First Quantum's 2026-2028 Guidance: Decoding the Production, Cost, and Capex Shifts

The new three-year outlook from First Quantum is a clear signal of strategic recalibration. It reveals a portfolio in transition, where the company is betting heavily on a single, major expansion while accepting lower output from an older asset. The numbers tell a tale of two mines: one being pushed to grow, the other being re-rated.

The most concrete shift is at the Sentinel mine in Zambia. The company has slightly lowered 2026 and 2027 copper production guidance, a move directly tied to operational realities. This reduction is driven by higher maintenance and revised ball mill availability rates at Sentinel, stemming from fatigue failures identified early last year. The guidance now reflects a mine facing technical headwinds, with full remedial work deferred to 2027. This is a downward revision that sets a new, lower baseline for Sentinel's contribution.

At Kansanshi, the picture is more complex. While the company is lowering gold production guidance for 2026 and 2027 due to lower grades and a timing shift for copper production at another asset, the strategic focus is on copper growth. The completion of the S3 expansion late last year is the catalyst. The guidance for Kansanshi copper output is being managed carefully, with 2026 expected to be marginally below previous guidance due to increased ore hardness. This is not a failure; it's the cost of scaling up. The company is prioritizing the ramp-up of this major expansion over hitting a specific copper tonnage target in its first full year.

The capital and cost guidance confirms the investment thesis. First Quantum is increasing 2026 capital expenditure guidance from previous levels, a move that funds the S3 expansion and other priorities. This spending is a direct investment in future organic growth. Simultaneously, the company has raised its cost expectations, setting total copper C1 cash cost and AISC unit cost ranges above previous guidance. This is a structural shift, partly due to the lower production forecast and a change in accounting methodology that excludes by-product credits as Guelb Moghrein transitions to gold focus. The message is clear: higher costs and higher capex are the price of admission for the growth at Kansanshi.

Finally, the nickel guidance provides a point of stability. The company has left enterprise nickel production guidance unchanged, suggesting that its nickel operations are running on a steady, predictable path without the same kind of major expansion or decline seen at the copper assets. This anchors the portfolio while the copper story plays out.

The bottom line is a portfolio in motion. The lowered Sentinel guidance and the re-rated Kansanshi gold output signal a mine being repositioned. The increased capex and elevated cost guidance are the tangible costs of that transition, funding a bet on sustained growth from one asset while the other is being managed for a new phase.

Financial Mechanics: Cost Pressures and Balance Sheet Management

The new cost and capex assumptions are not just accounting adjustments; they are the direct drivers of the company's near-term earnings trajectory and its ability to fund the growth bet. The financial mechanics reveal a firm under pressure, even as it executes its strategic pivot.

The most immediate pressure point is evident in the quarterly results. Despite a 15% sequential increase in copper production and improved operational execution, First Quantum posted a net loss of $48 million for the third quarter of 2025. This loss underscores a critical tension: production gains are being offset by the very cost and capital pressures the new guidance acknowledges. The company is trading volume for margin, a necessary but painful step in the expansion cycle.

To manage this pressure and secure its financial runway, the company has taken decisive balance sheet actions. The cornerstone is the $1 billion non-debt gold stream arrangement with Royal Gold, which provided a significant liquidity boost and extended the debt profile. This was paired with a series of bond transactions that pushed the company's earliest bond maturity out to 2029. This is a classic move to lengthen the debt profile, reducing near-term refinancing risk and providing the stability needed to fund the multi-year capex plan.

Yet the stock's performance tells a story of optimism that may not yet be fully reflected in the fundamentals. The shares have rallied 111% over the past year, a return that prices in a successful transition. However, valuation frameworks offer a more nuanced picture. While a discounted cash flow model suggests the stock is 62.3% undervalued, a price-to-sales analysis indicates it is overvalued relative to a calculated fair ratio. This divergence highlights the core investment question: is the market paying for the future cash flows the S3 expansion promises, or is it already pricing in success?

The bottom line is one of managed risk. The company is using non-debt financing and debt restructuring to fund its growth, a prudent move that buys time. But the elevated cost guidance and recent net loss show the financial toll of this transition. The sustainability of the growth plan now hinges on the S3 expansion delivering on its promise to turn higher costs into higher, profitable volumes. For now, the balance sheet is stable, but the earnings engine is under strain.

