Thank you for standing by. This is the conference operator. Welcome to the First Quantum Minerals, first quarter 2025 results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one, on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Bonita To, Director, Investor Relations. Please go ahead.
Thank you, Operator, and thank you, everyone, for joining us today to discuss our first quarter results. During the call, we will be making forward-looking statements. As such, I encourage you to read the cautionary notes that accompany this presentation, our MD&A, and the related news release. As a reminder, the presentation is available on our website and that all dollar references are in US dollars unless otherwise noted. On today's call are Tristan Pascall, our Chief Executive Officer; Ryan MacWilliam, our Chief Financial Officer; and Rudi Badenhorst, our Chief Operating Officer. I will turn the call over to Tristan for opening remarks.
Thank you, Bonita. Thank you, everybody, for joining us today on our first quarter update. It has been an eventful period since our Q1 results. Uncertainty from shifting trade policy has increased concerns about global growth. While there is not a material direct impact on our business from the tariffs, and we continue to see strong physical demand for copper in the current market, the potentially weaker outlook for global growth reinforces our focus on lean and safe operations and continuous work to strengthen the balance sheet and drive cost and capital disciplines. Since November 2023, we have taken deliberate and strategic actions to safeguard our business and protect the long-term growth of the company in a potential scenario of a significant slowdown.
This included a $500 million copper prepay agreement in February of last year, and we are pleased to announce with our first quarter results that we have supplemented this agreement with another three-year term for an additional $500 million copper prepay. During the quarter, we also successfully completed an additional $1 billion note offering that allowed us to retire a portion of our 2027 notes. We also implemented a copper hedging strategy that we have actively over a year. Additionally, our meaningful gold production from Kansanshi and Guelb Moghrein will also act as a natural hedge in a potential broad downturn. Whilst our financial initiatives are important actions in building our resilience, the strength of the company's business has always been with the quality of our assets. This is embedded in the culture of First Quantum, from overseeing construction and expansions right through to lean and safe production.
The company has consistently demonstrated our ability to deliver strong results through our consistent track record in operational excellence and continuous improvement, and we remain on track for 2025 for continued safe productivity in Zambia, to which Rudi will cover in his operational review. In Panama, the country made progress on social security reform during the first quarter and passed legislation on March 18. As well, President Mulino made public comments that he will approve the shipment of the copper concentrate and the restart of the power plant. Whilst we continue to follow these approvals with the president's public comments, we engage in constructive arbitration discussions with the government's legal counsel. On April 2, the company terminated its ICC arbitration and suspended the FTA arbitration, and we are committed to engaging with the government and the people of Panama on resolution for the Cobre Panamá mine.
In the meantime, the company continues with its public outreach within the country on the benefits of the mine. Cobre Panamá remains an important and strategic resource of copper, which is a critical metal for the renewable energy transition and ongoing upliftment in developing economies. The mine has always operated in an environmentally and socially responsible manner and has the potential to employ over 5,000 additional Panamanians and create over 40,000 direct and indirect Panamanian jobs. Cobre Panamá was purchasing approximately $20 million per week from Panamanian companies and would have provided over $500 million in taxes per year, in taxes, royalties, and social securities to the country. Since the suspension of operations in November 2023, as ordered by the previous government, the country of Panama has lost over $750 million in accumulated contributions to government and $1.5 billion in expenditures with local companies.
I would like to reiterate that the company is committed to a fair and transparent process towards an equitable resolution for the country of Panama and its people. On to Zambia. Whilst the rainy season brought steady rainfall, the reservoir levels at Lake Kariba currently remain at relatively low levels, and a return to normal hydroelectricity power generation will take time. As such, the company continues to proactively manage supplementary power arrangements and has sufficient import arrangements in place until the end of 2026 to cover 60% of the power needs of our Zambian operations, including the Kansanshi S3 expansion. With our first quarter results, I am pleased to share that Mr. Peter Buzzi and Ambassador Brian Nichols have been nominated to be appointed at our upcoming annual general meeting in May.
