Investor presentation february

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Investor presentation february

  1. 1. A Rapidly Growing Metals & Mining Companywww.first-quantum.com TSX: FM LSE: FQM LuSE: FQMZFebruary 2012 1
  2. 2. Cautionary Note ConcerningForward-Looking StatementsSome of the statements contained in the following material are forwardlooking statements and not statement of facts. Such statements are based onthe current beliefs of management, as well as assumptions based onmanagement information currently available. Forward-looking statements aresubject to various risks, uncertainties and other factors that could causeactual results to differ materially from expected results. Readers must rely ontheir own evaluation of these uncertainties.Note: all dollar amounts in US dollars unless otherwise indicated 2
  3. 3. First QuantumWhat Do Our Shareholders Own?• A substantial copper producer with a pipeline of expansions and new projects• An emerging nickel producer with growth opportunities• A strong balance sheet• Production in an industry with strong fundamentals• Most importantly, the ability to add value through efficient delivery of growth at costs below industry norms 3
  4. 4. What We Have Delivered So FarCopper Growth (1) Total Annualised Shareholder Return (2)2000-2011 CAGR (%) January 2000 – December 2011 (%) Barrick 34% First Quantum 32% Inmet 24% Southern Copper 23% Southern Peru 22% First Quantum 22% Antofagasta 21% Xstrata 20% Norilsk 15% Teck 18% Vale 12% BHP Billiton 7% Freeport 12% Teck 6% Glencore 10% Eramet 6% Antofagasta 7% Freeport 4% Anglo American 4% Hudbay 3% BHPB 3% Lundin 3% Rio Tinto 2% Norilsk 1% Xstrata 2% Codelco 1% Vedanta 2% KGHM 0% Anglo American 2% Kazakhmys (1)% Kazakhmys 1% ENRC 0% Rio Tinto (4)%(1) Source: Brook Hunt. Inclusive of corporate acquisitions.(2) Source: CapIQ. 4
  5. 5. Long-Term Targets1000 Copper Production 125 Nickel Production 000’s tonnes 000’s tonnes800 100600 75400 50200 25 0 0 04 06 08 10 12F 14F 16F 18F 04 06 08 10 12F 14F 16F 18F Base Projects Base Projects Optional 5
  6. 6. What We Are Looking to Deliver: Copper Growth Remains Best in Class2016 Copper Producer Landscape Copper Growth(Mt) 6th Largest Global 13th Largest Global 2011 – 2016 CAGR (%) Copper Producer Copper Producer FQM 29.2% by 2016 Currently Vale S Copper Xstrata Glencore Rio Tinto Kazakhmys 1.0 Barrick Vedanta KGHM BHPB Norilsk Codelco 0.3 Anglo Freeport Antofagasta Teck 6 Source: Brook Hunt. First Quantum estimates based on management projections.
  7. 7. Tripling Copper Production Capacity
  8. 8. Kansanshi Copper-Gold Mine• Located near Solwezi in the North Western Province of Zambia• First production in 2005• Open pit mining• Flexible ore treatment to allow for variation in ore type – Sulphide circuit – Oxide circuit – Gold facility• On-going program of resource development and exploration• Workforce of ~1,515 8
  9. 9. KansanshiMining Volumes & Strip Ratio 9
  10. 10. KansanshiSulphuric Acid Supply 10
  11. 11. KansanshiImproving Ore Availability 11
  12. 12. KansanshiMulti-Phase ExpansionExpansion EstimateProject Capacity Completion Cost Production Impact ($ millions)Acid Plant 5 1000t/day 2012 18Oxide 7.2 mtpa 2012 31 Copper: 10,000 - 15,000 tpaOxide 12 mtpa 2013 - 2014 200 Copper: 60,000 - 75,000 tpaSmelter 1.2 mtpa 2014 635 Smelter Acid - 900,000 tpa @ $40-$50/tonneSulphide 14 - 16 mtpa 2015 400 Copper: 60,000 - 70,000 tpa 12
  13. 13. KansanshiCopper Smelter Project Parameters• Concentrate feed rate 1.2 Mtpa —67% Sentinel —33% Kansanshi —Average copper grade 26%• Blister copper production 300,000 tpa• Acid production 1.0 Mtpa 13
