EM CEEMEA CREDIT: First Quantum: Q3 earnings, neutral read

(FMCN; NR/Bneg/B)

• A neutral read for credit sentiment from Canada-HQ, Zambia-focused First Quantum Minerals Q3 earnings, showing a net attrib. loss of USD48mn vs y/y profit as the Co. reviews up its guidance on Copper C1 costs and Management is still seeking a resolution for its Panama operations. In secondary markets, the recently issued FMCN Feb34s chart at z+310bp, close to the local lows.
• Operationally, Copper production stood at 105kt marginally missing estimates. Copper prod’n guidance has now been refined to 390k-410k tonnes range from earlier range of 380k-440k tonnes. Costs remain elevated with Copper C1 at $1.95/lb, +24% y/y, higher than estimates.
• Financially, rev’s missed estimates at USD1.34bn, up y/y. We see lower y/y gross profit at USD360mn, with op. profit also lower at USD223mn, which leaving a net attributable loss of USD48mn.
• EBITDA shows sequentially +9% q/q at USD435mn mainly on higher sales volumes, which leaves LTM EBITDA at USD1.67bn.
• Cash flow from operations looks elevated on receipt of USD1bn in August from two Gold Streaming Agreements (GSA). We note a reduction in quarterly capex at USD280mn vs USD310mn in Q2. Capex FY25 guidance has been revised down to USD1.15-1.25bn from USD1.30-1.45bn previous.
• Liquidity has been significantly boosted by the GSA, reaching USD2.26bn, up USD600mn vs Q2. Net debt decreased 12% during the quarter to USD4.75bn on the back of strong EBITDA generation (USD435mn) and USD1bn contribution from GSA, partly offset by lower Capex at USD280mn, sequentially elevated interest expenses (USD166mn) and moderate WC outflows (timing of receivables) of USD136mn, with total debt at USD5.71bn. Non-adj. rolling leverage is reported at 2.85x, sequentially lower and well within covenant thresholds.