Mr. Buzzi brings with him over 25 years in capital markets experience, whilst Ambassador Nichols previously served as the United States Assistant Secretary of State for Western Hemisphere Affairs, with over 35 years of experience in international relations, crisis management, and trade development across Latin America, Africa, and Asia. I would also like to personally thank Andrew Adams and Joanne Warner, who will both be retiring at our AGM. With that, I would like to hand the call over to Rudi to review the operations.
Thank you, Tristan, and thank you, everybody, for joining our call today. As Tristan mentioned, we had the seasonal impact of rainy season in Zambia during the first quarter, and it was pleasing to see that the mitigation conducted over the last few years on dewatering and added pumping capacity resulted in minimal impact on our operations from the weather. Operations in Zambia remained the first quarter. The imported power contracts that we initiated last year allowed interruptions of both Zambian operations. In addition, given the volatility of the copper price since the end of the quarter, the operational side of the business is focusing on lean and safe, cost-efficient operations.
At Kansanshi, we produced 47,000 tons of copper during the first quarter, a slight decline from the fourth quarter due to lower feed grades, as the swap of the mixed and sulphide mills that allowed for higher volume in the fourth quarter returned to normal by the end of last year. Gold production continued to be strong, with nearly 30,000 ounces produced in the first quarter. While the gold production, along with a strong gold price, provided a nice time for us during the quarter, copper C1 cash cost of.
Pardon the interruption. The deteriorating audio quality is making it challenging to understand the presenters. We are going to pause for a moment to switch to our backup line. We will turn the hold music on while we do this.
Gold production continued to be strong, with nearly 30,000 ounces produced in the first quarter. While the gold production, along with a strong gold price.
Please resume where you left off. Sorry. Thank you for your patience.
Thank you. Gold production continued to be strong, with nearly 30,000 ounces produced in the first quarter. While the gold production, along with a strong gold price, provided a nice tailwind for us during the quarter, copper C1 cash cost of $1.34 per pound was 13 cents quarter over quarter due to lower copper production, along with higher smelter costs. We remain well on track for 2025 production guidance of 160,000-190,000 tons of copper and 100,000-110,000 ounces of gold. There is a scheduled six-week maintenance shutdown of the smelter in the current quarter. Over to Sentinel. The operation reported 46,000 tons of copper in the first quarter, approximately 10,000 tons lower than the previous quarter, while cash costs increased to $2.55 per pound as a result of the lower production volumes.
During the quarter, monitoring of the ball mills identified early symptoms of fatigue related to weakening of flange bolts on the North Shelf. This phenomenon is appearing in some mills around the world of similar age by the same manufacturer. We are working closely with the original equipment manufacturer, as well as specialist engineering consultants, to minimize the impact of the maintenance for this fatigue. We continue to expect Sentinel to achieve its 2025 production guidance of 200,000-230,000 tons. A four-day full maintenance shutdown of the Sentinel plant is planned in the second quarter of 2025, followed by tailings thickener upgrades in the second half of 2025. There will be a continued focus at Sentinel to increase throughput and to drive lean and safe, cost-effective operations.
Additionally, grades are expected to be higher in the second half of the year, and as such, we expect steady improvement of copper production over the course of the year. For the first quarter of 2025, Enterprise produced 4,600 tons of nickel, a 25% increase over the previous quarter due to the ramp-up in ore supply to the plant as we mined through the difficult fault zone that impacted the fourth quarter last year. Grades were lower quarter over quarter as a result of a proportion of transitional ore. Nickel cash cost of $4.78 per pound was $0.16 higher than the previous quarter due to higher freight costs. 2025 production guidance remains unchanged at 15,000-25,000 tons of nickel. A four-day full maintenance shutdown of the Enterprise plant is planned in the second quarter of this year.
The focus for 2025 will be on ore quality and grade, controlled through ongoing reverse circulation drilling. Over to Cobre Panamá, which has been in preservation and safe management since November 2023. Costs in the first quarter were approximately $13 million per month and expected to remain in this range until formal approval is received for export of copper concentrate and the restart of the power plant. Thank you, and I will now hand the call over to Ryan to review the financials.
