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

By The Canadian Press

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By The Canadian Press

TORONTO - First Quantum Minerals (TSX:FM.TO - News) is seeking to slash outstanding debt by at least US$1 billion within six months as it scales back spending to offset low copper prices.

The Vancouver-based company has also cut 644 people from its workforce, reduced salaries by up to 20 per cent and 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."

Copper future contracts are currently pricing the industrial metal at about US$2.34 a pound, down from about $3 at year ago.

First Quantum said it's committed to reducing its outstanding debt by more than $1 billion through a combination of asset sales and other strategic initiatives by the end of the 2016 first quarter.

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.TO - News) 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.

The company's shares rose about 20 per cent overnight in London but remain near a 52-week low set last week.

The announcement was made after the Toronto Stock Exchange closed, with First Quantum shares at C$6.19 — up from the 52-week low of $4.52 set on Sept. 28 but down from $21.03 a year ago on Oct. 6, 2014.