Fitch Upgrade Rating of Mining Co in Zambia Long Term Debt Outlook to Stable

fitch ratings first quantum zambia

International ratings agency Fitch Ratings has recently its credit risk on (TSX:FM) long-term (LT) and senior unsecured debt at “B”.

On the other hand, the outlook on LT debt has been upgraded to “stable” from “negative” although the ramp-up on its Kansanshi and Sentinel mines in Zambia had been delayed due to power shortages.

However, a higher copper price and current ramp-ups of projects completed at Kansanshi and Sentinel mines in Zambia will increase copper output, Fitch Ratings indicates.

In addition, the sale of First Quantum’s mine in Finland and a new USD1.8b core banking facility are expected to improve the company’s cash flow and leverage ratios.

According to the same source, these factors will be determinant for the future financial health of the company after the downgrade at the beginning of 2016 to “B” from “BB” as a result of weak and volatile copper price.

The funds from operations (FFO) adjusted gross leverage, a measure of companies’ financial health, is expected to reach a peak of 7.0 in 2016 but to decrease to 5.5 in 2017 and 4.0 in 2018.

First Quantum produced 428,000 tonnes of copper in 2015 up from 411,000 tonnes in 2014.

Most of the production came from Kansanshi, the biggest copper mine in Africa that contributed with 263,000 tonnes in 2014 and 150,292 tonnes in 2015.

Sentinel, the new First Quantum’s copper mine, contributed with 32,971 tonnes in 2015.

Kansanshi currently employs 1,602 people and is located in the Northwestern province while Sentinel employs 2,877 people and is located in the same region.

According to First Quantum 2015 annual report, Kansanshi is expected to produce 235,000 tonnes in 2016 and 2017 while 240,000 tonnes in 2018.

Sentinel mine is expect to produce a maximum of 155,000 tonnes in 2016, 240,000 tonnes in 2017 and 260,000 tonnes in 2018.