Thank you, Rudi. On the market side, copper prices were solid during the quarter on the back of a tight concentrate market. Prices have fallen post-quarter end. U.S. tariff announcements have reduced the outlook for global economic growth. We expect continued volatility ahead given the uncertainty around trade policy, but it is pleasing to see the continued strong physical market in China. The LME price averaged $4.24 per pound during the quarter. This was up 2% from Q4, albeit materially below the U.S. COMEX benchmark price due to potential tariffs on copper imports into the U.S. Quarter over quarter, revenue was down 5%, which resulted in a 17% fall in EBITDA. The reduction in revenue was driven by lower copper and gold sales, which was somewhat mitigated by higher prices for both metals. The Q1 net loss attributable to shareholders was $23 million. Onto costs.
Copper C1 costs were up 16% to $1.95 per pound, driven by Sentinel's low production and stockpile drawdowns, along with higher Zambian employee and maintenance costs. This was partially offset by stronger gold-priced product sales from Kansanshi, which reduced overall C1 cash costs by $0.07. Remaining input prices were stable, including Zambian power rates. Onto the balance sheet, where we've remained active in our management of liquidity and debt maturities. We were pleased to complete an opportunistic $1 billion senior unsecured notes offering on the 5th of March. The timing was driven by both favorable spreads and the high-yield market backdrop at the time. The proceeds were used to reduce near-term maturities by $750 million and enhance liquidity by $250 million. This new bond extends our debt maturity profile out to 2033.
After the quarter end, we also entered into a supplemental three-year $500 million prepayment for future copper deliveries at spot market prices with similar terms and a repayment profile to the previous prepayment. These combined actions increase our short-term liquidity by about $750 million. We continue to explore other initiatives to strengthen our balance sheet, including a potential minority partnership in our Zambian business. Net debt increased in the quarter by $257 million to $5.8 billion. This increase was mainly due to unfavorable working capital movements and capital spend. These working capital movements were driven by higher trade receivables due to late March shipments and the impact of underlying copper price fluctuations on our provisionally priced sales. We expect this to unwind through quarter two. Liquidity remained strong at $1.6 billion at quarter end, comprising of $743 million in cash and $880 million of undrawn revolver.
We also continue our hedging strategy from last year, with a realized gain of $3 million for the quarter. Since inception in Q2 2024, the total program gain is $38 million. More than half of our copper sales are hedged via collars for the rest of 2025 through to June 2026, with an average floor of $4.14 per pound and cap of $4.75 per pound. This strategy stabilizes cash flows from a material portion of our production while we complete S3 and focus on resolution in Panama. In summary, our financial focus is on ensuring strong cost and capital discipline, on continuing to extend our debt maturity profile, on maintaining our strong liquidity position, and on benefiting from the hedge book in place, all of which puts us in a solid position to deal with any future volatility. I'll now hand the call back to Tristan.
Thank you, Ryan. Before opening the call for Q&A, I would like to provide an update on the progress of the Kansanshi S3 expansion project. During the quarter, 20% of major systems at the 25 million tonne per annum concentrator began early commissioning in parallel with the completion of construction. The majority of the 33 kV distribution network and substations were energized, which allowed for the SAG mill and gearless mill drive to be commissioned. In addition, water was introduced to the site for the raw water pond and process water tank. Remaining construction work continues with a focus on completing the remaining piping and electrical scope in particular. By the end of the quarter, the project achieved 83% construction completion. Configuration of the plant control system achieved 84% completion, and operational readiness, which includes onboarding and training of the workforce, reached 75% completion.
We continue to make good progress on the S3 expansion project at Kansanshi, and it remains on budget at $1.25 billion and well on track for completion by mid-year. In closing, I would like to reiterate our key priorities for this year. Firstly, towards resolving the situation in Panama, and we look forward to constructive discussions with the government for a resolution of the situation. Secondly, along with the actions taken to date, we will continue with the proactive management of our balance sheet and liquidity position. Thirdly, we will continue our focus on safe and lean productive operational performance. Finally, the successful delivery of the Kansanshi S3 expansion project. I remain confident in the outlook for the company. Our financial actions, along with other initiatives forthcoming, have provided the company with meaningful headroom in our balance sheet, and our operations remain steady, viable, and lean.
