investor presentation: our commitment to zambia in a slowing investment environment
DESCRIPTION
Our Commitment to Zambia in a Slowing Investment Environment Speaker: Clive Newall, President and Director, First Quantum Minerals Mining On Top: Africa - London Summit 25-26 Jun 2013 | LondonTRANSCRIPT
Our Commitment to Zambia in
a Slowing Investment Environment
2
Geographically Diversified Portfolio of High-Quality Operations & Projects
3
High-Quality, Stable Operations
Kansanshi Cu-Au mine, Zambia
• Located near Solwezi in the
north western Province of Zambia
• First production in 2005
• Open pit mining
• Flexible ore treatment to allow for
variation in ore type :
– sulphide circuit; oxide circuit;
gold facility
• Near mine resource definition and
exploration programs
• Workforce = ~11,200 (substantially more created through the multiplier effect)
4
High-Quality, Stable Operations
Kansanshi Cu-Au mine, Zambia
Multi-phase production expansion
project underway
– 2012 – 2015
60% increase in overall
production capacity
– 2012 – 2014
130% increase in oxide
production capacity
– 2014 - 2015
90% increase in sulphide
production capacity
Expansion
Project Capacity Completion
Estimate
Cost
Production
Impact
(US$M)
Oxide 7.2 mtpa Complete 31 Copper: 10,000 - 15,000 tpa
Oxide 14.5 mtpa 2013 - 2014 200 Copper: 60,000 - 75,000 tpa
Smelter 1.2 mtpa 2014 650 Smelter Acid – 1.0 Mtpa @
$40-$50/tonne
Sulphide 25 mtpa 2015 565 Copper: 60,000 - 70,000 tpa
5
Our Project Pipeline
Copper Smelter, Zambia
• Processing capacity of 1.2 Mtpa
—71% Sentinel
—100% Kansanshi
— Average copper grade 26%
• Blister copper production 300,000 tpa;
acid production 1.0 Mtpa
• Estimates:
− Capital cost of US$650M
− Operating cost US$69/tonne of
concentrate
− Commissioning from mid 2014
• Estimated savings: US$340M - US$510M/year
• Direct jobs to be created estimated at ~400
6
Our Project Pipeline
Sentinel Cu project, Zambia
• Located ~ 140 km northwest of
Solwezi, northern Zambia
• M&I resource of 1,027 Mt at
0.51% Cu grade, containing 5.2 Mt Cu
• Estimates:
– 2.2:1 LOM strip ratio
– >15 years mine life
– US$2.0 billion capex
– Annual production up to
300,000 tonnes
• Direct jobs to be created estimated at ~ 2,000
7
(21%)
(15%)
(5%)
3%
5%
5%
7%
9%
11%
12%
13%
15%
16%
22%
23%
27%
33%
Glencore
ENRC
Kazakhmys
Norilsk
Eramet SA
Anglo American
HudBay
Rio Tinto
Freeport
Teck
Lundin
Vedanta
BHP Billiton
Vale
Antofagasta
Southern Copper
First Quantum
Total Annualized Shareholder Return
Source: CapIQ
January 2000 – March 2013
8
8
Our Economic Contribution to Zambia
• Total Investment to end 2012
= $2.75 billion
• Committed Investment = $3.5 billion
• Tax paid since 2005 = >$2.0 billion
(>10% of all taxes collected)
• Number of employees including
contract labour =13,200
(substantially more with the multiplier
effect of 1:10)
• Direct contribution to Zambian gross
national income = 9%
9
Our Contribution to Our Zambian Communities
• On-going malaria control and HIV programs
• 106 school places currently provided;
additional 600 being created
• Over 50 hospital beds donated plus
refurbishments and upgrades to hospitals
• 930 conservation farming positions
supported
• 53 scholarships provided; 47 students on
various training programs
• 107-space apprenticeship program
10
Our Contribution to Zambia in a Slowing Investment Environment
Committed Investment to 2015 = $3.5 billion
• Sentinel copper project = $1.7 billion
• Kansanshi copper smelter = $480 million
• Kansanshi sulphide expansion = $555 million
• Other commitments = $765 million
• Direct jobs to be created = 2,400
One of the Few Mining Companies
Investing in Building Capacity
12
Metals & Mining Capital Expenditure Has Peaked
Source: Company information, CapIQ
Note: Includes Anglo American, BHP Billiton, Glencore Xstrata, Rio Tinto and Vale
(US$ MM)
--
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E
Capital Expenditure by Major Mining Companies
13
IPO Proceeds
(US$ Bn)
Junior Miners Struggling to Access Capital Troubled Financing Landscape Has Created a Funding Gap for Junior Mining Companies
Source: Ernst & Young Metals and Mining Outlook 2013
40-50% reductions in new issues and follow-on
proceeds providing little support for Juniors from the
equity markets
--
50
100
150
200
250
300
--
5
10
15
20
25
2007 2008 2009 2010 2011 2012
Proceeds Volume
Volume
(Deals)
14
Bond Proceeds
(US$ Bn)
--
40
80
120
160
200
--
20
40
60
80
100
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Proceeds Volume
Syndicated Loan Volume (2000-2012)
(US$ Bn)
Focus on Capital Structure, Not Capital Spending
Source: Ernst & Young Metals and Mining Outlook 2013
1
5
8
10
12
25
59
-- 20 40 60
Debtor in Possesion
Project Finance
Capital Expenditure
Acquisition Finance
Working Capital
Corporate Purposes
Refinancing
Volume
(Deals)
Source: Ernst & Young Metals and Mining Outlook 2013
Two-tier market:
the largest
borrowing large;
the rest
borrowing little
or not at all
Over 50% of
proceeds “used
to restructure
existing lending”
Only a small
fraction of
proceeds are
used to fund
growth projects
15
First Quantum: Success Through Project Development
We spend a
disproportionally high
amount on growth
projects
This approach has
been a key driver
behind our success as
a company by
providing the basis for
our superior track
record of production
growth and
shareholder returns
Building on this track
record, we have
increased and
accelerated our
development projects
(ktpa)
--
10%
20%
30%
40%
50%
60%
70%
2005 2006 2007 2008 2009 2010 2011 2012 2013
First Quantum Copper Peers Majors
Source: CapIQ
--
200
400
600
800
1,000
1,200
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: CapIQ
Bwana Lonshi
2001
Kansanshi
2004
Guelb Moghrein
2006 Frontier
2007
Ravensthorpe
2011
Kevitsa
2012
Kansanshi
Expansion
and Smelter
Sentinel
Cobre
Panama Haquira
Enterprise
Capital Expenditure as a Percentage of Revenue (2005-2013)
Copper Production (Total)
16
Leading Copper Growth
Source: BrookHunt
1.8
1.5 1.5
1.3 1.2
0.9 0.8
0.8
0.6
0.5 0.5 0.5 0.4 0.4 0.3
Fre
epo
rt-M
cM
oR
an
Gle
nco
re X
str
ata
Co
de
lco
First Q
uan
tum
BH
P B
illito
n
So
uth
ern
Co
pp
er
Rio
Tin
to
An
glo
Am
erican
KG
HM
Ka
za
kh
mys
Te
ck R
esou
rce
s
Va
le
An
tofa
ga
sta
No
rils
k
First Q
uantu
m 2
012
2018E Copper Production, Mt
17
In Summary
• Capital available for investment in mining
projects is diminishing rapidly
• First Quantum is one of the few companies still
investing
• Currently, mining companies are being much
more selective on where they invest their capital
Our Commitment to Zambia in
a Slowing Investment Environment