the line of Steve Bristo with RBC Capital Markets. You may begin.

Steve Bristo - RBC Capital Markets

Yeah, thanks and congratulations on a strong quarter. I just want to follow up on that smelter, I wonder if you decide to proceed, do you have any kind of timing on a decision and how long that would take for that additional expansion?

Clive Newall

Well, the team are working on it as we speak. So I don’t want to preempt anything that they might come up with in terms of detail. But we’ll get that information as quickly as we can and explain what we’re doing. But there’s still a lot of work going on how best to achieve what we need to achieve.

Steve Bristo - RBC Capital Markets

Okay, thanks.

Operator

Our next question is from the line of Ralph Profiti with Credit Suisse. You may proceed.

Ralph Profiti - Credit Suisse

Good day. Thanks for taking my question. You touched on this in an earlier question, but I would like a little bit more color on Kansanshi and why we're seeing the same order of magnitude on cost savings on the mining side as we're seeing on the processing side. This is a quarter where you mined more waste, less ore. Is this related to some of the efficiencies on weather you're talking about or are these high acid-consuming ores in benches that are further away in higher strip? Thanks very much.

Clive Newall

I think the consistency between mining and processing savings in costs mainly the big components of that is the cost volume related. Kansanshi is performing particularly well. In terms of other details, cost savings there is special availability of asset at the moment so we’re being able to process more that we mine and perhaps slightly higher gangue acid consuming ore. But we’re still rationing acid as we always have them exactly what we can treat and what we can’t treat those vary quarter-on-quarter. In terms of the mining, yes a lot of the savings on mining costs were related to volume because we did mine a lot of waste this particular quarter, the total volume moved, I haven't got the number in front of me but it was quite substantially greater than previous quarters.

Ralph Profiti - Credit Suisse

Okay. That’s it for me. Thanks, Clive.

Operator

Our next question is from the line of Kerry Smith from Haywood Securities. You may begin.

Kerry Smith - Haywood Securities

Thanks operator. Juliet, in Q3, the G&A was $39 million and it was $90 million for the nine months. Could you give some guidance on what the G&A should be on a go-forward basis on an average run rate?

Juliet Wall

Yes, I mean in terms of sort of some guidance, I would look more towards the last quarter although the last quarter was slightly lower than normal expectations because of some phasing of costs, but generally a bit higher than last quarter. I think last quarter total was around about $24 million typically a little bit higher than that.

Kerry Smith - Haywood Securities

So what would that be? Like is $30 million a quarter kind of a run rate or $120 million a year?

Juliet Wall

Yes, just slightly that would be approximately a reasonable assumption.

Kerry Smith - Haywood Securities

Okay. And the CapEx for Trident you gave in the MDNA is $1.9 billion. Was it $2 billion before or -- I mean, has the number come down $100 million, or was it always $1.9 million?

Clive Newall

I think its $2 billion, but it includes the section for Enterprise as well.

Kerry Smith - Haywood Securities

Okay. So the $1.9 billion …

Clive Newall

So the enterprise $1.9 on Sentinel and $100 million Enterprise making $2 billion for Trident project in total.

Kerry Smith - Haywood Securities

Yes. So the $1.9 billion you gave excludes Trident, okay or excluding Enterprise. Thank you. And the CapEx for the smelter project, is that still at the $650 million then? Are you still on budget there?

Clive Newall

Yes, the original smelter is still on budget. There maybe some small spec changes depending on what we do with regard to the expansion upside oxygen plants and things like that, both otherwise we’re on budget.

Kerry Smith - Haywood Securities

Right. And how much CapEx has been spent so far on both those projects and how much is actually been committed?

Juliet Wall

In smelter about (indiscernible).

Clive Newall

So was that just the smelter or things in general?

Kerry Smith - Haywood Securities

Well, I was thinking first of the smelter and for Enterprise -- or for Trident, pardon me, for Sentinel.

Juliet Wall

The smelter’s spend would be about 450 and committed would be about 600.

Kerry Smith - Haywood Securities

Okay.

Clive Newall

So 463, so it was Sentinel project -- 463 million on Sentinel.

Kerry Smith - Haywood Securities

Right.

Clive Newall

And I think …

Juliet Wall

The spend on Sentinel would be about 180.

Kerry Smith - Haywood Securities

Sorry, the spend on Sentinel is 980 million so far?

Clive Newall

Well, I think we’ve spend about half of it by now.

