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, Investor Relations. Please go ahead, Ms. Doddridge.
Thanks,
Melanie, and thank you, everybody, for joining us today to discuss our first quarter twenty twenty one 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 and A and the related results news release as well as the risk factors, particularly 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 Pascal, our Chief Operations Officer, will provide some general comments and discuss operations then Hannes Meyer, our CFO, will review the financial results.
After that, we will open up the lines to take questions. So with that, I'll turn the call over to Tristan.
Thanks, Lisa. Hello, everyone, and thanks for joining. Quarter one was a very strong quarter for the company. Our operations performed in line with plan and we continue to benefit from our low cost structure and stronger copper prices. Operations at Sentinel was strong throughout the course of 2020 and this continued in the first quarter of this year despite the heavy seasonal rains in Zambia.
Sentinel production grew by 3% from Q1 last year. We processed higher grades and fresh ore from the Stage two pit, but throughput was lower as a result of regular maintenance activities, in particular the repairs completed on the Train one ball mill trunnion and also from the impacts 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 63,130 primary crusher is larger than the three existing units and together they will enable higher throughput of about 62,000,000 tonnes 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 the decision towards the S3 expansion at Kansanshi that would ensure production levels remain steady for a period of more than twenty 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 August 12. Cobre Panama had a very good first quarter with record quarterly production for copper and gold. Copper production was up 46% from Q1 twenty twenty and twenty five percent from Q4 last year. Mining rates, throughputs and grades all increased while costs came down from Q1 twenty twenty despite the addition of about $8,000,000 into costs related with the COVID-nineteen protocols, which we didn't have last year in the first quarter. We expect to achieve a throughput of about 85,000,000 tonnes this year with improved throughput quarter on quarter as all characteristics improve throughout the year.
Cobre Panama also continues to advance the expansion to 100,000,000 tonnes. The focus in Q1 in this regard was on developing access along the overland conveyor corridor to the Kalina Pit. Our group costs were lower in the quarter driven by strong cost performance across our three large mines. Although costs at our smaller mines generally increased, their contribution 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-nineteen 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 of trade borders, port restrictions and some additional costs on freight as a result of COVID-nineteen restrictions.
We haven't experienced any other major disruptions and besides the shipping delays and possible higher freight costs, 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 project. 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 success of this business in the ongoing pandemic. And with that, I'll turn things over to Hamas Mayer, CFO.
Thanks, Tristan, and good day to everyone. I'd like to direct you to the slides titled Elephant. Total copper production for the quarter of 205,000 tonnes was 5% higher than the first quarter of twenty twenty. Record copper production at Kabre Panama drove strong operational performance in the quarter with 82,000 tonnes produced, a 46% increase from the first quarter in twenty twenty. Total gold production for the quarter of 78,000 ounces is a 13% increase from the corresponding quarter last year, mainly due to high 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 AUD540 million and comparative EBITDA of AUD811 million for the quarter was significantly higher than Q1 twenty twenty, attributable to increased sales volumes at Karepanama 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 twenty twenty, with all major copper operations delivering a reduction in cash cost. Net debt decreased during the quarter by nearly $350,000,000 to 7.062 as of March 31 and 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 Corvette Panama. Sentinel produced 58,000 tonnes of copper in Q3 sorry, in this quarter, 3% higher than Q1 twenty twenty, with a strong performance following successful completion of repairs to the Ball Mill Tronion during February. And Sandshi performed consistently in the quarter. Copper production of 49,000 tonnes for the quarter was impacted by lower grades and the rainy season in Zambia.
And a notable and as noted previously, total gold production for the quarter of 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 twenty twenty. Cobre Panama C1 cash cost of $1.15 per pound was $0.23 per pound lower than Q1 twenty twenty, reflecting the increase in production. Sentinel and Kansanshi C1 cash cost 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 twenty twenty.
The increase in all in sustaining costs reflect higher royalty payment due to higher metal prices of a step up in Zambia royalty rate, increasing to 10% for the month of March. The royalty expense accounted for AUD $0.09 per pound increase in total all in sustaining costs compared to Q1 twenty twenty. This has been partially offset by an lower C1 cash cost. Turning to the next slide, financial overview. Gross profit of $540,000,000 and comparative EBITDA of $811,000,000 for the first quarter of twenty twenty was significantly higher than the first quarter of twenty twenty, attributable to a 27% increase in realized copper price, increased sales volumes at Cobre Panama and lower cash cost.
