FQM.L Regulatory News (FQM)

RNS Number : 6448I

First Quantum Minerals Ld

16 March 2010

 

 

NEWS RELEASE 10-12 March 16, 2010 www.first-quantum.com

 

 

 

FIRST QUANTUM MINERALS REPORTS OPERATIONAL AND FINANCIAL RESULTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2009

(All figures expressed in US dollars)

First Quantum Minerals Ltd. ("First Quantum" or the "Company", TSX Symbol "FM", LSE Symbol "FQM") today announced its results for the three months and year ended December 31, 2009. The complete financial statements and management discussion and analysis are available for review at www.first-quantum.com and should be read in conjunction with this news release.

 

SUMMARY OPERATING AND FINANCIAL DATA

 

	Three months ended December 31		Year ended December 31
(USD millions unless otherwise noted)	2009	2008	2009	2008	2007
Realized copper price (per lb)	$2.79	$(0.04)	$2.16	$2.22	$2.97
Production - copper (tonnes)	98,528	95,635	373,940	334,415	226,693
Production - gold (ounces)	62,679	39,644	193,288	116,177	107,961
Sales - copper (tonnes)	98,171	97,280	366,581	334,787	223,907
Net sales	$656.3	$12.4	$1,902.9	$1,740.4	$1,539.2
Net earnings (loss)	$227.2	$(491.6)	$463.4	$45.9	$520.3
Earnings (loss) per share	$2.91	$(7.19)	$6.14	$0.67	$7.72
Average copper unit cash cost of production (C1) (per lb)	$0.97	$1.26	$0.96	$1.23	$1.04
Cash	$959.5	$216.5	$959.5	$216.5	$222.5

Unless otherwise indicated, all comparisons of performance throughout this report are to the comparative periods for 2008

FOURTH QUARTER HIGHLIGHTS

·; Record quarterly and yearly copper production on successful plant expansions at Kansanshi and Guelb Moghrein

·; 58% increase in Q4 gold production to record levels at Kansanshi and Guelb Moghrein on gold circuit and gold plant expansions

·; 23% reduction in the Q4 average copper unit cash cost of production (C1) due to cost saving initiatives, lower process input costs and higher gold credit; annual reduction of 22%

·; Q4 net earnings of $227.2 million and EPS of $2.91 realized on higher copper price and lower production costs

·; Announcements made to acquire the Ravensthorpe nickel operation in Australia for $340.0 million and Kiwara PLC, which holds prospecting licenses in Zambia, for approximately $260.2 million

·; Strong closing cash and working capital position realized on cash flows from operations and financing activities in 2009

RECENT DEVELOPMENTS

·; Development of the Kevitsa nickel-copper-PGE project in Finland was approved in Q4 with increased mineral reserves published in November 2009. Project construction has commenced and commercial production is targeted for mid 2012.

·; Construction work has commenced at the Ravensthorpe nickel operation on modifying the crushing, conveying, stockpile and reclaim areas and will continue for approximately the next 12 months, followed by approximately six months of commissioning and ramp-up. The total modification cost is estimated at $150.0 million.

·; In February 2010, the Company established a physical metal marketing division to manage offtake sales, marketing, logistics and administration for all tonnage produced by the Company's mining operations.

·; In Q1 2010, the Company, along with partners the IFC (International Finance Corporation) and the Industrial Development Corporation of South Africa ("IDC"), commenced international arbitration against La Générale des carrières et des mines ("Gécamines") and the République démocratique du Congo ("RDC") regarding the cancellation of the Kolwezi project.

·; The Company continues to evaluate the Lonshi underground project with a development decision pending. A drilling program is currently underway to define possible extensions to the ore body.

·; The Bwana Mkubwa copper SX/EW plant was restarted in January 2010 to process the stockpiled ore from the depleted Lonshi open pit mine. Grade A copper cathode production at an average rate of 800 tonnes of copper cathode per month is expected to continue until the end of 2010.

NEAR TERM OUTLOOK

·; Estimated production for 2010 is 385,000 tonnes of copper and 240,000 ounces of gold

·; Estimated average C1 cost for 2010 is $0.97 per pound. The gold credit is expected to increase with the additional estimated production. Management of processing costs will remain a key objective in the year. Higher mining costs are expected due to increased stripping activity.

·; Kansanshi now has three distinct fully operational processing routes. These routes, which cater for oxide/leach, mixed float and sulphide feeds, will continue to be optimized and metallurgical recoveries are expected to be enhanced. Gold production is expected to improve as a result of the commissioning of additional gravity concentrators in early 2010. New AC powered mining equipment will be commissioned with the objective of reducing unit costs and improving fleet reliability. Following an extensive geological review and drilling program at Kansanshi, a revised mineral resource and reserve estimate is pending.

·; At Frontier, additional mining flexibility will be applied to the mining operations through advanced mine planning and the utilization of AC powered haul trucks. The new haul trucks are expected to reduce costs and enhance operational reliability which in turn should result in an increase in mining volumes to ensure that ore feed rates are maintained or improved. In addition, a dewatering shaft project has commenced in order to maintain favourable ground conditions for mining as the open pit deepens.

·; At Guelb Moghrein, the final commissioning of the new heavy fuel oil ("HFO") power station in Q1 is expected to lower generating costs as all power will be derived from the new power station with all other power generator units expected to remain off-line. The commissioning of the high pressure grinding rollers ("HPGR") unit in early 2010 should mark the completion of the 3.8 million tonne per annum expansion project and allow for the further enhancement of both gold and copper recoveries.

·; An intensive drilling program is planned in 2010 for the Kalumbila exploration project in Zambia, which was acquired with Kiwara PLC and additional drilling programs have been initiated in Zambia, Finland and the RDC.

REVENUES

NET SALES (after provisional pricing and realization charges)	Three months ended December 31		Year ended December 31
(USD millions unless otherwise noted)	2009	2008	2009	2008
Kansanshi - copper	391.8	81.2	1,189.8	1,180.4
- gold	29.1	10.1	74.4	44.1
Frontier - copper	165.8	(73.9)	439.2	287.8
Guelb Moghrein - copper	45.4	(13.0)	115.7	137.7
- gold	24.2	11.1	81.6	53.4
Bwana/Lonshi - copper	-	(3.1)	0.4	35.4
- acid	-	-	1.8	1.6
Net sales	656.3	12.4	1,902.9	1,740.4
Copper provisional pricing adjustment included above	5.5	(212.7)	40.0	44.5
COPPER SELLING PRICE	USD/lb	USD/lb	USD/lb	USD/lb
Current period sales	3.00	1.35	2.35	2.50
Prior period provisional pricing adjustment	0.03	(0.99)	0.05	0.06
Treatment charges/refining charges ("TC/RC") and freight parity charges	(0.24)	(0.40)	(0.24)	(0.34)
Realized copper price	2.79	(0.04)	2.16	2.22

The average realized copper price for Q4 was significantly higher than Q4 2008, when the sharp decline in copper price impacted both the Q4 sales and provisional pricing adjustment. The realized copper price improved consistently through 2009 aided by increased local smelter capacity which resulted in reduced realization charges.

Copper sales volumes for Q4 increased 1% to 98,171 tonnes over Q4 2008. Sales volumes during Q4 were consistent with production. The 2009 annual sales volume increased 9% due to a 12% increase in copper production.

The Q4 positive provisional pricing adjustment resulted from the finalization of contracts totaling 16,364 tonnes of copper at an average price of $2.94 per pound ($6,486 per tonne). These contracts were provisionally priced at $2.79 per pound ($6,149 per tonne) at September 30, 2009 and were finalized during Q4 2009.

