Good morning, ladies and gentlemen. Welcome to the First Quantum Minerals quarterly results conference call. I would now like to turn the meeting over to Lisa Doddridge, Director of Investor Relations. Please go ahead, Ms. Doddridge.
Thanks, Melanie, and thank you everybody for joining us today to discuss our first quarter 2021 results. Before we begin, I will advise that over the course of the call, we will be making several forward-looking statements, and as such, I encourage you to read the cautionary note that accompanies our most recent MD&A and the related results news release, as well as the risk factors particular to our company, which are detailed in our most recent AIF and available on our website and on SEDAR. A reminder that the presentation which accompanies this conference call is available on our website. On today's call, Tristan Pascall, our Chief Operations Officer, will provide some general comments and discuss operations. Hannes Meyer, our CFO, will review the financial results. After that, we will open up the lines to take questions. With that, I'll turn the call over to Tristan.
Thanks, Lisa. Hello everyone, thanks for joining. Q1 was a very strong quarter for the company. Our operations performed in line with plan, we continued to benefit from our low-cost structure and stronger copper prices. Operations at Sentinel were strong throughout the course of 2020, this continued in Q1 of this year, despite the heavy seasonal rains in Zambia. Sentinel production grew by 3% from Q1 last year. We processed higher grades and fresher ore from the stage 2 pit, throughput was lower as a result of regular maintenance activities, in particular, the repairs completed on the train one ball mill trunnion, also from the impact of the heavy rainy season.
The focus for the remainder of this year at Sentinel is on maintaining consistent ore supply and the development of the pocket for the fourth in-pit crusher, which is expected to be commissioned during the second half of the year. The new 63130 primary crusher is larger than the three existing units, and together they will enable higher throughput of about 62 million tons per annum starting in 2022. Kansanshi's production was also impacted by the heavy rains in the quarter, as well as lower grades than were expected in all three circuits. Production declined by 12%. The lower production also resulted in increased costs. Despite the challenge of grade continuing to decline at Kansanshi until a decision on the S3 expansion is made, throughput and grades are expected to remain on plan to meet production guidance for the full year 2021.
We continue to look to advance a decision towards the S3 expansion at Kansanshi that would ensure production levels remain steady for a period of more than 20 years. We continue to work with the Zambian government to formulate a framework to move the expansion forward. However, with the country entering into election season from early May, we do not consider a decision will be made until after the election on the 12th of August. Cobre Panama had a very good first quarter with record quarterly production for copper and gold. Copper production was up 46% from Q1 2020 and 25% from Q4 last year. Mining rates, throughputs, and grades all increased while costs came down from Q1 2020, despite the addition of about $8 million into costs related with the COVID-19 protocols, which we didn't have last year in the first quarter.
We expect to achieve a throughput of about 85 million tons this year with improved throughput quarter-on-quarter as ore characteristics improve throughout the year. Cobre Panama also continues to advance the expansion to 100 million tons. The focus in Q1 in this regard was on developing access along the overland conveyor corridor to the Colina pit. Our group costs were low in the quarter, driven by strong cost performance across our three large mines. Costs at our smaller mines generally increased, their contribution to production was smaller relative to the growth in production from the rest of the portfolio, where costs are lower. The strong operating performance has been achieved despite the challenges posed by the global pandemic. We continue to deal with the various waves of contagion in different geographies along with the rest of the world.
The health and well-being of our workforce and the surrounding communities continues to be our priority in this regard. We have maintained all of our established COVID-19 protocols at all of our mines. We continue to work closely with the various levels of government and the health authorities in all the regions we operate to reduce transmission of the virus and to deal with outbreaks and infections as they occur. We have seen some impact on other aspects of our business, bottlenecks at trade borders, port restrictions, and some additional costs on freight as a result of COVID-19 restrictions. We haven't experienced any other major disruptions, and besides the shipping delays and possible higher freight costs, we don't expect to. Before I turn over the call, I would like to highlight one more area.
Last quarter, I indicated that during our call, we published for the first time our approach to climate change, making public our intent to deliver meaningful change in our business based on the implementation of step change improvement projects. The First Quantum approach to climate change, in keeping with our results-driven culture, is to set tangible targets and focus on the identification and execution of projects which produce real outcomes. We recognize the need to identify and integrate climate change and energy considerations into our strategic planning.
