First Quantum Minerals Ltd.
LSE : FQM
TSX : FM

First Quantum Minerals Ltd.

August 10, 2009 17:07 ET

First Quantum Minerals Reports Operational and Financial Results for the Three and Six Months Ended June 30, 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 10, 2009) -

(All figures expressed in US dollars)

First Quantum Minerals Ltd. ("First Quantum" or the "Company") (TSX:FM)(LSE:FQM) today announced its results for the three and six months ended June 30, 2009. The complete financial statements and management discussion and analysis are available for review at www.first-quantum.com and should be read in conjunction with this news release.



SUMMARY OPERATING AND FINANCIAL DATA
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Three months Six months ended
ended June 30 June 30
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(USD millions unless otherwise noted) 2009 2008 2009 2008
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Realized copper price (per lb) $ 1.85 $ 3.38 $ 1.72 $ 3.44
Production - copper (tonnes) 92,486 80,977 181,926 156,593
Production - gold (ounces) 36,827 34,227 87,252 50,722
Sales - copper (tonnes) 93,481 84,007 163,256 146,810
Net sales $ 420.5 $ 652.6 $ 688.7 $1,164.1
Net profit $ 101.5 $ 208.0 $ 112.4 $ 390.0
Earnings per share $ 1.31 $ 3.06 $ 1.54 $ 5.74
Average copper unit cash cost of
production (C1) (per lb) $ 0.90 $ 1.18 $ 0.94 $ 1.09
Cash $ 789.6 $ 457.3 $ 789.6 $ 457.3
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Unless otherwise indicated, all comparisons of performance throughout this
report are to the comparative periods for 2008


SECOND QUARTER HIGHLIGHTS

- 14% increase in copper production resulting in a year to date increase of 16%, with increases at Kansanshi of 21%, Frontier of 18% and Guelb Moghrein of 6%

- 18% increase in gold production resulting in a year to date increase of 72% due to modifications of the gold plants at Guelb Moghrein and Kansanshi in Q1

- 24% reduction in the Q2 average cash unit cost of production (C1) due to cost saving initiatives, lower process input costs and higher gold credit; year to date reduction of 14%

- Net profit of $101.5 million and EPS of $1.31 despite significantly lower copper price year-over-year and a negative hedging adjustment of $52.7 million; EPS before derivatives was approximately $1.80

- Equity financing closed in Q2 raising gross proceeds of CAD$345 million

- 6%, 5 year convertible bonds issued in Q2 for gross proceeds of USD$500 million

CURRENT MARKET OVERVIEW

The London Metal Exchange ("LME") cash copper price continued to increase since the end of the first quarter reaching $2.78 per pound on August 5, 2009. Although short term price movements have been positive, some uncertainty remains in the near term. The Company believes the longer term fundamentals for copper remain sound as supply from older mines continues to be affected by declining grades and technical issues and, in many cases, the development of new projects have been delayed due to the challenging global economic and credit environment.

NEAR TERM OUTLOOK

- Estimated production of copper for 2009 remains unchanged at 380,000 tonnes; gold production revised downward to 220,000 ounces

- Expected average C1 costs for 2009 are now $0.88 per pound. C costs have been impacted by the continued overall shortfall in local smelting capacity. After the wet season, Kansanshi was required to process the stockpiled mixed ore inventory which was higher cost and higher gangue acid consuming until new feed became available during June. This was a result of mining operations not being able to access some oxide areas of the pit until May. In addition, higher input costs are expected during the remained of the year as a result of higher commodity prices

- Development of the Kolwezi project is on schedule for commissioning by the end of Q2 2010

- The Guelb Moghrein expansion project remains on schedule with the objective of achieving commercial production by the end of Q3 2009

- The Company expects to issue by the end of Q3 2009, a revised resource estimate at Kevitsa, following completion of the recent expansion drilling program, which located significant wide intercepts of nickel and copper at or above grades in the main resource area



First Quantum Minerals Ltd.

REVENUES
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NET SALES (after provisional Three months ended Six months ended
pricing and realization charges) June 30 June 30
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(USD millions unless
otherwise noted) 2009 2008 2009 2008
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Kansanshi - copper 243.8 367.0 406.7 740.4
- gold 18.6 13.0 26.6 21.8
Frontier - copper 110.7 192.0 165.9 224.6
Guelb Moghrein - copper 25.7 51.1 46.2 118.3
- gold 21.4 13.3 41.1 29.7
Bwana/Lonshi - copper - 15.4 0.4 28.5
- acid 0.3 0.8 1.8 0.8
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Net sales 420.5 652.6 688.7 1,164.1
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Copper provisional pricing
adjustment included above 3.5 1.2 40.9 44.5
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COPPER SELLING PRICE USD/lb USD/lb USD/lb USD/lb
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Current period sales 2.08 3.72 1.85 3.60
Prior period provisional
pricing adjustment 0.02 0.01 0.11 0.14
Treatment charges/refining
charges ("TC/RC") and freight
parity charges (0.25) (0.35) (0.25) (0.30)
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Realized copper price 1.85 3.38 1.71 3.44
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Although the average realized copper price for the quarter was 45% lower than Q2 2008 it has been rising since the beginning of 2009 resulting in positive provisional pricing adjustments in the current quarter and year to date results.

Copper sales volumes for the quarter increased 11% to 93,481 tonnes. The increase was driven by a 14% increase in copper production and a reduction in the copper in concentrate stockpile of approximately 1,400 tonnes. The year to date sales volume was also up 11% due to a 16% increase in copper production over the same period.

Gold revenues increased by 52% for the quarter and 31% for the year to date. The increases resulted from higher gold byproduct from the copper in concentrate and tolled copper sales and from the operation of the gold plants at Guelb Moghrein and Kansanshi, which were commissioned during the first quarter.

The positive provisional pricing adjustment in the quarter resulted from the finalization of contracts totalling 10,829 tonnes of copper at an average price of $1.98 per pound ($4,364 per tonne). These contracts were provisionally priced at March 31, 2009 at $1.83 per pound ($4,033 per tonne).

The year to date positive provisional pricing adjustment resulted from the finalization of contracts totalling 79,293 tonnes of copper at an average price of $1.56 per pound ($3,438 per tonne). These contracts were provisionally priced at $1.33 per pound ($2,932 per tonne) at December 31, 2008 and were finalized during the year.