A positive provisional pricing adjustment for 2009 resulted from the finalization of 2008 year end sales contracts totaling 79,293 tonnes of copper at an average price of $1.56 per pound ($3,438 per tonne). These contracts were provisionally priced at $1.33 per pound ($2,932 per tonne) at December 31, 2008 and were finalized during 2009.

At December 31, 2009, 21,647 tonnes of copper provisionally priced at $3.34 per pound ($7,361 per tonne) remain subject to final pricing in January and February 2010. Refer to the 'Outlook' section for further discussion.

Gold revenues increased by 151% for Q4 and 60% for the year. The increases resulted from higher gold production from copper in concentrate and tolled copper sales and from the operation of the new gold plants at Guelb Moghrein and Kansanshi. Gold revenues were further improved by the higher gold price and lower realization charges incurred on gold dore sales during 2009.

SEGMENTED OPERATING RESULTS

 

Kansanshi Copper and Gold Operation	Three months ended December 31		Year ended December 31
	2009	2008	2009	2008
Production (tonnes)
Copper cathode	21,535	25,716	92,044	102,353
Copper in concentrate	16,017	25,641	65,920	67,780
Copper cathode tolled	24,901	10,657	87,015	45,181
Total copper production (tonnes)	62,453	62,014	244,979	215,314
Gold production (ounces)	32,476	23,633	99,936	54,252
Sulphide and mixed ore tonnes milled (000's)	4,343	2,956	15,582	9,219
Sulphide and mixed ore grade processed (%)	1.0	1.3	1.1	1.2
Sulphide and mixed copper recovery (%)	86	95	91	93
Oxide ore tonnes milled (000's)	1,478	1,414	5,661	5,972
Oxide ore grade processed (%)	1.4	1.7	1.5	1.7
Oxide copper recovery (%)	93	93	91	94
Copper sales (tonnes)	62,417	60,156	239,578	207,701
Cash costs (C1) (per lb)1	$0.96	$1.24	$0.99	$1.16
Total costs (C3) (per lb)1	$1.28	$1.52	$1.27	$1.63
Gross operating profit (loss) (USD M)	$231.2	$(66.9)	$610.4	$664.2

Copper production increased 1% in Q4 and 14% in 2009 achieving records in both periods. The addition of the mixed ore circuit during 2009 allowed for the effective processing of mixed acid soluble and acid insoluble copper ore to produce copper in concentrate. This ore type was previously stockpiled, and due to the successful recent introduction of the mixed ore circuit and continuous improvements made during 2009, mixed ore now represents a significant portion of Kansanshi's total copper production. The mixed ore circuit contributed 14,400 tonnes and 32,200 tonnes of contained copper for Q4 and 2009, respectively.

Q4 sulphide and mixed ore tonnes milled increased by 47% with capacity gains realized from the 12 million tonne per annum expansion and the addition of the mixed ore circuit in 2009. The increase in throughput was partially offset by decreases in ore grades processed and recoveries of sulphide and mixed copper contained. Recoveries were lower due to the inherently lower recovery rates of the new mixed ore circuit and the ore grade processed was lower due to a decrease in mined ore grades during Q4.

Q4 tolled copper cathode production from the Mufulira smelter increased by 134% from Q4 2008 due to capacity improvements throughout 2009. Kansanshi's high pressure leach system ("HPL") continued to process Frontier's concentrates and as a result there was no processing of Kansanshi concentrates through the HPL in Q4.

Copper cathode production decreased 16% during Q4 and 10% in 2009, in comparison to 2008, as output was restricted by decreased availability of higher grade ore in the mine pit.

Gold production improved through 2009 achieving a quarterly record of 32,476 ounces in Q4. Production benefited from increased ore throughput, the addition of gravity concentrators and further upgrades to the gold plant during Q4. The gold plant contributed 8,800 ounces of the total gold in dore production during Q4.

[1] C1 costs and C3 costs are non-GAAP measures. See "Regulatory disclosures - non-GAAP measures" for further information

 

Compared to Q4 2008, Kansanshi's Q4 average cash unit cost of production (C1) decreased by 23% for several reasons: cost saving initiatives implemented in late 2008, an increase in the gold credit, lower sulphur prices and therefore acid price and an impairment against stockpile inventory recorded in 2008. The gold credit was realized on record gold sales volumes and higher realized prices during Q4 2009. Acid consumption and prices have decreased significantly from 2008 when local acid availability was limited and sulphur prices were high. Kansanshi's average total unit cost of production (C3) was 16% lower due to the suspension of the Zambian concentrate export levy after Q1 2009 which was partially offset by an increase in the Q4 2009 depreciation expense resulting from the capital expansions during the year. The concentrate export levy was introduced in March 2008 but was temporarily suspended in March 2009 for the balance of 2009 in response to insufficient smelter capacity in Zambia to treat domestic concentrate production.

 

Frontier Copper Operation	Three months ended December 31		Year ended December 31
	2009	2008	2009	2008
Production - copper in concentrate (tonnes)	24,259	24,917	92,353	80,177
Sulphide ore tonnes milled (000's)	2,280	2,178	8,068	7,122
Sulphide ore grade processed (%)	1.2	1.3	1.2	1.3
Copper recovery (%)	91	91	92	89
Copper sales (tonnes)	26,424	28,533	91,567	87,022
Cash costs (C1) (USD per lb)1	$1.32	$1.53	$1.13	$1.52
Total costs (C3) (USD per lb)1	$1.52	$1.67	$1.30	$1.82
Gross operating profit (loss) (USD M)	$104.1	$(137.1)	$270.0	$86.9

Copper production decreased by 3% in Q4 and increased by 15% in the year compared to the same periods in 2008. Q4 production was impacted by lower ore grades processed as mining activities were mainly focused on waste stripping in preparation for the rainy season. Full year 2009 production benefited from increased ore throughput as efforts to improve mill rates were successful. Included in Frontier's total copper in concentrate production was approximately 2,450 tonnes that were processed through Kansanshi's HPL in Q4 and 11,050 tonnes in 2009.

Frontier's Q4 average cash unit cost of production (C1) was 14% lower than Q4 2008 due to decreases in realization charges as a result of changes in export contract terms and increased sales to local smelters. This decrease was offset partially by the increase in ore costs caused by increased waste stripping in Q4. The full year 2009 C1 costs were also lower following the implementation of cost saving initiatives started in Q4 2008. There were efficiency gains in on processing costs for the year due to higher mill throughput and higher copper production in 2009.

Operating profit is significantly higher than the comparative periods in 2008 due to the increase in the realized copper price and decrease in total operating costs. The 2008 results were impacted by the sharp decline in the Q4 2008 copper price and higher costs associated with the first full year of operations at Frontier.

 

 

 

 

 

 

 

 

 

 

 

 

 

[1] C1 costs and C3 costs are non-GAAP measures. See "Regulatory disclosures - non-GAAP measures" for further information

 

Guelb Moghrein Copper and Gold Operation	Three months ended December 31		Year ended December 31
	2009	2008	2009	2008
Production - copper in concentrate (tonnes)	11,816	8,177	36,608	33,073
Gold production (ounces)	30,203	16,011	93,352	61,925
Sulphide ore tonnes milled (000's)	769	553	2,287	2,072
Sulphide ore grade processed (%)	1.7	1.7	1.8	1.9
Copper recovery (%)	92	85	89	86
Copper sales (tonnes)	9,330	8,073	35,436	34,070
Cash costs (C1) (USD per lb)1	$0.63	$0.96	$0.44	$0.70
Total costs (C3) (USD per lb)1	$1.02	$1.08	$0.83	$1.05
Gross operating profit (loss) (USD M)	$41.0	$(27.9)	$94.6	$91.9

Copper production increased by 45% in Q4 and by 11% for 2009 due to increased plant throughput. Ore throughput in Q4 was 44% higher than Q4 2008 due to the completion of the expansion to 3.8 million tonne throughput per annum in Q3 2009.

