Earnings call: First Quantum Minerals faces headwinds in Q4 2023 results

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Earnings call: First Quantum Minerals faces headwinds in Q4 2023 results
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First Quantum Minerals (OTC: FQVLF ) Ltd (TSX:FM), a leading mining company, has released its fourth-quarter 2023 results, revealing significant challenges due to disruptions in its Panama operations, particularly at the Cobre Panama mine. The company reported a substantial revenue decline to $1.2B, a 40% drop, and a net loss of $1.447B, attributed to tax expenses and impairments. Despite these setbacks, First Quantum (NASDAQ: QMCO ) is taking several balance sheet initiatives, including a $500M copper prepayment agreement and the proposed sale of the Las Cruces mine in Spain. The company is also dealing with increased net debt, which has risen by $783M to $6.4B, but maintains a focus on operational efficiency and value creation.

Key Takeaways

  • First Quantum's revenue fell by 40% to $1.2B in Q4 2023.
  • The company posted a net loss of $1.447B due to tax expenses and impairments.
  • Copper production decreased at key mines, with plans to address the rainy season's impact.
  • First Quantum signed a $500Mcopper prepayment agreement with Jiangxi Copper.
  • The company is considering selling the Las Cruces mine and is focused on the Kansanshi S3 expansion.
  • Net debt increased to $6.4B, with the company pursuing various initiatives to strengthen its balance sheet.

Company Outlook

  • First Quantum is working to secure positive cash flows from the Kansanshi S3 expansion.
  • The company is focused on resolving challenges in Panama and improving community relations through initiatives like the Cobre Panama visitors program.
  • Arbitration with Panama is ongoing, seeking $20B in damages.

Bearish Highlights

  • Disruptions in Panama have heavily impacted operations.
  • An impairment of $854M was reported at Ravensthorpe due to lower nickel prices.
  • Nickel market pressure is expected to continue with increased supply from Indonesia.

Bullish Highlights

  • Despite challenges, the company remains committed to operational efficiency and value creation.
  • Interest in Zambian assets and potential minority investments are being evaluated.

Misses

  • The company has suspended dividends and is working on cost reductions and working capital optimization.
  • Copper C1 costs have increased by 28% to $1.82 per pound.

Q&A Highlights

  • Tristan Pascall clarified details of the copper prepayment agreement, noting that it includes no caps or floors aligned with LME prices.
  • The Taca Taca project in Argentina is being considered for monetization, pending environmental approval and favorable investment conditions.
  • Plans are in place to restart the idle power plant in Panama to benefit the grid and reduce power prices.

First Quantum Minerals Ltd is navigating a challenging period with operational disruptions and financial setbacks in the fourth quarter of 2023. The company's proactive approach to managing its balance sheet and strategic initiatives aimed at operational improvements indicate a focus on long-term stability and growth. As they work through these issues, First Quantum continues to evaluate opportunities for asset monetization and investments to bolster its position in the global mining industry.

InvestingPro Insights

As First Quantum Minerals Ltd (TSX:FM) confronts a challenging period marked by operational disruptions and financial setbacks, it's crucial for investors to observe the company through various financial lenses. According to real-time data from InvestingPro, First Quantum has an adjusted market capitalization of $6.07 billion, reflecting the scale of the company amidst the reported difficulties.

InvestingPro Data metrics reveal a negative P/E ratio of -6.22, which has further declined in the last twelve months as of Q4 2023 to -12.34. This indicates that investors are currently not expecting earnings to cover the share price, likely due to the company's recent losses. Additionally, the company's revenue has seen a contraction of -15.34% over the last twelve months as of Q4 2023, aligning with the reported 40% drop in Q4 revenue in the article.

In light of these challenges, two InvestingPro Tips stand out. First, the company maintains a strong free cash flow yield, suggesting that it could still generate sufficient cash relative to its share price, which is crucial for its balance sheet initiatives. Second, despite not being profitable over the last twelve months, analysts predict that First Quantum will be profitable this year, offering a glimmer of hope for the company's financial recovery.

For investors looking for a deeper dive into First Quantum's financial health and future prospects, more InvestingPro Tips are available. There are 4 additional tips listed on InvestingPro that can provide further insights into the company's performance and potential strategies.

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Full transcript - First Quantum Minera (FQVLF) Q4 2023:

Operator: Thank you for standing by. This is the conference operator. Welcome to the First Quantum Minerals Ltd Fourth Quarter 2023 Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Bonita To, Director of Investor Relations. Please go ahead.

Bonita To: Thank you, operator, and thank you everyone for joining us today to discuss our fourth quarter results. During the call we will be making forward-looking statements. As such, I encourage you to read the cautionary notes that accompany this presentation, our MD&A and the related news release. As a reminder, the presentation is available on our website and that all dollar references are in U.S. dollars unless otherwise noted. On today's call are Tristan Pascall, our Chief Executive Officer, Ryan MacWilliam, our Chief Financial Officer and Rudi Badenhorst, our Chief Operating Officer. And with that, I will turn the call over to Tristan for opening remarks.

Tristan Pascall: Thank you, Bonita. And thank you everybody for joining our conference call today to discuss our fourth quarter results. Financial and operating results in the fourth quarter last year was significantly impacted by the situation in Panama. As such, the quarter was challenging not just for First Quantum, but for our investors and our stakeholders in Panama, particularly our workforce, the local communities around us and our suppliers. However, we have a plan in place to address the challenges thrown up by the circumstances in Panama, focused on delivering the future positive cash flows from the Kansanshi S3 expansion, which will provide us the necessary time and space for resolution and Cobre Panama. We have made good progress on our balance sheet initiatives to deliver this plan, such as our announcement yesterday on a $500 million copper prepay. We are also well-advanced in discussions with our lenders, and we will keep the market up-to-date on our progress. I will start today's call with an update on the current situation in Panama, followed by an operational update by Rudi. We will keep these updates brief as understandably the focus is on our point balance sheet initiatives, which Ryan will review in detail. I will then close the call with our progress on the Kansanshi S3 expansion project before opening up the lines for Q&A. On our last conference call in October, I'll refresh concession contract for the Cobre Panama mine had successfully passed into law and published in the Official Gazette. Soon thereafter, however, civil unrest gained momentum in the country with road blockages and protests against the government and also the mining contract. The road blockages impacted people and businesses across the country and also at Cobre Panama, as illegal blockades at the port prevented deliveries of essential supplies for our power plant and eventually forced the mine to ramp down and stop production. The blockades also prevented the shipment of concentrate to which both Rudi and Ryan will speak to shortly. On Panama Independence Day, November 28, after four days of deliberation, the Supreme Court in Panama declared law 406 unconstitutional. This was then followed by an announcement on December 19 by the Minister of MICI that a temporary phase of environmental preservation and safe management would be established until June 2024, whilst planning audit and review activities are undertaken. This period will take us into the next administration in Panama with elections across the country to be held in May this year, and the new President taking office in July. In addition, the minister noted that it could take up to two years to plan and perhaps 10 years or more to implement the measures required following the abrupt halt operations that covered Panama. In early January, the company and MICI had discussions related to a formalized preservation and safe management program and the associated costs. At the government's request, we submitted our initial plan to address these critical activities on January 16. As part of this plan, we've proposed the sale of a concentrate on site to fund the initial phase of this critical environmental stability work estimated at around $15 million to $20 million per month and we currently awaiting a response from MICI on this plan. There is currently no mining activity at Cobre Panama, however, blockades around the mine have dissipated allowing for the delivery of critical supplies for the environmental stewardship of the asset. We have also commenced international arbitration processes including notification under the free trade agreement between Canada and Panama, and with the International Chamber of Commerce's International Court of Arbitration relating to the 2023 concession contract. That being said, arbitration is not our preferred outcome, and we continue to engage in constructive communication with the government as we remain committed to Panama and being a part of a long-term solution that delivers the best outcome for the country and Panamanians. As we navigate through this period of preservation and safe management at Cobre Panama, I want to reaffirm that our commitment to the environment is at the forefront. Cobre Panama has always operated under best-in-class environmental management and remains committed to this responsibility on a transparent basis, particularly with regards to tailings and water management. At all our mind sites, we implement best practices and adhere to stringent international standards to minimize ecological footprint and preserve and restore the natural surroundings. Similarly, our reforestation efforts at Cobre Panama are also world-class and contribute to the livelihoods of many Panamanian farmers. We do acknowledge that we need to improve our broad-based communications and we have made it a priority to address perceptions of mining by the public of Panama. This includes media campaigns to dispel the misinformation and fake news that gained traction at the close of last year, as well as direct engagement through tours to the mine site for government officials, civil society, organizations, and community members on an open and transparent basis to demonstrate our best-in-class environmental standards and the benefits of the mine to the country. Panamanians are curious about the mine, with almost half of the people recently polled expressing an interest in visiting to understand more about copper mining. And so yesterday, we launched the Cobre Panama visitors and citizen participation program. We look forward to welcoming some 3000 people per month who wants to learn more about this world-class project that is a huge part of the lives and economy of 1000s of citizens, and which is also a much needed contributor to both the global renewable energy transition and to electrification in developing countries around the world. As we continue with our campaigns to inform the Panamanian people about the mine, we are seeing new space begin to open up in Panama, in which a reasoned debate about the role of mining in the economy and society is increasingly possible. I would now like to hand the call over to Rudi who will provide an update on operations.

Rudi Badenhorst: Thank you, Tristan. And thank you, everybody for joining our call today. Copper production in the fourth quarter totaled 160,000 tons, representing a 28% decrease from quarter three. Sales volumes are also impacted, representing only 80% of the quarter's production and down over 40% from the preceding quarter, due to the poor disruptions at Cobre Panama. Copper C1 cash cost of $1.82 per pound during the quarter was $04.0 higher than quarter three, largely as a result of the lower production volumes. At Cobre Panama, the poor disruptions also prevented the delivery of physical supplies to operate the power plant and forced the mine to ramp down production. As such, copper production for the fourth quarter was 63,000 tons, representing a decrease of 50,000 tons from the previous quarter. Copper C1 cash cost of $1.45 per pound was $0.26 higher than the previous quarter due to the lower production volumes and lower byproduct rates. It is worth noting that prior to the disruptions at Cobre Panama, the CP100 expansion facilities were operating very well, which speaks to the strong capabilities of our project team. And the operation achieved a monthly production record in October and was on track to achieve the top end of its guidance rate, which is now suspended. At Kansanshi, the operation produced approximately 32,000 tons of copper down from the previous quarter by about 8000 tons due to mining constraints in mine 17 and the mine pit that impacted mining rights. The latter relates to a misfire that was experienced in one of the blasting blocks that restricted mining activity. This has been dealt with and is no longer a constraint. Production was also impacted by acid volume restrictions, due to unplanned maintenance at the smelter during the quarter. Additional asset is being procured from the copper belt as we rebuild our acid stocks. Kansanshi's production for 2023 was 135,000 tons well within the guidance range. Copper C1 cash cost of $2.43 a pound was $0.80 higher than quarter three, mainly due to lower production and a one-time catch-up charge on new electricity rates. Production guidance for 2024 is expected to be [indiscernible] to 130,000 tons and 65,000 to 70,000 tons of gold . At Sentinel, the operation continue to be impacted by hard ore in the lower levels of stage one and two pits, and as such copper production was down quarter-over-quarter to approximately 60,000 tons. Mining productivity, however, improved over the course of the quarter with improved blast fragmentation and reduced congestion with the commencement of stage three Western cutback mining. Copper production for the year as a whole was 214,000 tons falling short of the guidance. Copper C1 cash cost of $1.85 per pound was $0.20 higher than the preceding quarter, reflecting the lower production. Copper production is expected to be between 220,000 and 250,000 tons this year. With regards to the current rainy season, we have recorded more rain when compared to the 2019 to 2022 season, but less than we experienced during the last wet season. At Sentinel, it has been significant work on wet weather preparations and stormwater management processes have been implemented to mitigate the risk of potential water accumulation that was experienced in the previous rainy seasons. That being said, there will be some seasonal impact on the Zambian operations in the first quarter, which is reflected in our annual guidance. Thank you, and I would like now to hand over the call to Ryan to review the financials.

Ryan MacWilliam: Thank you, Rudi. As Rudi noted, Cobre Panama was under the state of preservation and safe management for much of the fourth quarter. The blockades around the mine impacted our ability to ship approximately 121,000 tons of copper concentrate, which was produced prior to the Supreme Court ruling, sales therefore fell by more than production. As a result, revenue declined 40% in the quarter to $1.2 billion. EBITDA decreased 72% to $273 million. Our net loss attributable to shareholders was 1.447 billion. This was due to a higher income tax expense from Cobre Panama and an $854 million impairment at Ravensthorpe. The nickel market is under pressure due to the continued ramp up in supply from Indonesia. This has resulted in both lower nickel prices and lower payabilities for Ravensthorpe. With the muted nickel outlook, we've taken the decision to fully impair Ravensthorpe. Across Western Australia, multiple nickel miners have idle production, and it has been pleasing to see the government respond by designating nickel as a strategic mineral and providing royalty relief to support the industry. Moving on to cost. Copper C1 costs were 28% quarter-on-quarter were up 28% quarter-on-quarter to $1.82 per pound impacted by lower production, higher fuel costs, and the impact of [one-offs] [ph] adjustments due to the signing of the new power contract in Zambia. Remaining input costs were stable during the quarter. In December, brent oil prices declined to around $76 per barrel, which should benefit costs in the coming quarter. Onto the balance sheet. Net debt increased by $783 million during the quarter to $6.4 billion. Liquidity was $1.2 billion at the end of the year. That's comprised of $959 million in cash and $250 million of undrawn revolver after we drew on the revolver through the quarter. There were two main drivers for the change to our debt and liquidity. Firstly, as mentioned in our Q3 results, during the fourth quarter, we made a one-time tax payment of $567 million to the government of Panama. This payment was made prior to the Supreme Court ruling. It was important to make this payment and meet the obligations of Law 406 which preserves the strong arbitration rights that we have under this contract the government of Panama. This was the largest ever tax payment in Panama's history, and as a reminder of the contribution that the mine has made to the country. Secondly, net debt increased due to the disruptions to shipping at Cobre Panama and the subsequent preservation and safe management of the mine. As I noted earlier, the disruption of the port prevented us from shipping copper concentrate. The sale of this concentrate will provide important funding of approximately $225 million at current market prices. This is required for the implementation of essential environmental stability measures under the preservation and safe management plan at the mine. With Cobre Panama not in operation, our focus is on ensuring that we have a balance sheet that confidently supports the completion of the Kansanshi S3 expansion project, independent of the timing of resolution in Panama. As a result, we already have initiatives underway to strengthen our financial position. These include the suspension of the dividends, the reduction in capital spending, and operating costs and working capital optimization. Liquidity has been further bolstered by yesterday's announcements of a $500 million copper prepayment with our longstanding customer junk sheet copper at a competitive cost of funds in line with that of our bank debt. The three-year prepayment agreement for 50,000 tons of copper per year, includes a one-year grace period before periodic repayment commences. The price at which copper is sold under the agreement will reflect the LME copper price subject to typical market terms. This prepayment agreement is a reminder of the strategic nature of copper in today's market and the value of stable supply, given the potential disruptions to copper production across the sector. In addition to the prepay, the process to sell our Las Cruces mine in Spain is well advanced and has attracted interest from a range of parties from various parts of the world, reflecting the strategic location and processing capabilities of this project within Iberian pyrite belt. As we alluded to in our January guidance release, we've also received expressions of interest regarding our Zambian assets, and as a result have commenced the process to evaluate the possibility of a minority investment by a strategic investor into this business. This interest is a reflection of the positive business and fiscal reforms that the Zambian government has delivered on in recent years. However, any such proposals received will be considered relative to other options available to the company and will only be pursued if we believe that they will deliver enhanced value and are in the best interest of our shareholders. The options that I have outlined are a subset of those available to the company. As we've mentioned, for a couple of months now, we've been considering pursuing a variety of balance sheet management initiatives across a wide range of finance providers from short-term trade to capital markets. The prepay is an attractive first step in this respect. And we will continue to deliver initiatives which position our balance sheet to support our businesses potential to create significant value over the coming period. Lastly, I'd like to address growing concern references in our MD&A and financial statements. Current forecasts in 2024 before taking into account future balance sheet initiatives indicate that the company may exceed our net debt to EBITDA covenant ratio threshold in the coming 12 months, resulting in a material uncertainty ongoing concern. This is similar to language that has been on our MD&A previously when we've worked through other challenging moments in our history. The nature of this analysis means that it does not factor in potential changes in the company's covenants, despite the fact that we are in advanced discussions with our banks in this respect. There is alignment with our banking group regarding amendments to the facilities to extend our debt amortization and provide more headroom in respect of our covenants. We expect to conclude these changes in the very near term. This should remove the technical risk around the bank covenants, when reviewed at the end of Q1. And that brings the finance section to an end. I'll now hand the call back to Tristan.

Tristan Pascall: Thank you, Ryan. Kansanshi S3 Expansion project remains on budget and on schedule to ramp up in the second half of 2025 and will return the company to a position of strong free cash flow generation. The 1.25 billion project is a key part of our ongoing commitment to Zambia, which is supported by the continuing stable investment climate in the country under the current Zambian government administration. Engineering work at the end of the fourth quarter was 80% complete with minor mechanical design left and the balance on instrumentation and control engineering. Deliveries of major long lead items such as the mills, the primary crusher and process thickeners remain on schedule. Construction on the site continues across all disciplines and excavation of the primary crusher position commenced during the fourth quarter. Similarly, the advancement of the smelter expansion to 1.6 million tons per annum fee capacity and ramp up of the enterprise nickel mine also remain on track. 2023 closed with the company facing one of its biggest challenges in its recent history. However, I remain confident in the resilience of First Quantum and the determination of the team to work through the current challenges. As Ryan discussed in his section, we are taking a proactive approach to manage our balance sheet and address our liquidity in a fulsome and disciplined manner. An important component to this fulsome solution is an amendment and extension of our loan facilities. We have a long relationship with our lending banks, and there's a high degree of alignment among parties, and we expect to provide an update to the market in short order. Whilst we address our liquidity, we remain focused on running our operations executing our Kansanshi S3 Expansion, and the safe and responsible stewardship of Cobre Panama. Thank you. Operator, I would like to open the line for questions now, please.

Operator: Thank you. [Operator Instructions] Our first question comes from Greg Barnes of TD Securities. Please go ahead.

Greg Barnes: Tristan, can you talk a little bit about the damages of value you're seeking under the arbitration process? I know you have the $10 billion number in the slide deck. But I'm wondering if that's the number you're seeking, or is it something more than that?

Tristan Pascall: Yes. Thanks, Greg. I mean, first off, we should highlight that although arbitration isn't our preferred outcome, we do have a strong case in arbitration. But we would really rather come to a resolution with a state of Panama, that results in the best outcome for the people and for the company. That being said, as part of the free trade arbitration that is between Canada and Panama on the free trade agreement, and as required under the process, we have provided a minimum value sought in those proceedings of $20 billion, reflecting an estimated fair market value of the initial investment. But in reality, with damages and interest, the award could be very much higher. There's been some figures quoted in the Panamanian media, which are several times higher. Alongside that we do have the ICC arbitration process as well. That's under the auspices of the concession contract from 2023.

Greg Barnes: And is the same value under the ICC [indiscernible]?

Tristan Pascall: That's under a fair market value consideration that is the termination clause in the ICC contract.

Greg Barnes: And just as a follow up, I'll just direct this to Ryan on the copper prepay, how does the mechanics of the repayment of the 500 million actually work?

Ryan MacWilliam: So Greg, the prepay as a sale agreement for 50,000 tons of copper over three years. And we sell copper to Jiangxi just as we've sold it to them in the past as a regular customer at market related terms. But also as part of the agreement, we receive an advance payment of $500 million. With the interest rate on that payment, a floating interest rate broadly in line with our bank debt costs. We then sell them the copper as per normal, no discount in the LME price on market terms, is a one-year grace period. And then in years two and three, we pay them back on that loan plus interest. And that payment is offset against what they would have paid us for the copper in years two and three.