At June 30, 2009, 21,542 tonnes of copper provisionally priced at $2.32 per pound ($5,113 per tonne) remain subject to final pricing in July and August 2009. Refer to the 'Outlook' section for further discussion.



SEGMENTED OPERATING RESULTS

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Three months ended Six months ended
Kansanshi Copper and Gold Operation June 30 June 30
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2009 2008 2009 2008
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Production (tonnes)
Copper cathode 21,237 25,430 45,073 52,952
Copper in concentrate 18,787 9,154 40,387 25,716
Copper cathode tolled 20,368 13,039 35,770 21,258
Total copper production (tonnes) 60,392 47,623 121,230 99,926
Gold production (ounces) 20,117 17,927 42,110 20,228
Sulphide ore tonnes milled (000's) 3,926 1,548 7,186 3,439
Sulphide ore grade processed (%) 1.0 1.4 1.1 1.3
Sulphide copper recovery (%) 94 93 95 93
Oxide ore tonnes milled (000's) 1,300 1,541 2,643 2,996
Oxide ore grade processed (%) 1.4 1.6 1.5 1.7
Oxide copper recovery (%) 89 92 91 93
Copper sales (tonnes) 56,484 45,495 103,175 92,506
Cash costs (C1) (per lb) $ 0.99 $ 1.15 $ 0.99 $ 0.98
Total costs (C3) (per lb) $ 1.27 $ 2.00 $ 1.25 $ 1.45
Operating profit (USD M) $127.3 $243.8 $181.3 $531.8
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Copper production increased 27% in Q2 and 21% in the year to date compared to the prior year. Q2 production benefited from an increase of 76% in copper in concentrate and tolled cathode production. This increase was due to a 154% increase in sulphide ore milled as the sulphide circuit expansion, which started commissioning in Q2 2008, continued to ramp up. Partially offsetting the higher copper in concentrate and tolled cathode production was a 16% lower copper cathode production. Mining activities were negatively impacted by the effects of the rainy season during Q1, which carried into early Q2 resulting in lower average oxide ore grades processed and higher gangue acid consumption.

Tolled copper cathode production from the Mufulira smelter was 56% higher than Q2 2008 and 32% higher than the previous quarter as capacity continued to improve since Q4 2008. Kansanshi increased average daily shipments to Mufulira during the quarter resulting in approximately 18,200 tonnes of copper in concentrate at the Mufulira smelter at June 30 that will be processed in Q3. Kansanshi's high pressure leach system ("HPL") continued to process Frontier's concentrates so there was no processing of Kansanshi concentrates through the HPL in Q2.

The processing of lower grade oxide ore which led to lower copper cathode production was due to the excess ground water during Q2. This delayed access to the higher oxide ore grade reserve in the mine pit and resulted in the processing of stockpiled oxide and mixed ores that were lower in grade and high in acid consumption.

With the effects of the rainy season and excess ground water subsiding towards the end of Q2, access to higher ore grades in the mine pit improved for both sulphide and oxide ores so that higher grade ore was available for processing in June and into Q3.

Gold production improved primarily due to the increase in copper in concentrate production. The gravity recovery unit also contributed approximately 3,500 ounces of gold production.

Kansanshi's Q2 average cash unit cost of production (C1) decreased 14% compared to Q2 2008. This reduction was due to the cost saving initiatives implemented initially in Q4, 2008 and lower oil and sulphur prices. Further expected reductions in the overall realization costs did not materialize as local smelter capacity constraints continued resulting in higher concentrate tonnages than expected having to be exported. Kansanshi's average total unit cost of production (C3) was lower due to the elimination of the windfall tax which was introduced in 2008 and repealed after the first quarter of 2009.

Operating profit was down for the quarter and six months against the comparative periods due to the lower realized copper price. In addition, export concentrate shipments were temporarily halted during the quarter while waiting for a government exemption on the 15% concentrate export levy. The exemption was received on May 18th and export shipments recommenced immediately.



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Three months ended Six months ended
Frontier Copper Operation June 30 June 30
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2009 2008 2009 2008
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Production - copper in
concentrate (tonnes) 24,058 23,136 43,329 36,573
Sulphide ore tonnes milled (000's) 2,035 1,794 3,605 3,293
Sulphide ore grade processed (%) 1.3 1.4 1.3 1.3
Copper recovery (%) 92 91 93 84
Copper sales 26,706 28,615 40,933 32,829
Cash costs (C1) (USD per lb) $ 0.98 $ 1.40 $ 1.09 $ 1.51
Total costs (C3) (USD per lb) $ 1.12 $ 1.70 $ 1.23 $ 1.88
Operating profit (USD M) $ 69.4 $125.8 $ 98.1 $143.9
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Copper production increased 4% in Q2 and 18% in the year to date compared to the same periods in 2008 due to increased ore throughput and improved recoveries. The increase in ore throughput was the result of Frontier's efforts to improve mill rates. Included in Frontier's total copper in concentrate production were approximately 3,400 tonnes that was processed through Kansanshi's HPL for the quarter and 4,300 tonnes for the six months.

Frontier's Q2 average cash unit cost of production (C1) was 30% lower than Q2 2008 due to decreases in oil based consumable costs, waste stripping, employment costs and freight parity charges. Following on the costs saving initiatives implemented in Q4 2008, production was increased during the quarter which reduced the average cash unit cost by a further 20%, to $0.98, from the Q1 2009 average. Lower freight parity charges were due to changes in the export contract terms and to the processing of some concentrates through Kansanshi's HPL facility.

Despite the significant improvement in the average cash unit cost production (C1), operating profit was down for the quarter and year to date against the comparative periods due to the lower realized copper price. Sales volumes for the quarter exceeded production as there was no local smelter capacity available for the treatment of Frontier concentrates so all production other than that treated at Kansanshi's HPL facility was exported. This resulted in a reduction of the copper in concentrate stockpile to approximately 2,400 tonnes of copper in concentrate as at June 30th.