Gold production increased by 89% in Q4 and by 51% for 2009 due to increased plant throughput, higher gold grades treated and the addition of the gold dore smelter in Q1 2009. The gold dore smelter produced approximately 3,500 ounces of gold in dore in Q4 and 14,300 ounces of gold in dore in 2009.

Guelb Moghrein's average cash unit cost of production (C1) was 34% lower in Q4 compared to Q4 2008. This reduction was due to an increase in the gold credit and efficiencies gained from the 45% increase in copper production in Q4 2009. The full year C1 cost for 2009 was 37% lower than 2008 also due to the increases in gold and copper production in 2009.

Guelb Moghrein's operating profit was higher against the comparative periods in 2008 due to the lower total production costs and higher realized copper and gold prices in Q4 and for 2009.

 

Bwana/Lonshi Copper Operation	Three months ended December 31		Year ended December 31
	2009	2008	2009	2008
Production - copper cathode (tonnes)	-	527	-	5,851
Copper sales (tonnes)	-	518	-	5,994
Gross operating profit (loss) (USD M)	$12.7	$(64.2)	$(5.9)	$(99.5)

The Bwana Mkubwa site remained on care and maintenance as at December 31, 2009. The operating gain at Bwana/Lonshi in Q4 2009 was recognized on a net realizable value of inventory adjustment of $15.5 million.

In January 2010, transportation of the Lonshi ore stockpile provided sufficient feed to restart the Bwana Mkubwa copper SX/EW plant, with grade A copper cathode production expected in 2009 at an average rate of 800 tonnes per month. The Company has recorded a partial reversal of the 2008 adjustment to net realizable value of inventory of $15.5 million as the conditions causing this write down have improved.

 

 

[1] C1 costs and C3 costs are non-GAAP measures. See "Regulatory disclosures - non-GAAP measures" for further information

COSTS AND EXPENSES

	Three months ended December 31		Year ended December 31
(USD millions unless otherwise noted)	2009	2008	2009	2008
Gross operating profit (loss)	389.0	(296.1)	969.1	743.5
General and administrative	(5.3)	(7.1)	(25.3)	(31.4)
Other income (expenses)	5.3	(5.3)	26.2	(0.5)
Derivative instrument adjustments	3.6	(0.1)	(135.9)	(6.1)
Exploration	(16.0)	(9.1)	(25.9)	(28.5)
Interest	(18.3)	(9.6)	(60.4)	(31.8)
Income taxes	(88.6)	61.2	(200.3)	(247.2)
Non-controlling interests	(42.5)	28.7	(84.1)	(97.9)
Net earnings (loss) before impairment charge	227.2	(237.4)	463.4	300.1
Impairment charge on investments	-	(254.2)	-	(254.2)
Net earnings (loss) after impairment charge	227.2	(491.6)	463.4	45.9
Earnings (loss) per share
- basic (USD per share)	$2.91	$(7.19)	$6.14	$0.67
- diluted (USD per share)	$2.67	$(7.19)	$5.92	$0.67
Weighted average shares outstanding
- basic (number of shares - millions)	78.2	68.4	75.5	68.2
- diluted (number of shares - millions)	87.9	68.4	81.0	68.9

General and administrative costs decreased in Q4 and 2009 from 2008 due to cost saving initiatives implemented in late 2008 and a reduction in stock based compensation expense in 2009. Other income (expenses) includes a gain on sale of marketable securities of $9.6 million for Q4 and $18.6 million for 2009.

The Company implemented a hedging program during Q1 2009 due to the uncertain economic outlook and the steep fall in the copper price during Q4 2008. These copper hedges were entered into in order to protect the Company against possible further declines in the copper price. Subsequent to entering into the hedges, the copper price increased significantly resulting in the derivative instrument adjustments for 2009.

Exploration expenses include $20.4 million incurred at the Lonshi underground evaluation project for 2009.

Interest expense was higher than the comparative periods as the average debt level increased following the issue of the 6%, $500 million convertible bond during Q2. In addition, due to the significant changes in the credit conditions, the $250 million corporate revolving loan was renewed at higher costs in Q1.

Non-controlling interests expense has risen from 2008 due to the increase in net income of Kansanshi, Guelb Moghrein and Frontier in 2009.

FINANCIAL POSITION AND LIQUIDITY

	Three months ended December 31		Year ended December 31
(USD millions unless otherwise noted)	2009	2008	2009	2008
Cash flows from operating activities
- before working capital	269.9	(148.2)	678.1	636.6
- after working capital	270.1	43.4	562.6	765.4
Cash flows from financing activities	(47.5)	(47.7)	547.0	(24.2)
Cash flows from investing activities	(111.1)	(106.1)	(366.6)	(765.0)
Net cash flows	111.5	(110.4)	743.0	(23.8)
Cash balance	919.2	176.2	919.2	176.2
Available credit facilities
- Corporate revolving loan and short-term facility	250.0	200.0	250.0	200.0
- Corporate revolving credit and term loan facility	50.0	-	50.0	-
Cash flows from operating activities per share (basic)1
- before working capital (USD per share)	$3.45	$(2.17)	$8.98	$9.33
- after working capital (USD per share)	$3.45	$0.63	$7.45	$11.23

Operating cash flows continued to be generated from positive operating results during Q4.

Financing activities during Q4 include a scheduled repayment on the Kansanshi subordinated debt facility and the reclassification of cash to restricted cash as required under the corporate revolving credit and term loan facility. During 2009, the Company generated cash through equity and debt financing. In April 2009, the Company completed an equity financing by issuing 9,343,750 common shares of the Company at a price of CAD37.00 per share for gross proceeds of CAD345.7 million. The net proceeds, after fees and expenses, were $269.5 million. In June 2009, the Company completed an issue of a $500 million 6%, five year unsecured convertible bond for net proceeds of $488.0 million after the payment of commissions, fees and expenses related to the offering.

During 2009, the Company repaid the balance of $50.0 million on the corporate revolving credit facility. Subsequent to December 31, 2009, this $250.0 million facility was extended and will be available for draw until January 2011. The Company also repaid the balance of $11.0 million outstanding on the Kansanshi project completion facility.

Capital expenditures during Q4 were lower than previous periods due to the suspension of the Kolwezi development project on September 16, 2009. Kansanshi's mixed ore circuit and sulphide circuit expansions were completed during Q3 and expenditures on the gold recovery process continued in Q4. The plant expansion to 3.8 million tonnes per annum at Guelb Moghrein was substantially completed in Q3 and expenditures continued on the gold recovery circuit into Q4. During Q4, the Company paid a deposit of $34.0 million in relation to the acquisition of the Ravensthorpe nickel operation.

In addition to the Company's substantial cash reserves, additional sources of funding available include the $250.0 million corporate revolving loan that has been extended to expire in January 2011 and $50.0 million available under the corporate revolving credit and term loan facility. The Company's working capital balance (not including cash and debt) at December 31, 2009 increased by $228.4 million from December 31, 2008 due to an increase in the accounts receivable balance as a result of the sharp increase in copper price from 2008 to 2009. Included in the working capital balance is finished goods inventory of approximately 26,063 tonnes of contained copper.

