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Mer 13 Oct 2010 12:08
First Quantum sees 14 pct fall in FY copper output
Wed Oct 13, 2010 4:51am EDT
By Julie Crust
LONDON, Oct 13 (Reuters) - First Quantum Minerals (FM.TO) (FQM.L) expects copper production to fall about 14 percent this year mainly as a result of losing its licence to mine at the Frontier operation in the Democratic Republic of Congo (DRC).
The company was forecasting copper production of 365,000 tonnes in 2010.
"You have got to knock off the fact that we only got less than a half year's production at Frontier," President Clive Newall told Reuters late on Tuesday.
Frontier was forecast to produce about 90,000 tonnes of copper, implying overall copper output for the miner of about 320,000 tonnes. It produced about 374,000 tonnes in 2009.
"Production in 2011 won't be as high as we are losing a whole year at Frontier, but we are making up quite a bit from Kansanshi and Mauritania so it's not going to be a heck of a lot less than this year," he said.
Output at the 80-percent owned Kansanshi mine in Zambia will rise in 2011 and there will be a "significant" increase in output at its Guelb Moghrein mine in Mauritania, he said.
The company has three court cases outstanding, two versus the DRC and one against Eurasian Natural Resources Corp (ENRC.L), relating to the withdrawal of two licenses - Frontier and Kolwezi - in the DRC. It was stripped of the licences after the DRC said they had been illegally granted.
The case concerning the cancellation of the Kolwezi copper project, the first of the three legal cases to be started, is expected to be concluded at the end of 2012, Newall said. "An awful lot can happen in three years in the DRC, particularly when you've got elections coming up next year," he said.
The company was the DRC's single largest taxpayer in 2009, accounting for 50 percent of all tax revenue gathered, and about 2,000 workers lost their jobs as a result of the licence issues. The miner currently has no operations in the DRC.
It has yet to state how much it is seeking in damages, but analysts have estimated that the company's market capitalisation took a hit of about $2.5 billion.
However, the company is not letting the legal cases get in the way of its development and exploration projects.
The Ravensthorpe nickel operation in Australia is expected to start up in the second half of 2011 and output from Finland's Kevitsa nickel-copper project is targeted for mid 2012.
"Our new project in Zambia is a real star," Newall said referring to the old Kalumbila copper and nickel exploration project in the North Western Province.
It is fast tracking the Sentinel project there and hopes to reach full output in 2014.
"It's a very much larger ore body than we anticipated when we started," he said, estimating that it could be one of the top 12 copper mines in the world in terms of size.
The company is carrying out a study into building a smelter at Kansanshi, its copper-gold mine already in production in the North Western province. The company is confident of being able to finance the smelter cost, seen at around $300-600 million, via any number of possible options.
"The combined projects will be well above $1 billion," Newall said.
The company, which has a market cap of about $6.7 billion, is confident about its growth programme.
"We have three new projects coming on stream over the next three years which will more than double the size of the company" from where it was before the company's was stripped of its Frontier project, Newall said.