The startup of the S3 expansion at Kansanshi is only a few months away and will be a turning point for the company, returning it to a position of free cash flow generation. Over the last 18 months, the company has become more efficient and focused, and this has prepared us well for any challenge, including those presented to us by the current macroeconomic environment. We will continue to take action proactively, strategically, and always with a long-term view. Thank you. This brings our prepared remarks to an end. Operator, we can open the call for Q&A.
Thank you. We will now begin the analyst question and answer session. Analysts are permitted to ask one question and one follow-up, and are welcome to rejoin the queue if they have more. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Henrique Marques with Goldman Sachs. Please go ahead.
Hi. Thanks for taking my question. We heard the Panama's president addressing the nation yesterday regarding the mine situation, potential solutions, as well as a timeline to get a solution by end of the year. It would be great if you could give us more color on what exactly these options are and if you see this timeline as feasible. If the mine actually reopens by end of the year, how long should it take to fully ramp up? Thank you.
Thanks, Henrique. Thanks for the question. Also, thank you to your team for publishing your explanatory notes on the comments by the president of Panama on Tuesday. We did see some misunderstandings of the English translations in some newswire. Those have been corrected, but your note was very helpful to understand the president's statement. In terms of his statement, President José Raúl Mulino has been consistent in saying that he will address the issue of the mine following Social Security, and I think those comments on Tuesday reinforced that. He did talk about various routes for resolution. At this stage, we think it is too early for us to comment on that, and we certainly welcome the president's comments around that. Once the suspension of arbitration is in place, he would make a call for the parties to engage in dialogue, and certainly, we will engage in that dialogue.
In terms of what the outcome will be, we think it's too early for us to comment on at this point in time. In terms of dates and ramp-up, certainly, we would be interested in getting the matter resolved as quickly as possible. In terms of ramp-up, our view was it would take six to nine months to get to around 80% of throughput on the process plants, but to get to 100 million tons per annum, that last stage of optimization will be fairly involved and take a further degree of time to get there.
Thank you.
The next question comes from Orest Wowkodaw with Scotiabank. Please go ahead.
Hi, thanks. Just following up on the previous question, is there any exact timeline at this point where you expect those negotiations to begin on a restart?
Hi, Orest. Thanks for the question. No, not particularly. What we did hear from the president, and consistent with his previous comments, is that once suspension of arbitration was in place, that he would call for dialogue between the parties. We're ready for that dialogue. I think it's important to the country of Panama, to the people of Panama, that we get on with that. We did put aside and suspend the arbitrations. We've consistently repeated that arbitration is not our preferred course of action, and to come to resolution would be in the best interest for the benefit of the country.
As a follow-up, is there anything left for First Quantum to do in terms of meeting the president's request in order to engage in discussions?
No, not on our side as far as I'm aware, Orest.
Okay. Thank you.
The next question comes from Matthew Murphy with BMO Capital Markets. Please go ahead.
Hi. Yeah, it kind of feels like things are starting to progress on the Panama front. How does it make you think about the partner and sale options at this point? Is that kind of on hold, and you see how Panama hands out over the next few quarters, or is it still a priority to further improve the balance sheet?
Thanks, Matthew. I assume you're talking about the Zambia partnership. Ryan, do you want to take that question?
Sure. Hi, Matt. The Zambia partnership is really discussions or a reflection of a broader strategic desire to work more with partners, where there's the right partner that makes sense for us and them. We wouldn't tie it specifically to any discussions or progress around Panama. It's really that broader strategic initiative that catalyzed the partner in Ravensthorpe, that catalyzed the partner with Rio Tinto La Granja, and the fact that Zambia has made really positive strides in recent years to reform its mining sector has attracted interest from different parts of the world. We are seeing if that might eventuate into a sensible partnership.
At this stage, while the discussions continue, we still have to go through those and see where they get to, and if at the end of them, there's something that makes sense for us, makes sense for Zambia, and makes sense for a potential partner, and then we'll update in due course.
Okay. And then just as a follow-up, does the gold price make you think about options with your gold exposure to improve the balance sheet?
Yeah, go ahead, Ryan.