Comparative earnings for the first quarter of AUD150 million is an increase of AUD225 million compared to Q1 twenty twenty. Comparative earnings per share of AUD0.22 and basic earnings per share of AUD0.21 up $0.33 and $0.3 higher than Q1 last year, respectively. Net rate reduced by nearly $350,000,000 during the quarter, and further reduction remains a key priority. The next slide, an increase in gross profit. We had a $393,000,000 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 $1,000,000,000 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 $175,000,000 in April 2021, available for twelve months from the date of signing. Net debt has reduced by approximately $600,000,000 in the last three quarters. Taking into account forecasted cash flow, capital expenditure outflows, available cash and committed facilities, the company expects to have sufficient liquidity through the next twelve 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 price risk and further strengthen the balance sheet. As previously stated, the company's credit rating at two agencies were recently upgraded. On April 6, Fitch upgraded the previous B minus rating to B with a stable outlook. And on the April 9, S and P Global Ratings upgraded the previous CCC plus rating to B with a stable outlook. The upgrades of both agencies were attributed to the company's mitigation of the impacts of COVID-nineteen and 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. In addition, on April 8, Moody's Investor Services announced the withdrawal of the company's unsolicited and nonparticipating rating. The rating has been unsolicited and nonparticipating for over three years. Turning 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 hedge sales is expected to decline. Approximately onethree of our expected copper sales in the next twelve months are hedged. At 04/27/2021, the company had unmargined copper forward sales contracts for just over 89,000 tonnes 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 and margin sales contracts for just under 213,000 tonnes at weighted average prices of $3.1 per pound to $3.67 per pound outstanding with maturities to March 22.
The company also has unmargined nickel forward sales contracts for just over 1,000 tonnes at an average price of $7.13 per pound with maturities to October 21. In addition, the company has zero cost nickel and margin sales contracts for 500 tonnes at weighted average price of 7.5 per pound to $8.55 per pound outstanding with maturities to August 21. Thank you. And with that, I'll hand back over to Lisa.
Thanks, Janet, and thanks, Tristan. Operator, can you please open the line to take questions?
Certainly. We will now take questions from the telephone lines. The first question is from Carl Blunden of Goldman Sachs. Please go ahead. Your line is now open.
Hi, good morning. Thanks for the time and 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. And I'd be interested in your take about how you'd like to balance debt reduction with organic investment.
And then 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, Carl. 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, but at the moment, we're very much focused on brownfields and in particular the Cobre Panama 1 Hundred Million tonne expansion, the work at Sentinel on the fourth crusher. And indeed when we get to some agreement with the Zambian government on the S3 expansion at Kansanshi.
But no decision yet on greenfield projects, although there is a strong pipeline in that regard. Hamas?
Thanks. Thanks, Tristan. Cole, on I mean, we are generating good cash flow at the moment. So the priority remains the debt reduction. As you stated, we've got various debt outstanding in bank and bonds.
Those bonds are allable. And look, we'll look at applying some of that cash against the various debts, either repaying revolver or calling some of the bonds. So that will certainly be a priority in the next 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. And I know there's been less discussion of that recently. Just 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, and then if there's a relation between that and the Zambia elections?
Sure, Carl. 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 bidask spread at the moment, I think, is challenging to overcome.
And so that's where we stand at the moment on Zambia. We have a good constructive arrangement with government, relationship with government. As we look forward to the election, there probably will be some noise, as there always is. But Zambia has a good strong democracy and will come through as we've been through many times in terms of election. And then 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 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?
Yes. Hi, Jackie. Yes. We were hoping for some progress there, and I think what's happened is the timetable for the election has caught us now. And so 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. And then maybe just a question on Cobre Panama. Your production there was really good. Congrats on a great quarter there.
And I just want to add 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?
Or is this something that you think is structurally going to be a little bit stronger going forward, this gold grade?
Yes, 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. So 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. So 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 Jonas Vaslidis of Morgan Stanley. Please go ahead. Your line is now open.
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? And at which stage do you think you will 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 Load nine review hasn't really changed. Is there any updates you can share with us on this? Thank you.
Jonas. I'll try to cover all of those questions, but I'll see how we go. So Ravensthorpe, yes, in terms of an operational update, yes, what I'd say is we continue 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. And there we do see better material handling characteristics and indeed improved grades.
So Hailbop is characterized by clay 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. And we're seeing good performance of beneficiation at the front end of the circuit. So that all bodes well and we're really just looking forward to getting into Sumakalevi 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, but 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, run rate this year was expected to be around 57,000,000 tonnes. And then that will step up next year as we add the fourth crusher in above 60,000,000 tonnes towards 62,000,000 tonnes. So Sentinel is on track this year for the guidance we provided and performing well as it did last year.