Portfolio Context: Cobre Panamá and the Path to S3 Ramp

The new guidance is set against a portfolio landscape defined by a single, critical growth engine and a persistent source of uncertainty. The path to delivering on the promised organic expansion hinges entirely on one project, while another major asset remains in limbo.

The primary source of future growth is now operational. The Kansanshi S3 Expansion achieved commercial production at the end of 2025, marking a major milestone. This project, which contributed approximately 25,000 tonnes of copper to annual output last year, is the sixth large-scale SAG mill train First Quantum has delivered. Its completion under budget and on schedule provides the tangible foundation for the company's three-year outlook. The guidance shifts for Kansanshi-lower gold output, managed copper ramp-up, and higher cost expectations-are the direct financial mechanics of this expansion's integration. The company is positioning itself to deliver sustainable organic growth from this asset over the guidance period.

Yet this growth story exists alongside a significant overhang. The Cobre Panamá mine remains in a phase of Preservation and Safe Management, a status that began in November 2023. This is not a dormant asset; it is a source of ongoing operational and financial uncertainty. While the Panamanian government has signaled a positive step forward by announcing plans to process stockpiled ore-a move that would create jobs and generate royalties-the company is clear: this is not a mine reopening. The unresolved status of Cobre Panamá continues to cloud the company's long-term portfolio and its ability to unlock the full value of its copper assets.

To manage this complex landscape, First Quantum has taken decisive steps to strengthen its financial position. The company recently secured a $1 billion non-debt gold stream arrangement with Royal Gold, a key liquidity boost that complements a series of bond transactions extending its earliest maturity to 2029. This balance sheet fortification is essential, providing the stability needed to fund the multi-year capex plan for the S3 expansion while navigating the uncertainty at Cobre Panamá.

The bottom line is a portfolio in two distinct phases. One asset is actively being scaled up to drive future growth, while another is being managed through a prolonged period of preservation. The company's guidance reflects this duality: it is betting its organic future on the successful ramp of S3, while its financial strategy is built on managing the risks and costs of a portfolio that includes a major unresolved asset.

Catalysts, Scenarios, and Key Risks

The new three-year guidance sets the stage, but the path to a successful turnaround is defined by a series of forward-looking events and variables. The coming months will test whether the company's strategic recalibration translates into financial reality or exposes underlying vulnerabilities.

The primary catalyst is the cluster of disclosures scheduled for early February. First Quantum will release its full-year 2025 financial and operating results on February 10, 2026, followed by a CEO presentation at the Future Minerals Forum in Riyadh. This is the first major test of the new guidance against the company's actual 2025 performance. Investors will scrutinize whether the reported results align with the new cost and capex assumptions, and whether management's tone on the S3 ramp and Sentinel stability matches the cautious optimism embedded in the outlook. The presentation at the forum will be a critical moment to assess management's confidence and strategic clarity.

A key risk is the execution of the growth plan itself. The success of the guidance hinges on two operational fronts. First, the Kansanshi S3 Expansion must deliver on its promise of sustained organic growth, with the copper ramp-up hitting targets in 2026 and beyond. Any delay or cost overrun here would directly undermine the core investment thesis. Second, the stability of the Sentinel circuit remains a concern. The mine's lowered production guidance due to maintenance and ball mill issues is a known headwind. The pace at which these technical problems are resolved in 2026 will determine whether Sentinel becomes a reliable contributor or a persistent drag.

The broader copper market outlook provides a supportive backdrop but does not mitigate these company-specific risks. Experts are forecasting a market deficit in 2026, driven by supply disruptions like the Grasberg restart delays and Kamoa-Kakula's stockpile depletion. This fundamental strength offers a tailwind for prices and potentially for First Quantum's revenue. However, it is a macro variable outside the company's control. The guidance assumes the company can capture this favorable environment, but its ability to do so depends entirely on executing its internal plan. A bullish market can mask operational missteps, but it cannot replace them.

The bottom line is a setup defined by high-stakes execution. The February catalysts will provide the first concrete data point on whether the company is on track. The S3 ramp and Sentinel stability are the immediate operational hurdles. And while a favorable copper market offers a cushion, the ultimate outcome will be determined by the company's ability to manage its complex portfolio and deliver on its ambitious, yet costly, growth bet.