  14. 14. KansanshiCopper Smelter Project Key Estimates• Capital cost of US$635M• Commissioning from mid 2014• Operating cost US$69/t of concentrate 14
  15. 15. Economic Benefits of the Copper Smelter Transport Kansanshi 100% to Zambian Smelters Sentinel 900,00 – 1,200,000 to export less 300,000 t Blister Cost per annum @ $220/t: $130M to $ 200M Export Levy Current 10% of export value Sentinel Annual export 230,000 – 310,000 copper in concentrate Cost per annum Cu @ $ 7,000/t: $160M to $ 220M Acid Supply Current consumption 1,200 tpd @$ 200/t: $ 90Mpa Increase with AP5 + 900 tpd @$ 200/t: $ 150Mpa Annual Savings $ 340M to $ 510M 15
  16. 16. Guelb Moghrein Copper-Gold Mine• 100% ownership• Located 250 kilometres northeast of the nation’s capital, Nouakchott• As at December 31, 2011, the estimated minelife was approximately 10 years (including stockpiles)• First production in 2006• Workforce of ~1,200 16
  17. 17. Guelb Moghrein Copper-Gold Mine• 2011 production challenged with plant utilization issues but tonnage increases evident at year end• Mining side performed positively• 2012 focus on improved throughput and recoveries to increase copper production 17
  18. 18. Guelb Moghrein - Outlook • Feed tonnage rising during operating Average tonnes per hours with improved grinding and operating hour HPGR operation500450 • Additional mill and further400 modifications to existing circuits350 expected to achieve desired tonnage300 targets.250200 • Improvements to equipment150 utilization required10050 • Copper recovery over 90% 0 2007 2008 2009 2010 2011 Dec 2011 2012 • Tonnage increased more consistently to meet design 18
  19. 19. Ravensthorpe Nickel Operation20 Months from Purchase to Production• Purchased in February 2010 for US$340M• Design phase – February – December 2010• Modifications – July 2010 – September 2011• Commissioning – June – December 2011• First product – 4 October 2011• First exports – 25 November 2011 19
  20. 20. RavensthorpeMaking it Work• Front-end materials handling• Dewatering• Buffer storage capacity• Refurbish existing plant• Tailings Storage Facility 20
  21. 21. Ravensthorpe Operational Achievements• Crushing: – SAP and LIM achieved design of 2000 tph• Beneficiation: – SAP – 550 tph vs design of 455 tph – LIM – 1200 tph vs design of 1177 tph• Atmospheric Leach: – 180 tph vs design of 135 tph• PAL Trains: – 150 tph vs design of 150 tph• MHP Loadout: – 120 tpd Ni vs design of 137 tpd• Acid Plant: – 4200 tpd vs design of 4400 tpd 21
  22. 22. Ravensthorpe Going Forward  Target operations:  39 ktpa for the first five years; 28 ktpa over the life of mine; C1 cost of ~$7.00 per lb (1) • Expected mine life >30 years • Three ore bodies: Halleys, Hale-Bopp, Shoemaker-Levy • 480 staff(1) At current sulphur prices 22
  23. 23. Kevitsa Nickel-Copper-PGE Project• 100% owned; Acquired in 2008• Large undeveloped sulphide nickel deposit suitable for open cast mining• 240M tonnes @ 0.30% Ni (0.28 NiSulphide) and 0.41% Cu• Initial ore feed of 5.5 mt/yr with intention to expand by ~50% in 2013• On-going drill program continues to deliver encouraging results 23
  24. 24. Kevitsa Nickel-Copper-PGE Project• First product expected in May, sales in July, 2012• Target operations:  10 ktpa nickel @ ~$6.70 / lb  20 ktpa copper @ ~$1.10 / lb• Workforce primarily from Lapland; FQM technical staff in key areas• Preliminary mining, process and engineering staff established on-site and assisting with initial startups• Negotiations underway with various offtake customers 24
  25. 25. Sentinel Copper Project• Located ~ 140 km northwest of Solwezi, Northern Zambia• Resource update being finalized• EIA and land use agreement obtained• Estimates: – Production to start at 150 ktpa copper concentrate initially, rising up to 300 ktpa – Strip ratio 2:1 – Mine life over 20 years – C1 costs between $1.10 - $1.20/lb 25
