First Quantum Minerals Ltd
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First Quantum Minerals Ltd
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Good morning. My name is Heidi, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quantum Minerals First Quarter 2018 Earnings Conference Call. [Operator Instructions] Mr. Clive Newall, President and Director of First Quantum, you may begin your conference.
Thanks, Heidi, and thank you, everyone, for joining us today. Joining me in London are Hannes Meyer, CFO; Juliet Wall, General Manager, Finance; Simon MacLean, Group Reporting Controller; and David Silvestro, Head of Tax. A few housekeeping items before we proceed. I draw your attention to the fact that over the course of this conference call, we will be making several forward-looking statements. And as such, I encourage you to read the cautionary note that accompanies our first quarter MD&A and the related results news release, as well as the risk factors particular to our company, which are detailed in our most recent Annual Information Form and available on our website and on SEDAR.Following my opening remarks, Hannes will take us through the financial results, then we will open the lines to take questions.A reminder that the presentation which accompanies this conference call is available on our website and can be accessed either on the Events section or on the Q1 2018 Results Conference Call button under the News section of the homepage.Okay. So let's get started. It was a very solid first quarter in what is a very important year for First Quantum. Our copper production exceeded last year's comparable at Sentinel, in particular, and Kansanshi operated strongly through very wet seasonal conditions in Zambia. The most of you know, the first quarter is usually the wettest part of the year, impacting production, and therefore, unit cost of production. Normally, as [indiscernible] season is out of the way during the second quarter, is an improvement in both of these areas. Meanwhile, the enhancements implemented at Sentinel during 2017 made a huge difference by strengthening the overall operation. This is evident in the mine's performance, statistics and in the recent photographs that we show -- include in our presentation.Our Kansanshi smelter turned in yet another strong quarter, treating over 350,000 tonnes of concentrate, far exceeding design. Çayeli continues to recover from the unfortunate shaft incident last year. The team there continues to do a great job in managing the challenging conditions of this later-life mine. But due to the timing of shipments, no sales were recorded at Çayeli in the quarter. We expect these will be made up mostly over the second and third quarters.At Guelb Moghrein, it is the first full quarter operating the magnetite plant. Total revenue of $5 million has been recorded from sales in the quarter. While this is not material at the moment, it does provide a credit to the operation's overall cost. The team there is working on producing a higher-value product, debottlenecking the plant and pursuing further sales opportunities.Overall, we've maintained a low unit cost of production with the benefits of our margin improvement programs, and as I mentioned earlier, we expect some improvement with the onset of drier weather conditions in Zambia. Looking forward, I will remind you that we are planning some maintenance shutdowns this second quarter. We have 5 days at Sentinel, 8 days at Las Cruces, 5 days at Guelb Moghrein and 8 days at Pyhäsalmi.Turning to coal productivities. We continued the work to better align debt maturities with the planned startup and operation of Cobre Panama and, of course, to increase liquidity. The issuance of our $1.85 billion senior notes comprising $850 million due 2024, and $1 billion due 2026, bearing interest 6.5% and 6.875%, respectively, accomplished both of these objectives. A bond issue was considered more appropriate at this particular time rather than the project financing group we had embarked on at the end of 2015. For this reason, we have discontinued that process.During the quarter, we reported on an assessment received from the Zambia Revenue Authority in regard to duty paid on the import of capital items, consumables and spare parts we used at Sentinel mine from January 2013 to December 2017. We are in the process of providing the large volume of relevant documentation to the agency in our rebuttal of this assessment. Working together with an external international accounting firm, our shipping agent, good progress is being made. What we have reviewed, so far, represents approximately 2/3 of the value of the assessment, and we have not found any material errors.We continue to work through the materials and maintain open transparent dialogue with the relevant authorities. The obvious question is when do you think this matter will be resolved. For that, we cannot give any guidance as there are other parties involved. But as always, it will be resolved. Turning to Cobre Panama. I