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First Quantum's 2022 expectations worsen

Global copper miner First Quantum Minerals has revised down its 2022 production guidance and lifted cost expectations after a soft start to the year while the company’s share price has eased lower.
First Quantum's 2022 expectations worsen First Quantum's 2022 expectations worsen First Quantum's 2022 expectations worsen First Quantum's 2022 expectations worsen First Quantum's 2022 expectations worsen

Total copper production guidance for the year now stands at 790,000-855,000 tonnes, which is down from 810,000-880,000 tonnes.

The revision followed first quarter production falling 10% from Q4 2021 to 182,210 tonnes.

"Different factors at each of the main operating mines contributed, to varying degrees, to a reduction in grade from Q4 2021 levels," First Quantum said.

"Grades are expected to return to planned levels at Cobre Panama and Sentinel over the coming months, while Kansanshi's grades are expected to be lower than 2021," the company said.

Total gold and nickel production guidance remains unchanged at 285,000-310,000 ounces and 25,000-30,000 contained tonnes, respectively. Gold production fell 6% quarter on quarter to 74,945oz and nickel production rose by 51% to 5,122 contained tonnes.

Meanwhile, the miner's guidance for C1 cash cost has been lifted from US$1.30-$1.50 to $1.45-$1.60 per lb and nickel C1 guidance has risen from $5.75-$6.50 to $6.25-$7.00 per lb. Likewise, all-in sustaining cost guidance ranges for copper and nickel were lifted from $1.90-$2.05 to $2.15-$2.30 per lb and $7.00-$7.75 to $7.50-$8.50 per lb, respectively.

First Quantum pointed to the war in Ukraine and the associated wide-reaching sanctions imposed upon Russia leading to higher energy and commodity prices which have contributed to the global inflationary environment.

"For the company, various inputs and operational costs have increased and may increase further; these include costs for fuel, explosives, sulphur, freight, reagents and steel," First Quantum said.

"Such inflationary pressures have currently added approximately $0.10 per lb to monthly copper C1 cash costs and approximately $0.50 per lb to monthly nickel C1 cash costs," the company said.

Canaccord Genuity Capital Markets analyst Dalton Baretto said that while First Quantum's Q1 copper production was in line with CG's estimates, it was below consensus forecasts of 194,000 tonnes while C1 costs were above street forecasts of $1.52/lb.

Despite the forecast misses and reduced guidance, Baretto said the results were only "modestly" negative.

Jefferies analyst Christopher LaFemina noted that First Quantum is "very well" placed to benefit from rising copper prices in the years ahead.

"A lack of supply growth combined with growing demand for decarbonization and other end markets should lead to a multi-year period of higher than expected prices, with the market becoming critically tight by 2025," he said.

The Toronto Stock Exchange-listed company's share price fell 4% day on day to C$33.83 (US$26.47) on April 26. Earlier in the month, on April 5, the stock closed as high as C$44.96.

First Quantum has a market capitalisation of C$23.38 billion.