 

 

 

 

[1] Cash flow per share is a non-GAAP measure. See "Regulatory disclosures - Calculation of operating cash flow per share" for further information

 

As at December 31, 2009, the Company had the following contractual obligations outstanding:

(USD millions)	Total	Less than 1 year	1 - 2 years	2 - 3 years	3 - 4 years	4 - 5 years	Thereafter
Term debt	191.6	84.5	85.9	5.3	5.3	5.3	5.3
Convertible bonds	500.0	-	-	-	-	500.0	-
Accounts payables	643.8	643.8	-	-	-	-	-
Deferred payments	9.1	0.4	0.4	0.4	0.4	-	7.5
Commitments	112.9	112.9	-	-	-	-	-
Asset retirement obligations	21.9	-	-	-	-	-	21.9

INVENTORY

	Copper (tonnes)	Gold in dore (ounces)
Kansanshi	22,059	1,415
Frontier	963	-
Guelb Moghrein	3,041	1,120
Total	26,063	2,535

Copper in concentrate increased by 400 tonnes in Q4 to 26,063 tonnes at December 31, 2009, with an average cost of approximately $1.15 per pound ($2,529 per tonne). Sales volumes during Q4 were consistent with production and local smelter capacity remained strong. The high pressure leach facility at Kansanshi was offline for maintenance towards the end of 2009, with approximately 270 tonnes of concentrate stockpile awaiting further processing. Approximately 18,900 tonnes of Kansanshi copper in concentrate was in the process of being treated or stockpiled for treatment at the Mufulira smelter as at December 31, 2009. Contained gold in dore inventory increased from Q3 to 2,535 ounces due to timing of shipments and increasing dore production at Kansanshi and Guelb Moghrein in Q4. Gold contained in copper in concentrate is not included in the inventory balances noted above.

CONVERTIBLE BONDS

The Company issued $500.0 million of convertible bonds (the 'Bonds') in June 2009 for net proceeds of $488.0 million after the payment of commissions and expenses related to the offering. The Bonds bear interest at 6% per annum, payable semi-annually in equal installments and are due on June 19, 2014 (the 'Final Maturity Date'). These Bonds may be converted into the Company's common shares, at the option of the holder thereof, at any time from October 19, 2009 to the close of business falling seven business days prior to the Final Maturity Date. The conversion price (the "Conversion Price") is USD $56.39 (CAD $63.11) per common share for a maximum total of 8,866,820 common shares issuable upon conversion. In addition, if certain fundamental changes occur to the Company, holders of the Bonds may be entitled to an adjustment to the Conversion Price. The Company has the option to call the Bonds after July 3, 2012 until the Final Maturity Date, in the event that the trading price of the common shares exceeds 140% of the Conversion Price over a certain period. In addition, the Company has the right to redeem the Bonds if at any time the aggregate principal amount of the Bonds outstanding is equal to or less than 15% of the aggregate principal amount of the Bonds initially issued.

As the bonds are convertible into common shares of the Company, the Company is required to account for the Bonds as both debt and equity. The Company elected to use the fair value approach to value the debt portion and the residual value approach to allocate the remaining value to equity. The result of this accounting approach was an allocation of $431.1 million as debt and $56.9 million as equity, which is equal to the net proceeds of $488.0 million. The debt portion of the Bond will be increased over the term of the Bonds to the face value of $500.0 million.

COMPREHENSIVE INCOME

The market value of available-for-sale investments continued to increase during Q4 resulting in the Company recognizing a tax effected increase in the fair value of investments of $61.6 million for Q4 and $297.2 million for 2009.

SHAREHOLDERS' EQUITY

Shareholders' equity increased due to the equity financing, the convertible bond issuance, the positive operating results and the increase in the fair value of the Company's marketable security investments.

The Company's equity financing resulted in the issuance of 9,343,750 common shares for net proceeds of $269.5 million and the convertible bond issuance resulted in an increase to shareholders' equity of $56.9 million.

As at the date of this report the Company has 80,549,483 shares outstanding.

DEVELOPMENT ACTIVITIES

Acquisition of the Ravensthorpe nickel operation, Australia

In December 2009, the company entered into an agreement with BHP Billiton to acquire the Ravensthorpe nickel operation ("Ravensthorpe") subject to relevant approvals from the Australian Foreign Investment Review Board and the West Australian Minister for Mines and Petroleum. The government approvals were received in February 2010 and the finalization of the acquisition was completed on February 10, 2010 for $340.0 million.

Ravensthorpe is located in Western Australia, approximately 550 kilometers south-east of Perth. It is an open pit mine and hydrometallurgical process plant that uses proven technology to recover nickel and cobalt to produce a mixed nickel cobalt hydroxide intermediate product. Ravensthorpe's development was completed in 2007. However, operations were suspended in January 2009 after the LME nickel price dropped to as low as $8,810.00 per tonne in late 2008.

The Company is planning to spend the next 12 months constructing two additional crushing plants in the modification of the crushing, conveying, stockpile and reclaim areas of the plant. This is expected to be followed by approximately six months of commissioning and ramp-up. The capital requirement for the modification is estimated at approximately $150.0 million, depending on currency exchange rates. The Company expects Ravensthorpe's average annual production of nickel metal will be approximately 39,000 tonnes for the first five years after recommencement of operations and an average annual production of 28,000 tonnes of nickel metal over the expected life of mine of 32 years.

Acquisition of Kiwara PLC

In November 2009, the Company entered into an implementation agreement to acquire the entire issued share capital of Kiwara PLC ("Kiwara") by way of scheme of arrangement (the "Scheme"). At the time, Kiwara owned a 85% interest in mineral prospecting licenses (the "License Area") on the periphery of the Kabombo Dome in North Western Province, Zambia, and had an option to acquire the remaining 15%. The License Area includes the Kalumbila Copper deposit which represents an early stage opportunity to develop a relatively low grade but extensive copper resource.

Pursuant to the Scheme, Kiwara shareholders receive 0.0085 First Quantum shares and GBP0.375 for each Kiwara share held. The Scheme became effective on January 29, 2010 and the acquisition was completed at a value of approximately $260.2 million.

Subsequent to the successful acquisition of Kiwara, the Company, through its wholly-owned subsidiaries, exercised options to purchase 10% of the issued share capital of Kalumbila Minerals Limited ("Kalumbila") increasing the Company's ownership to 95% of the issued share capital of Kalumbila and the License Area.

 

Acquisition of the non-controlling interest in Mauritanian Copper Mines SARL

In February 2010, the Company completed the acquisition of the 20% non-controlling interest in Mauritanian Copper Mines SARL, which owns the Guelb Moghrein copper and gold operation, for $63.0 million.

Kevitsa nickel/copper/PGE project, Finland

The Company announced Board approval for development of the Kevitsa project on November 30, 2009. Concurrently, an Engineering Study was finalized and a technical report for the updated Kevitsa mineral resource and reserve was published and has been filed on SEDAR. The new mineral resource shows an increase in both nickel and copper grades. Ongoing delineation drilling has extended the mineralization both south and east with an updated mineral resource estimate anticipated to be assessed in mid 2010.

Basic engineering has commenced and detailed engineering design is expected to begin in March 2010. A final contract on building the access road to the mine site was signed with the Lapland Road Administration Authority. The new Vajusuvanto bridge leading to the mine area was officially opened by the minister in charge in November 2009.

