FIRST Quantum Minerals says the mining fiscal regime will put the company’s ability to meet various debt financing obligations at risk, which would curtail expansion programmes and halt further investment.
And FQM, the owners of Kansanshi Mine in Solwezi, has recorded a decrease in gross profits for the 2014 financial year of US$997.8 million from US$1.1 billion in 2013.
Commenting on the continued impasse surrounding the controversial mineral royalty rates hiked to 20 per cent from six per cent for open pit mining, FQM stated that the raised mineral royalties would adversely impact reported earnings before interest, taxes, depreciation and amortisation (EBITDA) on a number of key facilities.
“Combined with the recent significant fall in commodity prices, the changes put at risk the company’s ability to meet the net debt to EBITDA covenant under its US$3.0 billion senior debt facility; US $350.0 million Kansanshi facility; and US$100.0 million equipment finance facility with Caterpillar Financial Services Corporation,” FQM stated in a news release on their 2014 financial results.
And FQM chief executive officer and chairman, Philip Pascall, stated that the company remained committed to reducing capital expenditure in the 2015 fiscal year on account of both domestic and international pressures.
“Our previously-announced reduction in planned capital expenditures for 2015 is a substantial step in addressing some of those pressures. While we believe the strong long-term fundamentals for copper remain intact, we consider it prudent to take additional action to ensure that the company can withstand a prolonged period of lower metal prices while building production capacity for the future,” stated Pascall. “As such, we continue to pursue our company-wide cost reduction and cash conservation efforts.”
Meanwhile, the company registered a drop in gross profit from US $997.8 million in 2014 compared to US $1.1 billion gained the previous year, despite increased copper sales volumes of 411,203 tonnes in 2014 from 386,057 tonnes in 2013.