First Quantum delays Cobre Panama capex update

An update on all its development projects did little to assuage fears surrounding First Quantum Minerals’ (TSX: FM) most recent, expensive acquisition.

While the company has taken on a lofty expansion plan, which includes building six facilities, investors are concerned about the company’s ability to deliver on its most significant source of future growth: the Cobre Panama copper megaproject in Panama.

First Quantum acquired Cobre Panama via its drawn-out, $5.1-billion acquisition of Inmet Mining earlier this year, saying it would release a revised capex estimate and commissioning schedule before year-end.

But that update is being pushed to early 2014, which has some investors jittery.

Such fears are no doubt connected to the expensive acquisition and higher-than-expected development costs that have run across the mining industry as metal prices fall. The environment has created concern over increased capex at Cobre Panama, so a delay in getting information on the matter isn’t helping.

Word of the delay had the company’s shares falling 4% since First Quantum issued the statement, with its stock trading for $16.85 on Dec. 11.

Before being taken over by First Quantum, Inmet forecast that it would cost $6.2 billion to build the mine, but First Quantum hinted that it could do better, touting its own development expertise as it sought to convince shareholders of the merits of its takeover offer.

The company blames the delay on a need to correct technical and logistical shortcomings left over from the work done by Inmet. It says the corrections are taking longer than expected.

As for its other projects in the development pipeline, First Quantum has reported success with the expansion of its Kansanshi copper mine in Zambia. The company expanded the oxide circuit of Africa’s biggest copper mine to 14.5 million tonnes per year, with the first copper cathode produced in November.

It expects that the expanded solvent-extraction and electrowinning plant will reach full capacity once its copper smelter at the site is in operation. Construction at the 1.2-million-tonne-per-year copper smelter is humming along, with commissioning expected to begin in mid-2014. The US$690-million smelter could reach 80% of its design capacity by mid-2015.

First Quantum also updated investors on the construction of its Sentinel copper mine, also in Zambia. It says the project is on schedule and on budget, and should be commissioned in the second half of next year. It expects the project will cost US$1.9 billion to build, which works out to US$6,335 per installed tonne of production, making it one of the lowest-cost development projects in the copper industry.