Kansanshi copper/gold operation, Zambia

Sulphide ore treatment capacity will be increased by approximately 10% and flexibility will be improved upon the inclusion of secondary crushing in Q2 2010 in conjunction with mill feed belt capacity upgrades and modifications to the pebble crushing. Additional flotation capacity is being planned to ensure that efficiency losses are mitigated as ore treatment rates are increased. The replacement of the SAG mill on the oxide circuit was completed in Q1 2010.

The project to improve recovery of gold to gravity concentrates via additional gravity concentrators progressed with rapid and successful commissioning of two additional gravity concentrators in Q1 2010. Two more gravity concentrators are scheduled to be installed in Q2 2010. Additional research projects are underway to improve secondary recovery of gold from the gravity concentrate streams.

Guelb Moghrein copper/gold operation, Mauritania

The new HPGR comminution circuit is progressing with all major items of equipment on site and civils works near completion. Commissioning of the new circuit is scheduled for completion in Q2 2010. The gold scavenger flotation circuit extension and gravity concentrator are planned for commissioning in Q1 2010. Greater fuel efficiency at the plant is anticipated with the completion of the last phase of the new power station in Q1 2010. The remaining two 5 mega watt engines are on site and most of the auxiliary equipment has been installed in advance.

Frontier copper operation, RDC

The focus at Frontier for 2010 is to increase waste stripping to establish wider and more efficient working areas in the pit. This is planned to be achieved through the use of contractors and also with the introduction of new AC haul trucks. The AC haul trucks provide the capability for an AC powered trolley assist system in order to decrease hauling costs. These mining activities will increase the total mining volumes as well as the strip ratio in 2010.

Bwana Mkubwa copper SX/EW plant, Zambia

The RDC has permitted the Company to export Lonshi oxide ore with the border being officially re-opened November 5, 2009 and exports resumed on November 9, 2009. The Bwana Copper plant was successfully re-commissioned early in January 2010 and is anticipated to operate at an output level of approximately 800 tonnes of grade A copper cathode per month for the balance of 2010. The strategy beyond the exhaustion of ore from Lonshi is under review.

 

 

Kolwezi copper/cobalt project, RDC

Project construction was suspended on September 16, 2009 in response to an order by the General Prosecutor of Katanga to seal the KMT facilities. The project is currently on care and maintenance. Refer to the "Other items" section for further discussion

Lonshi underground evaluation project, RDC

Decline development into the Lonshi underground deposit continued with strong intersections through the lower conglomerate ore body, and adjacent lower dolomite ore body. In addition to the decline development, an extensive surface drilling program is currently underway to improve confidence in the current resource model and to test for potential extensions to the ore body.

The exploration and development of the underground project will continue into 2010 with an objective to provide support for operational development.

Exploration

The Company's exploration activities continued at a high level during Q4 with ongoing drill programs in Finland, Zambia and the RDC.

At Kevitsa in Finland, four drill rigs are now active and exploration drilling continues to return encouraging intercepts some distance from the planned pit. Efforts are focused on assessing the potential for near surface mineralization to impact on areas of proposed plant and infrastructure. Infill drilling has now commenced to follow up on encouraging exploration intercepts immediately south of the current resource area. A series of regional Ni-Cu projects in Finland have been defined with alliance partner Newgenco. Claim reservations are being applied for with follow up exploration planned in 2010.

In the RDC, drilling continued on several high priority targets. A new prospect has been defined at 'Clairiere' some 50 kilometres ("kms") east of Lubumbashi. Seven core holes testing a strong copper soil anomaly have intersected a prospective package which is variably mineralized with disseminated chalcopyrite and bornite, the intercepts lie in the centre of a large 'copper clearing' with abundant copper flower, assay results are awaited. Five drill holes completed on the edges of the Frontier resource area have highlighted additional mineralization. A wide mineralized intercept on the footwall (western side) of the Frontier ore zone has potential to expand the mineable resource and is being targeted with follow up drilling in the next quarter. At Lonshi, an extensive diamond drill program of approximately 30,000 metres has commenced to test the strike and depth extent of the sulphide ore system with a view to expanding the current resource for underground extraction.

In Zambia, a potential new discovery appears to have been made at the 'South East Dome' prospect some 2 kms SE of the Kansanshi Main pit. Nine core holes completed in Q4 have all returned mineralization including some wide intercepts of 50 meters or more at estimated grades of 1% TCu. Two rigs are actively drilling in order to delineate the extent and geometry of the new deposit.

The Company announced the acquisition of Kiwara PLC during the quarter. Kiwara is the owner of the Kalumbila and Kawako exploration projects located approximately 150 kms from Kansanshi in the Solwezi district of Zambia. Kalumbila represents an early stage opportunity to evaluate and develop a relatively low grade but extensive copper resource. The nearby Kawako Project is at a reconnaissance drilling stage but includes some extraordinary high grade Nickel intercepts. An intensive drilling program is planned for Kalumbila in 2010.

In Mauritania, a major airborne gravity survey is in progress covering over 1,500 square kms surrounding the Guelb Moghrein mine. This survey has the potential to directly target high density Iron-Oxide-Copper-Gold (IOCG) deposits like Guelb Moghrein under sand cover. Follow up RC drilling has commenced on the previously discovered IOCG mineralization at El Joul some 8 kms SE of the mine.

 

OTHER ITEMS

Kolwezi update 

During 2007, the Government of the RDC announced a review of over 60 mining agreements entered into over the last decade with foreign companies. The Kolwezi mining convention ("Contract of Association"), to which the Company's subsidiary Congo Mineral Developments Limited ("CMD") is a party, was included in this review. The Company and its contributing partners in the Kolwezi Project, Industrial Development Corporation of South Africa ("IDC") and the IFC (International Finance Corporation), have obtained legal advice that the Contract of Association is valid and binding and that all terms have been complied with by CMD. The Contract of Association also provides a dispute resolution mechanism through international arbitration.

Despite CMD's voluntary participation in the revisitation and efforts to reach a negotiated resolution, CMD received a letter from the RDC Prime Minister dated August 21, 2009, which reported on the outcome of an August 4, 2009 meeting of the RDC Council of Ministers with respect to the Contract of Association. The letter notes the "impossibility to pursue the partnership" and directed that the exploitation permit held by KMT, the Company formed by the parties to pursue the project, be returned to Gécamines pursuant to the Contract of Association.

The reasons for the decision as quoted in the Prime Minister's letter are:

1. misdated KMT Decree issue;

2. failure to commence commercial production within 44 months;

3. failure to respect the terms of the initial tender offer;

4. refusal to agree to pay increased royalties; and

5. refusal to agree to cancel the Management Fees provided for in the Contract of Association.

First Quantum remains firmly of the view that none of these reasons have any legal basis. CMD responded to the Prime Minister's letter, rebutted each of the reasons cited by the Council of Ministers, and requested further meetings to resolve the matter. CMD declined to return KMT's exploitation permit, and in response, the RDC Mining Registry ("CAMI") unilaterally cancelled KMT's exploitation permit and issued a new exploitation permit to Gécamines. Because of the urgent circumstances and in view of the precipitous actions of the RDC and of its State entities based on the decision of the Council of Ministers, on August 26 and September 3, 2009, KMT and CMD initiated three proceedings before the Tribunal de Grande Instance High Court in Kinshasa (the "Local Court") of the RDC seeking to obtain appropriate provisional measures to preserve their rights and to secure the KMT Project site.

Subsequently, on September 15, 2009 CMD received an order by the General Prosecutor of Katanga to seal KMT's facilities. The Company has been advised by its lawyers that such an order is illegal. On September 16, 2009 the Company had no choice but to announce that it had suspended construction at its KMT Project. Given the actions taken by the RDC government, the Company was also advised there was no longer any purpose in pursuing interim relief in the Local Court.