want to mention an achievement that we are particularly proud of. The project has logged over 10 million man-hours worked without incurring a single lost-time injury. It is especially remarkable considering the environment and the circumstances, which include very high rainfall, different languages and cultures, a large and complex project with many heavy lifts and many work fronts. This achievement builds on our project development team's track record. It includes over 5 million man-hours worked, lost-time injury-free at Sentinel, and 3 continuous years of work on projects at Kansanshi, also with no occurrence. As I noted at the beginning of my comments, 2018 is an important year for First Quantum. Already some precommissioning works have started at Cobre Panama, which is moving towards a phased commissioning later this year. Ramp-up is expected in 2019 and into 2020, with the expanded capacity of 350,000 tonnes a year announced earlier this year. Taking into consideration the increased scope of the project, we have adjusted our progress base, and therefore, the percentage of completion. Currently, the project overall is now about 70% complete with specific discipline well advanced.Site-wide concrete progress is 81% complete; structural steel erection, 65%; mechanical installation, 57%; tailings management facility, 79%; and pre-strip, 78%. The engineering is 95% complete and mainly focused on completing the works associated with the expansion. Procurement is basically done with only minor purchase orders remaining.The port and power station, the more advanced of the 2 150-megawatt generating sets, is essentially complete and expected to generate first power this quarter. This is a few weeks later than previously guided, reflective of the industrial action we experienced over this year, which affected progress in some areas by as much as 6 weeks. The boiler currently being started up on the diesel will subsequently switch to coal as the coal shipments have begun arriving at the port. The second generating set is 89% complete and it's commissioning underway. So it is closely following set one as planned. In the meanwhile, we've connected to the Panamanian electricity grid, which provides adequate precommissioning power across the site. This has significantly reduced our reliance on site generators for the remainder of the construction phase.At the process plant, which is about 58% complete, much of the mechanical equipment is installed, including all 7 mills, the flotation cells and thickness. Our focus now is installing the remaining mechanical equipment along with conveyors, piping, and electrical work. The additional works associated with the expansion to the 85 million tonne per annum capacity is planned to be implemented progressively and expected to be complete by the end of the third quarter 2019, with commissioning during the fourth quarter. So to summarize where we are, our operations are performing well. Our balance sheet is in good shape, especially considering the significant investments in new capacity we have made over the past few years during very low metal prices. We remain focused on our priorities, which are: bringing Cobre Panama into operation in a manner which Panama and our company can be proud of; to deleverage the balance sheet, when that project is operating; and to provide returns to our shareholders, who have been patiently supportive of our vision and strategy.And now with that, I'll hand -- I'll ask Hannes to take us through the financial review.
Thanks, Clive, and good day, to everyone. Turning to Slide 15 in the presentation, talking about quarterly production. Our copper production was 10% or 13,000 tonnes above Q1 2017. Sentinel production of 50,000 tonnes was 14,000 tonnes higher than Q1 2017 due to improved recovery and throughput.Despite a tough and prolonged wet season, the Sentinel has done well at maintaining throughput levels in line with the previous quarter. The Kansanshi smelter achieved another record quarterly production and throughput having treated 351,000 dry metric tonnes and produced 87,000 tonnes of copper in the quarter. Turning to the next slide, Q1 overview. Comparative EBITDA of $363 million was $45 million higher, and gross profit of $181 million was $64 million above the previous quarter, reflecting higher copper prices as the price profile of the sales hedge program improved. The copper sales hedge program resulted in a hedge loss of $121 million in the quarter and reduced realized prices by $0.40 per pound. Net debt of $5.6 billion was in line with the previous quarter due to the higher EBITDA and a receipt of Franco-Nevada stream covering the capital expenditure and an installment for the acquisition of LS-Nikko's effective 10% stake in Cobre Panama.Turning to Slide 17, the next one, on quarterly unit cash costs. Copper C1 of $1.27 was in line with Q1 2017. The all-in sustaining cost for the quarter increased $0.13 against the same period in the previous year, reflecting a planned increase in sustaining