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Guelb Moghrein Copper and Gold Three months ended Six months ended
Operation June 30 June 30
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2009 2008 2009 2008
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Production - copper in
concentrate (tonnes) 8,036 8,722 17,367 16,390
Gold production (ounces) 20,371 16,300 45,142 30,491
Sulphide ore tonnes milled (000's) 474 491 1,004 1,008
Sulphide ore grade processed (%) 2.0 1.9 1.9 1.9
Copper recovery (%) 86 86 90 88
Copper sales (tonnes) 10,291 7,953 19,148 17,710
Cash costs (C1) (USD per lb) $0.06 $0.71 $0.21 $0.55
Total costs (C3) (USD per lb) $0.46 $1.14 $0.56 $1.02
Operating profit (USD M) $20.9 $45.1 $38.8 $99.5
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Copper production for the quarter was down 8% compared to Q2 2008; however for the year to date copper production was 6% higher. Gold production was 25% higher in Q2 and 48% higher for the year to date compared to 2008.

Copper production was negatively impacted in Q2 by maintenance shutdowns resulting in the lower ore throughput. Gold production benefited from the reduction in the copper in concentrate stockpiles and from the gold dore smelter, which was commissioned at the beginning of the year. The gold dore smelter produced approximately 3,500 ounces and 7,200 ounces of gold bullion production in Q2 and the year to date, respectively.

Guelb Moghrein's average cash unit cost of production (C1) was 92% lower in Q2 compared to Q2 2008. This reduction was due to a significant increase in the gold credit and lower freight parity charges on concentrate exports.

Despite the increase in copper sales volumes and lower average cash unit cost of production (C1), Guelb Moghrein's operating profit was down against the comparative periods due to the lower realized copper price.



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Three months ended Six months ended
Bwana/Lonshi Copper Operation June 30 June 30
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2009 2008 2009 2008
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Production - copper cathode (tonnes) - 1,496 - 3,704
Operating profit (USD M) $(6.4) $(6.7) $(10.8) $(13.1)
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The Bwana Mkubwa site remains on care and maintenance, while alternative copper oxide feed sources for Bwana Mkubwa continue to be investigated. If sufficient economically suitable feed can be arranged, the process facility will be re-opened.



COSTS AND EXPENSES

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Three months ended Six months ended
June 30 June 30
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(USD millions unless otherwise noted) 2009 2008 2009 2008
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Operating profit 211.2 408.0 307.4 762.1
Corporate costs and other
expenses/income 4.8 (7.9) (0.4) (17.5)
Derivative adjustments, net (52.7) (2.2) (99.1) (3.6)
Exploration (3.5) (4.2) (7.0) (10.0)
Interest, net (11.5) (7.9) (22.6) (16.5)
Tax expense (40.6) (134.9) (49.1) (232.9)
Minority interests (6.2) (42.9) (16.8) (91.6)
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Net profit 101.5 208.0 112.4 390.0
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Earnings per share
- basic (USD per share) 1.31 $3.06 1.54 $5.74
- diluted (USD per share) 1.30 $3.02 1.53 $5.67
Weighted average shares outstanding
- basic (number of shares - millions) 77.2 68.0 72.9 67.9
- diluted (number of shares - millions) 77.9 68.9 73.4 68.8
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Corporate costs included a foreign exchange gain of $9.3 million during the quarter.

The Company implemented a hedging program during Q1 2009 due to the uncertain economic outlook and the steep fall in the copper price during the last quarter of 2008. These copper hedges were entered into throughout Q1 to protect the Company against possible further declines in the copper price. In fact, the copper price has increased sharply since entering into these hedges to $2.32 per pound ($5,107 per tonne) on June 30 resulting in the hedging adjustments for the quarter and year to date of the current year. Of the total hedging adjustment recorded for the current year, $55.5 million remains unrealized and non-cash related.

Interest expense was higher than the comparative periods as the average outstanding debt level was higher during the majority of the current year. Due to the significant changes in the credit conditions, the $250 million corporate revolving loan was renewed at higher margins and costs in the first quarter. These costs have been amortized over the term of the loan. Interest was accrued on the 6%, $500 million convertible bond from the middle of June.

The income tax and minority expense were lower due to the decreased operating profits at all operations.



FINANCIAL POSITION AND LIQUIDITY
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Three months ended Six months ended
June 30 June 30
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(USD millions unless otherwise noted) 2009 2008 2009 2008
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Cash inflows from operating activities
- before working capital 158.3 303.0 243.4 575.6
- after working capital 154.9 316.1 95.8 459.6
Cash inflows from financing activities 567.2 170.6 646.7 219.1
Cash outflows from investing activities (95.9) (362.9) (169.4) (485.3)
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Net cash inflows 626.2 123.8 573.1 193.4
Cash Balance 749.3 393.4 749.3 393.4
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Available credit facilities
- Corporate revolving credit and term
loan facility 250.0 - 250.0 -

Cash inflows per share
- before working capital (USD per share) $2.05 $4.45 $3.34 $8.47
- after working capital (USD per share) $2.00 $4.64 $1.31 $6.76
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The Company completed an equity financing in April by issuing 9,343,750 common shares of the Company at a price of CDN$37.00 per share for gross proceeds of CDN$345.7 million. The net proceeds, after fees and expenses, were $269.5 million. Part of these funds was used to repay the outstanding balance of $150.0 million on the corporate revolving credit facility, which remains fully available for redraw.

The Company also completed an issue in June of $500.0 million of 6%, 5 year unsecured convertible bonds for net proceeds of $488.0 million after the payment of fees and expenses related to the offering.

In addition to the repayment of the corporate revolving credit facility during the quarter, financing activities included a scheduled payment of $40.3 million on the $400 million corporate revolving credit and term loan facility and the Kansanshi project completion facility was fully repaid in Q1. Overall, the current period's cash inflow from financing activities was higher than the comparative period due to the equity financing and the convertible bond issuance.

Capital expenditure continued on the Kolwezi development project and the expansion activities at Guelb Moghrein. The decrease from the comparative periods was due to a planned reduction in capital expenditures. Prior year's investing activities included significant marketable security investment purchases.

Operating cash inflows continued to be generated from the positive operating results. Operating cash inflows before working capital movements were higher than net income due, mainly, to depreciation expense, unrealized non-cash derivative adjustments and minority expense.