Kerry Smith - Haywood Securities

Okay. So that’s above, okay. So half of the 1.9 (indiscernible). Okay and committed?

Clive Newall

Yes. I think we got an additional committed capital of 463. I’m not sure what the total is?

Juliet Wall

It's about 1.5, goes with total committed -- let’s say total committed. The spend will be just about 980.

Kerry Smith - Haywood Securities

Okay. Just so just so I'm clear on the smelter 450 has been spent and 600 is committed, and then on the Sentinel 980 spend with 1.5 committed. Is that correct?

Clive Newall

Yes.

Kerry Smith - Haywood Securities

Okay, great. And then, just sorry, just one other kind of little detail, Juliet. On that slide 15, you showed the CapEx spend in the quarter of 736, and you had indicated in your commentary 155 for Cobre Panama, 280 for Sentinel, and 309 for Kansanshi, if I heard you correctly. But the sum of those three numbers is actually 744, so it's bigger than the number you gave there. I'm just wondering if I heard the numbers wrong.

Clive Newall

I might, yes I’ll go check that.

Kerry Smith - Haywood Securities

Okay. Okay, that’s all my questions. Thank you.

Operator

(Operator Instructions) And our next question is from the line of Jean Devevey from Exane. You may proceed.

Unidentified Analyst

Yes, hi. (Indiscernible) from Exane. I had a first question on the Zambian export levy. It was waived a couple of weeks ago and then reinstated by the President of Zambia two days ago. So I guess that’s kind of back tracking, has that been surprising for you too, but could you please provide a bit of color behind that decision by the Zambian President and the impact for First Quantum, if there is any?

Clive Newall

Well, we can’t really comment on what the government had in mind by giving us the or retracting it initially and then canceling it very shortly afterwards. But I mean from our perspective the impact is relatively modest because we have a smelter starting up next year. We need some stockpile for a concentrate for commissioning. Also right now of course the market for concentrate is a bit soft, TCRCs are high. The incentive to export is less than it would be or it has been for many years. So, it really won't have a huge impact on us. And I think I said what we're doing is we’re looking at ways of mitigating the build up of concentrate anyway by looking at ways of producing two different concentrates at Kansanshi, one high grade which of course reduces the volume but a low grade concentrate which will run through the H-pile on the site at Kansanshi. And that should enable us to pretty well stop and build up this concentrate going forward. So the impact is not great.

Unidentified Analyst

Okay, thanks. And then I had a question on Guelb Moghrein; you had a fairly sharp sequential drop in copper production in Q3. Could you please come back on the reasons behind that and would you expect that to improve again in Q4, I mean, in terms of volumes there?

Clive Newall

We will see causes of the ….

Hannes Meyer

(Indiscernible) if I get back to you on that, unless anybody has any understanding of the grade movement there.

Unidentified Analyst

Okay.

Clive Newall

We’ll get back to you on that.

Unidentified Analyst

Okay, thanks. And one last single question about the sulfuric acid supply. Could you please give us an indication of the [ph] channel prices you’re seeing for sulfuric acid maybe both for Ravensthorpe and for Sentinel operations currently?

Clive Newall

Well, a lot of our dealings with the sulfur market are confidential, commercial arrangements, so we can’t really comment on that. But I am sure you’re seen that sulfur prices around the world have been relatively soft recently or firming slightly in the immediate right now, but $75 a tonne (indiscernible) be in the gulf is the prices I saw yesterday for example. So -- but as for the cost of the commercial terms of the agreements we have with suppliers I am afraid that’s confidential.

Unidentified Analyst

Okay. That’s helpful anyway. Thank you.

Operator

Our next question is from the line of Sasha Bukacheva with BMO Capital Markets. You may begin.

Sasha Bukacheva - BMO Capital Markets

Good morning.

Clive Newall

Good morning.

Sasha Bukacheva - BMO Capital Markets

My first question is; what is the annual operating cost of running the magnetized circuits at Guelb Moghrein or at least the range of cost?

Clive Newall

We’re still doing all the detail design on this, and I don’t think – we haven't got to detail cost yet, well get that in public unless we got something new Hannes.

Hannes Meyer

I think in terms of the running cost it's actually fairly low because it's just, it's part of the [ph] rent of mine materials. So the running cost is actually pretty low, the cost is more on the transporting side of it.

Sasha Bukacheva - BMO Capital Markets

So do you have a range in mind? High level?