In terms of Law nine, yes, there isn't really much to add. 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 will be going we expect to go into the next session of Parliament, which I think is post July in terms of the process in the National Assembly. But that's all the sort of guidance on timing I can give it for the time being.
Great. And sorry, if I can squeeze in the last one. I was really intrigued about the comments on integrating 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?
Yes. Thanks, Jonas. 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. And we'll give more detail around that as we develop it, and we'll communicate fully in that regard.
The next question is from Greg Barnes of TD Securities. Please go ahead. Your line is now open.
Yes, thank you. Good morning, Tristan. Just a question for you, more of a hypothetical one. First Quantum has been seen as a target potentially for a long time in terms of takeover. Do you see an opportunity for you to become more of a consolidator in the industry given your increasing financial strength?
Yes. Thanks, Greg. Certainly, look, right now we're focused on debt reduction. As we look at how the market stacks up, it is something that we look at. It comes across the table.
We what we see in our own portfolio is very strong growth and that's important that we deliver that for shareholders. And always in the past, we've looked at 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.
Then just on the greenfield opportunities, namely Takataka and Hikira. I understand where Takataka is, but Hikira has been wandering around for a long time, not much going on. You talked in the press release about a resettlement process. But just can you give us any clearer idea of where that sits, what's going on and how that could evolve over the next three to five years?
Yes. Look, it is a community question there, an overriding community question. We talk to so those communities are in several groups and we're talking closely to the groups that are the principal focus of the operations. But really, Hikira sits out beyond Takataka in terms of the ranking as to how we see it would be developed. And as we said, we wouldn't be making a decision on that in the next sort of three to four years because of that ranking unless we would get to resolution with the community.
In the meantime, we're watching developments in Peru. And we'll watch and follow the elections carefully as well in that regard.
Okay. Thank you. Thank
you. The next question is from Ed Brucker of Barclays. Please go ahead. Your line is now open.
Hey, thanks for taking my question. Just two quick ones from me. So with the recent ratings upgrades from Fitch and S and P and then Moody's dropping the rating, you're fully single B and L kind of from the CCC range prior. So it's a decent milestone, but I wondered if you would be able to explain to us kind of the reasoning behind the Moody's dropping the rating. REPRESENTATIVE:]
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. And then
my next one is kind of going back to the gross debt versus net debt question that's always been in the mind of some of the credit investors. But with the bank debt and the maturities in 2023 and 2024 becoming callable kind of at low prices, do you think you could use that as an opportunity to take out some gross debt? Or do you think you could you'll still kind of reduce the net debt number just with pulling a cash reserve?
No. We'll start reducing the gross debt number as well.
The
next question is from Matthew Fields of Bank of America. Please go ahead. Your line is now open.
Hey, Tristan, Hannes, Lisa. Actually great timing to continue on that sort of gross debt question. $225,000,000 of the term loan payable this quarter, do you anticipate kind of paying down revolver as well in that sort of continuance of the trend that we've seen? And then sort of are we still kind of on track for that $2,000,000,000 of overall debt reduction, which would imply another kind of $1,000,000,000 from here over the next however many quarters?
Yes. So we've got the term loan installment due in June, 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. So look, it will evolve as the cash flow sort of continues to flow in.
Okay. And I'm sorry, but is the another $1,000,000,000 from here still kind of the bogey that we're, that you're targeting?
Yes. I mean, that's I mean, you can run the numbers there, but that's quite achievable in not too distant future.
Okay. And then the bilateral facility that you signed in April. I'm just curious, you know, 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 $175,000,000 facility even if only for twelve months?
Yeah. So I'll deal with the hedges first on two components. Bigger hedges that we quote and that's out there that's unmargined. But the normal hedges that we have on for the quotational period. So we do sell to our customers and then there's a hedge marrying that time frame up.
Those are subject to margin calls. So with the rise in the copper price, of course, there's sort of margin calls on that. So what I've done is and this is quite a quick process, it's probably a week, it's 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. So that was put in place pretty quickly. Of course, that unwinds as copper prices frustrate at these labor levels for longer, then that sort of margin calls.
And as you settle the sale, you realize then the price. So there's that hole for the margin calls disappear then.
Okay. And is that an unsecured facility?
Yes, unsecured. And
the need for it will basically go away as your hedged position declines over the next twelve months?