Yep. Certainly, the gold price hitting record highs has provided an important tailwind on our costs. We saw a $0.07 benefit in Q1 relative to Q4 last year in our C1 costs due to that increase in gold price, coupled with the strong gold production coming out of Kansanshi and increasing the out of Guelb Moghrein with the CIL plant online there. Yes, I mean, there are a range of financing options available to us. You saw through the course of this quarter, we issued the bond, we've done a copper prepay. There are options around gold, whether it's gold prepay, gold streams, and other tools in the toolbox.
I think whenever you're sitting with high-quality assets and two strategically important commodities, you're going to have a wide range of options, and that's what we've demonstrated and which we expect will continue to be the case going forward and indeed pleasing to see the strong gold price that we've seen in recent months.
The next question comes from Ioannis Masvoulas with Morgan Stanley. Please go ahead.
Yes, hello. Thank you for taking my question. Looking at the developments in Panama, it feels like things are moving in the right direction, but I wanted to ask you, now that you have discontinued the ICC process and suspended the FTA arbitration, what's your legal recourse going forward if things do not progress the way you anticipate?
Hi, Ioannis . Yeah, thank you. We have been very willing to do that and to take those courses of action to open space for engagement. The suspension of arbitration provides the opportunity for engagement, for dialogue with the government of Panama. The suspension can be continued through requests from both parties, and certainly, we would be constructive in that process. In the long term, all our legal rights are protected, and ultimately, there can be reversion back to arbitration. Again, that's not our preferred outcome. We would seek to get to resolution through engagement.
Very clear. Thank you.
The next question comes from Lawson Winder, Bank of America Securities. Please go ahead.
Good morning. Thank you very much, Operator. Hello, Tristan, Rudi, and Ryan. Thank you for today's update. Wanted to ask about Panama as well, and it makes a lot of sense that you've gone ahead and suspended the arbitrations or put one on hold and canceled the other. The other parties involved have not yet done so, and it seems the government of Panama is willing to engage as long as First Quantum is willing to take this step. Is that a fair statement, or is there still an expectation that the government would like to see some of the other arbitrations suspended as well?
Yeah, thanks, Lawson. Look, I'm speaking only from what we see in public statements because we can't speak for the government of Panama, but my understanding from the president's comments over the course of the week is that they are looking for those other suspensions. Certainly, from our side, we believe we've done everything to get ready for those, to prepare the ground for that engagement, and certainly, we're ready and able for those engagements to take place.
Yeah, your openness to communicate with the government has been, I think, very helpful. I wanted to also just follow up on the power situation in Zambia. Sixty percent imported, I think, is the highest that you guys have ever done historically. Is there room to keep moving that up should that situation arise? Could you maybe also give us some color on where the power is coming from and then how you think about those current options today and how those might potentially increase should that need arise?
Thanks, Lawson. Rudi, do you want to take that one?
Yeah, no problem.
Hi, Lawson. Thanks for the question. The rainy season in Zambia is lingering somewhat. Last week, we still had 100 mm of rain to Northwest Province. The rain is lasting a little bit longer. We've seen very good river flows in the northern part of the Zambezi. Last week, 2,900 cubic meters a second, while the big falls are still sitting at about 2,200. There is still quite a lot of water that needs to come down over the next month or a bit into Kariba, and we look forward to see what that does to the lake levels. However, we are fully aware that one season is not going to resolve it, and we expect to see the emergency power restrictions and obviously then the broadly importation of power not ceasing until sort of the second half of 2026.
Deliberately, as a result of that, we have taken preemptive steps to secure power through third-party imports other than ZESCO because ZESCO is importing as well, all the way through to Q1 2027. Principally, that sits at around 60% of our power needs will be then directly imported through third-party providers, and the remainder comes from ZESCO. The contract that we have in place at the moment for that duration does allow for upside, and we are quite comfortable that if there is any need for additional power, we would be able to secure that without too much of an issue. The power originates mainly, as far as our direct imports through those providers, from South Africa, Mozambique, a little bit from Malawi.
are some interconnectors being finalized from Tanzania, which opens up really a big power source from Ethiopia coming through into Tanzania and Zambia over the next two years. Along with that, you're well aware of the fact that we've entered into an arrangement with TotalEnergies for 430 MW of wind and solar power. That comes into effect towards the middle of 2026, all the way through to 2028. We've secured 100 MW of solar power, so a base load of 25 MW coming into play in the third quarter of this year from within country, solar and Kariba. We continue to invest into the grid in Zambia to stabilize voltage and help ZESCO protect their grid against fluctuations from interconnectors to neighboring countries.