CapEx, and that was about $0.06 per pound, and higher royalty rates due to the increased copper price, and that was $0.07 per pound impact. Copper C1 and all-in sustaining guidance for the year remains unchanged at $1.20 to $1.40 per pound and $1.65 to $1.85 per pound.The next slide, strengthening the balance sheet. We continue to proactively manage our balance sheet to ensure we have strong liquidity and appropriate covenants. At the end of Q1 2018, the company was in compliance with all existing facility covenants and ends the quarter in a strong position with $1.67 billion of committed undrawn facilities and $810 million of unrestricted cash.On February 27, the company completed the offering of $1.85 billion of senior notes, comprising $850 million due in 2024 and $1 billion in 2026. The proceeds of the offering were used to repay in full and cancel the term loan of $700 million and repay the outstanding balance of the company's senior revolving credit debt facility, which remains available to draw upon as well as pay transaction fees associated with the offering and for general corporate purposes.In February, the company completed a $250 million term loan facility and -- at Kalumbila, which owns the Sentinel mine. The facility was upsized to $400 million in March 2018 in accordance with the accordion feature of the facility agreement. The increased facility has been drawn down in April 2018. In February, the outstanding balance of $175 million on the Kansanshi senior term was repaid in full and canceled.So to the next slide. So the hedge program outlook. With the increase in copper price and our improved financial position, we've announced -- lined our strategy to ensure that we capitalize more of the upside. We've plainly utilized 0 cost collars and put options in recent hedge transactions. The outstanding hedges are relatively low in volume and have an improving price profile. To the next slide, Cobre Panama capital expenditure. Cobre Panama total CapEx guidance remain unchanged at $6.3 billion, with $1.2 billion of total capital spend to completion. Expenditure during the quarter was $338 million or $236 million on the [ next ] basis. Guidance on other group CapEx also remains unchanged. Thank you, Clive?
Okay. Thanks, Hannes. So with that, Heidi, perhaps we could hand it over for questions, please?
[Operator Instructions] And your first question comes from the line of Orest Wowkodaw with Scotiabank.
I was wondering if you can give us some color on the customs dispute in Zambia. You mentioned, I guess, you're 2/3 through. Have there been discussions with high levels of government there beyond the tax authority in terms of the expected time line to resolve this?
You want to take that, David?
Yes, sure. Thanks, Clive. Yes, we had engaged in some discussions. I think overall our discussions have been positive. And we have agreed a process under which we will move forward to resolve the matter. We haven't set a specific time lines. I think we need to work through that process, and everyone understand there is significant amount of documentation that needs to be reviewed, and that can take the relevant amount of time. So positive discussions, and we're working in a transparent way with the authorities to resolve the matter.
Okay. And I think when this news broke about a month ago or so, you, at the time, you were indicating this could take 4 to 6 months to go through all the documentation. But it sounds like you're already 2/3 through in a little over a month. I mean, does that imply that this could get resolved quicker than 4 to 6 months?
I think that in terms of the document review process, that may be the case, yes. But in terms of resolution of the overall matter, we couldn't comment further than what we've previously indicated.
And we've also focused on the big-ticket items first as well. So there are an awful lot of much smaller invoices to go through as well.
That's right. So we have taken a value approach. So the 2/3 we've indicated probably represents 1/3 of the actual documents by volume. So going forward, we are into the more low-value, high-volume phase of the review process.
Okay. That's great. And then just finally on the hedging program. It's starting to wind down, which I think everyone's happy to see. Are there plans to continue to add hedging this year? And I'm curious also whether you're planning to add any for 2019 during the ramp-up phase? Or whether we should assume that this will end this year?
First, we evaluate the various requirements, and it consists of production, and we've seen good production at Sentinel coming online at the end of Cobre Panama on that capital phase. So in the light of that, we evaluate all of these things and consider that if we do any further hedges, it will probably be a long or same sort of collar structure that we've done in the last 6 to 9 months. So it is something we continue to evaluate.
Okay. But it sounds like you're leaving the door open for potentially hedging into '19. Or am I misreading that?