At the time of suspension the construction of the Kolwezi Project was at an advanced stage (approximately 75% complete) and was on schedule to start commissioning in May 2010. The suspension resulted in the immediate loss of 700 local jobs in the Kolwezi area, loss of tax revenues to the RDC government, and an indefinite delay in commissioning of the Kolwezi Project, which was targeted for May 2010.

On October 21, 2009, KMT and CMD appeared before the Local Court and asked the Local Court to note that it was not seized of the provisional requests previously sought, and to note the withdrawal of the proceedings. The RDC and Gécamines contested the withdrawal of the proceedings. The debate that followed before the Local Court dealt only with questions of procedure, namely the withdrawal of the demands and incidentally on the joining of the three cases. There was no debate on the merits and no evidence was provided to the Local Court. The Company learned by way of a press conference called by the Vice Minister of Mines that the Local Court had rendered judgment on October 28, 2009, but that judgment was only served on CMD on November 23, 2009. The judgment held that the actions instituted by CMD and KMT were receivable, but not founded in law. The Local Court concluded on the basis of no evidence that there was not a clerical error in the Decree granting authorization for the constitution of KMT, but rather there was a formal defect. The Local Court also found without any evidence presented that there was fraud committed in the constitution of KMT and held that for this reason KMT did not exist in law. The Court then accepted the cross-claim of the RDC and Gécamines, and, as a consequence, condemned each of the CMD and KMT to pay to Gécamines and the RDC as damages and interest the equivalent of US $3,000,000 and court costs.

Thus, the Local Court ruled not only on the withdrawal of the proceedings but also on the constitution of KMT itself. The Local Court did so without any debate or evidence and while it had taken its decision under advisement after having heard the parties on issues of procedure and whether the Local Court was seized of the matter. At the same time, the Local Court imposed unproven damages and interest. On December 21, 2009 CMD and KMT filed an appeal of the judgment (the "Local Appeal").

By letter transmitted on January 11, 2010, Gécamines notified CMD, IFC and IDC of the decision of its Board of Directors to cancel the Contract of Association. By letter dated January 15, 2010, KMT's legal counsel replied to this letter, setting out summary reasons why the purported cancellation of the Contract of Association was not well founded and requiring that Gécamines withdraw its cancellation letter, failing which the CMD, IFC and IDC's reserved their rights to initiate the international arbitration proceedings provided for in the Contract of Association. Gécamines did not withdraw its cancellation letter.

In the Company's view the Local Court's decision constituted a flagrant denial of justice and this, along with the actions taken by Gécamines to wrongfully cancel the Contract of Association, demonstrated the need for the Company to file international arbitration seeking orders obliging the RDC and Gécamines to respect their undertakings and obligations under the Contract of Association. On February 1, 2010 CMD, IFC and IDC commenced international arbitration at the International Chamber of Commerce (ICC) in Paris.

In public statements made on February 3, 2010 during the Indaba mining conference held in Cape Town, South Africa, the Minister of Mines of the RDC indicated that instructions had been given by the Government of the RDC to Gécamines to start negotiations with third parties in order to create a new partnership in relation to the KMT Project and that Gécamines had started such discussions with certain third parties. In response the Company has published notices in certain widely circulated publications advising of CMD's, IFC's and IDC's valid contractual rights, and the ongoing ICC International Arbitration with respect to the KMT Project and warning third parties not to interfere with KMT legal title or attempt to induce a breach of CMD's, IFC's and IDC's contractual relations with the RDC and Gécamines.

On February 23, 2010, without any prior notice KMT and CMD received a Notice of Hearing Date from Gécamines and CAMI setting the Local Appeal for hearing in less than 24 hours on February 24, 2010. Gécamines and CAMI requested the confirmation of the Lower Court judgment and also made an unsupported request for up to $US12 billion in damages to be awarded to Gécamines and CAMI. KMT's lawyers attended and objected to the proceedings. The Company believes a decision of the Local Appeal is imminent. The Company continues to believe the allegations against KMT and CMD have no merit and intends to vigorously defend against any decision. No amount has been accrued in these financial statements.

The Company believes there is no legal basis for the cancellation of KMT's exploitation permit, the sealing of the KMT facilities, Gécamines' cancellation of the Contract of Association, or the decision of the Local Court, and as previously noted, that CMD and the KMT Project's other contributing partners, the IFC and the IDC, continue to have a valid and binding contract with the RDC and Gécamines.

The carrying value of the Kolwezi development project is $786.8 million and is comprised of the initial acquisition cost of $387.6 million and capital expenditures of $399.2 million. In response to the events during the year and subsequent to December 31, 2009, the Company has performed an impairment analysis based on the estimated undiscounted values of the potential outcomes of the dispute including the process of international arbitration. No impairment has been recorded as at December 31, 2009 as a result of this analysis. The final outcome of the arbitration process remains uncertain and may result in the impairment or loss of all or part of the Company's investment. Under IFRS, the use of a discounted cash flow model to test for impairment is likely to have a material impact on the Company's carrying value of the Kolwezi project (refer to the "Regulatory Disclosures - International Financial Reporting Standards - Mineral properties, plant and equipment"). 

 

 

Zambian taxation update

The Government of the Republic of Zambia ("GRZ") announced in January 2008 a number of proposed changes to the tax regime in the country in relation to mining companies. These changes included a new windfall tax on copper sales revenue; a new variable profit tax; a concentrate export levy of 15%; an increase in the royalty rate to 3%; an increase in the income tax rate to 30%; and other changes including changes in the timing of deductibility of capital allowances and streaming of hedging losses and gains. These changes were passed by Parliament in March 2008 and the majority of changes took effect from April 1, 2008.

Under the new President, the GRZ reviewed these tax changes and proposed that the new windfall tax be removed, the deductibility of capital allowances be increased back to 100% in the period of expenditure and to allow hedging income be part of mining income for tax purposes. These changes were passed by Parliament in March 2009 and the majority of changes took effect from April 1, 2009. These enacted changes are not retroactive to April 1, 2008. On May 18, 2009, the GRZ issued a temporary exemption of the concentrate export levy of 15% until December 31, 2009 in order to allow the Company to export the copper in concentrate that could not be treated in Zambia due to the lack of smelter capacity within Zambia.

The Company, through its Zambian subsidiaries, is party to Development Agreements with GRZ for its existing operations which provide an express right to full and fair compensation for any loss, damages or costs (including interest) incurred by the Company by reason of the government's failure to comply with the tax stability guarantees set out in the Development Agreements, and rights of international arbitration in the event of any dispute. Following consultation with external legal counsel, the Company assessed there to be a high probability of recovery from the GRZ of payments made in respect of these taxes.

In the consolidated financial statements, the Company has recognized a tax expense in accordance with applicable laws from time to time notwithstanding the Development Agreements. In addition and reflecting the enforceability of the Development Agreements, the Company has recognized a receivable from the GRZ for an amount in respect of the expected ultimate repayment of taxes in excess of the taxes permitted under the Development Agreements. As required by the financial instruments accounting standards, this receivable has been classified as "loans and receivables" and initially recorded at fair value based on management's best estimate of the timing of receipt and amounts due. The receivable will be assessed for impairment in future periods based on changes in facts and circumstances; any impairment amounts required in the future may be material. As at December 31, 2009, this receivable amounts to $181.3 million.

Currently, the Company is involved in discussions with the GRZ to find an alternative solution to arbitration or litigation to fully resolve all outstanding matters in relation to the tax changes introduced in conflict with the Development Agreements. The timing and outcome of these discussions remains uncertain.

