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TORONTO – When First Quantum Minerals Ltd. acquired Inmet Mining Corp. for almost $5-billion early last year, the key rationale is that it expected to find enormous cost savings at Cobre Panama, Inmet’s flagship project and one of the world’s largest undeveloped copper deposits.
On Tuesday, nearly a year later, First Quantum finally released its Cobre Panama projections. The headline number was an eye-opener, as the company’s proposed capital cost of US$6.4-billion is actually higher than the US$6.2-billion that Inmet was talking about. However, First Quantum also plans to produce a lot more copper than Inmet did.
“The re-engineering of the Cobre Panama project has resulted in a very much larger project of substantially lower capital intensity, and with a considered but clearly defined timeline to completion,” President Clive Newall said on a conference call.
Vancouver-based First Quantum plans to churn out a whopping 320,000 tonnes of copper a year at Cobre Panama, roughly 20% more than Inmet proposed. It also expects to produce 100,000 ounces of gold, 1.8 million ounces of silver and 3,500 tonnes of molybdenum per year from the mine.
The proposal got a big thumbs up from investors and analysts, who have been waiting months for this information and were pleased with what they saw.
“The slight increase in capex is more than offset, in our view, by the increased throughput and copper production, lowering the capital intensity of the project,” RBC Capital Markets analyst Fraser Phillips said in a note. “Also, we believe the increase in capital cost is lower than the increase the market was anticipating.”
First Quantum spent much of the last year studying and making changes to Inmet’s mine plan at Cobre Panama to find efficiencies. The company has a well-regarded mine-building team, and has looked for ways to reduce the use of contractors and take more control over construction of the project.
For the rest of this article, click here: http://business.financialpost.com/2014/01/28/first-quantum-raises-copper-forecast-for-cobre-panama-but-start-pushed-back/