Copper cathode production was 34% higher in Q1 2013 compared to Q1 2012 due to increased throughput and recovery. Recovery increased to 88% in Q1 2013 due to the full implementation of the leach feed surge tank with oxygen addition that was completed during 2012. Copper grades were consistent at 6.7%. Production in Q1 2012 was negatively impacted by a nine-day planned maintenance shutdown and a one-day national strike.
Cash costs in Q1 2013 were 28% lower than Q1 2012 due to significantly higher copper cathode production as well as lower operating costs relating to lower reagent costs and the non-recurrence of costs associated with the maintenance shutdown in Q1 2012.
Sales revenues and gross profit have both increased in comparison to Q1 2012 by 26% and 43%, respectively. The increase in sales revenues reflects higher copper cathode sales volumes, partially offset by lower realized copper prices. The increase in sales revenues combined with lower operating costs drove the increase in gross profit. Gross profit in the 10-day post-acquisition period is impacted by the partial recognition in net earnings of the fair value adjustments made to inventory on the date of acquisition. These adjustments impact the results as a portion of the inventory held on the balance sheet at acquisition date has been sold. It is expected that the fair value adjustment to finished goods inventory will be fully unwound during Q2 2013.
Subsequent to the quarter end, a fire occurred in one of the plant's eight leach reactors. All eight reactors were shut down following the fire to allow for a thorough assessment of damages and to investigate the cause of the fire. As of April 23, seven of the eight reactors were re-commissioned and the final reactor is expected to be online by mid-May. The fire and related re-commissioning period is expected to result in approximately 3,300 tonnes of lost copper cathode production, however plans to recover some or all of the lost production are currently under review.
Outlook
Production is expected to be between 69,000 tonnes and 72,000 tonnes copper cathode in 2013. The plant will be tested at higher ore throughput and lower grade to assess the effects on plant performance before Las Cruces enters into lower copper grade areas of the mine, which is expected in 2014.
In 2013, process plant improvements will focus on reducing recovery losses downstream of the leaching reactors that have risen with the increase in copper cathode production and due to operating with process solutions that contain more copper.
-------------- --------------------------------- Historical results--------------------------------------------------------------------------Cayeli Copper and Zinc March 22-31 Full Quarter Operation(1) 2013 Q1 2013 Q4 2012 Q1 2012--------------------------------------------------------------------------Ore tonnes milled (000's) 37 323 319 299Copper ore grade processed (%) 3.2 3.2 3.0 3.4Copper recovery (%) 76 77 74 79Zinc ore grade processed (%) 4.5 4.6 5.0 5.4Zinc recovery (%) 66 68 69 65Copper production (tonnes) 909 7,873 7,024 8,082Copper sales (tonnes) 742 8,080 5,088 11,136Zinc production (tonnes) 1,107 10,249 11,062 10,498Zinc sales (tonnes) - 7,173 10,019 10,298Cash costs (C1) (per lb)(2) n/a $0.93 $0.65 $0.76Total costs (C3) (per lb)(2) n/a $1.51 $1.14 $1.22--------------------------------------------------------------------------Sales revenues 5.0 65.3 45.9 101.9Gross profit (loss)(3) (1.7) 31.3 16.5 66.0EBITDA(2) (0.4) 38.2 21.2 71.0--------------------------------------------------------------------------(1) Results from the Cayeli mine are only included in First Quantum'sfinancial results for the period subsequent to the date of acquisition onMarch 22, 2013. Prior period results are shown for comparative purposes onlyand do not include any financial adjustments that would be required had theacquisition taken place on January 1, 2012.(2) C1 and C3 costs and EBITDA are not recognized under IFRS. See"Regulatory Disclosures" for further information. C1 and C3 costs have beenrecalculated using First Quantum's methodology and may be different to thatpreviously disclosed by Inmet.(3) Gross profit (loss) is defined as sales revenues less cost of sales;disclosure regarding the Cayeli mine in Inmet's financial reporting definessales revenues less cost of sales as operating earnings.