Hannes Meyer

Yes, I think we have probably, I figure exactly on that range, but the operating cost itself is low, it's more on the cost, where the cost is. And I think from recollection we will just have to confirm that’s probably $60, $65 a ton.

Sasha Bukacheva - BMO Capital Markets

Okay, thank you. My other question is; do you actually anticipate any contributions from Franco-Nevada for towards Cobre Panama CapEx before the year end?

Clive Newall

Hannes can you answer that.

Hannes Meyer

Clive to be able that question, I’m not sure, going to answer that question at the moment, so I will have to (indiscernible).

Clive Newall

Yes, I know that’s confidential commercial discussion again.

Sasha Bukacheva - BMO Capital Markets

Well, just based on what's been publicly disclosed, I guess they contribute $0.30 on a dollar full-line (indiscernible) would have been already invested this year?

Hannes Meyer

Yes, we’ll have to look at our numbers and just see when we require contribution.

Sasha Bukacheva - BMO Capital Markets

Okay, thank you. And then, I guess you've mentioned that there were shortcomings uncovered at Cobre Panama which required corrective action. So can you maybe elaborate on that a little bit?

Clive Newall

I don’t really think we want to be doing that in the public domain just there was a fair bit of catch up to do on various aspects of the site developments that had already happened and well I’ll leave it at that, I think.

Sasha Bukacheva - BMO Capital Markets

Okay. Thank you so much.

Juliet Wall

And I just think you’ll go back to an earlier CapEx just on the question, the CapEx 736 in the cash flow, the numbers given out were Kansanshi 309, Trident 218 or Sentinel 218 and Cobre Panama 155 and that adds up to 682, which is the large proportion of the 736, just to clarify that. Thank you.

Operator

And our next question is from the line of Zach Zolinierz from GMP Securities.

Zach Zolinierz - GMP Securities

Thanks, I appreciate taking the questions. I guess my first, I wanted to jump to the revolver extension that was announced. Given, just trying to understand it's a relatively modest extension to June. Obviously, it's short term. I mean, how should we be looking at this? And maybe what else is going on in your discussion, but should we take it to mean that standard chartered, perhaps to extend it longer requires different terms or from your perspective, are you looking at other financing, maybe not in the revolver bank debt format?

Hannes Meyer

I think we’ve put a long standing relationship with Standard Chartered and with many of our banks in our banking group. So this extension gives us a bit more time wisely considering Cobre Panama’s spend profile as well and exactly what spending is needed in future. Well I think it just gives us a little bit of time until we’ve got the exact staging of our capital and exact capital requirement and (indiscernible) it down.

Zach Zolinierz - GMP Securities

Got it. So basically wait for the December update, see what you need, and then -- so it doesn’t mean -- I mean you could still look to sort to have a revolver or bank debt as opposed to, say like a new high-yield bond?

Hannes Meyer

Absolutely. I think we look at the combination of all of the options. I mean we’ve got some banking relationships, the banks been with us for a long time. And it simply makes sense to go down that (indiscernible) the bond market as (indiscernible). I think that seems a bit (indiscernible) deal relating to all of the options (indiscernible).

Zach Zolinierz - GMP Securities

Understood. Then my just second follow-up to that is are you thinking about any potential changes to the corporate structure as part of a long-term financing solution?

Hannes Meyer

If you’re talking corporate structure, can you be a more specific to what you mean by corporate structure?

Zach Zolinierz - GMP Securities

I mean, I guess I am referring to there, there was the amalgamation that happened on the Inmet side, there is sort of Inmet as its own restricted group. Any ways of shifting around the business as it’s structured now to allow for some other type of long-term financing?

Hannes Meyer

Yes, when we continue to look at what is the most optimum way of funding the group in future, and we will continue to look at various options.

Zach Zolinierz - GMP Securities

All right. Thanks for taking the questions.

Operator

Mr. Newall, there are no further questions at this time. I will be turning the call back to you for your closing remarks.

Clive Newall

Well, thank you very much everybody for coming on the call today. And if you have any further questions, don’t hesitate to call either myself or Sharon, we will try and get back to you as quickly as we can. So thanks again. Talk to you next quarter.

Operator

Ladies and gentlemen, this does conclude the conference call for today. We thank you all for your participation and kindly ask that you please disconnect your lines. Have a great day everyone.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: First Quantum Minerals' Management Discusses Q3 2013 Results - Earnings Call Transcript

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts