First Quantum assures Zambian power supply improving

Addressing concerns about the power deficit affecting its Zambian operations, First Quantum has assured that a consistent electricity supply was being received and that it is evaluating secondary sources of power.

In July the Zambian state energy supplier, ZESCO, imposed reductions to supply of electricity to all mining operations in the North Western province of Zambia.

The London- and Toronto-listed miner, which in November was forced to lower 2015 production guidance, said its Kansanshi mine, smelter and the Sentinel copper mine project, were being consistently provided by roughly 285MW of energy, which was enough to allow for normal operations at the mine and smelter and for Sentinel to operate at above nameplate capacity throughput "for periods".

First Quantum said Zambia's rainy season was helping to recharge the Kariba dam that generates the majority of the country's electricity.

With upstream river flows increasing, it said: "Water from the catchment area typically makes its way into the Kariba dam over a period of months with dam recharge occurring from January to June."

On top of this supply, other thermal and hydro projects were "nearing completion" to provide 420MW of further energy, with ZESCO importing power from neighboring countries and from an independent power producer.

The ramp-up of the Sentinel complex had been affected by the limited power supply and facilities at the Kansanshi mine, smelter forced to operate at reduced capacities since then, though conditions stabilised later in the year.

First Quantum also announced on Tuesday that the processes to reduce its $5bn-plus of net debt by over $1bn by the end of the first quarter of 2016, through a combination of asset sales and other strategic initiatives, was "proceeding as planned with the continued support of its secured lenders".

Management are reportedly considering streaming sales of future precious metals output from some of its mines, including Finland's Kevitsa nickel project and and Kansanshi.

The company has also been fielding offers for Kevitsa mine, which may fetch at least $1bn, according to sources cited by Bloomberg earlier this month.

The company's shares climbed to 145.5p on Tuesday afternoon's announcement before losing momentum and falling to 127p, a decline of 1.3% on the day back towards their recent long-term lows.