Additional sources of funding available include the $250 million corporate revolving loan that is due to expire in January 2010. $40.3 million of the cash balance is classified as restricted cash to be used for the next scheduled corporate revolving credit and term loan facility payment due at the end of Q3. The Company's working capital balance (not including cash and debt) at June 30 increased by $110.4 million from December 31, 2008. Included in the working capital balance is approximately 37,100 tonnes of contained copper.

Upon resolution of the RDC revisitation process, the Company intends to finalize long-term project financing for the development of the Kolwezi project in accordance with the provisions of the amended Contrat D'Association. A syndicate of commercial and development banks was mandated in early 2008 to provide a $450 million facility for the development of the project. Subject to a satisfactory outcome to the revisitation process and documentation, they are prepared to provide the financing subject to completion of documentation and satisfaction of conditions precedent. Management however does not anticipate raising more than $350 million of senior debt. The project debt, when drawn down, will be used to repay some shareholder funding provided by the Company to date. In addition, the Company is entitled to a pro-rata contribution of capital costs incurred to date from the other contributing partners in the Kolwezi project upon declaration of financial close as defined in the Contrat D'Association or those contributing partners will be required to dilute their equity interests. Notice of financial close has been given to each of the International Finance Corporation and Industrial Development Corporation of South Africa with their contributions due during Q4 of 2009.

As at June 30, 2009, the Company had the following contractual obligations outstanding:



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Less
(USD millions unless than 1 1 - 2 2 - 3 3 - 4 4 - 5 There-
otherwise noted) Total year years years years years after
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Term debt 285.5 84.2 85.1 95.4 5.2 5.2 10.4
Convertible bonds 500.0 - - - - 500.0 500.0
Accounts payables 247.0 247.0 - - - - -
Deferred payments 6.6 5.4 0.4 0.4 0.4 - -
Commitments 136.5 136.5 - - - - -
Asset retirement
obligations 19.2 - - - - - 19.2
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INVENTORY

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Finished Product Copper (tonnes) Gold (ounces)
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Kansanshi 34,693 -
Frontier 2,355 -
Guelb Moghrein 88 1,924
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Total 37,136 1,924
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Overall, inventory increased by $34.5 million from December 31, 2008, which was related to the increase in the copper in concentrate stockpiles. The Company has stockpiled approximately 19,900 tonnes of copper in concentrate since December 31, 2008 resulting in approximately 36,300 tonnes of contained copper in concentrate at June 30 with an average cost of approximately $0.88 per pound ($1,950 per tonne). This was a reduction of approximately 1,400 tonnes of copper in concentrate from March 31. There was also approximately 800 tonnes of finished copper cathode awaiting delivery at June 30th. Local smelter capacity constraints continued throughout Q2 and the Company temporarily suspended export shipments from Kansanshi while awaiting the Zambian government exemption of the 15% concentrate export levy. The exemption was given on May 18th and export shipments recommenced immediately. The Mufulira smelter is expected to increase capacity in Q3 due to the commissioning of improvements to their converters which will result in the processing of the on-site concentrate stockpile in Q3. At June 30, there was approximately 18,200 tonnes of Kansanshi copper in concentrate that is currently being treated or stockpiled for treatment at the Mufulira smelter. In addition, the Company has shipped concentrates for smelter treatment to other Zambian smelters that have had available smelter capacity since the end of Q2 resulting from a lack of supply from other mines.

CONVERTIBLE BONDS

The Company issued $500.0 million of convertible bonds (the 'Bonds') in June for net proceeds of $488.0 million after the payment of fees and expenses related to the offering. The Bonds bear interest at 6% per annum, payable semi-annually in equal installments and are due June 19, 2014 (the 'Final Maturity Date'). These Bonds may be converted into the Company's common shares, at the option of the holder thereof, at any time from October 19, 2009 to the close of business falling seven business days prior to the Final Maturity Date. The initial conversion price (the "Conversion Price") is USD $56.39 (CAD $63.11) per common share for a maximum total of 8,866,820 common shares issuable upon conversion. In addition, if certain fundamental changes occur to the Company, holders of the Bonds may be entitled to an adjustment to the Conversion Price. The Company has the option to call the Bonds after July 3, 2012 until the Final Maturity Date, in the event that the trading price of the common shares exceeds 140% of the Conversion Price over a certain period. In addition, the Company has the right to redeem the Bonds if at any time the aggregate principal amount of the Bonds outstanding is equal to or less than 15% of the aggregate principal amount of the Bonds initially issued.

As the bonds are convertible into common shares of the Company, the Company is required to account for the Bonds as both debt and equity. The Company elected to use the fair value approach to value the debt portion and the residual value approach to allocate the remaining value to equity. The result of this accounting approach was an allocation of $431.1 million as debt and $56.9 million as equity, which is equal to the net proceeds of $488.0 million. The debt portion of the Bond will be increased over the term of the Bonds to the face value of $500.0 million.

COMPREHENSIVE INCOME

The equities market continued to recover during Q2 resulting in the Company recognizing an increase in the fair value of marketable security investments of $101.1 million for the quarter and $139.2 million for the year to date.

SHAREHOLDERS' EQUITY

Shareholders' equity increased due to the equity financing, the convertible bond issuance, the positive operating results and the increase in the fair value of the Company's marketable security investments.

As previously noted, the Company's equity financing resulted in the issuance of 9,343,750 common shares for net proceeds of $269.5 million and the convertible bond issuance resulted in an increase to shareholders' equity of $56.9 million.

As at the date of this report the Company has 78,410,323 shares outstanding.

DEVELOPMENT ACTIVITIES

Kolwezi copper/cobalt project, RDC

Approximately $408 million of the project budget has been committed up to the end of Q2 2009. The overall project was approximately 63% complete as at June 30, 2009.

As reported previously, the project construction was slowed to provide for a reduced monthly cash outflow during the first half of 2009. The project construction schedule and monthly expenditure has now been reset to provide a Q2 2010 construction completion, with project commissioning expected to commence by the end of Q2 2010.

The estimated capital cost is still expected to be under the original budget of $593 million at approximately $585 million.

The plant will initially produce 35,000 tonnes of copper cathode and 7,000 tonnes of cobalt hydroxide per year and is designed to double capacity during the first year for a budgeted capital cost of approximately $40 million. The mine life is expected to be 22 years at the expanded annual production rate of 70,000 tonnes of copper cathode per year.

Kansanshi copper/gold operation, Zambia

The successful achievement of production goals with the sulphide expansion circuit and successful completion of test work aimed at achieving economic recoveries from transitional mixed ores allowed a switch to mixed ore treatment through the original sulphide circuit, with dedicated treatment of sulphide ore in the expansion circuit only. This positions Kansanshi to economically process all significant in situ ore types and significantly reduces mining costs as transitional ores are no longer moved to stockpile and value is realized immediately. Extensive stockpiles of mixed ore are available and will provide low cash cost mining as the stockpiles are processed. Recoveries in the first full month of production were in line with expectations. Optimization of this treatment route is ongoing to boost throughput and recovery.

Mining activities around pit development exposed a higher grade oxide reserve which is expected to significantly improve cathode output for Q3. Ongoing projects to improve the throughput, recovery and quality of electro-won copper continue, with additional clarifier capacity as well as piping and pumping improvements initiated.

Development of a gravity gold processing route that significantly increases recovery of gold into bullion has advanced, with large scale plant trials to be carried out in Q3. The planned circuit combines efficient gravity concentration with pyro-metallurgical processing of lower grade gravity products, thus minimizing losses and improving recovery. This process will complement the additional gravity concentrate streams being developed in plant, and is expected to raise overall gold recovery and increase revenue from gold.

Guelb Moghrein copper/gold operation, Mauritania

The plant expansion project to 3.8 million tonnes per year throughput remains on schedule. Commissioning of the new rougher flotation cells commenced at the end of June. Commissioning of other elements of the plant is scheduled to continue through Q3 with the objective of achieving design capacity by the end of the quarter. The new power station building was completed and installation of the first two engines is progressing with 10 mega watts of commercial power available from the new power station. The earthworks on the new tailings dam were essentially completed and the installation of the water and power lines commenced, which are expected to be completed in Q3.

The commissioning of the two vertimills was successfully completed producing finer feed to the gold circuit allowing final optimization of the circuit. Construction of the third carbon-in-leach tailings pond was also successfully completed.

Kevitsa nickel/copper/PGE project, Finland

At Kevitsa, the expansion development drilling program which located significant wide intercepts of nickel and copper at or above grades in the main resource area was completed in March. A new mineral resource estimate is expected to be finalized during Q3. A draft of the internal Engineering Study Report has been compiled. The environmental permit was granted in July and the mining concession is expected in Q3 2009. Exploration in the mine area and elsewhere in Northern Finland has started and an increase in ground area has been secured for exploration.

Lonshi underground evaluation project, RDC

Further work continues on the Lonshi underground evaluation project. The objective of this exercise is to establish the operational and commercial viability of producing upwards of 35,000 tonnes per annum of copper in concentrate. The current resource should support this level of operation for in excess of 13 years.

The underground portal has been established and approximately 255 metres of decline has been developed with approximately 100 metres remaining to intersect the ore zone, which is expected to be achieved in August. Finalization of design will take place in Q3, supported with a Board application for capital expenditure to continue for the stoping phase of the project.

Exploration

Emphasis during 2009 continues to be focused on adding value to the Company's current operations through building robust geological models of the Company's deposits to improve the understanding of mineralization controls. This process has greatly assisted in targeting near mine exploration drilling and building valid exploration models for the district. During Q2 detailed mapping was completed around Lonshi in the RDC and Kevitsa in Finland.

A new geological model of the Kevitsa deposit was completed in Q2 incorporating re-logging of drillcore and a wealth of historical geophysical data. The new Kevitsa geological model has been successfully utilized as a framework for new resource estimation and provides some obvious targets for resource extension drilling which commenced at the end of Q2.

At Kansanshi, the near mine exploration program is well underway. Initial holes testing targets to the south of the Kansanshi Main pit have intercepted encouraging mineralization over widths of 12-20 metres.

In the RDC, drilling has been completed on a number of near mine targets at Frontier. The most encouraging area continues to be directly south of the mine where resource definition drilling is planned to start shortly. Further exploration drilling has now commenced on near mine targets at Lonshi.

OTHER ITEMS

Kolwezi revisitation update

During 2007, the Government of the RDC announced a review of over 60 mining agreements entered into over the last decade with foreign companies. The Kolwezi mining convention was included in this review. The Company and its contributing partners in the Kolwezi project, Industrial Development Corporation of South Africa ("IDC") and the International Finance Corporation ("IFC"), have obtained legal advice that the Kolwezi mining convention is valid and binding and that all terms have been complied with. The Kolwezi mining convention provides a dispute resolution mechanism through international arbitration.

Over the past months, the Company and its contributing partners attended several meetings with Gecamines (the state-owned mining agency of the RDC) and Government representatives on the review of the Kolwezi mining convention. There have been recent media reports that a representative of the Government of the RDC made public statements that the Kolwezi Project Contrat D'Association had been cancelled because of failure to start commercial exploitation within an agreed timeframe. At the time of this report, the Company has received no official notification of any cancellation. The Company believes there is no legal basis for the cancellation of the contract, and as previously noted, the Company, and the project's other contributing partners the IFC, and the IDC continue to have a valid and binding contract with the RDC and Gecamines. While the Company will continue to seek a negotiated solution to the RDC mining contract revisitation, it will, if necessary, pursue all available legal remedies, including recourse to international arbitration.

Zambian taxation update

The Government of the Republic of Zambia ("GRZ") announced in January 2008 a number of proposed changes to the tax regime in the country in relation to mining companies. These changes included a new windfall tax on copper sales revenue; a new variable profit tax; a concentrate export levy of 15%; an increase in the royalty rate to 3%; an increase in the income tax rate to 30%; and other changes including changes in the timing of deductibility of capital allowances and streaming of hedging losses and gains. These changes were passed by Parliament in March 2008 and the majority of changes took effect from April 1, 2008.

