First Quantum to sell assets, reduce debt by at least US$1 billion by end of Q1

TORONTO – Shares in First Quantum Minerals (TSX:FM) soared 21 per cent Tuesday after the Vancouver-based mining and metals company said it plans to slash its debt by at least US$1 billion within six months through a combination of asset sales and other strategic initiatives.

The various moves announced by the company, which are aimed at offsetting the effects of low copper prices, included laying off 644 people and reducing salaries by up to 20 per cent.

Copper future contracts are currently pricing the industrial metal at about US$2.35 a pound, down from about $3 at year ago.

Meanwhile, the company also lowered the cost target for its flagship Cobre Panama project by seven per cent to US$5.95 billion.

“Even at current commodity prices, Cobre Panama remains economically highly attractive,” the company said late Monday.

“The initiatives now being undertaken are aimed at protecting against disruption to the planned timetable to completion for Cobre Panama and importantly, the current strong support of the company’s lenders is maintained.”

In addition to the reduced spending on the Panama project, which First Quantum is developing with several partners, the company is aiming to reduce or reschedule about $700 million in other capital programs.

First Quantum says about US$2.6 billion has already been spent on Cobre Panama, including $524 million from partner KPMC. The rest of the costs will by be covered by a further $666 million from KPMC, $1 billion from Franco-Nevada and $1.66 billion from First Quantum.

It announced separately that a subsidiary of Toronto-based Franco-Nevada Corp. (TSX:FNV) is expected to provide US$330 million to US$340 million this month as an initial payment towards the US$1-billion deposit on future sales of gold and silver from the Cobre Panama copper project.

On the Toronto Stock Exchange, First Quantum shares rose $1.30 or 21 per cent to $7.49 on heavy volume of more than 12.5 million shares.