Look, I'm not saying no, and I'm not saying yes, because door probably stays open. But I mean, it's probably not our intention at the moment, but we'll evaluate.
Yes, we have to take into consideration our views, our ongoing -- changing views of the copper market going forward. I mean, what we feel today may not be the same as what we feel in 6 months' time. So we -- our strategy will be adjusted according to that as well.
And your next question comes from the line of Matthew Fields with Bank of America Merrill Lynch.
Can you walk us through the mechanics of the repayment you made of the shareholder loan with the proceeds from Franco-Nevada this quarter? Was that required for the agreement? Was that just voluntary? And essentially, now going forward, when you repay that loan, does half of it come to you now that you own that 10% stake from LS-Nikko?
Yes. I mean, there is no requirement to repay the shareholder loan. It's just an efficient way of redistributing the cash back to the owners. And yes, you are correct, we own half of that shareholder loan. So the Franco stream was just injected into the company and then the cash used to return to the 2 shareholders within that structure being Kores and ourselves.
Okay. And then with nickel prices recovering over the last year, has there been any discussion about restarting Ravensthorpe or maybe trying to sell the asset again?
We continue to review that, and we continue to keep Ravensthorpe on a very high level of care and maintenance, and in fact, we're doing various remedial tasks around the project and preparations for the development of the next ore body. But there are no plans at -- the current price of $6 a bit -- is still insufficiently high to merit bringing it back online at this point.
Your next question comes from the line of Sean Wondrack with Deutsche Bank.
First question. There is a little bit of disclosure in your financials regarding Las Cruces, potentially something you found there. Could you comment on that a little bit please?
Would you say that again, Sean? Something we've?
Development at Las Cruces. Yes, that you may have discovered another ore body I believe it said. Can you comment on that? Or is it still too early?
No, I don't think we said that. I mean, we are evaluating the underlying primary ore body, which is effectively a separate ore body. And the drill program ongoing as we speak. And we will establish -- measure the indicated resource there over the course of the next few months. But there is exploration going on in the region, but I haven't seen any discoveries announced recently.
Okay. So I'll stay tuned regarding that one. The next question, just regarding, and obviously you guys delevered a lot during the quarter, close to 4.5 turns in net leverage now. Just kind of based on a $3.10 kind of copper price this year, I show you guys sort of ratio deleveraging down closer to about 3/10 in net leverage. Does that sound right to you, Hannes? Taking the lead point [indiscernible] ...
I wouldn't like to guide on that. But you are correct that we do delever quite quickly through the year. Last year, our hedges sort of locked us in an about $2.40-or-so copper price. So with a higher copper price, you can see that's coming through, and you saw that in this last quarter. And I mean, in the last quarter we still suffered $120 million loss on the hedge book. So I mean, I think, the current hedge book is just over $20 million-or-so, and the water -- you'll see that benefit certainly coming through plus the higher production at Sentinel. So that certainly helps a lot in deleveraging through this year.
Your next question comes from the line of Jeff Kramer with Morgan Stanley.
Just checking on you -- given the tax situation in Zambia and the additional commitments to Cobre, should we expect there won't be any material advancements or capital commitments to other projects either at Zambia or South America until Cobre reaches commercial operations state and the Zambian tax situation has settled?
I think, obviously, Cobre Panama completely dominates our focus at the moment. And our planned capital expenditure is largely related to maintenance capital elsewhere, but the bulk of it into Cobre Panama. So we have no sort of short-term plans or medium-term plans for developing any new projects in -- substantial projects. There are obviously some smaller projects around Zambia, but there's no major projects in the immediate plan.
Got it. And then...
The CapEx guidance that we gave did allow for -- it's not specific, but it did allow for some initial development spend from '19, 2019 onwards. So that's why you do see a bit of a step-up in the CapEx guidance. But it has -- it's not specific as to what project it relates to.
