First Quantum to Expand Copper Capacity at Cobre Panama

Top copper producer First Quantum Minerals (TSX:FM) is on track to expand capacity by 15 percent at its Cobre Panama project in Panama, the company said on Monday (February 12).

The project is expected to start phased commissioning during 2018, continue to ramp up over 2019 and reach 85 million tonnes per year by 2020. After 2022, the company intends to increase capacity to 100 million tonnes per year.

“2018 is an important year for us with the start of the critical phased commissioning of our largest project to date … We believe the project will enter operations at a time when the fundamentals for copper will be at their strongest,” said Philip Pascall, CEO and chairman.

Copper prices have been climbing since 2017, and are up more than 17 percent year-on-year. A strong demand outlook, a weak US dollar and a lack of new mine supply have supported prices.

“The outlook for copper has improved meaningfully and is widely expected to remain strong for some significant time. As such, we believe this is an opportune time to undertake these initiatives which have compelling estimated benefits,” Pascall added.

As part of the upgrade, the company will install an eighth mill and associated infrastructure, which is expected to be complete by the second half of 2019. The expansion will include an increase in mining fleet and process equipment, additional pre-production stripping and supporting infrastructure.

“Additionally, all steps conceivable are being taken to enable a smooth and efficient commissioning and ramp-up process. We are replicating the principles we had implemented at our Kansanshi smelter where we achieved commercial operations well ahead of all prior projections,” Pascall noted.

First Quantum expects to produce at least 150,000 tonnes of copper in 2019, between 270,000 and 300,000 tonnes in 2020 and up to 350,000 tonnes in 2021.

In order to achieve those increases, Cobre Panama’s total development capital has been bumped up to $6.3 billion, improving capital intensity to $18,000 per tonne of copper produced yearly, assuming output of 350,000 tonnes per year of copper concentrate.

The market has reacted positively to the news, with First Quantum’s share price increasing more than 18 percent since the announcement.

“Cobre Panama remains a valuation game-changer for returns and cash flow growth and is a big part of FM’s ambitious growth plan to now grow copper production to our estimated 905 kt in 2020, up from 570 kt in 2017,” Eight Capital analysts said in a note to clients.

The firm is keeping a buy rating on the company, and has increased its target price from C$25 to C$26 per share. Similarly, Raymond James analysts are maintaining their outperform rating and have increased their target price to C$21 per share, up from C$20.

“While the increase in overall capex on the project was greater than our expectations, it is somewhat offset by a faster pull forward of copper production in the mine plan than we were expecting,” analysts at the firm explained.

On Wednesday (February 14), First Quantum closed up 3.07 percent, at C$20.84 in Toronto.

Don’t forget to follow us at @INN_Resource for real-time news updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.