Yes. And it's not tied to the hedges that we mentioned. That's just a normal operational sort of quotational period hedge. Because 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.
But that's subject to margin goals.
The
next question is from Lawson Winder of Bank of America Please go ahead. Your line is now open.
Hello, and thank you for your time today, ladies and gentlemen. Just a couple of questions for 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. So 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?
Lawson. No, it's in line with the block model. And what we see over the year is the guidance we've given that remains absolutely valid. Q1 was strong and we had a lot of good reason on the production side to be very happy and very pleased with the progress there. In April, we have seen some more maintenance this month.
And really that's built off the higher throughputs rate we've seen. We brought forward the planned maintenance shuts on mill relines and so on into April. Really all what that says Lawson is over the year we will see ups and downs and the guidance we provided remains valid. The grades that we've seen are in line with the block model and reconcile very well both to block model and then also to the plant feed. So the guidance remains very current.
Okay. Thanks so much, Tristan. And then on the strip ratio, that seems to be running a little low and perhaps even a little lower than planned. So implied 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 caused that to run potentially lower than the original plan? And then what's the outlook for that for the remainder of the year?
Sure, Lawson. Yes, look, the strip ratio we give is really across the year. What we need to do is to get into the northern area and that's the so that's really a pushback on the northern side of the Batikka 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 and that will be prepared over a period of around two to three years. So we're looking to get a shovel into that area and that will pick up waste for the rest of the year.
So we are on plan. But yes, it was a bit lower in the quarter.
Okay. That's great. And then maybe just one final question on Sentinel. You guys guided to slightly lower grades in the quarter in Q2 that is. You for that guidance.
Very helpful. Historically, we've seen or could we expect the Q2 grades to sort of be in line with sort of historical low quarterly lows? Or 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. And so that will come through
in
Q2. The grades and the grades are a bit lower as we said, but 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. Your line is now open.
Good morning, all. Thanks for
the presentation. My question is on costs. So seasonally first quarter is weakest in terms of both production and costs. So should we assume unit costs stepping down as they historically have? Or are you starting to feel inflationary pressures which could be a headwind for costs?
Thank you.
Hi, Ajit. No, I think the cost performance was reasonably sound in Q1. Looking back on last year, certainly there's an improvement over Q4 and really that's on the higher unit production from the three larger mines cumulatively across the quarter. We are seeing some cost inflationary pressure and we've mentioned that in terms of freight and also on capital equipment purchases and so on. But we haven't really seen that translate into consumables as yet.
But obviously, steel prices are a little bit higher, diesel prices are heading higher. So the expectation is we will start to see some of that wash through in the second half of the year. That's the expectation. But at this stage, no, we haven't seen those come through in terms of the impact of the business on the site. And with the higher copper production, it has come off from last year.
Q3 was a sort of standout quarter last year and really that was built off well, it was just better than average across the year in Q3 and I don't think really representative of the whole year's performance last year. So Q1 this year, I think, is much more representative, and 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. So at Cobre Panama costs, you had a very strong cost performance. Should we about should we think $1.15 per pound as the base cost?
Yes. I think we've guided to overall in the range $1.201.0.3 dollars that kind of number overall for the group. And yes, 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, higher steel costs and so on wash through.
Got it. Thank you very much.
Thank you. The next question is from Emily Chang of Goldman Sachs. Please go ahead. Your line is now open. Good morning, Tristan and Harris.
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 $2,000,000,000 off 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, should we be thinking about a pivot to increasing shareholder returns?
Justin, shall I answer that? Sure. Yes, Philip, sure. I just wanted to address the point that Greg made originally because it comes into this. Our aim is to reduce our debt.
And we'll spend the next few years in some study work on the projects that you referred to, which was Tukataka, 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 Hakira. We need to be able to deal with those communities. During this COVID 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. But those studies have advanced and we'll keep them going and that will 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's 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. And 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, but that would ensure that we had a pipeline of development in the future. Then 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 was in the longer term going to be essential.
Good picture.
Great. That's helpful color. And then one just follow-up, if I may. Can you what's the latest update with the Jiangxi copper shareholding in first quantum? Is there anything there that's new?
I'll leave it at that. Thank you.
Hi, Emily, I can answer that. And no, nothing new. Constructed dialogue and we spoke to Shangzi after Chinese New Year and we'll follow-up after the Q1 results as well. So 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 the 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. Just a question, a slight follow-up on the previous one regarding Jiangxi. Is the minority stake sale still in active dialogue? Or is it more in the background now?