Further to this, we have now committed that in 2021, we will report in alignment with the Task Force on Climate-related Financial Disclosures, the TCFD framework, set tangible and realistic targets with an identified pathway to achievement for absolute emission levels and the carbon intensity of the company's operations, and to integrate an internal carbon price and the expected determined impacts on the commodity prices in the evaluation of our new projects. I look forward to reporting further on our progress on these aspects throughout the year. Finally, I want to, on behalf of the entire company, thank our people once again. Our workforce continues to demonstrate adaptability, commitment, and resilience, and make significant contributions to the success of this business in the ongoing pandemic. With that, I'll turn things over to Hannes Meyer, the CFO.
Thanks, Tristan. Good day to everyone. I'd like to direct you to the slide titled Overview. Total copper production for the quarter of 205,000 tonnes was 5% higher than the first quarter of 2020. Record copper production at Cobre Panama drove strong operational performance in the quarter, with 82,000 tonnes produced, a 46% increase from the first quarter in 2020. Total gold production for the quarter of 78,000 ounces is a 13% increase from the corresponding quarter last year, mainly due to record high production at Cobre Panama of 36,000 ounces. Financial performance in the quarter was driven by strong sales with increased metal prices and low overall operating costs, resulting in a significant increase in comparative EBITDA and net earnings, as well as a notable reduction in net debt.
Gross profit of $540 million and comparative EBITDA of $811 million for the quarter were significantly higher than Q1 2020, attributable to increased sales volumes at Cobre Panama, as well as a 27% increase in the realized copper price. C1 cash cost of $1.24 per pound was 5% lower than the first quarter in 2020, with all major copper operations delivering a reduction in cash cost. Net debt decreased during the quarter by nearly $350 million- $7.062 billion as at March 31st. Further reduction remains a key priority, with continued strong future cash flow anticipated. In addition, the company's credit rating at two agencies was recently upgraded. Turning to the next slide on production. As previously highlighted, record production of 82,000 tonnes was achieved at Cobre Panama.
Sentinel produced 58,000 tonnes of copper in this quarter, 3% higher than Q1 2020, with a strong performance following successful completion of repairs to the ball mill trunnion during February. Kansanshi performed consistently in the quarter. Copper production of 49,000 tonnes for the quarter was impacted by lower grades in the rainy season in Zambia. As noted previously, total gold production for the quarter, 78,000 ounces, included record high production at Cobre Panama. Quarterly unit cash cost. Total C1 cost for the quarter of $1.24 per pound was $0.06 per pound or 5% lower than Q1 2020. Cobre Panama C1 cash cost of $1.15 per pound was $0.23 per pound lower than Q1 2020, reflecting the increase in production. Sentinel and Kansanshi C1 cash costs benefited from favorable foreign exchange impact and lower fuel costs.
All-in sustaining costs for the quarter of $1.72 per pound was $0.08 per pound higher than Q1 2020. The increase in all-in sustaining costs reflect higher royalty payments due to higher metal prices and a step-up in Zambia royalty rate, increasing to 10% for the month of March. The royalty expense accounted for $0.09 per pound increase in total all-in sustaining costs compared to Q1 2020. This has been partially offset by a lower C1 cash cost. Turning to the next slide, financial overview. Gross profit of $540 million and comparative EBITDA of $811 million for the first quarter of 2020 were significantly higher than the first quarter of 2020, attributable to a 27% increase in realized copper price, increased sales volumes at Cobre Panama, and lower cash costs. Comparative earnings for the first quarter of $150 million is an increase of $225 million compared to Q1 2020.
Comparative earnings per share of $0.22 and basic earnings per share of $0.21 are $0.33 and $0.30 higher than Q1 last year, respectively. Net debt reduced by nearly $350 million during the quarter and further reduction remains a key priority. Next slide, an increase in gross profit. We had a 393% increase in gross profit from higher revenues, higher Cobre Panama sale volumes, and lower cash costs. Turning to the next slide on debt and liquidity profile. The company ended with $1 billion of net unrestricted cash and cash equivalents and was in full compliance with all its financial covenants. The company signed a bilateral borrowing facility of $175 million in April 2021, available for 12 months from the date of signing. Net debt has reduced by approximately $600 million in the last three quarters.