OUTLOOK

The Company expects its 2010 production to increase to 385,000 tonnes of copper and 240,000 ounces of gold. The group C1 cost of production is expected to remain unchanged at $0.97 per pound of copper.

During January and February 2010, copper production was approximately 55,400 tonnes from:

Kansanshi 33,400

Frontier 15,400

Guelb Moghrein 5,200

Bwana Mkubwa 1,400

The Company sold 55,300 tonnes of copper in January and February 2010.

Kansanshi

Copper production for the first two months of 2010 was affected by the replacement of the oxide SAG mill which caused a period of downtime and a temporary shift in the processing plan. The mixed ore circuit will continue to focus on increasing flotation capacity to enhance efficiencies at the targeted throughput rates. Sulphide ore treatment capacity will be increased by approximately 10% by the inclusion of secondary crushing in Q2 2010 in conjunction with mill feed belt capacity upgrades and modifications to the pebble crushing circuit aimed at increasing capacity and flexibility.

Gold production has benefited from the successful commissioning of two Falcon concentrators. Two additional concentrators will be installed in Q2 and further opportunities are being considered to improve recoveries in 2010.

Guelb Moghrein

Production at Guelb Moghrein was impacted by extended downtime during January as a result of unscheduled maintenance on mill 3. Progress on the new HPGR comminution circuit is in line with commissioning at the beginning of Q2. A gold scavenger flotation circuit extension and Falcon concentrator will be commissioned in Q1 and is expected to result in increased gold recoveries shortly thereafter. Greater fuel efficiency is expected with the completion of the last phase of the new power station in Q1.

Frontier

Mining activities have been focused on pit maintenance and waste stripping in early 2010 in response to difficult pit conditions caused by a heavy rainy season. Increases in plant throughput and recoveries will remain key production objectives in 2010. Waste stripping activity planned for 2010 is expected to impact ore costs in 2010, while the cost saving initiatives implemented in late 2008 will be reviewed and improved upon.

Bwana Mkubwa

The Bwana Mkubwa copper SX/EW plant began processing ore from the Lonshi oxide stockpile in January 2010. The plant will continue to process the available Lonshi ore to produce at an average expected rate of 800 tonnes of grade A copper cathode per month until the stockpile is exhausted.

Medium term group production estimate (2011 to 2014)

The Company expects production from the Kansanshi, Frontier and Guelb Moghrein operations to increase to an average total of 400,000 tonnes of copper and 250,000 ounces of gold for years 2011 to 2014. During this period, the Kevitsa and Ravensthorpe projects are scheduled to begin commercial production. Including the anticipated annual average copper production from the Kevitsa project, the Company expects its copper production to rise to 420,000 tonnes from year 2013. In addition, the Company expects the Kolwezi project could begin production within 12 months from recommencement of construction and produce 70,000 tonnes of copper annually.

The Company expects to become a material nickel producer by year 2013 with total nickel production of approximately 50,000 tonnes annually from the Ravensthorpe and Kevitsa projects.

Hedging program

Following the sharp decline in the copper price in the last quarter of 2008, the Company resolved in January 2009 to hedge up to 50% of planned copper production on a rolling six month period to protect itself against possible further falls in the copper price. An option based strategy of bought puts and sold calls was entered into to achieve a guaranteed, minimum price (put strike) over the hedged quantity while still participating in favorable price movements up to a capped, ceiling price (call strike). All copper contracts entered into under this strategy during 2009 have matured during the year.

The Company regularly reviewed its risk positions and as the copper market regained strength over the course of the 2009 year, no additional hedging positions were undertaken subsequent to June 2009. As at December 31 2009, the Company did not have any commodity hedge positions outstanding.

 

 

 

As at December 31, 2009, the following derivative positions were outstanding:

	Maturity 2010	Maturity 2011	Total	Fair value December 31, 2009		Fair value December 31, 2008
Gold				Asset	Liability	Asset	Liability
Forward sales contracts	-	-	-	-	-	-	(19.1)
Bought put options	-	-	-	-	-	2.2	-
Sold call options	-	-	-	-	-	-	(2.1)
Foreign exchange
Foreign exchange spot and forward sales contracts - USD equivalent	61.5	-	61.5	0.7	-	0.2	-
Foreign exchange bought put options and forward sales contracts - USD equivalent	96.6	-	96.6	-	(0.6)	2.0	-
Foreign exchange sold call options - USD equivalent	24.5	-	24.5	0.2	-	-	(4.6)
Cross-currency swap	-	-	-	-	-	4.6	-
Interest rate
Floating to fixed interest rate swap - principal	48.1	19.4	67.5	-	(0.7)	-	(0.2)
Average fixed interest rate	1.82%	1.80%	1.82%
Other
Embedded derivative				-	(7.6)	-	(8.0)
				0.9	(8.9)	9.0	(34.0)
Copper embedded derivative (tonnes)	21,647	-	21,647
Average price ($/tonne)	$7,361	-	$7,361
Gold embedded derivative (ounces)	4,069	-	4,069
Average price ($/oz)	$1,096	-	$1,096

Provisionally priced copper sales subject to final settlement prices in 2010

At December 31, 2009, 21,647 tonnes of copper sales were provisionally priced at an average of $3.34 per pound ($7,361 per tonne). Of this total, 11,563 tonnes and 10,084 tonnes were subject to final pricing in January and February 2010, respectively.

The average LME cash price for January 2010 was $3.35 per pound ($7,386 per tonne) and for February 2010, $3.11 per pound (6,848 per tonne) resulting in a negative provisional adjustment of $4.9 million which will be recognized in Q1 2010.

 

 

On Behalf of the Board of Directors 12g3-2b-82-4461

of First Quantum Minerals Ltd. Listed in Standard and Poor's

G. Clive Newall

President

 

For further information visit our web site at www.first-quantum.com

 

North American contact: Sharon Loung 8th Floor, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8 Tel: (647) 346-3934 Fax: (604) 688-3818 Toll Free: 1 (888) 688-6577 E-Mail: sharon.loung@fqml.com United Kingdom contact: Clive Newall, President 1st Floor, Mill House, Mill Bay Lane, Horsham, West Sussex RH12 1TQ United Kingdom Tel: +44 140 327 3484 Fax: +44 140 327 3494 E-Mail: clive.newall@fqml.com Or Simon Hockridge Hogarth Partnership Ltd. Tel: +44 (0) 20 7357 9477

 

Certain statements and information herein, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities laws. Such forward-looking statements or information include but are not limited to statements or information with respect to future price of copper or gold, estimation of mineral reserves and mineral resources, our exploration and development program, estimated future expenses, exploration and development capital requirements, and our goals and strategies. Often, but not always, forward-looking statements or information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate" or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.

 

With respect to forward-looking statements and information contained herein, we have made numerous assumptions including among other things, assumptions about the price of copper and gold, anticipated costs and expenditures and our ability to achieve our goals. Although our management believes that the assumptions made and the expectations represented by such statements or information are reasonable, there can be no assurance that a forward-looking statement or information herein will prove to be accurate. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information.

 

See our annual information form and our quarterly and annual management's discussion and analysis for additional information on risks, uncertainties and other factors relating to the forward-looking statements and information. Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actual results, performances, achievements or events not to be anticipated, estimated or intended. Also, many of the factors are beyond our control. Accordingly, readers should not place undue reliance on forward-looking statements or information. We undertake no obligation to reissue or update forward-looking statements or information as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements and information made herein, are qualified by this cautionary statement.

