May 9, 2011 / 10:27 AM / 7 years ago

UPDATE 3-First Quantum profit lifted by higher copper price

* Q1 EPS $2.18 vs $1.69 a yr ago; Street view $2.60

* Sales up 27.9 pct to $705.2 mln

* Shares up 4.1 percent at midday (Adds analyst comments, details on results, share price move; in U.S. dollars unless noted)

By Euan Rocha

TORONTO, May 9 (Reuters) - First Quantum Minerals (FM.TO) reported a sharp increase in first-quarter profit on Monday, as declines in copper production were more than offset by gains in the price of the metal.

The Canadian miner, whose focus is on Africa, said net income in the quarter ended March 31 rose to $206.7 million, or $2.18 per diluted share, from $150.3 million, or $1.69 per diluted share, a year earlier.

However, the results fell well short of analyst expectations, as taxes and changes in accounting standards hit earnings. Analysts, on average, had forecast earnings of $2.60 a share according to Thomson Reuters I/B/E/S.

Nonetheless, shares of the Vancouver, British Columbia-based company rose 4.1 percent as the price of copper firmed after a major selloff last week. [ID:nLDE7480UN]

The company also said it continues to expect 2011 copper production of 300,000 tonnes and gold output of 200,000 ounces. Its full year average copper production cost forecast has increased to $1.15 per pound from $1.10.

First Quantum also plans to begin nickel production when its Ravensthorpe project in Australia starts up in the second half of this year.

Desjardins Securities analyst John Hughes noted in a report to clients that First Quantum’s development projects are advancing on schedule and reiterated his “buy” rating.

Shares of First Quantum, which is developing projects in Australia, Peru, Finland and Zambia, were up C$5.11 at C$128.83 at midday on the Toronto Stock Exchange.

COPPER OUTPUT

Copper production in the quarter declined 13.5 percent to 74,888 tonnes. Last month, First Quantum said its first-quarter copper output would be hit by a shutdown at its Frontier mine in the Democratic Republic of Congo (DRC). [ID:nN19287695]

Quarterly sales though rose 27.9 percent to $705.2 million, due to a more than 40 percent increase in its average realized copper price.

First Quantum said it will continue to pursue all available avenues to recover the value of its DRC assets. In 2009, the DRC shut First Quantum’s $750 million KMT copper project, after a review flagged contract irregularities and production delays at the site. A year ago, a court in the country also annulled the miner’s rights to two other copper mines. [ID:nLDE64L0CZ]

First Quantum has started an international arbitration process to resolve the disputes, but said the timing of any judgments or negotiated settlements is not known.

The company said it has begun work to increase output from its Kansanshi copper-gold mine in Zambia. The two-phase plan will increase copper output from the mine to 400,000 tonnes by 2015 from its current capacity of 250,000 tonnes. ($1=$0.965 Canadian) (Additional reporting by Amruta Sabnis in Bangalore; editing by Rob Wilson)

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