First Quantum Minerals: Strategic Turnaround at Cobre Panamá and Kansanshi S3 Expansion Fuel Long-Term Value Creation

In the second quarter of 2025, First Quantum Minerals (FQM) delivered a mixed but strategically significant earnings report, with net earnings of $18 million and adjusted earnings of $17 million. While the numbers may appear modest, the underlying operational and financial progress at Cobre Panamá and the Kansanshi S3 Expansion project signals a critical inflection point for the company. These two initiatives are not just about short-term cash flow—they are catalysts for de-risking FQM's liquidity profile and repositioning it as a resilient, long-term value creator in a volatile mining sector.

Cobre Panamá: From Liability to Strategic Asset

The Cobre Panamá mine, once a cornerstone of FQM's operations, became a political and environmental flashpoint after its closure in late 2023. For over a year, the mine sat idle, incurring monthly costs of $17–18 million while generating no revenue. This liquidity drag was a major headwind for FQM, but the May 2025 approval of the Preservation and Safe Management (P&SM) plan by the Panamanian government marked a turning point.

By June 2025, FQM had shipped 8,248 tonnes of stranded copper concentrate to Europe, with two additional shipments following in July. These exports, while representing just 27.5% of the 120,000-tonne stockpile, have provided a vital cash injection to offset operational costs. More importantly, the P&SM plan includes the restart of the on-site thermoelectric power plant in Q4 2025. This plant, with a generating capacity of 300 megawatts, could transform Cobre Panamá from a cost center into a revenue stream by selling surplus electricity to Panama's national grid.

The strategic shift from adversarial arbitration to diplomatic cooperation with the Panamanian government has also stabilized the mine's regulatory outlook. FQM's decision to prioritize dialogue over confrontation has not only preserved the asset's long-term viability but also created a framework for transparency and environmental stewardship. This pivot reflects a matured approach to risk management, prioritizing liquidity preservation over short-term political gains.

Kansanshi S3 Expansion: A Blueprint for Operational Excellence

While Cobre Panamá is a tale of risk mitigation, the Kansanshi S3 Expansion project in Zambia is a story of growth. The $1.5 billion expansion, now 91% complete, is on track for first production in the second half of 2025. This project, which adds 25 million tonnes of annual processing capacity, is a testament to FQM's execution capabilities and its focus on low-cost, high-margin operations.

The S3 Expansion has already demonstrated its value: Q2 2025 saw Kansanshi produce 40,000 tonnes of copper and 28,000 ounces of gold, driven by upgrades to gravity concentrators and the installation of new processing infrastructure. With capital expenditures peaking and cash spending declining, the project is set to transition into a free cash flow generator. This timing is crucial for FQM, as it allows the company to leverage the S3 Expansion's output to reduce net debt, which fell by $334 million in Q2 to $5.45 billion.

Moreover, the S3 Expansion's success underscores FQM's ability to scale operations without compromising sustainability. The project includes innovative technologies like low-energy rail-run conveyor systems, which reduce power consumption by 50–70% compared to traditional methods. These efficiencies not only lower operational costs but also align with the company's broader environmental, social, and governance (ESG) commitments.

Hedging, Liquidity, and the Path to Deleveraging

FQM's strategic progress is complemented by disciplined financial management. The company secured a $500 million copper prepayment in April 2025 and expanded its hedging program to cover 60% of 2025 copper production and 40% of 2026 output. These measures lock in prices between $4.14/lb and $4.71/lb, providing stability in a volatile market. Gold hedging, covering 78,318 ounces, further diversifies revenue streams.

The combination of improved cash flows from Cobre Panamá, the S3 Expansion's ramp-up, and aggressive hedging has positioned FQM to deleverage meaningfully. With a liquidity buffer of $1.7 billion (including $737 million in cash and $930 million in undrawn revolver capacity), the company is well-equipped to weather macroeconomic headwinds. Investors should note that FQM's net debt-to-EBITDA ratio is on track to fall below 1x by year-end, a significant improvement from its 2023 peak.

Investment Implications: A Catalyst-Driven Turnaround

For investors, the key takeaway is clear: FQM's strategic focus on Cobre Panamá and Kansanshi S3 Expansion is unlocking value across multiple dimensions. The P&SM plan has transformed a stranded asset into a liquidity generator, while the S3 Expansion is a growth engine with strong EBITDA margins. Together, these initiatives are de-risking the company's balance sheet and positioning it for a re-rating.

The stock's technical profile also warrants attention. After a 30% decline in 2024 due to Cobre Panamá's closure, shares have rebounded 25% in 2025, driven by improved visibility on the P&SM plan and S3 progress. However, the stock remains undervalued relative to peers like BHP Group and Freeport-McMoRan, trading at a 20% discount to the industry average EV/EBITDA multiple. This discount reflects lingering concerns about Cobre Panamá's long-term viability, but the P&SM plan's success and the S3 Expansion's on-time delivery are likely to close this valuation gap.

Conclusion: A Strategic Rebuild, Not a Short-Term Play

First Quantum Minerals' 2025 Q2 earnings may not dazzle, but the operational and strategic progress at Cobre Panamá and Kansanshi S3 Expansion tells a compelling story of transformation. By turning a political liability into a structured asset and executing a capital-intensive expansion with precision, FQM has demonstrated its ability to adapt and thrive in a high-risk sector. For investors with a three- to five-year horizon, the company's disciplined approach to liquidity, hedging, and growth makes it an attractive candidate for long-term value creation. The path ahead is not without risks—Cobre Panamá's future remains uncertain—but the strides made in 2025 have laid a solid foundation for a more resilient and profitable FQM.