Taking into account forecasted cash flows, capital expenditure outflows, available cash, and committed facilities, the company expects to have sufficient liquidity through the next 12 months to carry out its operating and capital expenditure plan and remain in full compliance with financial covenants. We continue to take action to manage operational prices and further strengthen the balance sheet. As previously stated, the company's credit rating at two agencies were recently upgraded. On April 6th, Fitch upgraded the previous B minus rating to B with a stable outlook. On the 9th of April, S&P Global Ratings upgraded the previous triple C plus rating to B with a stable outlook. The upgrades of both agencies were attributed to the company's mitigation of the impact of COVID-19 in 2020, continued improvements in the company's financial profile, and deleveraging. Strong operational performance and a positive outlook on copper prices driven by robust demand forecast.
On April the 8th, Moody's Investors Service announced the withdrawal of the company's unsolicited and non-participating rating. The rating has been unsolicited and non-participating for over two years. To the last slide on hedging. Hedging was undertaken when Cobre Panama was being built to ensure consistent and sufficient cash flow. As we look forward to certainty of cash flows and confidence in copper prices, we will continue to review the level of hedging and act opportunistically. Over time, the level of hedged sales is expected to decline. Approximately a third of our expected copper sales in the next 12 months are hedged. At April 27th, 2021, the company had unmargined copper forward sales contracts for just over 89,000 tons at an average price of $2.88 per pound outstanding, with periods of maturity to December 2021.
In addition, the company has zero cost collar un margined sales contracts for just under 213,000 tons at weighted average prices of $3.10 per pound-$3.67 per pound outstanding, with maturities to March 2022. The company also has unmargined nickel forward sales contracts for just over 1,000 tons at an average price of $7.13 per pound, with maturities to October 2021. In addition, the company has zero cost nickel un margined sales contracts for 500 tons at a weighted average price of $7.50 per pound-$8.55 per pound outstanding, with maturities to August 2021. Thank you, and with that, I'll hand back over to Lisa.
Thanks, Hannes, and thanks, Tristan. Operator, can you please open the line to take questions?
Certainly. We will now take questions from the telephone lines. Thank you for your patience. The first question is from Karl Blunden of Goldman Sachs. Please go ahead. Your line is now open.
Hi, good morning. Thanks for the time. Congrats on the strong results this quarter. Question with regard to priorities with cash flow. It looks like we may be facing a period here of pretty strong copper prices. I'd be interested in your take about how you'd like to balance debt reduction with organic investment. Just on the debt reduction side, is there a preference at this point in time for bonds versus bank debt, given the potential for rates to rise?
Thanks, Karl. Look, just to comment on growth and balancing that longer term. Certainly, as we've said numerous times, the focus remains on debt reduction, and I'll get Hannes to make some comments in that regard. Certainly, the business has a strong greenfield portfolio, at the moment, we're very much focused on brownfields. In particular, the Cobre Panama 100 million ton expansion, the work at Sentinel on the fourth crusher, indeed, when we get to some agreement with the Zambian government on the S3 expansion at Kansanshi. No decision yet on greenfield projects, although there is a strong pipeline in that regard. Hannes?
Thanks, Tristan. Karl, we are generating good cash flow at the moment, so the priority remains the debt reduction. As you stated, we've got numerous debt outstanding in bank and bonds. Those bonds are portable, and we'll look at applying some of that cash against the various debts, either repaying revolver or calling some of the bonds. That will certainly be a priority in the upcoming future.
Fair enough. There's just one other item on the balance sheet I wanted to follow up on. A couple of quarters ago, there was some discussion around potentially raising liquidity in Zambia through a JV. I know there's been less discussion of that recently. Just be interested in your take on where that sits in the priority queue, if that's still something reasonable to think about as an option for you. Then if there's a relation between that and the Zambia elections.
Sure, Karl, I'll take that one. Look, the diversification aside, and notwithstanding the impact of diversification on our business, we're happy in Zambia. It's a good place to do business. The bid-ask spread at the moment, I think is challenging to overcome. That's where we stand at the moment on Zambia. We have a good, constructive arrangement with government, relationship with government, and as we look forward to the election, there probably will be some noise, as there always is. Zambia has a good, strong democracy and will come through as we've been through many times in terms of elections. As I said, we'd look forward to making decisions on S3 expansion after the election.
Thanks very much.
Thank you.
The next question is from Jackie Przybylowski of BMO Capital Markets. Please go ahead. Your line is now open.
Hi. Thanks very much. Just maybe to follow up on that last question. On the Q4 earnings call, Tristan, you talked about wanting to see stability in Zambia and related to the deductibility of royalties from taxes. Has there been any movement there? Are you more comfortable with that, or is that something that you still have to wait until after the election to be sort of satisfied on?