  26. 26. Sentinel Copper Project Project Total Nominal Nominal Cost 20Mtpa Plant 40Mtpa Plant Mining 299 495 Treatment 393 645 Plant Infrastructure 217 335 Indirects 169 250 Total 1,078 1,725 26
  27. 27. Sentinel Copper ProjectProject Status• Committed deliveries for mills, gearless mill drives, crushers and mining fleet• Flowsheets completed• Concept layouts and detailed estimates complete• Equipment list complete• 300-man construction camp complete 27
  28. 28. Sentinel Copper ProjectProject Status• Power scope defined and commercial discussions are continuing• Mine planning commenced• Internal reviews undertaken• Site access complete• Pending Board approval 28
  29. 29. Enterprise Nickel Project• Located 12 km northwest of Sentinel• High grade sulphide nickel – open pit potential• Potential to produce 40 - 70 ktpa of Ni vaesite nickeloan pyrite 29
  30. 30. Enterprise Nickel Project• Current focus – continue to define resource, design the mine and confirm process route• Campaign treatment at the Sentinel facilities significantly reduces capital – utilization of re-grind mills and cleaner circuits• Open pit mining – potential one-off pre-strip utilizing Sentinel mining fleet 30
  31. 31. Haquira Copper Project• Acquired in December 2010• Large scale copper project located in southern Peru  M&I resource of 3.7 Mt of copper equivalent and an inferred resource of 2.4 Mt of copper equivalent• Currently focused on:  Community relations and land access  Expanding infill and condemnation drill program and environmental matters 31
  32. 32. Long-term Copper Dynamics15
  33. 33. Copper Price Estimates Over Time 4.50Copper Price (US$ / lb Cu) 2009 4.00 2011 3.50 2010 3.00 Actual 2008 2.50 2011 2.00 2007 Long Term 2010 LT 2009 LT 1.50 2008 LT 2004 2006 2007 LT 1.00 2002 2003 2005 2006 LT 2004 LT 2000 2001 2000 LT2001 LT2002 LT 2003 LT 2005z LT 0.50 0.00 Long Term Price Estimate 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Source: Broker Research 33
  34. 34. Surpluses Overestimated & Deficits Underestimated Brook Hunt Supply / Demand – Forecast vs. Actual Supply / Demand Surplus (Deficit) (ktpa) Copper Demand (ktpa) 1,500 19,000 1,137 960 1,000 737 648 18,000 500 424 295 236 0 78 0 17,000 (77) (134) (135) (293) (334) (500) (422) 16,000(1,000) (1,080)(1,500) 15,000 2003 2004 2005 2006 2007 2008 2009 2010 3-Year Prior Estimate Actual Copper DemandSource: Brook Hunt and USGS 34
  35. 35. Copper Grades Have Declined Significantly Grades of Global Copper Mined % Cu 1.60 1.40 Lack of sizeable, high quality production coming on-stream… 1.20 Initial production of Grasberg 1.00 and Escondida 0.80 0.60 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025Source: Brook Hunt. Broker Research 35
  36. 36. Emerging Markets – Substantial Growth Ahead GDP per Capita US$35,000 USA30,00025,000 UK20,00015,00010,000 Brazil 5,000 China Russia 0 1835 1855 1875 1895 1915 1935 1955 1975 1995Source: Maddison 36
  37. 37. Projected Impact on the Copper MarketKey Points Intensity of Refined Copper Consumption (1) Multiple of India, Brazil, China kg Cu per capita 7.1x Should China, India and Brazil all 25 Average Intensity of Use (x) grow in line with population Aggregate Copper Use 6.1x 21.50 forecasts and reach copper use 20 per Capita: 18.50 per capita equivalent to, say, the 3.0 kg per capita 4.5x EU-27 country group by 2020, the 15 13.7 increased annual copper demand 2.3x would be approximately 10 2.1x 10 Mtpa, equivalent to: 6.30 7.00 5.50 – ca. 60% of current annual 5 1.80 global copper demand 0.55 0 – Nine new Escondidas being India Brazil China EU 27 Japan Germany Korea Taiwan brought on line Source: International Copper Study GroupIllustrative Scenarios New Annual No. of New No. of NewAssuming Increased Intensity of Cu Consumption for China, India and Brazil Cu demand Escondidas (2) First Quantum’s (3)  If China, India and Brazil reach the copper intensity of EU27 countries by 2020, this equates to...  