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets

As at December 31, 2009 and 2008

(expressed in millions of U.S. dollars)

 

	Note	2009	2008
Assets
Current assets
Cash and cash equivalents	19	919.2	176.2
Restricted cash	8a	40.3	40.3
Accounts receivable		342.6	93.2
Inventory	4	346.7	270.9
Current portion of other assets	7	195.2	150.8
		1,844.0	731.4
Investments	5	460.4	163.5
Property, plant and equipment	6	2,157.9	1,996.3
Other assets	7	102.3	113.3
Total assets		4,564.6	3,004.5
Liabilities
Current liabilities
Accounts payable and accrued liabilities		323.0	333.1
Current taxes payable	12	320.8	146.4
Current portion of debt	8	84.5	139.5
Current portion of other liabilities	10	3.9	27.0
		732.2	646.0
Debt	8	107.1	246.2
Convertible bonds	9	438.4	-
Other liabilities	10	36.1	34.8
Future income tax liabilities	12	373.9	363.6
Total liabilities		1,687.7	1,290.6
Non-controlling interests		391.4	313.3
Total liabilities and non-controlling interests		2,079.1	1,603.9
Shareholders' equity
Capital stock	13	750.4	420.3
Retained earnings		1,437.9	980.3
Accumulated other comprehensive income		297.2	-
Total shareholders' equity		2,485.5	1,400.6
Total shareholders' equity, liabilities and non-controlling interests		4,564.6	3,004.5
Commitments	20
Contingencies and measurement uncertainty	21
Subsequent events	21,22

 

 

 

 

 

 

 

 

Consolidated Statements of Earnings and Comprehensive Income (Loss)

For the years ended December 31, 2009 and 2008

(expressed in millions of U.S. dollars, except for share and per share amounts)

 

		Note	2009	2008
Sales revenues
	Copper		1,745.1	1,641.3
	Gold		156.0	97.5
	Acid		1.8	1.6
			1,902.9	1,740.4
Cost of sales			(745.4)	(763.2)
Adjustment to net realizable value of inventory		4	25.4	(60.5)
Depletion and amortization			(161.7)	(113.3)
Royalties, windfall taxes and export levies		21b	(55.0)	(187.4)
Zambian taxes recovery		21b	2.9	127.5
Operating profit			969.1	743.5
Other income (expenses)
	Exploration		(25.9)	(28.5)
	General and administrative		(25.3)	(31.4)
	Interest		(60.4)	(31.8)
	Impairment of available-for-sale investments	5	-	(254.2)
	Derivative instrument adjustments		(135.9)	(6.1)
	Other income (expenses)	15	26.2	(0.5)
			(221.3)	(352.5)
Earnings before income taxes and non-controlling interests			747.8	391.0
Income taxes		12	(200.3)	(247.2)
Non-controlling interests			(84.1)	(97.9)
Net earnings			463.4	45.9
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale investments, net of tax of $10.3 million (2008 - $36.9 million)			315.8	(457.2)
Realized loss (gain) on available-for-sale investments, net of tax of nil (2008 - $0.1 million)			(18.6)	0.4
Other-than-temporary loss recognized in net earnings			-	254.2
			297.2	(202.6)
Comprehensive income (loss)			760.6	(156.7)
Earnings per common share		13b
	Basic		$6.14	$0.67
	Diluted		$5.92	$0.67
Weighted average shares outstanding (000's)		13b
	Basic		75,508	68,161
	Diluted		80,982	68,916
Total shares issued and outstanding (000's)		13a	78,590	68,751

 

 

The accompanying notes are an integral part of these consolidated financial statements.

For a copy of the notes visit the Company's website at www.first-quantum.com.

 

Consolidated Statements of Changes in Shareholders' Equity

For the years ended December 31, 2009 and 2008

(expressed in millions of U.S. dollars)

 

		Note	2009	2008
Capital stock
Common shares
Balance - beginning of year			441.8	415.2
	Stock options exercised	14a	12.9	6.8
	Shares issued on equity financing	13a	269.5	-
	Acquisition of Scandinavian Minerals Limited	16	-	19.8
Balance - end of year			724.2	441.8
Equity portion of convertible bonds
Balance - beginning of year			-	-
Equity allocation of convertible bonds		9	56.9	-
Balance - end of year			56.9	-
Treasury shares
Balance - beginning of year			(38.8)	(34.3)
	Shares purchased	14b	(11.7)	(9.2)
	Restricted and performance stock units vested	14b	3.3	4.7
Balance - end of year			(47.2)	(38.8)
Contributed surplus
Balance - beginning of year			17.3	15.1
	Stock-based compensation expense for the year	14a	5.8	8.7
	Transfers upon exercise of stock options		(3.3)	(1.8)
	Restricted and performance stock units vested	14b	(3.3)	(4.7)
Balance - end of year			16.5	17.3
Total capital stock			750.4	420.3
Retained earnings
Balance - beginning of year			980.3	987.4
Net earnings for the year			463.4	45.9
Dividends			(5.8)	(53.0)
Balance - end of year			1,437.9	980.3
Accumulated other comprehensive income
Balance - beginning of year			-	202.6
	Other comprehensive income (loss) for the year		297.2	(202.6)
Balance - end of year			297.2	-
Retained earnings and accumulated other comprehensive income			1,735.1	980.3

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

For a copy of the notes visit the Company's website at www.first-quantum.com.

 

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows

 For the years ended December 31, 2009 and 2008

(expressed in millions of U.S. dollars)

 

	Note	2009	2008
Cash flows from operating activities
Net earnings for the year		463.4	45.9
Items not affecting cash
Depletion and amortization		161.7	113.3
Non-controlling interests		84.1	97.9
Impairment of available-for-sale investments	5	-	254.2
Adjustment to net realizable value of inventory	4	(25.4)	60.5
Unrealized foreign exchange loss (gain)		2.7	(9.9)
Future income tax expense		(2.5)	64.9
Stock‑based compensation expense	14	5.8	8.7
Derivative instruments		(16.6)	(5.5)
Non-cash interest expense		21.2	3.8
Loss (gain) on disposal of investments		(18.6)	0.3
Other		2.3	2.5
		678.1	636.6
Change in non‑cash operating working capital
Decrease (increase) in accounts receivable and other		(300.0)	48.3
Increase in inventory		(1.8)	(113.1)
Increase in accounts payable and accrued liabilities		23.6	183.6
Increase in current taxes payable		174.4	19.2
Long-term incentive plan contributions		(11.7)	(9.2)
		562.6	765.4
Cash flows from financing activities
Proceeds from debt		138.9	294.4
Repayments of debt		(347.2)	(276.2)
Proceeds from convertible bonds		488.0	-
Proceeds on issuance of common shares		279.1	5.0
Restricted cash		-	5.6
Dividends paid		(5.8)	(53.0)
Dividends paid to non-controlling interests		(6.0)	-
		547.0	(24.2)
Cash flows from investing activities
Payments for property, plant and equipment		(361.8)	(460.3)
Deposit for Ravensthorpe acquisition	22b	(34.0)	-
Acquisition of Scandinavian Minerals Limited	16	-	(214.3)
Available-for-sale investments, net		29.2	(90.4)
		(366.6)	(765.0)
Increase (decrease) in cash and cash equivalents		743.0	(23.8)
Cash and cash equivalents - beginning of year		176.2	200.0
Cash and cash equivalents - end of year	19	919.2	176.2

 

 

The accompanying notes are an integral part of these consolidated financial statements.

For a copy of the notes visit the Company's website at www.first-quantum.com

 

 

 

This information is provided by RNS

The company news service from the London Stock Exchange