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First Quantum launches US$1B bought deal as Panama closure pushes miner to the brink

The Cobre Panama open-pit copper mine stands in Donoso, Panama, Thursday, Jan. 11, 2024. A Canadian-headquartered mining company is seeking at least $20 billion through international arbitration in the wake of the shutdown of its copper mine in Panama. THE CANADIAN PRESS/AP-Agustin Herrera

TORONTO — First Quantum Minerals Ltd. said it will raise roughly US$1 billion through a bought deal offering and use the proceeds to repay debt and bolster its liquidity as it says its operations could be threatened by the closure of its Cobre Panamá mine.

The deal is being underwritten by a syndicate led by RBC Capital Markets, BMO Capital Markets and Goldman Sachs, where the underwriters have agreed to purchase 121,680,000 common shares of First Quantum at a price of C$11.10 each. 

In a bought deal, a bank or group of investors purchases a group of shares, usually at a discount, then sell them to a third party.

The company also said it was embarking on several other measures to shore up its finances.

Earlier in the day on Wednesday, First Quantum revealed it's seeking at least US$20 billion through international arbitration after the Panama government effectively shut down its copper mine in the country. 

The CEO of First Quantum Minerals Ltd. said arbitration is not the company's first choice and that it continues to hope it can reach a satisfactory solution with the government of Panama regarding the future of Cobre Panamá.

But Tristan Pascall told analysts on a fourth-quarter conference call Wednesday that the company commenced the arbitration process under the terms of the free-trade agreement between Canada and Panama as well as through the International Chamber of Commerce's International Court of Arbitration.

"We have provided a minimum value we saw in those proceedings of US$20 billion, reflecting an estimated fair market value of the initial investments," Pascall said.

"But in reality, with damages and interest, it could be very much higher."

First Quantum suspended production at its open-pit Cobre Panamá mine at the end of November after Panama's Supreme Court ruled that a 20-year contract allowing for its operation in the country was unconstitutional.

The mine had been the focus of ongoing blockades and widespread protest by nationalists and environmentalists concerned about its impact in a delicate jungle ecosystem.

The shutdown has had a devastating effect on First Quantum, which has said that it could take up to a decade for the company to implement the inspections, planning and environmental stability measures required by the country's government.

In the meantime, the company has said it will cost between US$15 million and US$20 million per month to safely maintain the site while it is shut down.

In the fourth quarter, the blockade around the mine impacted First Quantum's ability to ship approximately 121,000 tonnes of copper concentrate, which had been produced prior to the Supreme Court ruling. As a result, the company's revenue declined 40 per cent in the quarter to US$1.2 billion.

First Quantum Minerals Ltd. reported a net loss for the quarter of US$1.45 billion, and warned in its earnings release that the situation in Panama has impacted the company's earnings potential to the point that its ability to continue operating could be threatened within the next 12 months.

But Pascall said the company is confident in a number of initiatives it has undertaken to bolster its finances and protect against this risk, including the signing of a US$500-million copper prepay arrangement. The company is also aiming to sell off minor assets and shares in major ones, and is working with lenders to amend and extend its 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 updates to the market in short order," he said.

First Quantum shares closed 2.58 per cent higher on the TSX Wednesday at $11.91 but have lost more than half of their value over the past year.  

This report by The Canadian Press was first published Feb. 21, 2024.

Companies in this story: (TSX:FM)

The Canadian Press

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