The next question comes from Myles Allsop at UBS. Please go ahead.
Great. Thank you. Could you just confirm whether the environmental audit has started yet? I presume it has not because I cannot see any comments around it. How long will that take? First question.
Yes. Thanks, Myles. The status of the environmental audit was that the terms of reference went through public consultation back in February, and we understand now those terms of reference are in the process of being finalized. The logistics around appointment of the company currently involved, the auditor, currently sit with the regulator, and we're waiting to hear back in terms of the formal notification around who that is and the timetable for that. In the meantime, we have had a CODESA audit. That is the MiAMBIENTE, the Ministry of Environment's independent auditor, came through last month and completed their regular audit of the site on environmental matters. Their finding was that Cobre Panamá was 100% compliant on all environmental obligations. We've provided that audit publicly on the website. It's available to see.
In the meantime, yes, Miles, we're waiting to hear back from government on the wider audit environmentally.
Okay. Thanks. You mentioned earlier around this ball mill issue, potentially at Sentinel. Could you just provide a little bit more detail around that and what the scenarios are? Will this potentially result in an extended outage, or can it be managed within a normal maintenance schedule?
Sure. Rudi, could you take that one, please?
Thanks, Myles. The fatigue relates to the bolts on the shell of the mill flanges, not the mill itself. The mining relates to the ball mill in Train 2 on the discharge end. Our condition monitoring team picked it up quite early, so intervention is opportune. We are working with the OEMs and other mill specialists to understand the core reason for the phenomena. In the meantime, however, it is a nuisance downtime of the ball mill where the SAG continues to run during this downtime. Thus, tons per hour through that specific mill train is just lower for the period the ball mill stands. It is not a complete outage. Going forward, we are confident that we will address the mill bolt issue, and we do not foresee an extended downtime on the unit.
The next question comes from Dalton Barretto at Canaccord Genuity. Please go ahead.
Thanks, Operator. Good morning, Tristan and team. Just staying in Panama here. Tristan, I understand that for the FTA arbitration, the suspension isn't sort of a permanent thing and that you have to keep renewing it. Can you tell me how often you have to renew it and what you'd need to see from the government of Panama to keep renewing it?
Yeah. Thanks, Dalton. We are very happy to put aside the arbitration. Again, it is not our preferred pathway and outcome. We want to be in engagement, and we have given the space for that to happen. Yes, both parties would need to mutually agree and go back to keep moving forward, and that is up to the parties as we intend to go forward together. We would just need to see constructive progress. We have every reason to think that is the case, and we note the president's comments this week in which he was saying that once all the suspension arbitrations were in place, he would be calling for dialogue between the parties, and we look forward to joining that dialogue.
Great. Thanks, Tristan. Maybe just as a follow-up, one of the things President Mulino was adamant about on Tuesday night was that contract law would not be the pathway forward just given what's happened. There may not be a short answer to this, but can you sort of talk about what some of the legal pathways forward could be?
Sure, Dalton. Thanks. Yes, the president did make those comments, and I think he's been consistent in saying he's repeatedly said that any agreement will not relate to a contract law because Law 9 and then Law 406 have not been successful. They haven't proved to be durable. In his comments, I'll just point out he also pointed out the economic impact to the country of the mine closure and the many well-paid jobs have been lost, particularly for young people. Suppliers have been badly affected, and it's affected the country's economic outlook. We believe the president is looking for a solution that would be durable, which has not been the case with the previous contract law approach. Ultimately, we're in complete agreement. We would be focused on a legal solution that is durable and fair for both parties, for all parties involved, including the people of Panama.
I think, Dalton, at the moment, it's too early to comment on what the potential solutions might look like.
This concludes the question and answer session. I would like to turn the conference back over to Tristan Pascall for any closing remarks. Please go ahead.
you, Operator. I would like to thank everybody for joining the call today for your interest and time, and I look forward to speaking to you again at our next update.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.