Under the new President, the GRZ reviewed these tax changes and proposed that the new windfall tax be removed, the deductibility of capital allowances be increased back to 100% in the period of expenditure and to allow hedging income be part of mining income for tax purposes. These changes were passed by Parliament in March 2009 and the majority of changes took effect from April 1, 2009. These enacted changes are not retroactive to April 1, 2008. On May 18(th), 2009 the GRZ issued a temporary exemption of the concentrate export levy of 15% until December 31, 2009 in order to allow the Company to export the copper in concentrate that cannot be treated in Zambia due to the lack of smelter capacity within Zambia.

The Company, through its Zambian subsidiaries, is party to Development Agreements with GRZ for its existing operations which provide an express right to full and fair compensation for any loss, damages or costs (including interest) incurred by the Company by reason of the government's failure to comply with the tax stability guarantees set out in the Development Agreements, and rights of international arbitration in the event of any dispute. Following consultation with external legal counsel, the Company assessed there to be a high probability of recovery from the GRZ of certain payments made in respect of these taxes. Accordingly, the Company has recognized a receivable from the GRZ for an amount in respect of the expected ultimate repayment of taxes in excess of the taxes permitted under the Development Agreements. As required by the financial instruments accounting standards, this receivable has been classified as "loans and receivables" and initially recorded at fair value based on management's best estimate of the timing of receipt and amounts due. The receivable will be assessed for impairment in future periods based on changes in facts and circumstances; any impairment amounts required in future may be material. As at June 30, 2009 this receivable amounts to $140.0 million.

Currently, the Company is seeking to hold discussions with the GRZ to find an alternative solution to arbitration or litigation to fully resolve all outstanding matters in relation to the tax changes introduced in conflict with the Development Agreements. The timing and outcome of these discussions is uncertain.

OUTLOOK

Group production estimate for 2009 remains at 380,000 tonnes of copper; gold production revised to 220,000 ounces

The Company estimates copper production and average C1 costs for 2009 as follows:



---------------------------------------------------------------------------
Expected
Target Target average C1
production production cost
Cu tonnes Au ounces USD/lb
---------------------------------------------------------------------------
Kansanshi 245,000 120,000 0.92
Guelb Moghrein 39,000 100,000 0.32
Frontier 96,000 - 1.01
---------------------------------------------------------------------------
Total 380,000 220,000 0.88
---------------------------------------------------------------------------


The group 2009 production estimate remains at 380,000 tonnes of copper. Kansanshi and Guelb Moghrein's year to date production was in line with the Company's expectation. With the effects of the wet season subsiding, mining activities have ramped up at Frontier, which is expected to provide higher grade ore for processing and increase copper production to meet the 2009 full year estimate.

The group gold 2009 production estimate has been lowered to 220,000 ounces. Guelb Moghrein's gold production remains on target with the 2009 full year estimate of 100,000 ounces. Due to the delays in refining the gold dore smelter and gold recovery issues with the HPL process, Kansanshi's gold production target has been revised to 120,000 ounces. Continued development on the gold processing circuit and the gold dore plant is expected to increase gold production over the remainder of the year.

The group expected average C1 cost for the 2009 year has been revised to $0.88 per pound. Zambian smelter capacity constraints continued during Q2 and are expected to remain throughout the balance of the 2009 year resulting in higher freight parity costs. This combined with delays in accessing the higher grade ore at Kansanshi and Frontier during the earlier part of this year has resulted in the revised average C1 cost of production at Kansanshi and Frontier. Guelb Moghrein's expected average C1 cost has been revised downward due to the higher than anticipated gold credit received.

Hedging program

As a result of the sharp copper price falls in the last quarter of 2008 which severely reduced profit, the Company decided to hedge up to 50% of targeted copper production for a rolling six-month period to protect against possible downside risk of a further decline in the copper price in Q1. The Company used a zero premium, put and call strategy to achieve a guaranteed, minimum price (put strike) over the hedged quantity while still participating in favourable price movements up to a capped, ceiling price (call strike). If the copper price closes between the put and call strikes during a hedged period, the Company will receive the spot price for the amount it has hedged.

The outstanding positions as at June 30 comprised 45,500 tonnes bought puts at an average strike price of $3,512 per tonne ($1.59 per pound) and 51,500 tonnes sold calls at an average call strike of $4,105 per tonne ($1.86 per pound).

The hedging program is regularly reviewed in light of the prevailing market conditions and economic outlook. The Company has not added any hedging since June 30, 2009.



As at June 30, 2009, the following derivative positions were outstanding:

---------------------------------------------------------------------------
Maturity Maturity Total June 30, December 31,
2009 2010 2009 2008
---------------------------------------------------------------------------
Liabi- Liabi-
Asset Lity Asset lity
---------------------------------------------------------------------------
Copper
Bought put
options (tonnes) 45,500 - 45,500 0.8 - - -
Average strike
price ($/tonne) $3,512 - $3,512
Sold call
options (tonnes) 51,500 - 51,500 - (67.1) - -
Average strike
price ($/tonne) $4,105 - $4,105
---------------------------------------------------------------------------
Gold
Forward sales
contracts
(ounces) 19,014 - 19,014 - (11.8) - (19.1)
Average forward
price ($/oz) $400 - $400
Bought put
options (ounces) 19,014 - 19,014 - - 2.2 -
Average strike
price ($/oz) $350 - $350
Sold call
options (ounces) - - - - - - (2.1)
Average strike
price ($/oz) - - -
Foreign exchange
Foreign exchange
bought put
options 21.5 - 21.5 1.3 - 2.2 -
- USD equivalent
Foreign exchange
sold call options 21.5 - 21.5 - (0.9) - (4.6)
- USD equivalent
Cross-currency swap 32.0 - 32.0 5.1 - 4.6
---------------------------------------------------------------------------
Interest rate
Floating to
fixed interest
rate swap
- principal 69.2 56.6 125.8 - (0.2) - (0.2)
Average fixed
interest rate 1.87% 1.82% 1.85%
---------------------------------------------------------------------------
Other
Embedded
derivative - - - - (8.1) - (8.0)
---------------------------------------------------------------------------
7.2 (88.1) 9.0 (34.0)
---------------------------------------------------------------------------
Copper embedded
Derivative
(tonnes) 21,542 - 21,542
Average price
($/tonne) $5,113 - $5,113
Gold embedded
derivative
(ounces) 2,936 - 2,936
Average price
($/oz) $927 - $927
---------------------------------------------------------------------------


Provisionally priced copper sales subject to final settlement prices in Q3

At June 30, 2009, 21,542 tonnes of copper were provisionally priced at an average of $2.32 per pound ($5,113 per tonne). Of this total, 10,381 tonnes and 11,160 tonnes were subject to final pricing in July and August 2009, respectively. The average LME cash price for July was $2.37 per pound ($5,214 per tonne) resulting in a positive provisional adjustment of $1.1 million which will be recognized in Q3 with the final settlement of the August provisionally priced copper.