Got it. Understood. And just with regards to the streaming. I think total now is north of $1.2 billion. Initially, it's going to be at a -- about $1 billion, and maybe some of that is just capital return to the owners versus the development CapEx. But are the streaming transactions done at this point? Or should we expect there to be more going forward?
We've done 100% of Cobre Panama, so I think that's done.
And your next question comes from the line of Matt Murphy with Macquarie.
I have a question on the industrial action at Cobre Panama. I mean, good to hear everyone is back to work and at full peak construction levels. I've seen some articles in the press on continued union wage negotiations. Just wondering if you can provide some color on that. And do you think Cobre Panama still has potential for work disruption? Or are those issues in the press more national and your local issues are fairly resolved?
Yes. I think that lots of comment better reflects the nature of the dispute. And that it was part of a -- the major union, an engineering union, in Panama flexing its muscles for a wage settlement across the engineering workers throughout Panama. And so we were just sort of in the middle of that. And I think that is an ongoing negotiation, not with us, but with lots of other parties as well.
Okay.
As to whether it has potential for further disputes in -- very difficult to tell. But in America, generally, it's a fairly common occurrence, isn't it?
Great. Okay. And you're at peak construction right now. When does that start to decline? As in when do your workforce needs start to go down?
Later this year, I mean, we'll be running at peak labor for quite a few months yet.
Okay. And then maybe just the last one on Cobre Panama. Just wondering commissioning of the power plant -- have you had any surprises? Are you satisfied with the quality of work as you commission this first major piece of equipment?
Yes, all the testings, steam blows, everything was very successful. It went pretty smoothly. [indiscernible] the industrial dispute happened just at the wrong moment, otherwise it will be up and running by now.
Your next question comes from the line of Oscar Cabrera with CIBC.
Clive, I think this is about the third time that we've heard you say that you'll return cash to shareholders, that being very patient with your development project pipeline. As you are looking to perhaps increase the size of throughput in Cobre Panama, 200 million tonnes, and the other projects, how do you envision that return of cash to shareholders, dividends? Have you thought about how you're going to do that?
No, not in detail yet, Oscar. We're -- we still are a year or 2 away from that. So it hasn't been the focus of the board just yet. But it will be in the form of dividend in some form or a competitive dividend.
Right. And then just to make sure I understood the -- your response to Matt's question with regards to potential issues with the larger union. Did you say that this is ongoing with other companies, but not you? Or could be ongoing with you as well?
Oh, well, we reached an agreement with them. But they are continuing negotiations with other engineering organizations around Panama [indiscernible].
Could you -- I'm sorry, can you just remind me the number of -- I believe it was 10% of the workforce that was involved in this. And was it mainly benefits or increased pay that they were looking for?
No, I think it was a smaller number than 10% of the labor force involved, actually as some track members. But it was a more of -- the dispute from our perspective was that it was effectively a dispute between several unions, some tracks and the other unions on-site with the disruption of work because of that. That was the problem.
Your next question comes from the line of Alex Terentiew with BMO Capital Markets.
A couple of questions. First just here on Sentinel. I understand grades were a little bit lower, and you had the rainy season, so there were water management costs. But the costs in the quarter were $1.83 a pound. Ideally, where do you expect costs for the mine to stabilize? I mean, if you can give us some guidance either on a per pound basis or even just on-site operating cost per tonne? And then the second question, your smelters -- your smelter performing quite well, as you know, it hit some record numbers there for concentrate process. Are you seeing sufficient smelter capacity in Zambia even with some of your peers ramping up in that region? Or is smelter capacity something that you are going to need to be keeping in -- a more closer watch on going forward?
I mean, I think on the C1 cost, we've guided for this year, Juliet, and the number was $1.70. It's a range.
We just give in a range, so we haven't given specific on Sentinel. But we would expect it to decrease quarter -- every quarter throughout this year and on the stand-alone basis for the second half of this year to be more in the $1.50s and then just seeing that lower number continue into 2019 and onwards.
And I think in the long run, you can probably expect somewhere around $1.50 C1 cost 2 to 3 years from now.
