First Quantum Sees Banks Refinancing Much of $2.5 Billion Debt

First Quantum Minerals Ltd. (FM), the copper producer seeking to refinance $2.5 billion of borrowings, expects a “substantial portion” to come from bank debt.

“We are still seeing reasonable appetite in the bank market to take up this debt and it appears that the bond market is still strong,” Chief Financial Officer Hannes Meyer said in an e-mail. The Vancouver-based company plans to have the bank financing in place by the end of the year, he said.

First Quantum, Canada’s largest copper producer, needs to refinance short-term debt that it took on to fund about half its C$5 billion ($4.9 billion) acquisition of Inmet Mining Corp. in April. Copper prices have dropped 6.3 percent since the end of November, when the company first announced its hostile offer.

“We are currently in discussions to replace the $2.5 billion short-term facilities,” Meyer said Aug. 8. “A substantial portion of that is likely to be in the form of bank debt with some term and revolving features.”

The April acquisition gave First Quantum access to the Cobre Panama project, which Inmet said would cost $6.2 billion to build. First Quantum will this year announce a revised plan for the venture, having determined it can build the copper mine faster and at a lower cost than Inmet, Operations Director Matt Pascall said in June.

Acquisition Financing

First Quantum raised debt for the Inmet deal in March, with an interest rate of the London interbank offered rate plus 2.75 percent.

“They are likely to be well-bid on debt given the strength and financing track record of the business,” Cailey Barker, metals and mining equity research director at London-based Numis Securities Ltd., said Aug. 9.

First Quantum plans to be the world’s fourth-biggest copper miner by 2018, behind Freeport-McMoRan Copper & Gold Inc. (FCX), Glencore Xstrata Plc and Codelco. While developing Cobre Panama, it’s also building a mine and smelter in Zambia, where it already operates the Kansanshi pit.

The company will pursue its growth projects even if copper prices fall a further 25 percent, according to Meyer, who said he doesn’t expect the metal to drop to such an extent.

To contact the reporter on this story: Matthew Hill in Johannesburg at mhill58@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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