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First Quantum Minerals Ltd -- Moody's assigns Ba3 CFR to First Quantum Minerals; outlook stable
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(P)B1 rating assigned to senior unsecured notes

London, 28 September 2012 -- Moody's Investors Service has today assigned a Ba3 corporate family rating (CFR) and a Ba3 probability of default rating (PDR) to First Quantum Minerals Ltd. (FQM" or "the Company"). Concurrently, Moody's has assigned a provisional (P)B1 rating with a loss-given default (LGD) assessment of 4 (69%) to the proposed $350 million of senior unsecured notes to be issued by FQM.

The outlook on all ratings is stable.

Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect the rating agency's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation and the security package, Moody's will endeavour to assign a definitive rating to the notes. A definitive rating may differ from a provisional rating.

RATINGS RATIONALE

The Ba3 CFR is constrained by the high business risk profile of the Company, essentially due to significant concentration risk in terms of geography (Zambia, accounting for 85% of revenues as of 2011YE) and commodity, given the very high exposure to copper (which accounted for nearly 90% of revenues in 2011). Furthermore, the business profile is also characterized by limited operational diversification in terms of number of significant mines. Moody's expects the main mine owned by the Company, the Kansanshi copper-gold mine in Zambia, will still account for nearly 65% of revenues and 80% of EBITDA in 2013, when the two new nickel mines in Australia and Finland, currently still in ramp-up phase, will be fully operational. Moody's considers as a further important source of risk the execution of large capex projects targeting the doubling of the current copper production capacity of FQM by 2015, which will require a very high amount of capex to be spent in the next couple of years.

However, Moody's believes that the risks noted above are mitigated by (1) the company's good financial results, underpinned by FQM's competitive cash-cost basis and the good quality of its mining operations; (2) robust credit metrics, with low financial leverage and substantial cash flow generation demonstrated to-date; (3) a good liquidity profile; and (4) FQM management's conservative and disciplined financial policy, which Moody's expects will be applied also going forward, as FQM's management focus on (i) the ramp-up of production at the two new nickel mines recently commissioned in Australia and Finland; and (ii) the execution of the large capex mainly directed towards the further development of FQM's mining assets and deposits in Zambia.

The rating agency however cautions that FQM's focus on organic growth in Zambia could prove to be risky, should the local business environment become less favourable, especially as the Zambian Government - as it is the case elsewhere in resource rich countries - is contemplating new measures to redistribute the country's mineral wealth. In particular, Moody's notes that the current Government, which came into power in September last year, has increased tax pressure for miners, (tax rate is now 43% for FQM in the country, after the Government raised mineral royalty rates from 3% to 6% earlier this year for base metals), and has expressed its intention to negotiate an increase in its stakes in the mines to 35% from around 10-20% currently (in the case of FQM, the Zambian Government currently owns a 20% stake in the Kansanshi mine).

In Moody's view, FQM's liquidity is good. As of June 2012, cash and cash equivalents on balance sheet amounted to $857 million. FQM's liquidity profile also benefited from a cash payment ($750 million) received last April from Eurasian Natural Resources Corporation Plc (Ba3 negative). This amount represented the first payment of a total $1.25 billion agreement reached by two miners last January to settle their legal dispute over FQM's claims for the Kolwezi project, the Frontier and Lonshi mines and related exploration interests in the Democratic Republic of Congo.

The liquidity position is also supported by a $1 billion five-year secured term loan and revolving credit facility (maturing in January 2017), currently undrawn. These are available to the Zambian subsidiary Kansanshi Mining Plc to fund the capex and working capital requirements of the Kansanshi mine. Further liquidity support stems from a secured project loan of $250 million, also undrawn, for the expansion of the Kevitsa nickel mine in Finland. Following the issuance of the new senior unsecured notes, FQM's liquidity would be strengthened further, as the targeted $350 million proceeds from the notes will increase the cash available to fund the group's future capex and general working capital requirements. The main cash requirements over the next 18 months are related to expansionary capex, particularly in 2013 when it will peak at $1.7 billion; no meaningful debt repayments are scheduled over the same timeframe.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook assigned to the ratings is based on Moody's expectations that FQM will perform broadly in line with its proposed business plan over the next two years, and retain good liquidity headroom at all times to comfortably manage its sizeable expansionary capex plan.

WHAT COULD MOVE THE RATINGS UP/DOWN

Although unlikely in the near term, Moody's says that upwards pressure would develop on FQM's Ba3 rating, if it (1) improved its weak business profile, by further diversifying its asset base and cash flow generation away from Zambia; and (2) improved its operating and financial performance, by successfully executing its large capex plan with no material delays or cost overruns.

Downwards pressure on the rating would develop if a protracted deterioration in the commodities markets negatively affected FQM's operating and financial performance, thereby materially reducing the currently large headroom under the financial covenants. The rating would also come under negative pressure if FQM adopted a more aggressive growth strategy -- i.e., including possible debt-funded acquisitions leading to weaker credit metrics -- and higher-than-anticipated costs to execute the capex plan, especially if this precipitated protracted negative free cash flows and a weakened liquidity profile.

SENIORITY OF THE PROPOSED NOTES

The proposed notes will rank as FQM's senior unsecured obligations and will be structurally and contractually subordinated to the secured bank debt available to and drawn by the operating subsidiaries. Furthermore, the guarantors' coverage will only be provided -- on a subordinated basis - by two operating subsidiaries whose nickel operations remain in a ramp-up (FQM Kevitsa Mining Oy) or early production phase (FQM Australia Nickel Ltd). On aggregate, the two subsidiaries accounted for 29% of FQM's consolidated assets and 5% of consolidated EBITDA as at June 2012, on a last 12-months basis. Due to the amount of senior secured and unsecured debt that is structurally or contractually senior to the new notes, Moody's considers it appropriate to assign the new notes a rating that is one notch below the CFR.

PRINCIPAL METHODOLOGY

The principal methodology used in rating First Quantum Minerals was the Global Mining Industry Methodology published in May 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

First Quantum Minerals Ltd (FQM), headquartered in Canada and listed on the Toronto Stock Exchange and the London Stock Exchange (ticker 'FQM'), is an established mining company with large operations in Zambia, where it manages Kansanshi, a very large and low-cost copper and gold mine. FQM also operates a mid-sized copper and gold mine in Mauritania, and two nickel mines which become operational recently, Ravensthorpe in Australia (commissioned in December 2011) and Kevitsa in Finland (commissioned in May 2012). For the 12 months ended June 2012, FQM generated revenues of $2.58 billion and reported an EBITDA of $1.1 billion.

REGULATORY DISCLOSURES

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