Clive Newall - President & Director Juliet Wall - General Manager, Finance Zenon Wozniak - Head, Projects Hannes Meyer - CFO

Ian Rossouw - Barclays Capital Matthew Fields - Bank of America Merrill Lynch Justine Fisher - Goldman Sachs Orest Wowkodaw - Scotiabank Alex Terentiew - Raymond James Financial Services Sasha Bukacheva - Bank of Montreal Sean Wondrack - Deutsche Bank Ralph Profiti - Credit Suisse

Welcome to First Quantum Minerals First Quarter 2016 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the meeting over to Clive Newall, President and Director of First Quantum Minerals. Please go ahead, Mr. Newall.

Thanks, Operator. And thanks everyone for joining in today. On the call today on the First Quantum Minerals side we have Zenon Wozniak, Head of Projects, Hannes Meyer, CFO, Juliet Wall, General Manager and Libby Senez, Reporting Controller. Before we proceed, I'd like to, as usual, draw your attention to the fact that over the course of the conference call we'll 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 available on our website and on www.SEDAR.com. Following my opening remarks, Juliet will take us through the financial results which were published yesterday after the close of markets and then we'll open the line for 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 2016 Results Conference Call button under the News section of the home page. Okay. To get started on the review, as you know, it was a very challenging start to the year for most companies especially so for those of us in the resource sector. The copper price dipped below $2.00 in January, it was a shot to producers like us who generally felt it did not reflect the fundamentals of the market and was probably speculatively driven. Certainly this, together with the market uncertainty over the past 18 months or so, has strengthened our resolve and I'm sure that of our peers as well, to ensure our business is positioned to withstand a prolonged period of similar conditions. While initiatives we implemented starting in late 2014 are now making a difference, but it's becoming increasingly apparent in the results over last four quarters and particularly the first quarter of this year, for which comparative earnings and cash flow from continuing operations amounted to $63 million and $254 million respectively. These are well ahead of last year's comparables, despite much lower prevailing copper and nickel prices. Underlying the results were continued strong performance at all of the operations, including the smelter. With higher copper recoveries and throughput rates enhancing the benefits of the ongoing company-wide cost reduction and our copper sales hedge programs. The financial results, of course, do not include production and sales from Sentinel which also had a good quarter. The plant is operating well, with both trains in continuous operation and increasingly longer periods with above design throughput. This is happening with about 120 megawatts of power allocation versus the 160 megs that would be needed for steady state operations. Going forward, the key to Sentinel ramping up, from here, is to have the second power line fully energized, as the mine will soon be encountering harder run of mine ore. Zesco has advised that this will only happen when the number [ph] substation or some other new sources come online. We're obviously keen to see this happen as the line has been completed for almost nine months now. The results of our cost savings program are evident in the financials, as Juliet will explain in a few minutes. On an unit cost of production basis for both copper and nickel, whether you look at C1, all-in sustaining costs or C3 costs, they're all well below the level of last year's first quarter. As we noted in our news release, we maintain our vigilance on cost savings and cash outlays and on opportunities to build on what has been achieved so far. One of the opportunities we identified and have initiated is the delisting of our shares from the LSE. The decision was made since trading volumes remained very low despite our best efforts over the past 15 years. In fact, recently we've been frequently asked by shareholders in Europe why we continue to have a listing considering the low activity, the cost and administration required. In terms of listing and other associated expenses, it represents a saving of anywhere between half a million and a million dollars a year depending on circumstances. So it is not an insignificant amount in addition to all of the administration required. The delisting is scheduled to become effective at start of business on May 31. The agreed sale of the Kevitsa mine is on track to close in June, just a few weeks later than was originally scheduled. Proceeds from the sale, of course, will be included in the net debt EBITDA ratio covenant calculation. With this and the company's higher cash generating capability, our