First Quantum to sell $1bn in shares in effort to keep afloat

Tristan Pascall, CEO First Quantum Minerals

FIRST Quantum Minerals is to sell $1bn in shares and raise a further $1.6bn from an offering of notes in an effort to strengthen its balance sheet.

This is following the shock closing of its Cobré Panama mine in December after the Central American government said the terms of the group’s mining licence at Cobré Panama violated certain principles of the constitution.

The Canadian firm also amended some of the terms of a $2.2bn corporate bank facility by extending their maturity to April 2027.

These measures were unveiled at First Quantum’s company fourth quarter results on Wednesday in which the company reported a net loss of $1.45bn.

On Wednesday (February 21), First Quantum announced it had struck a three year deal to sell $500m in copper shipments to its second biggest shareholder, Jiangxi Copper Company.

Cobré Panama is First Quantum’s biggest revenue-generating asset, responsible for about 40% of revenue last year, said Bloomberg News. The closure cast the company’s finances into uncertainty, with billions of dollars of debt maturing in the coming years, it said.

First Quantum said it agreed to sell 121.7 million shares at C$11.10 apiece to a group of banks led by Royal Bank of Canada, Bank of Montreal and Goldman Sachs Group as part of a bought deal. The $1.6 million sale of senior secured second lien notes due 2029 are in a private offering, subject to market conditions, the company said.

First Quantum will continue to advance additional initiatives, including asset and stake sales, in “a disciplined manner,” the company said.

It also announced it was seeking $20bn from Panama in a free trade arbitration case following the closure of the mine.

“Although arbitration isn’t our preferred outcome, we do have a strong case,” Tristan Pascall told analysts on the results call. The $20bn reflects an estimated fair market value of the company’s initial investment “but in reality, with damages and interest, the award could be very much higher”, he added.

Despite efforts to shore up its balance sheet, First Quantum said in its results announcement that it’s at risk of a covenant breach in the coming year, resulting in “material uncertainty” that may cast doubt on the company’s ability to continue.