Yeah. Hi, Jackie. Yeah, we were hoping for some progress there, and I think what's happened is the timetable for the election has caught us now. Early May, the government goes into recess, and that means all the ministers leave their portfolio two months in advance of the election. That's really now the hard cliff that we're up against in terms of making progress there. That's why we say it's more likely to come after the election.
Got it. Okay. Thanks for that. Then maybe just a question on Cobre Panama. Your production there was really good. Congrats on a great quarter there. I just want to ask specifically on the gold. I know you guys have talked about this before, that some of the gold is difficult to predict. I think more specifically, the gravity gold is difficult for you guys to predict. Is that what happened in the quarter? Did you just have a good quarter for gravity gold? Is this something that you think is structurally going to be a little bit stronger going forward, this gold grade?
Yeah, Jackie, no, the production from the gravity gold, we're continuing to optimize, but it's not a major portion of the gold production as yet. It really boils down to grades, and the grades vary in the ore body. They're associated with the, and correlated to copper grades, but there will be times where they differ, they go up and down different to the way the copper grades go up and down. It was a good quarter in terms of producing gold into the copper concentrate, and that's what came through.
Great. Thanks very much. I'll leave it there. Thanks, Tristan, very much, and congrats on a great quarter.
Thank you. The next question is from Ioannis Masvoulas of Morgan Stanley. Please go ahead.
Yes. Good morning, and thanks for taking my questions. I've got three at this stage. The first one on Ravensthorpe. It continues to face ramp-up challenges. Can you talk about a quick operational update on how you see things playing out over the next couple of quarters? At which stage do you think you'll be able to make a decision around bringing in a partner? Secondly, on Sentinel, despite the issues you had during the quarter, you mentioned that you reached a record monthly throughput in March. Could you give us an indication on that run rate, just to get an idea of the exit rate for that mine? Thirdly, the language around the Law 9 review hasn't really changed. Is there any updates you can share with us on this? Thank you.
Hi, Ioannis. I'll try to cover all those questions, but I'll see how we go. Ravensthorpe, yeah, in terms of an operational update, what I'd say is we continue to face headwinds in the Hale Bopp and Halley's deposit where we're focused on the moment, and we look forward to getting into Shoemaker-Levy. That remains on track in terms of pulling ore across on the new conveyor line in the second half of the year. There we do see better material handling characteristics and indeed improved grades. Hale Bopp is characterized by clayey material that hangs up and so on, and that's been the challenge, and lower grade.
In terms of the process plant, however, we've seen good signs coming through the quarter, that is, that we did do good repair work in February, as I said on the last call, and that's all in good standing. We've seen good performance of beneficiation at the front end of the circuit. That all bodes well, and we're really just looking forward to getting into Shoemaker-Levy at Ravensthorpe, and that sets up the long life going forward at the mine. In terms of a partner, that process is continuing, and I wouldn't really add much more at the moment there. That process is in good order. At Sentinel, in terms of the run rate, I believe we said on the last call in terms of the guidance for the year, that the run rate this year was expected to be around 57 million tons.
That will step up next year as we add the fourth crusher in above 60 million tons towards 62 million tons. Sentinel is on track this year for the guidance we provided and performing well as it did last year. In terms of Law 9, there isn't really much to add. The process is continuing, and I realize the timetable there, people are looking for answers. It's a bureaucratic process with government. In terms of the process we have with the high-level ministerial commission, it's in good order and constructive. We'll be back across there early May, early next month, continuing those discussions. We expect to go into the next session of Parliament, which I think is post-July, in terms of a process in the National Assembly. That's all the sort of guidance on timing I can give it for the time being.
Great. Sorry if I can squeeze in the last one. I was really intrigued about the comments on integrating a carbon price in project evaluation. Could you share your thoughts on the framework around it, and what sort of carbon price are we talking about, and how that could differ by region as you operate across different jurisdictions?
Thanks, Ioannis. I think that's work in progress for us. Obviously, we're having a look at what's in the industry, and I think many groups are finding their feet and finding their way forward on this. There is a broad range, but what we're saying is we're interested to set an internal price, particularly as we look at the greenfield projects. We'll give more detail around that as we develop it, and we'll communicate fully in that regard.
Okay. Fair enough. Thanks so much.
Thank you. The next question is from Greg Barnes of TD Securities. Please go ahead. Your line is now open.