On Behalf of the Board of Directors of First Quantum Minerals Ltd.

G. Clive Newall, President

12g3-2b-82-4461

Listed in Standard and Poor's

Certain statements and information herein, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities laws. Such forward-looking statements or information include but are not limited to statements or information with respect to future price of copper or gold, estimation of mineral reserves and mineral resources, our exploration and development program, estimated future expenses, exploration and development capital requirements, and our goals and strategies. Often, but not always, forward-looking statements or information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate" or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.

With respect to forward-looking statements and information contained herein, we have made numerous assumptions including among other things, assumptions about the price of copper and gold, anticipated costs and expenditures and our ability to achieve our goals. Although our management believes that the assumptions made and the expectations represented by such statements or information are reasonable, there can be no assurance that a forward-looking statement or information herein will prove to be accurate. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information.

See our annual information form and our quarterly and annual management's discussion and analysis for additional information on risks, uncertainties and other factors relating to the forward-looking statements and information. Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actual results, performances, achievements or events not to be anticipated, estimated or intended. Also, many of the factors are beyond our control. Accordingly, readers should not place undue reliance on forward-looking statements or information. We undertake no obligation to reissue or update forward-looking statements or information as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements and information made herein, are qualified by this cautionary statement.



Consolidated Balance Sheets
(unaudited)
(expressed in millions of U.S. dollars, except where indicated)
---------------------------------------------------------------------------
June 30, December 31,
Note 2009 2008
---------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents 749.3 176.2
Restricted cash 7 40.3 40.3
Accounts receivable 208.3 93.2
Inventory 3 298.1 270.9
Current portion of other assets 6 162.6 150.8
---------------------------------------------------------------------------
1,458.6 731.4
Investments 4 300.1 163.5
Property, plant and equipment 5 2,089.6 1,996.3
Other assets 6 111.2 113.3
---------------------------------------------------------------------------
Total assets 3,959.5 3,004.5
---------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 292.4 333.1
Current taxes payable 176.3 146.4
Current portion of long-term debt 7 84.2 139.5
Current portion of other liabilities 9 81.5 27.0
---------------------------------------------------------------------------
634.4 646.0
Long-term debt 7 201.3 246.2
Convertible bonds 8 431.5 -
Other liabilities 9 33.8 34.8
Future income tax liabilities 344.6 363.6
---------------------------------------------------------------------------
Total liabilities 1,645.6 1,290.6
Minority interests 330.1 313.3
---------------------------------------------------------------------------
Total liabilities and minority interests 1,975.7 1,603.9
---------------------------------------------------------------------------
Shareholders' equity
Capital stock 751.9 420.3
Retained earnings 1,092.7 980.3
Accumulated other comprehensive income 139.2 -
---------------------------------------------------------------------------
Total shareholders' equity 1,983.8 1,400.6
---------------------------------------------------------------------------
Total shareholders' equity, liabilities
and minority interests 3,959.5 3,004.5
---------------------------------------------------------------------------
Commitments and contingencies 14, 15
---------------------------------------------------------------------------


Approved by the Board of Directors

Peter St. George Andrew Adams
Director Director

The accompanying notes are an integral part of these consolidated
financial statements.

For a copy of the notes visit the Company's website
at www.first-quantum.com.


Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
(expressed in millions of U.S. dollars, except where indicated)
--------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
--------------------------------------
Note 2009 2008 2009 2008
--------------------------------------------------------------------------
Sales revenues
Copper 380.2 625.5 619.2 1,111.8
Gold 40.0 26.3 67.7 51.5
Acid 0.3 0.8 1.8 0.8
--------------------------------------------------------------------------
420.5 652.6 688.7 1,164.1
Cost of sales (162.7) (199.7) (303.0) (325.5)
Depletion and amortization (38.6) (25.6) (70.4) (45.9)
Royalties, windfall taxes and
export levies 15 (11.3) (86.6) (20.0) (97.9)
Zambian taxes recovery 15 3.3 67.3 12.1 67.3
--------------------------------------------------------------------------
Operating profit 211.2 408.0 307.4 762.1
Other expenses/income
Exploration (3.5) (4.2) (7.0) (10.0)
General and administrative (5.6) (8.2) (11.3) (14.9)
Interest (11.5) (7.9) (22.6) (16.5)
Derivative instrument losses (52.7) (2.2) (99.1) (3.6)
Other expenses/income 11 10.4 0.3 10.9 (2.6)
--------------------------------------------------------------------------
(62.9) (22.2) (129.1) (47.6)
--------------------------------------------------------------------------
Earnings before income taxes
and minority interests 148.3 385.8 178.3 714.5
Income taxes (40.6) (134.9) (49.1) (232.9)
Minority interests (6.2) (42.9) (16.8) (91.6)
--------------------------------------------------------------------------
Net earnings for the period 101.5 208.0 112.4 390.0
--------------------------------------------------------------------------
Other comprehensive income
Unrealized gain (loss) on
available-for-sale
investments, net of tax 102.3 (36.1) 140.5 (101.3)
Realized gain on available-for-sale
investments, net of tax (1.2) - (1.3) -
--------------------------------------------------------------------------
101.1 (36.1) 139.2 (101.3)
--------------------------------------------------------------------------
Comprehensive income 202.6 171.9 251.6 288.7
--------------------------------------------------------------------------

Earnings per common share
Basic $1.31 $3.06 $1.54 $5.74
Diluted $1.30 $3.02 $1.53 $5.67
Weighted average shares outstanding
(000's)
Basic 77,242 68,046 72,861 67,941
Diluted 77,897 68,938 73,412 68,790
Total shares issued and outstanding
(000's) 78,224 68,696 78,224 68,696
--------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.

