First Quantum prices US$1.3 billion note offering

First Quantum Minerals Ltd. (FM-TSX) said it has completed the pricing for a US$1.3 billion offering of senior notes, with proceeds earmarked for debt repayment. It said the offering of senior notes due in 2031 has been raised from the original US$1.0 billion target.

Interest on the notes will accrue from the issue date at a rate of 8.625% annually and will be payable semi-annually. Settlement is expected to occur by May 30, 2023. The notes will be senior unsecured obligations of the company and will be guaranteed by certain First Quantum subsidiaries.

The company said it intends to apply proceeds from the sale of the notes to the repayment of US$970 million aggregate principal amount under the company’s existing revolving credit facility, and to redeem US$300 million in outstanding senior notes due in 20025. Part of the proceeds will also be used to pay expenses associated with the offering.

First Quantum shares eased lower on the news, falling 3.8% or $1.26 to $31.44 on volume of 349,490. The shares are currently trading in a 52-week range of $39.27 and $18.67.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania. The company’s portfolio of assets includes the Kansanshi mine in Zambia, which ranks as the largest copper mine in Africa.

Cobre Panama is First Quantum’s flagship operation. It is a huge open-pit copper project located in the Panama jungle, about 120 kilometres west of Panama City and ranks as First Quantum’s key asset.

Cobre Panama contributes to approximately 5.0% of Panama’s GDP, makes up 75% of the country’s export goods and has created at least 40,000 jobs, directly and indirectly, that supports an estimated 100,000 or more Panamanians.

First Quantum recently entered into a joint venture agreement with Rio Tinto Plc [RIO-NYSE] that would allow the company to earn a 55% stake in the giant La Granja Cu project in northern Peru.

La Granga is one of the world’s largest undeveloped copper projects, containing a very large and relatively high grade inferred resource of 4.31 billion tonnes of grade 0.51% copper. Under the agreement, First Quantum will pay $105 million in cash and invest $546 million of the initial project capital (the remaining capex will be shared pro-rate on a 55%-45% basis).

Project work over the next several years is largely study based, requiring on modest capital spending. It is speculated that the development of the company’s Taca Taca copper project in Argentina is likely to move forward first (sometime after 2024) pending sufficient balance sheet deleveraging and an acceptable investment climate.