Yes, thank you. Morning, Tristan. Just a question for you, more of a hypothetical one. As Quantum has been seen as a target perpetually for a long time in terms of a takeover, do you see an opportunity for you to become more of a consolidator in the industry given your increasing financial strength?
Yeah. Thanks, Greg. Certainly. Look, right now we're focused on debt reduction, and as we look at how the market stacks up, it is something that we look at. It comes across the table. What we see in our own portfolio is very strong growth, and that's important that we deliver that for shareholders. Always in the past, we have looked at opportunities, but it needs to fit into where we can add value, and bring something meaningful to shareholders in terms of incremental earnings per share and long-term growth.
Just on the greenfield opportunities, namely Taca Taca and Haquira. I understand where Taca Taca is, but Haquira has been wandering around for a long time, not much going on. You talk in the press release about a resettlement process, but just, can you give us any clear idea of where that sits, what's going on, and how that could evolve over the next three to five years?
Yeah. Look, it is a community question there, an overriding community question. Those communities are in several groups, and we're talking closely to the groups that are the principal focus of the operations. Really, Haquira sits out beyond Taca Taca in terms of the ranking as how we see it would be developed. As we said, we wouldn't be making a decision on that in the next three to four years because of that ranking. Unless that we would get to a resolution with the community. In the meantime, we're watching developments in Peru, and obviously, we'll watch and follow the elections carefully as well in that regard.
Thank you.
Thank you. The next question is from Ed Brucker of Barclays. Please go ahead.
Hey, thanks for taking my question. Just two quick ones from me. With the recent ratings upgrades from Fitch and S&P and then Moody's dropping the rating, you're fully single B now, from the triple C range prior. It's a decent milestone, but I wondered if you would be able to explain to us the reasoning behind the Moody's dropping the rating.
Hannes, do you want to take that one?
Look, it's been an unsolicited rating. We've dropped Moody's from a solicited basis three years ago, so they continued on an unsolicited basis. Look, we've requested them to drop that on a few occasions and eventually, that came through.
Got it. My next one is going back to the gross debt versus net debt question that's always been in the mind of some of the credit investors. With the bank debt and the maturities in 2023 and 2024 becoming callable at low prices, do you think you could use that as an opportunity to take out some gross debt, or do you think you'll still reduce the net debt number just with building a cash reserve?
No, we'll start reducing the gross debt number as well.
Got it. Thank you very much.
Thank you. The next question is from Matthew Fields of Bank of America. Please go ahead.
Hey, Tristan, Hannes, Lisa. Actually great timing to continue on that gross debt question. $225 of the term loan payable this quarter, do you anticipate paying down revolver as well in that continuance of the trend that we've seen? Are we still on track for that $2 billion of overall debt reduction, which would imply another $1.3 billion from here over the next however many quarters?
Yeah. We've got the term loan installment due in June, so that will reduce the term loan further. Of course, additional cash coming in. We've got various options of it, either going to revolver or then starting to look at some of the bonds to call it. It will evolve as the cash flow continues to flow in.
Okay. I'm sorry, but is another $1.3 billion from here still the bogey that you're targeting?
Yeah. You can run the numbers there, but that's quite achievable in not too distant future.
Okay. The bilateral facility that you signed in April, I'm just curious, with the cash that you're generating now, the cash you have on balance sheet, the liquidity, the revolver availability that you have, which is bigger than you've had in a long time, why the need for the $175 million facility, even if only for 12 months?
Yeah. I'll deal with the hedges first on two components. There are bigger hedges that we quote, and that's out there, that's unmargined. The normal hedges that we have for the quotational period, we do sell to our customers, and then there's a hedge marrying that timeframe up. Those are subject to margin calls. With a rise in the copper price, of course, there's sort of margin calls on that. What I've done is, and this was quite a quick process, it's probably a week, is just to ask one of our banks on a bilateral basis there to provide a facility just to cover that, not to erode any other liquidity that we have. That was put in place pretty quickly. Of course, that unwinds as copper price stays at these levels for longer.
That sort of margin calls, as you settle the sale, you realize then the price. That hole for the margin calls disappear then.
Okay. Is that an unsecured facility?
Yep. Unsecured.
The need for it will basically go away as your hedged position declines over the next 12 months.
Yeah, it's not tied to the hedges that we mentioned. That's just a normal operational sort of quotational period hedge. What we do is we hedge the quotational period for when we sell the product until the sale is closed. We hedge that portion of it as well. That's subject to margin calls.