For a copy of the notes visit the Company's website at
www.first-quantum.com.


Consolidated Statements of Changes in Shareholders' Equity
(unaudited)
(expressed in millions of U.S. dollars, except where indicated)
--------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
-------------------------------------
Note 2009 2008 2009 2008
--------------------------------------------------------------------------
Capital stock
Common shares
Balance - beginning of period 444.1 416.9 441.8 415.2
Stock options exercised 0.1 4.2 2.4 5.9
Stock issued on equity
financing 10 269.5 - 269.5 -
Acquisition of Scandinavian
Minerals Limited - 19.8 - 19.8
--------------------------------------------------------------------------
Balance - end of period 713.7 440.9 713.7 440.9
--------------------------------------------------------------------------
Equity portion of
convertible bonds
Balance - beginning of period - - - -
Equity allocation of
convertible bonds 8 56.9 - 56.9 -
--------------------------------------------------------------------------
Balance - end of period 56.9 - 56.9 -
--------------------------------------------------------------------------
Treasury shares
Balance - beginning of period (38.8) (36.8) (38.8) (34.3)
Shares purchased - (2.8) - (5.3)
Restricted stock units vested - 0.1 - 0.1
--------------------------------------------------------------------------
Balance - end of period (38.8) (39.5) (38.8) (39.5)
--------------------------------------------------------------------------
Contributed surplus
Balance - beginning of period 18.4 17.1 17.3 15.1
Compensation expense for the
period 1.8 2.4 3.5 4.8
Transfers upon exercise of
stock options (0.1) (1.2) (0.7) (1.6)
Restricted stock units vested - (0.1) - (0.1)
--------------------------------------------------------------------------
Balance - end of period 20.1 18.2 20.1 18.2
--------------------------------------------------------------------------
Total capital stock 751.9 419.6 751.9 419.6
--------------------------------------------------------------------------

Retained earnings
Balance - beginning of period 991.2 1,133.3 980.3 987.4
Net earnings for the period 101.5 208.0 112.4 390.0
Dividends - - - (36.1)
--------------------------------------------------------------------------
Balance - end of period 1,092.7 1,341.3 1,092.7 1,341.3
--------------------------------------------------------------------------

Accumulated other comprehensive
income
Balance - beginning of period 38.1 137.4 - 202.6
Other comprehensive income
(loss) for the period 101.1 (36.1) 139.2 (101.3)
--------------------------------------------------------------------------
Balance - end of period 139.2 101.3 139.2 101.3
--------------------------------------------------------------------------
Retained earnings and
accumulated other
comprehensive income 1,231.9 1,442.6 1,231.9 1,442.6
--------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.

For a copy of the notes visit the Company's website at
www.first-quantum.com.


Consolidated Statements of Cash Flows
(unaudited)
(expressed in millions of U.S. dollars, except where indicated)
--------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
-------------------------------------
Note 2009 2008 2009 2008
--------------------------------------------------------------------------
Cash flows from operating
activities
Net earnings for the period 101.5 208.0 112.4 390.0
Items not affecting cash
Depletion and amortization 38.6 25.6 70.4 45.9
Minority interests 6.2 42.9 16.8 91.6
Adjustment to net realizable
value of inventory (10.7) - (10.7) -
Unrealized foreign
exchange loss (gain) 3.4 (0.4) 0.6 3.8
Future income tax expense (2.0) 24.1 (12.0) 39.4
Stock-based compensation
expense 1.8 2.4 3.5 4.8
Unrealized derivative
instruments loss (gain) 13.4 (1.0) 55.5 (2.8)
Other 6.1 1.4 6.9 2.9
--------------------------------------------------------------------------
158.3 303.0 243.4 575.6
Change in non-cash operating
working capital
Increase in receivables
and other (68.2) (121.7) (121.0) (222.0)
Increase in inventory (9.1) (19.9) (24.5) (80.4)
Increase (decrease) in accounts
payable and accrued
liabilities 44.5 104.0 (32.2) 88.8
Increase in current taxes
payable 29.2 53.3 29.9 102.7
Long term incentive plan
contributions - (2.8) - (5.3)
--------------------------------------------------------------------------
154.7 315.9 95.6 459.4
--------------------------------------------------------------------------
Cash flows from financing
activities
Proceeds from long-term debt - 244.4 139.0 294.4
Repayments of long-term debt (150.0) (0.3) (251.5) (25.6)
Proceeds from convertible bonds 488.0 - 488.0 -
Proceeds on issuance of
common shares 269.5 3.0 271.2 4.3
Restricted cash (40.3) (40.4) - (17.9)
Dividends paid - (36.1) - (36.1)
--------------------------------------------------------------------------
567.2 170.6 646.7 219.1
--------------------------------------------------------------------------
Cash flows from investing
activities
Payments for property, plant
and equipment (94.4) (110.9) (173.2) (211.4)
Acquisition of Scandinavian
Minerals Limited - (215.7) - (215.7)
Acquisition of available-for-sale
investments, net (1.5) (36.3) 3.8 (58.2)
--------------------------------------------------------------------------
(95.9) (362.9) (169.4) (485.3)
---------------------------------------------------------------------------
Effect of exchange rate
changes on cash 0.2 0.2 0.2 0.2
Increase in cash and cash
equivalents 626.2 123.8 573.1 193.4
Cash and cash equivalents -
beginning of period 123.1 269.6 176.2 200.0
--------------------------------------------------------------------------
Cash and cash equivalents
- end of period 749.3 393.4 749.3 393.4
--------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.

For a copy of the notes visit the Company's website at
www.first-quantum.com


Contact Information

  • First Quantum Minerals Ltd. - North American Contact
    Sharon Loung
    (604) 688-6577 or Toll Free: 1 (888) 688-6577
    (604) 688-3818 (FAX)
    sharon.loung@fqml.com
    or
    First Quantum Minerals Ltd. - United Kingdom Contact
    Clive Newall
    President
    +44 140 327 3484
    +44 140 327 3494 (FAX)
    clive.newall@fqml.com
    www.first-quantum.com
    or
    Hogarth Partnership Ltd.
    Simon Hockridge
    +44 (0) 20 7357 9477