On the smelting front, Alex, there is plenty of spare capacity in the region at the moment at local smelters because Glencore has not started ramping up Mufulira or Nkana yet, Mopani. And I think probably concentrates from the Congo are a little bit diminished at the moment for the various issues in the DRC. So there is capacity around right now.
Okay. That's great. And just if I could -- to follow up just the one of your earlier questions, nickel. Is enterprise something that you guys will look to take advantage of the high nickel price and kind of capture some of that optionality? Or is there a price at which nickel and enterprise becomes something you want to pursue?
I think enterprise, we would prefer to bring enterprise online at a significantly higher price than the current price. And we don't really see that likelihood this year right now. So we're not sort of rushing into anything at enterprise. But it's very much kept in mind, and we watch the markets very carefully and expect that.
Your next question comes from the line of Lawson Winder with the Bank of America Merrill Lynch.
You talked to a little bit more about the exploration in this release versus the last, and you mentioned satellite zones that you were targeting at Kansanshi. I was just curious are those more oxide or sulfide in nature. And can we expect those potentially be added to resources at year end?
It's a bit early to be contemplating, adding to resources because the drilling season is only just well it probably hasn't been going yet in Zambia. We have to wait for the ground to dry out after the rainy season. But we have a number of targets in the region, some oxide, some sulfide. I would say predominantly, sulfide at the moment. We would very much like to identify some more oxide but -- so we're always in this position. We always have quite a few targets in the region in the immediate[Technical Difficulty]
Hello. We're back.
Hopefully this next question doesn't bring the whole call down again. Just I noticed that at year-end 2017, you added a copper estimate to the reserve estimate at Ravensthorpe. Just curious if that changes the calculus on whether or not to restart it and what the ideal nickel price is to restart. I mean, having that copper...
Oh, you mean cobalt, don't you, Lawson, not copper.
I thought I saw a copper.
No, just cobalt.
Okay.
You're probably right. Its symbol is CO, so you may have read this as copper.
Okay. Well, that was stupid of me if that's what happened. I apologize for that. And if I might just ask one quick more question just on the Cobre Panama settlement. I mean, it was my understanding that there was some sort of agreement reached in order to get the workers back to work. So the outside union, do they now have full access to the site? Is that the change in the situation right now?
We haven't put the agreement -- the details of the agreement in the public domain yet. It's quite complicated. So I think if we could just maybe talk about that in the next conference call.
Your next question comes from the line of Karl Blunden with Goldman Sachs.
Just wanted to focus on the regulatory matters. You did put an update on that ZCCM process in your report. Just I wanted to understand what the range of outcomes are that could come out of it at this point. It seems like a favorable decision in February but an appeal going on now.
Yes, I guess -- I mean, we disclosed that. There was the arbitration and that dismissed the ZCCM case. They've appealed. In general, those appeals are not very successful. So we'll just have to go through that process and see what happens.
Got you. And then on the operating side, we haven't heard much on the power situation in Zambia right now. Is everything going smoothly? It seems that way. And with the high rainfall and the season, would that bode well for the availability of power for the rest of the year?
Yes, I think the good rainfall helps a lot, but it's also new capacity came online last year, which increased the overall capacity quite substantially. And at the moment, we have all the power that we need. And in fact, we're running our high-pressure acid leach plant at Kansanshi to boost production there. It requires quite a lot of power. There's plenty of power available.
Your next question comes from the line of Stan Borin with Finisterre Capital.
I have 2 basic questions. On KPMC shareholder loan agreement, I'd like to know what is the maturity of that loan? How does it rank relative to bonds? And I just wanted to clarify what was discussed earlier. So in effect, half of the loan balance you owe to yourself. So first quarter balance, 6 59 effectively, loan balance is 3 30, roughly. Is that correct?
Yes, it sounds about correct. Look, in terms of those loans, you should view it as capital rather than a loan in a bond environment.
Are you saying they rank junior to the bonds?
No. I'm trying to think now, but -- yes, no. So it does rank junior due to Franco streaming arrangement as well. But I mean, you should really view that as part of our capital structure and more equity of nature rather than a debt.