Okay. Got it. All right. Thanks very much, Hannes, and good luck for the rest of the year.
Thank you. The next question is from Lawson Winder of Bank of America Securities. Please go ahead.
Hello, and thank you for your time today, ladies and gentlemen. Just a couple questions from me. I wanted to hopefully get some clearer guidance or direction on Cobre Panama for the rest of the year, vis-a-vis the first quarter. The grades in Q1 at 0.46 were relatively strong. Is that in line with your block model, or are grades actually running a little better than expected?
Hi, Lawson. No, it's in line with the block model. What we see over the year is the guidance we've given, that remains absolutely valid. Q1 was strong. We had a lot of good reason on the production side to be very happy, very pleased with the progress there. In April, we have seen some more maintenance this month. Really that's built off the higher throughputs rate we've seen. We've brought forward the planned maintenance shuts on mill re-lines and so on into April. Really, all what that says, Lawson, is over the year, we will see ups and downs. The guidance we provided remains valid. The grades that we're seeing are in line with the block model and reconcile very well, both to block model and then also to the plant feed. The guidance remains very current.
Thanks so much, Tristan. On the strip ratio, that seems to be running a little low and perhaps even a little lower than planned. In-place strip ratio was about half or 0.5 times in the quarter. Is it turning out better than your expectations? Rather, have there been some adjustments in the mine plan that have caused that to run potentially lower than the original plan? What's the outlook for that for the remainder of the year?
Sure, Lawson. Yeah, look, the strip ratio we give is really across the year. What we need to do is to get into the northern area, so that's really a pushback on the northern side of the Botija pit, where there's some waste there. The reason to do that is to prepare the new position for the next box cut, the next move of the in-pit crushers. That will be prepared over a period of around two to three years. We're looking to get a shovel into that area, and that will pick up waste for the rest of the year. We are on plan. Yes, it was a bit lower in the quarter.
Okay, that's great. Maybe just one final question on Sentinel. You guys guided to slightly lower grades in the quarter in Q2, that is. Thank you for that guidance. Very helpful. Historically, could we expect the Q2 grades to sort of be in line with sort of historical lows, quarterly lows? Are we looking for something sort of outside of what historically has been a quarterly low there?
Lawson, no, I don't think we have the concern that it would be outside historical lows. April at Sentinel, we've also had some maintenance and heavy rains there. That will come through in Q2. The grades are a bit lower, as we said. No, nothing sort of beyond historical low points.
Great. Thank you so much, Tristan. Much appreciated. Take care.
Thanks.
Thank you. The next question is from Abhi Agarwal of Deutsche Bank. Please go ahead.
Good morning, all. Thanks for the presentation. My question is on costs. Seasonally, first quarter is weakest in terms of both production and costs. Should we assume as unit costs stepping down as they historically have? Are you starting to feel inflationary pressures which could be a headwind for costs? Thank you.
Yeah, hi. No, I think the cost performance was reasonably sound in Q1. Looking back on last year, certainly there's an improvement over Q4, really that's on the higher unit production and from the three larger mines cumulatively across the quarter. We are seeing some cost inflationary pressure, we've mentioned that in terms of freight and also on capital equipment purchases and so on. We haven't really seen that translate into consumables as yet. Obviously, steel prices are a little bit higher, diesel prices are heading higher. The expectation is we will start to see some of that wash through in the second half of the year. That's the expectation. At this stage, no, we haven't seen those come through in terms of the impact of the business on the site. With the higher copper production, it has come off from last year.
Q3 was a sort of standout quarter last year. Really that was built off what it was just better than average across the year in Q3. I don't think really representative of the whole year's performance last year. Q1 this year, I think is much more representative. We do continue to see it step down at Cobre Panama, for example, as we continue to deliver more copper production.
Got it. If I may squeeze another question. At Cobre Panama costs, you had a very strong cost performance. Should we think $1.15 per pound as the base cost?
Yeah, I think we've guided to overall, in the range $1.20- $1.30, that kind of number overall for the group. Yeah, we don't see any reason to move from those costs. What I'm worried about there is just, second half of the year, if we start to see some of that higher diesel price or higher steel costs and so on wash through.
Got it. Thank you very much.
Thank you. The next question is from Emily Chieng of Goldman Sachs. Please go ahead.
