- First Quantum Minerals (TSX:FM) has signed a shareholder rights agreement with Jiangxi Copper, its second-largest shareholder
- This agreement restricts Jiangxi from increasing its stake in the Canadian copper producer or selling a block of shares of 5 per cent or more without First Quantum’s consent
- First Quantum reported a Q2 2024 net loss attributable to shareholders of US$46 million, or 0.06 per share, and an adjusted loss of US$13 million, or 0.02 per share
- First Quantum Minerals stock opened trading at C$17.00
First Quantum Minerals (TSX:FM) has signed a shareholder rights agreement with Jiangxi Copper, its second-largest shareholder.
This agreement restricts Jiangxi from increasing its stake in the Canadian copper producer or selling a block of shares of 5 per cent or more without First Quantum’s consent. The three-year deal also allows Jiangxi to nominate one individual for consideration by First Quantum’s governance committee for a seat on the board of directors.
Canada’s critical minerals crackdown
It comes in the wake of the Canadian government’s work to tighten control over Chinese investments in the critical minerals sector in an effort to develop supply chains that reduce reliance on China. Earlier this month, the government stated it would approve foreign acquisitions of Canadian critical mineral firms only in “the most exceptional of circumstances.”
A Jiangxi representative noted in a BNN Bloomberg interview that the agreement does not restrict the Chinese company’s ability to purchase assets from First Quantum.
“Acquiring and investing in overseas mining assets is a major task of the company, and it will evaluate projects based on factors including price and government policy headwinds toward China,” the representative told BNN Bloomberg. Jiangxi, one of the world’s largest copper smelting companies, holds an 18.5 per cent stake in First Quantum and invested an additional US$212 million in shares in January.
Management’s take
“It was pleasing to reach a shareholder rights agreement with Jiangxi Copper, which formalizes a clear basis for the relationship between us,” First Quantum’s chief executive officer, Tristan Pascall, said in a news release. “The relationship with Jiangxi Copper, who have been a long-standing customer, has solidified since their purchase of First Quantum shares in 2019. We look forward to Jiangxi Copper’s continued strong support on the strategic direction of the company.”
First Quantum has received financial support from Jiangxi after it had to shutter its flagship copper mine in Panama in 2023 and its Q2 2024 results published this week reflect the Toronto-based miner’s means to advance its business without its core asset in play.
“We had another solid quarter in Zambia and with the work achieved to date, both Kansanshi and Sentinel are set up well for the remainder of the year,” Pascall continued. “At Enterprise, the continued successful commissioning and ramp-up has enabled the declaration of commercial production on June 1, 2024, while the S3 Expansion is progressing well and on track for completion in mid-2025. We also initiated a copper hedge program as we continue efforts to maintain the strength of the balance sheet.”
Q2 2024 results
First Quantum reported a net loss attributable to shareholders of US$46 million, or 0.06 per share, and an adjusted loss of US$13 million, or 0.02 per share. The company posted a gross profit of US$333 million and EBITDA of US$336 million. These figures represent an improvement from Q1 thanks to higher copper and gold prices.
Operations
Total copper production in Q2 was 102,709 tonnes, a 2 per cent increase from Q1 2024, driven by higher production at the Kansanshi mine. Copper sales volumes totalled 94,628 tonnes, lower than production because of shipment timing and vessel delays. The copper C1 cash cost was US$1.73 per pound, benefiting from strong by-product gold credits.
At Kansanshi, copper production reached 41,507 tonnes in Q2 2024, a 10,034-tonne increase from the previous quarter, because of higher feed grades from the Main 15 and Main 17 cutbacks. The Sentinel mine produced 53,595 tonnes of copper in Q2 2024, a decrease from the previous quarter because of lower grades. The Enterprise mine declared commercial production as of June 1, 2024, with nickel production increasing to 6,147 tonnes from 4,031 tonnes in Q1 2024.
Ravensthorpe nickel production for Q2 2024 totalled 1,253 tonnes, down from 3,740 tonnes in Q1 2024, as the site was placed into care and maintenance. Costs for this program are expected to be US$5 million per month in Q3 and US$2 million per month from Q4 onwards.
Financial performance
First Quantum’s Q2 2024 benefited from strong copper and gold prices, with gross profit at US$333 million, up US$177 million from Q1 2024. Operating cash flows were US$397 million for the quarter, while net debt increased by US$160 million because of higher capital expenditures at Kansanshi.
2024 guidance
Looking ahead, First Quantum’s 2024 guidance remains unchanged for copper and gold production, while nickel production guidance has been narrowed. Copper unit cost guidance also remains unchanged.
First Quantum is a global copper producer in the form of concentrate, cathode, and anode, with additional inventories of nickel, gold and cobalt. The company has been active in Panama for the past decade.
First Quantum Minerals stock opened trading at C$17.00. The stock has lost more than 58 per cent year-over-year but has risen more than 36 per cent since 2019.
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(Top photo: First Quantum Minerals)