Unit costs drag on FQM

Revenues rose by 9 per cent to $722m in the June quarter, as copper sales climbed 11 per cent to 72,711 tonnes on the comparable period in 2011. Second-quarter gold sales were up by a fifth, while nickel production at the Ravensthorpe mine in Australia was in line with start-up output in the previous quarter. In all, FQM delivered quarterly net profits of $142m, or 30¢ a share. While this was 9 per cent down on a fully diluted basis, it actually beat consensus estimates by 36 per cent.

Despite the improvements to both production and sales during the second quarter, profits at the half-year mark were held in check due to an increase in copper production costs of more than a fifth, coupled with a 9 per cent fall in realised prices. Cost of sales rose to $906m ($563m in 2011), which fed through to a 28 per cent decline in half-year net profits to $261m, if you exclude a $1.22bn one-off gain from a long-running dispute with ENRC in the Democratic Republic of Congo.

Looking ahead, FQM maintained its full-year guidance for copper production of 270,000-290,000 tonnes, with cash costs estimated at $1.55 per pound – broadly in line with the first half. Following approvals in May, FQM will be progressing development work at its Sentinel copper project in Zambia, which is eventually expected to produce up to 300,000 tonnes a year. FQM has also earmarked $1.2bn-$1.4bn in capital expenditure, primarily to drive output at its flagship Kansanshi plant in Zambia.

Before these figures, JPMorgan Cazenove expected adjusted 2012 EPS of $1.37 ($1.18 in 2011).