Good morning, Tristan, Hannes. Thanks for the update here. I wanted to ask about your leverage targets and sort of capital return plans thereafter. I think you mentioned previously that you're looking to take $2 billion off of debt. Maybe could you give us a sense as to what we should expect thereafter? Should it be an acceleration of growth spend? I know you outlined a couple of brownfield projects there, or should we be thinking about a pivot to increasing shareholder returns?
Tristan, shall I answer that?
Sure.
Yeah, Philip, sure.
I just wanted to address what the point that Greg Barnes made originally, because it comes into this. Our aim is to reduce our debt, we'll spend the next few years in some study work on the projects that you referred to, which was Taca Taca, which primarily requires some negotiation with the Argentinian government, and that has been making progress because they want projects to happen. The same situation is obviously going to prevail in the case of Haquira. We need to be able to deal with those communities, during this COVID-19 period, when Peru has particularly suffered from high levels of infection, it's been quite difficult to engage as well as we'd like, as you'd imagine, into those sort of more remote areas. Those studies have advanced, we'll keep them going, they'll take us a while.
That gives us the opportunity to focus on reducing our debt and moving to a situation where we can provide returns to our shareholders in the form of dividends. In the next quarter statements, probably Hannes will make some statement about what we'll aim to try and do just in a modest form in not too long into the future on dividends. It would be modest, but something that can be absorbed within that debt repayment schedule. It's a mixed exercise of reducing debt, some returns to shareholders, and preparing ourselves with what are nothing more than studies of various sorts for projects that will not see the light of day for a few years for different reasons. That would ensure that we had a pipeline of development in the future.
I think your question was what would we then do with the funding that kept reducing our debt? Obviously it will be a mixture of what we return to shareholders and what we retain for that growth, which is in the longer term, going to be essential. Good picture.
Great. That's helpful color. One just follow up, if I may. What's the latest update with the Jiangxi Copper holding in First Quantum? Is there anything there that's new? I'll leave it at that. Thank you.
Yeah. Hi, Emily. I can answer that. No, nothing new. A constructive dialogue, and we spoke to Jiangxi after Chinese New Year, and we'll follow up after the Q1 results as well. It's an orderly conversation and a constructive dialogue. We really just, at the moment, see them as a long-term shareholder who's very happy with the rise in their share price.
Great. Thank you.
Thank you. The next question is from Jatinder Goel of BNP Paribas. Please go ahead. Your line is now open.
Thanks. Good morning and good afternoon. A question, a slight follow-up on the previous one regarding Jiangxi. Is the minority stake sale still an active dialogue, or is it more in the background now? It looks like with copper price rise, you are not pressed to do it, and you can probably live without it. From your perspective, is it still an active dialogue? Has the election got any bearing on it in terms of where the discussion goes? I'm just trying to understand if that minority stake sale is an isolated dialogue or if the stability agreement in Zambia and S3 or enterprise development are part of the same puzzle which you would want to solve all at one go. Thank you.
Sure, Jatinder. Thank you. Look, no, they're separate, the answer in terms of the stake sale process, as I said earlier, is notwithstanding the diversification side of things there. The challenge is on the bid-ask spread, I think it's too far to cover. We're happy in Zambia. It's a constructive process with the Zambian government. For instance, we're involved with the Ministry of Finance and the Ministry of Mines this week in the mining Ndola in Zambia, and that's a constructive dialogue around the ongoing investment climate into Zambia and the opportunities for mining to develop in the country. In terms of the election and the process, really that is around S3 and really the conversations, that dialogue with Ministry of Finance, Ministry of Mines and the broader Zambian government is around how we can get that to a level of fiscal stability.
As I said, with the breakup or the reset of government from early May, it's unlikely that we would get firm response back on that until after the election now, I think. That would be separate from any process, which as I said.
Okay. Very clear, Tristan. Thank you so much.
Thank you. Once again, please press star one at this time if you have a question. The next question is from Ian Rossouw of Barclays in London. Please go ahead. Your line is now open.
Thanks. Hi, guys. Just a couple of questions. Firstly, on Kansanshi. Doesn't look like you've paid any minority dividends there for at least five years. Obviously, initially you had to repay the smelter investment there. Presumably with strong copper prices, the balance sheet should be in a good position, obviously, again, looking to do the S3 expansion down the line. I'm just curious, could you give a sense what the balance sheet position is looking like at Kansanshi and just what the thinking is around the balance sheet there? Should we expect some minority dividends at some stage?