Because it looks like with proper price rise, you are not pressed to do it and you can probably live without it. But from your perspective, is it still an active dialogue? And has 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 is 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. And the answer in terms of the stake sale process, as I said earlier, is notwithstanding the diversification side of things there, we just the challenges on the bid ask spread, and I think it's too far to cover. So we're happy in Zambia.
It's a constructive process with the Zambian government. So for instance, we're involved with the Ministry of Finance and the Ministry of Mines this week in the mining in Daba 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. But 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 government is around how we can get that to a level of fiscal stability. And as I said, with the breakup or the recess of government from early May, it's unlikely that we would get sort of firm response back on that until after the election now, I think.
That would be separate from any process, which as I said,
yeah. Okay, very clear, Tristan. Thank you so much.
Thank you. The next question is from Ian Rizzo of Barclays in London. Please go ahead. Your line is now open.
Thanks. Hi, guys. Just a couple of questions. Firstly, on Kansanshi, it doesn't look like you've paid any minority dividends there for at least five years. I mean, obviously, that initially, you had to repay the smelter investment there.
But 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. So I'm just sort of curious, could you give a sense what the balance sheet position is looking like at Constancia and just what the thinking is around the balance sheet there? Should we expect some minority dividend at some stage?
Ian. We do pay minority dividends. So Constancia does decay dividends and interim dividends. So we had one payment, I think it went through recently, probably in March or so. With with Kansanshi we've looked at the future investment that's required on S-three.
Hence, there's sort of cash available then for that investment once we get that agreement ready to, you know, once once we get comfortable with the Zambia political situation and the required assurance that we need in terms of making such a decision. So it's cashed up and ready to make that investment in Zambia.
Okay. All right. And then just sort of relate to 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 a lot. Thank
you. And the last question is from Orest Wowkodaw of Scotiabank. Please go ahead. Your line is now open.
Hi, good morning. A couple of remaining questions for me. First of all, Tristan, 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.
It sounds like you're having more maintenance scheduled here in Q2. Does that guidance assume that you expect to do better than 85,000 tonnes a day in the back half of the year?
Orest. So it's 85,000,000 for the year, so the number per day is 236,000 tonnes a day. And the answer in Q1 is we've dumped along at 19,600,000 tonnes for the quarter that was in the release. The budget over that time was 20,200,000 tonnes. So we're pretty close on budget.
That is back ended. And the reason for that is we've got quite a lot of material in Q1, which is the andesite material, which is tougher and takes more out of 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. So that was the reason, was really the characteristics of the ore and the areas in which we're mining for that.
But yes, otherwise, the throughput rate that we're delivering and certainly March was excellent in that regard. We had secondary crushers running and we do see the impact of those both secondary crushers running well. The impact and we're certainly achieving those mill rates per day that are required to deliver the 85 across the year. And so for that reason, we have confidence in the 85,000,000 It's a big number, Orest, but we have confidence in it.
Thank you. Yes, sorry, I meant the 85,000,000 tonnes, not tonnes per day. And 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. Just curious if where that may sit in terms of your priorities?
Yes, Orest. On enterprise Yes,
Philip, go ahead. It's just because it's very topical at the moment. Enterprise warrants proceeding with in the not too long distant future because it's got a total life of about nine years. Obviously, you don't want to have it start up after the rest of Sentinel. We've got to run through, and Sentinel probably got another 14 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. And then next dry season, we would do balance of the stripping that's needed so that you start to get into production. And in the forecast for capital, those amounts are provided for. There doesn't need to be any expenditure on the plant itself. So towards the end of twenty twenty two, you'd start to see some production of enterprise if all of that goes according to plan.
But it'd probably drift off a bit anyway simply because we're running to the range at the end of twenty twenty two, and expect that that would be a little bit difficult in this pit that we're starting off in. So that gives you some idea. In other words, we haven't forgotten about it at all, but we need to get moving with it. So 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 that have already been settling down and struggled through a quite tricky situation and environment during that COVID, which was not easy on them. Actually just settling the operation to cope with the variables they need to do does just take time. You've seen that at Sentinel. But 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. So it sounds like you may have, call it, production starting as early as 2023?
Yes. Well, that would be 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.
Thank you very much. Appreciate it, Philip.
Thank you. And there are no further questions registered at this time. I'll turn the meeting back over to Ms. Dodridge.
Thank you very much, Melanie. And 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, if you need anything else, please contact me directly. Thanks again, and everybody have a great day.
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