Okay. And is there a particular maturity date on that?
So currently it's 2023, but that will be extended. So we'll push that out.
Okay. And second question is on the hedging program. So I see in the second quarter of '18, 100,000 tonnes has been hedged. Just trying to understand what effective price that may be at. So assuming copper prices stay where they are, what would be approximate effective price that you would get for that volume?
Sorry, 100,000 tonnes, you say there?
Yes, in Slide 19.
On Slide 19. Let me just go back to that slide. Oh, yes. Look, at current prices, it's probably at about [ $3.10 ]. The [ $3.10 ] sort of [ collars ] is about [ $3.01 ]. Yes, so we probably get around $3, but more...
Roughly?
Yes.
Your next question comes from the line of Ralph Profiti with Eight Capital.
Two questions for me. Firstly, Clive, with respect to this provision process that's been agreed with the ZRA, should we view the accounting involvement and the shipping agent as sort of working on the First Quantum challenge? Or should we more view this as a sort of perhaps like a neutral party audit where they provide recommendations to ZRA and then perhaps some binding recommendations as well?
It's David here. No, they will be working in our teams in terms of pulling together relevant documentation. So we'll be working with the accounting firm and the shipping agent to pull together the newest documents that are needed for each bill of entry.
Okay. Okay. And maybe just a quick follow-up. On Kansanshi, Clive, grades were up at all 3 ore types but recoveries were significantly down sort of on quarter-over-quarter and the MD&A spoke to what's been referred to as ore changes. Are these specific to ore type classification? Or is there a change in geology that we're seeing there?
No, there's a zone of tarnished sulfide ore particularly, and that tarnishing just causes a reduction in recovery, but will -- it's not going to last very long. In case there is more in the future, we're actually putting in some technology to actually overcome that issue to the extent that that's possible to reduce the impact on recovery. So it's a temporary thing.
Your next question comes from the line of Brian Lalli with Barclays.
I guess, just 2 questions. First, just from a housekeeping perspective, but the additional 1 70 you drew in April and the upsized loan, just to be clear, is that cash going to come in as unrestricted? And I guess just does it impact the total liquidity that you've shown on Slide 18? And again, I just want to make sure we're modeling that correctly.
The 1 70 we drew down in April, the facility was in place by 31st of March. It was undrawn, the 1 70, and yes, it is unrestricted.
Okay. Cool. Again, I just want to make sure I'm modeling cash correctly. And then secondly, just maybe a follow-up question on -- sorry?
So it was a loan available at the end of March, but we have drawn it subsequent.
Right. Understood. Okay. Cool. And then just a broader question on the balance sheet strategy. As Cobre ramps up, again, in '19, '20, I guess, how would you think about gross debt in the context of that give or take 900 kt production profile? And I appreciate that some of this is tied to copper prices and ultimately, your ability to generate EBITDA from a net leverage perspective. But I guess, do you feel comfortable with the $6 billion give or take of unsecureds? Or do you think gross deleveraging is still going to be a focus as free cash flow ramps up? I think that would be helpful to frame up sort of your long-term balance sheet strategy.
I think we delever any way through the higher copper price and Cobre Panama ramping up with robust commitment as well to reduce absolute amount of data as well. So the 6 is in the high 5 now, and we have been investing heavily in Cobre Panama and that's been deliberate strategy. So in the long run, we will probably -- if I have to put a target on that, I'd probably knock at least $2 billion off that gross amount. And if you look at net debt to EBITDA as a ratio, probably around 2. Although with Cobre Panama coming online and depending on your outlook on the copper price, even that $4 billion is probably -- will probably even be below that, that level at that time. The bonds are important part of the capital structure, and it is -- we've developed a good sort of bondholder base at this stage and it's -- we'll see the bond -- probably smaller bonds in the future, but still relevant in the bond market, big enough presence in the bond market to retain that bondholder following that we have at the moment.
Your next question comes from the line of Greg Barnes from TD Securities.