internal forecast, using consensus and below current metal prices, indicate that the company will continue to be in compliance with its financial covenants over the next 12 months. Consequently, the material uncertainty we noted in our year-end 2015 financial statements regarding the company's ability to meet the ratio covenant, has been removed. Of course, anything is possible in the current market environment and out of an abundance of caution, we continue to advance other strategic initiatives aimed at further strengthening the balance sheet. One of those is putting in place a project financing of up to $2.5 billion for the Cobre Panama project. We're only really able to get started on this following the finalization of the revised precious metal stream agreement but it is now being progressed in earnest. It's worth noting here the continued support we receive from our lending group, most of whom visited our Cobre Panama project in March and it's fair to say they are all impressed with what we're doing and have accomplished to date. Moving over to Zambia, the government recently introduced a bill to Parliament to amend some elements of the mining tax regime, pertinent to First Quantum's operation are the change in royalty from a current 9% to a sliding scale of 4% and 6% depending on the monthly average LME copper price and the removal of a variable profits tax. Our Enterprise project, the nickel project near Sentinel, is not yet in operation, but one element of the bill proposes to suspend the $0.10 export duty on nickel ores and concentrates, for which there is no in-country processing facilities. There isn't a set date yet for the implementation of these changes, but when it does come into effect, it will be very positive for both the industry and the country. On the power front, approximately 285 megawatts, in total, continues to be provided to Kansanshi and Sentinel. The cost of power is the subject of ongoing dialogue between the mining industry, the state owned provider and the government. In Juliet's review she will go through the accounting for power costs in the financials, but I would say the main take-aways at this point is that there has been no change in the provision of power to our operation. It's sufficient for normal operations at Kansanshi, the smelter complex and for Sentinel to achieve nameplate capacity for periods and, importantly, the dialogue with the three parties, the government, the power provider and industry, on the tariff going forward. Separately we continue to pursue options to independently secure power for our operations, both in the near and long term. Our Cobre Panama project is making good progress and as can be attested by the three groups of stakeholders who visited last month. Our visitors saw firsthand the large and difficult scope item for the project, mainly earthworks, is well under control. Indeed, in the pre-strip earthworks, we had a record month in March with 1.64 million BCMs of material moved. The pre-strip earthwork is now 17% complete, tailings management facility earthwork 51% complete and the process plant earthworks are already largely completed. In total this amounts to an impressive 77 million bank cubic meters of earthworks carried out to date. We continue to focus on the power station, its associated infrastructure, as a priority and we expect first power production in the second half of 2017, ahead of the completion of the project as a whole. In other areas of the project, concrete progresses is at 65% and the structural steal erection is progressing and at 30%. Two of the seven mill shells are already installed and the third is getting started. Our project procurement activities continue to take advantage of the current subdued market environment, with shorter equipment deliveries and reduced pricing opportunities being realized for equipment and both commodities. The project is scheduled for commissioning and ramp-up in 2018 and a target to achieve an equivalent 60 million ton per year throughput rate by the end of that year. So to sum up the quarter and where the company, as a whole is, our cost improvement program is yielding good results which are evident in the financials. This together with the agreed sale of Kavitsa has significantly strengthened the balance sheet and removed the threat of a covenant breach within the next 12 months, barring significant unforeseen events. We're pushing ahead with the strategic initiatives and do have available levers to strengthen our financial position even further. The process to put in place project financing of up to $2.5 billion is being advanced rapidly. Development of our Cobre Panama project is moving along very well and finally constructive tax regime in Zambia expected soon will be a step in the right direction for the industry and for the country itself. So, with that, I'll ask Juliet to take us through the financial review.