Operator: Our next question comes from Orest Wowkodaw with Scotia Bank. Please go ahead.

Orest Wowkodaw: Ryan, do you have a target of debt reduction corporately in terms of what you're trying to get with respect to the various transactions you're looking at?

Ryan MacWilliam: Thanks, Orest. The focus is really on having the balance sheet that confidently delivered the S3, because it's S3 that delivers Zambia back to being a strong cash flow producer, and then will naturally deleverage from there. So we have a clear plan in place. It's a holistic plan. It's well-advanced. We announced two important step forwards in that plan today which is the copper prepay and alignment on the bank covenants, and we'll keep the market updated in short order on further progress.

Orest Wowkodaw: Does the prepay qualify or is it considered debt under the covenants or is that considered not debt?

Ryan MacWilliam: Yes. From an accounting perspective it will be deferred revenue, but from a debt perspective -- from a covenant perspective it will likely be included in the debt -- the covenant calculation.

Orest Wowkodaw: Okay. So it's still -- it helps you with liquidity but not with your debt covenants?

Ryan MacWilliam: Correct. The focus on the debt covenants has really been that discussion with the banks. And I just like to note, appreciation for the supportive and constructive approach that our banks have taken in the discussions with us to reach alignment on new covenants.

Orest Wowkodaw: Okay. And can you give us an idea how much of a minority interest are you considering in Zambia in terms of potential sale to a strategic?

Ryan MacWilliam: Orest, I wouldn't get too much into the specifics at this stage, other than to say we've received interest from a number of parties in respect of Zambia and stakes within our business. I think that's a function of it being a high quality, copper business in Zambia, and also the real improvement we've seen in Zambia, which has attracted a variety of parties also to make other investments in Zambia. And we'll explore those discussions in a disciplined manner and if there's a transaction that makes sense for shareholders will progress with that transaction, if not, we're comfortable with the existing ownership structure in Zambia.

Operator: Our next question comes from Jackie Przybylowski of BMO Capital Markets. Please go ahead.

Jackie Przybylowski: I just wanted to ask you about the unsold copper concentrate that you have in Panama 121,000 tons. If you could tell us, I know, it hasn't been sold yet. If you could tell us maybe if you expect it will be sold in the first quarter or if we should assume that's the second quarter transaction. And as a follow up, I guess it'd be helpful just given the Law 406 has been overturned, if you could talk a little bit about what like types of royalty rates and things that you're expecting you would owe on that sale, if and when it happens. Thank you.

Tristan Pascall: Sure, Jackie. Yes, so there's 121,000 tons sitting in the shed. And it's clear from our perspective, that was mines in process prior to the Supreme Court decision, and that will provide the pathway to ship it out. We'd like to press for that. So certainly, we submitted the preservation and safe management plan on the 16th of January. And in conversations with the ministry, a key component of that plan and how to address the environmental stewardship of the site, which is needed is to how those costs are met. So the concentrate is an important part of that. In addition, we don't want to see any gassing or anything coming off that concentrate. So there's a strong argument to move it. We would like to press for that as soon as possible. And in regard to the royalties and so on to, look that's yet to be resolved with the government. But looking at the way the current mining code works, we would expect that the mining code royalties would apply to that. We don't see the minimum tax, the previous arrangements under the Law 406 [indiscernible]. We'd be looking at royalties under the current mining code.

Operator: Our next question comes from Dalton Baretto of Canaccord Genuity. Please go ahead.

Dalton Baretto: Tristan, I'm wondering if I can ask you about the situation around the election in Panama right now. I understand, Martinelli has been disqualified from running. So I'm wondering what the board looks like to you right now. And how you're thinking about both the election as well as your action, post the election? Thank you.