Hi, Ian. We do pay minority dividends. Kansanshi does declare dividends and interim dividends. We had one payment, I think it went through recently, probably in March or so. With Kansanshi, we've looked at the future investment that's required on S3, and hence there's sort of a cash available then for that investment once we get that agreement ready. Once we get comfortable with the Zambia political situation and the required assurance that we need in terms of making such a decision. It's cashed up and ready to make that investment in Zambia.
Okay. All right. Thanks. Just sort of relate to what's similar on the Cobre Panama side. Should we assume all cash that the operation generates then obviously goes to pay down the intercompany debt at the parent and then also the external debt to KPMC or at least 10% of that shareholding?
That's correct. Yes. Any excess cash will be returned then to shareholders either in the form of loan repayments or dividends.
Okay. All right. Thanks for that. That's all.
Thank you. The last question is from Orest Wowkodaw of Scotiabank. Please go ahead.
Hi. Good morning. Couple of remaining questions for me. First of all, Tristan, on Cobre Panama. Your release talked about still achieving 85,000 tonnes a day throughput average at Cobre Panama. Clearly, while you had a really good quarter, it was still below that in Q1. Sounds like you're having more maintenance scheduled here in Q2. Does that kind of assume that you expect to do better than 85,000 tonnes a day in the back half of the year?
Hi, Orest. It's 85 million for the year. The number per day is 236,000 tonnes a day. The answer in Q1 is we thumped along at 19.6 million tonnes for the quarter. That was in the release. The budget over that time was 20.2 million tonnes. We're pretty close on budget. That is back-ended, and the reason for that is we got quite a lot of material in Q1, which is the andesite material, which is tougher and takes more out of the milling. As we get into the guts of the year, the andesite reduces, and we see softer ore coming through. That's bearing out in the mine plan, and we see that sort of shifting in Q2 already. That was the reason, was really the characteristics of the ore and the areas in which we're mining for that.
Yeah, otherwise, the throughput rates that we're delivering and certainly March was excellent in that regard. We had the secondary crushers running, we do see the impact of both secondary crushers running well, and we're certainly achieving those mill rates per day that are required to deliver the 85 across the year. For that reason, we have confidence in the 85. It's a big number, Orest, but we have confidence in it.
Thank you. Yeah, sorry. I meant the 85 million tons, not tons per day. Then, just shifting gears, where does the Enterprise project sit in your portfolio? I don't think I've heard you talk about it in many years, and just curious where that may sit in terms of your priorities.
Yeah. Orest.
Can I just-
Yep.
Yes, Philip, go ahead.
Yeah. Just because it's very topical at the moment. Enterprise warrants proceeding with in the not too longest in the future because it's got a total life of about nine years, and obviously don't want to have it start up after the rest of Sentinel. We've got to run through and Sentinel's probably got another 14 odd years to go. The aim for that will be that we'll start some work to do with the protection of the pit and stripping, this dry season. Next dry season, we would do balance of the stripping that's needed so you start to get into production. In the forecast for capital, those amounts are provided for. There doesn't need to be any expenditure on the plant itself.
Towards the end of 2022, you'd start to see some production of Sentinel if all of that goes according to plan. It probably drift off a bit anyway, simply because we'll run into the rains at the end of 2022, and expect that that would be a little bit difficult in this pit that we're starting off in. That'll give you some idea. In other words, we haven't forgotten about it at all, but we need to get moving with it. Much of Sentinel has been focused on getting everything else to run nice and steadily, which it is. I think what Tristan probably wasn't saying is that the same is true of Panama.
You've got a large new team of people who have really been settling down and struggled through a quite tricky situation, environment for during that COVID, which was not easy on them. Actually just settling the operation to cope with the variables they have the need to do, does just take time. We've seen that at Sentinel. Sentinel is really that little bit more mature, and it works pretty steadily, so it can now tackle Enterprise without causing any disruption.
That's excellent to hear. It sounds like you may have, call it productions starting as early as 2023?
Yeah. Well, we'll work our way through it now and see where we get to. We'll no doubt find a few things out in that pit, like one always does when you start a mine.
Great. Thank you very much. Appreciate it, folks.
Thank you. There are no further questions registered at this time. I'll turn the meeting back over to Ms. Doddridge.
Thank you very much, Melanie. Thank you everybody for your participation in the call today and your continued support of First Quantum. Finally, if you have any follow-up questions, you need anything else, please contact me directly. Thanks again, and everybody have a great day.
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