If China, India and Brazil reach the copper intensity of Japan by 2020, this equates to...  If China, India and Brazil reach the copper intensity of Germany by 2020, this equates to...(1) Defined as copper consumed by semis fabricators or “first users” of refined copper (ingot makers, master alloy plants, wire rod plants, brass mills, alloy wire mills, foundries and foil mills)(2) Based on Escondida 2010 production of 1.09 Mt 37(3) Based on FM 2010 production of 323 kt
  38. 38. Projects Less Sensitive to Copper PricesTop 25 Copper Projects Capex Intensity (US$ / t) Minimum Required Copper Price to Generate 15% IRR (US$ / tonne Cu) Cobre Panama (Inmet) $ 21,622 Caracoles (Antofagasta) $ 20,421 Caserones (JX Nippon) $ 20,045 Sierra Gorda (Quadra FNX) $ 19,895 El Moro (GoldCorp) $ 18,551 Telegrapho (Antofagasta) $ 18,472 Tampakan (Xstrata) $ 18,400 Toromocho (Chinalco) $ 17,325 Oyu Tolgoi (Ivanhoe) $ 16,602 Las Bambas (Xstrata) $ 15,759 Salobo (Vale) $ 15,514 Los Bronces (Anglo Amer.) $ 15,474 Cerro Verde (Freeport) $ 15,470 Ministro Mina Hales (Codelco) $ 15,435 Quebrada Blanca (Teck) $ 15,000 Canariaco (Candente) $ 14,672 Quellaveco (Anglo Amer.) $ 14,667 Haquira (FQM) $ 14,290 Rio Blanco (Zijin) $ 13,611 Antamina (BHP) $ 11,550 Antapaccay (Xstrata) $ 10,794 Galeno (Minmetals) $ 10,696 Sentinel (FQM) $ 9,079 Buenavista DC (South. Cop) $ 8,061 Konkola Deep (Vedanta) $ 6,130 Cumulative Production (paid kt Cu)Source: Brook Hunt, equity research estimates. 38
  39. 39. Agreement to Dispose of DRC Assets• Agreement with ENRC to dispose of all residual claims and assets• Total consideration of $1.25B – consisting of: – $750M payable on closing – $500M three-year promissory note with a 3% interest coupon• Condition of closing – FQM, ENRC and DRC government will settle all disputes relating to the companies beings sold, their assets and operations in the DRC, and – FQM. ENRC and DRC government will be releasing one another in respect of all claims and judgments related to the foregoing or to any other matter arising in the DRC on or before the date of closing• Transaction closing expected on or before February 29, 2012 39
  40. 40. A Rapidly Growing Mining & Metals Company• Unique core technical strength behind the strong track record of value creation• Existing operations provide a solid platform to support growth• Strong financial position and cash flow• ~$5 billion investment in growth over 2012 – 2016 to significantly increase copper and nickel production• Growth program expected to position First Quantum as the world’s 6th largest copper producer and a top ten nickel producer 40
  41. 41. A Rapidly Growing Metals & Mining Companywww.first-quantum.com TSX: FM LSE: FQM LuSE: FQMZFebruary 2012 1
  42. 42. Corporate Profile Stock exchange listings & symbols – (S&P/TSX 60 Index) TSX: FM LSE: FQM LuSE: FQMZ Shares issued and outstanding 476.3 million Fully diluted 476.3 million 52-week share price range C$29.60 – C$12.60 Recent share price – February 17, 2012 C$22.24 Market capitalization – $ millions C$11.4 billion Average daily trading volume - shares 1.6 million Dividend paid in regards to year 2010 – per share C$0.80 US=36%; UK=26%; Geographic breakdown of institutional shareholders Canada=23%; other=15% 42

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