Clive, with the labor action at Cobre, has the [ store ] into the mill timing slipped? Are we talking early 2019 now? Are you still going to squeeze it in the end of 2018?
Well, we lost 1 month, 5 weeks, maybe in some areas 6 weeks, as a result of it. So yes, it slipped. It slipped by that amount. I think we're still targeting first concentrate this year, but it will be right at the end of the year. So it's made it tighter quite clearly.
Your next question comes from the line of Ian Rossouw with Barclays.
Just on Cobre and the ramp up, do you mind providing more details on the delay? I know you mentioned that you have good power to continue commissioning activities. But at what stage do you actually require both lines to be up and running in the power plant for ramping up the plant?
Oh, we -- sure. We need the power station running fully by -- it's going to probably by mid next year, I would think, that we will be ramped up to that extent that we would need that amount of power. I haven't seen a schedule of that to be honest, so I'm kind of guessing slightly here. But the second line is very close behind the first line. As you saw it, I think it's 89% complete. And once this -- the first line is up and running, I imagine we'll be getting straight into commissioning the second one. So they're much closer together partly because of this month's delay.
Cool. And then just on the remaining parts of the plant and you said that, that might be quite tight for ramping up this year, I mean, which area is the sort of main focus area for you on the critical [ power ] items? Is it the processing plant or...
Yes, the process plant still has quite a bit to do, although the heavy stuff, apart from lifting the conveyor sections, has been done. But there's work going on all over the site. So it's all coming together at the appropriate time. But clearly, the plant has quite a bit to go, yes.
Your next question comes from the line of Dalton Baretto with Canaccord.
Just a couple of quick clarification questions for me. First of all, Clive, is it still your intention to shut down the leach circuit back in Kansanshi for 70 days beginning this quarter?
No. No. There -- do we have another shut lately?
I think there's still one, but timing is still being...
The HPL. Are you talking about high-pressure leach or the...
That's right. The high-pressure leach, sorry.
Oh, yes, no. High-pressure leach, yes. Yes, there is a complete relining.
But the exact timing...
We haven't [indiscernible] yet. Yes.
[indiscernible]
Yes, it may be not be this quarter, current quarter.
Okay. And then secondly, did I hear you correctly earlier in that we're going to get a first look at your plans for the Las Cruces sulfides later this year?
Just on the resource base. We -- the first priority is to get it drilled out so that we understand the ore body and the scale and knock the -- everything about it. So there's a lot of test work to do as well. So -- but it's a resource that is still not completed yet and the drilling is still ongoing. So it will be a few months here.
Your next question comes from the line of Frank Duplak with Prudential.
I just had a quick question on copper shipments for the first quarter. It looked like they were about 7,000 tonnes below production, and I recognize that half of that is Çayeli and the rest looks like it was around Zambia. Was there any weather-related issue on getting their shipments out the door? Can you just talk about that for a second?
On Çayeli, no, it's just getting shipped [ full of oil ]. Çayeli is relatively small production. So we try to maximize or minimize the freight charge by filling the capacity of the vessel that's taking the ore. So from there, it's definitely timing -- just timing of ships. And I think that out of the smelter, just timing of deliveries of anode and blister are -- we often get things like this, a slight buildup of inventory.
Yes, and we also -- remember, this wasn't another record quarter of production. So when you commit to sales in the next quarter, you sort of look at your budget and your plan and you factor in a bit of a safety margin. You don't commit all of those sales. So when you run the smelter as successfully as the guys have done, you actually produce more than you sell. Now we've taken action on that, and the remainder of that balance will be sold through the year. So you will see that the inventory decrease in the next few quarters.
And there are no further questions in the queue. I'll turn the call back over to the presenters.
Thank you very much, operator, and thanks, everybody, for joining us on the call. If there are any follow-up questions, please contact either myself or Sharon Loung and we'll try and get back to you as soon as we can. Okay. Thanks, and goodbye until the next one. Cheers.
This concludes today's conference call. You may now disconnect.