In November 2023, widespread civil unrest across Panama prompted the Panamanian government to halt operations at First Quantum Minerals’ largest asset, the Cobre Panama mine. This mine contributed approximately 62% of FQM’s net cash flow, supplied 2% of the global copper market and was generating quarterly cash flow of $600m before the shutdown.
As a result, the company embarked on a major balance sheet refinancing, amending and extending its main corporate banking facility, with 100% lender consent, along with a series of equity and debt capital markets transactions, including the issuance of a new 2nd-lien note, and a commodity prepayment transaction.
The main objective of the series of transactions was to provide the company with strong liquidity, sustainable leverage and a solid financial position on which to deliver its operational objectives despite closure of the operation in Panama, with flexibility should the situation there be resolved.
FQM’s treasury team, along with its banking partners, adopted a three-pronged approach – each transaction was strategically designed to interlink with the others and the bond, equity and amendment of the senior finance agreement (SFA) were cross-contingent on each other, with minimum capital market transactions sizes a requirement for success, without which none of the deals would close and become effective.
Throughout this complex process, the treasury team coordinated closely with all stakeholders, including credit rating agencies. As a result, the $1.6bn 2nd-lien bond received a rating of B by both S&P and Fitch, consistent with FQM’s overall rating. And despite the equity issuance, FQM’s share price and bond yields responded positively to the transaction and the successful removal of the liquidity risk concerns in the market.
These transactions were executed under extraordinary pressure, within a condensed time frame, and amid significant uncertainty.
It was an excellent example of a complex corporate finance deal with several critical elements, executed in difficult geopolitical circumstances