Tristan Pascall: Yes, sure. So I think there's two parts. The first is that, as I was saying there, it's important that some activities commence on the site. And that's really to address the environmental stewardship requirements right now. And we're seeing positive signs in terms of framework around the preservation and safe management plan that is in discussion with the current administration. The election is in May, there's some eight candidates running for that. I think Dalton, what we say is, whoever comes in, the solutions that are provided by the mine in terms of contribution to the economy, contributions to employment, social security, social infrastructure are extremely important and can't be ignored in the context of the challenges that Panama is experiencing in terms of lower growth rates, and also the situation with low water and so on. So we're seeing very high power prices in the country. Getting the power plant running would provide an active contribution to support high power prices for people in their homes in Panama. These are the issues that the incoming administration will need to deal with whichever the successful outcome of the democratic elections is.

Dalton Baretto: Okay. Thank you for that. And then I think you said earlier in your comments that you're seeing new space for responsible debate on the role of mining. What does that look like in Panama right now? And what's the plan to post the election to address that sort of the social license?

Tristan Pascall: Sure, Dalton. So I think the decision by the Supreme Court last year was understandable in terms of a release valve and a lot of emotion in the country. What was a surprise was that they stopped operations. And that needs to be dealt with, because stopping things in such a hard stop, can be very detrimental to the environment. And so that's the reason why the preservation and self management framework is important that those activities can get underway. I think there's an understanding that mines can't stop dead, and there needs to be a fulsome work out of that solution. So we see MICI talk about developing a plan over two years, and it may perhaps take up to 10 years to resolve that. In terms of openings further space, we acknowledge there was a lot of emotion we need to do more in terms of broad-based communication in speaking to people, I think Panamanians are interested to learn about the mine. If you ask them, what should happen from this point that's challenging for people to answer. And I think that is a space. But a lot needs to be done in terms of this time in front of the election, and then into the run up to the new administration coming in.

Operator: Our next question comes from Ralph Profiti of Eight Capital. Please go ahead.

Ralph Profiti: I just have one. The MICI delivery of this preliminary draft on January 16, include proposals for cost sharing of the $15 million to $20 million a month, after successful monetization of those inventories. Just wondering how we should think about sort of who foots the bill, in that medium term?

Tristan Pascall: Sure, Ralph. So what happened there MICI had asked for us to submit a plan. That is they said, this needs to be addressed, how will you address the safe environmental management of the site. So they called for a plan. And so it was our submission, preservation and safe management plan that dealt with the topics of environmental stewardship that is required, it dealt with the topics of the welfare of employees, and how they would be looked after given the circumstances, security of the asset, safe maintenance, that is keeping the assets in good standing, and then also the costs. And certainly, there's an understanding in terms of that framework that the cost of that environmental stewardship do need to be met. So the concentrate is available for that. It also eliminates potential environmental degradation on the concentrate itself. And that would address that $15 million to $20 million per month. That's the necessary level, in order to ensure environmental stewardship, that sort of level of about 1400 people per site, which is about the right level, beyond that the ability to operate some of the machinery there would give us greater ability to show that pH and the tailings dam is held within compliance. And that is there is no degradation in terms of downstream environmental impacts. And we've seen that all the way through Panama, it really has been operating as a gold standard environmentally, particularly in regard to discharge of water from the tailings dam, all our independent audit to return those very high standard results. And for that to continue those costs do need to be addressed. That was part of the plan that we put forward.

Operator: Our next question comes from Bryce Adams of CIBC Capital Markets. Please go ahead.

Bryce Adams: Firstly, just noting the Ravensthorpe impairment, it might be difficult with so many unknowns, but what are the triggers for an impairment test on Cobre Panama that test is -- is that something that's being considered or with arbitration initiated, it's not required, just wondering what the trigger might be for the testing there.

Tristan Pascall: Sure, Bryce. So we do look at impairment trigger across our assets that include Ravensthorpe included Cobre Panama, and you then consider a variety of scenarios going forward at Cobre Panama as you work through that impairment analysis. I think it's important to note that you also consider potential arbitration outcomes when you conduct that analysis. On the basis of that we were comfortable with the book value we have for Cobre Panama.

Bryce Adams: Okay, thanks. And for a follow up, I'm going to get back to the copper concentrated Cobre Panama. If you're successful in shipping out that con, do you expect that all of the net revenue is available for care and maintenance costs? And in that scenario, is there a potential for right down to the amount of the cost of the inventory?

Tristan Pascall: Yes, Bryce. The way it would work is, we would sell that copper concentrate that would generate around turn $220 million of cash around $160 million of EBITDA. So that normally would have been EBITDA that would have flowed into Q4 that would then flow in Q1, and that cash amount we expect broadly fund the preservation and environmental work at sites for the site for the most of this year.

Operator: Our next question comes from Ioannis Masvoulas of Morgan Stanley (NYSE: MS ). Please go ahead.

Ioannis Masvoulas: First question for me, going back to the prepayment agreement. Could this deal in any way restrict the pool of possible bidders for a minority stake? Given that you will have to sell 50,000 tons per annum to Jiangxi for the next three years? And then within that, do you have capacity to do more of these deals, for example, at the Sentinel? Thank you.

Tristan Pascall: Sure, Ioannis. And so to your first question, no, the contracting entity is our marketing subsidiary, and it's a small percentage of the overall copper production from Zambian business. In terms of your second question, yes, there is potential for future agreements like this one. We will assess them on a case-by-case basis, just as we do all our financing options, and where we feel they're at competitive terms that makes sense for us, we'll enter into them.

Operator: Our next question comes from Lawson Winder of Bank of America (NYSE: BAC ) Securities. Please go ahead.

Lawson Winder: Thank you for the presentation today. I just wanted to get a little bit of clarity on the prepay out. I wasn't 100% clear that there are no caps or floors?

Tristan Pascall: Correct, Lawson, it's that LME prices. So there's no implicit hedging agreements locked into the prepay. It's just about purely selling physical copper at market related prices. And as part of that, there's also a loan agreement to First Quantum.

Lawson Winder: Okay, perfect. Also wanted to ask you about potential asset monetization or minority sale. So I mean, through your sort of consistent communication with the market and with us, Taca Taca has never been mentioned as a possible asset that could be monetized to help with liquidity and striking the balance sheet. Is that something you guys talk about internally?

Tristan Pascall: Sure, Lawson. We certainly looked at that. Taca Taca is a great project. We think it hangs together really well. The current stage of the asset is we need to address two questions. One, the environmental social impact assessment approval. And secondly, the investment climate in Argentina. And at this stage, we think both of those, particularly the investment climate as though we're seeing with the new administration there certainly intent. But it's really yet -- we get to see implementation that would, we think impacted the way in which a process would go forward. Certainly, as we look at that asset, the potential for partnership, and so on in the future, we'd been open to say we would look at that. I think it really needs to get to a shovel ready position, Lawson before, we could look further into that.

Operator: Our next question comes from Ian Rossouw of Barclays (LON: BARC ). Please go ahead.

Ian Rossouw: Just one question on this preservation and safe management program. Does any of your proposals include producing new copper, to help fund the ongoing program going forward? And maybe just as part of that, you mentioned that now that the blockade has cleared, have you been able to restart the power plant and selling into the grid?

Tristan Pascall: Sure, Ian. At this time, no power plant is still idle. We'd like to see that happen. The producing that power would certainly have a very positive impact for Panamanians in terms of reducing power price in the grid. It's currently at a historical high, because of low water in the hydro dams in the country. And this time of year is always a low because of rainfall anomaly and because of low wind and solar. So currently Panama is running a lot of diesel power, which is very expensive. And certainly the power station can contribute to the national grid. In terms of running operations and generating new copper, that alternative is available in that, turning the mill and producing on one train as we were during the care and maintenance stage during the COVID period. We're certainly able to hold the environmental stewardship particularly around the tailings dam in a very strong position. And ultimately, it's the buffering from [indiscernible], the buffering from the processing in the milling trains, and certainly you could see that in by some level of operation really holds things steady and hold thing constant, it would also provide the sand that's necessary for the ongoing cycling sand construction on the tailings dam. Without that you're challenged around erosion, you're challenged around long term on those issues on the tailings dam because all of the long term planning was there. But in the interim, you know, there is ongoing construction that is required on the dam and to manage you know, pH in the tailings in the facility itself.

Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Tristan Pascall for any closing remarks.

Tristan Pascall: Thank you very much, operator and thank you everyone for joining our call today. We certainly appreciate the support and we look forward to talking to you again soon.

Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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