Thanks, Clive and good day, everyone. First of all, turning to the first slide and the first quarter 2016 highlights for continuing operations, it's worth highlighting at this point that figures in the presentation are stated on a continuing operations basis and therefore exclude Kavitsa in both current and comparative periods. This follows a previously announced agreement to sell Kavitsa and the reclassification of Kavitsa as a discontinued operation. So, copper production for continuing operations was at a record level and 30% higher than Q1 2015, with higher production at the majority of operations and additional contribution from Sentinel. Nickel production for continuing operations was 3000 tons above Q1 2015 due to a fourth quarter of Ravensthorpe production after Q1 2015 was impacted by the December 2014 leach tank failure. Record copper sales were 44% higher than Q1 2015 on higher production and the anode sales at Kansanshi. Andoe inventory was 46,000 tons 31, March, 2016 so that's a decrease of 16,000 tons from the Q4 2015 levels. The expectation is that this will be sold down to approximately 20,000 tons to 25,000 tons by the middle of 2016. Copper C1 of $1.03 per pound for the quarter was $0.38 cents below Q1 2015, driven by cost saving initiatives, consumable and fuel prices and exchange rate movement. Copper all-in sustaining costs of $1.36 per pound was significantly below the Q1 2015 level of $2.22 per pound on lower C1, reduced Zambian royalties, lower sustaining CapEx and lower general and administrative expense. So, turning to the next slide, Q1 production from continuing operations. Compared to Q1 2015 copper production increased by 30% or 27,000 tons reflecting Sentinel pre-commercial production and higher Kansanshi production. Sentinel contributed 21,000 tons pre-commercial production in the quarter, an increase of 6,000 tons on Q4 2015, but the ramp up towards commercial production levels continues. Kansanshi production of 58,000 tons was 8% above Q1 2015 on higher milling volumes and improved recoveries on the mixed and oxide circuit. In Q1 2016 the Kansanshi smelter processed 244,000 tons of concentrate, produced 53,000 tons of copper anode and 239,000 tons of sulfuric acid and achieved an overall copper recover of 98%. This has translated to savings in active costs, TCRCs and freight. Nickel production was 3,000 tons above Q1 2015 due to the impact of the atmospheric leach tank failure at Ravensthorpe in December 2014. Goal production of 56,000 ounces, was 6,000 ounces or 13% above Q1 2015. Kansanshi was 10% higher on improved head grade and Guelb Moghrein was 19% higher on increased throughput and improved recoveries. So turning to the next slide which is financial overview of continuing operations,. Despite market conditions, Q1 2016 growth profit of $105 million for the quarter was $82 million higher than Q1 2015, as increased sales volume, cost savings, lower royalties and favorable FX were partly offset by lower realized prize. Net debt of $4.8 billion was brought inline with Q4 2015 and comparative EBITDA was $269 million for the quarter. Comparative EPS of $0.09 per share in Q1 2016 was $0.11 above Q1 2015. Outside of the comparative results, the quarterly earnings includes the $236 million loss on the remeasurement to fair value less cost per sale of Kavitsa. The following actions taken by management, including the agreed sale of Kavitsa, as well as the imbedded cost savings and sales hedges and the company's current forecast for 2016 do not indicate a breach of the net debt to EBITDA covenant ratio for the next 12 months. As such and as Clive has already noted, the material uncertainty we noted in our year-end 2015 financial statements regarding the company's ability to meet the ratio covenant has been removed. Additionally, in April, a further 70,000 tons of copper sales hedges have been put in place and as of today, the company has sales hedge positions outstanding of 200,000 pounds of copper at an average price of $2.26 per pound and 2,400 tons of nickel, at an average price of $4.20 per pound. So going on to the next slide, cash costs. As previously mentioned copper C1 costs for continuing operations of $1.03 per pound was $0.38 or 27% below Q1 2015, with a focus on cost reduction and efficiencies, as well as savings on asset costs at Kansanshi, fuel power and consumables across the group and favorable exchange rates along with the benefits of higher production. Group all-in sustaining costs of $1.36 per pound with $0.86 or $0.39 below Q1 2015 and lower C1 costs, reduced Zambian royalty costs and a reduction in exploration and general and administrative expenses. Specifically, Kansanshi copper CL costs reduced $0.59 against Q1 2015 due to the benefit of low cost acid produced by the Kansanshi smelter, along with lower fuel costs and cost saving initiatives. Kansanshi all-in sustaining costs was $1.32, lower than Q1 2015 due to C1 cost improvement, reduced royalty rate from 20% to 9% and reduced sustaining CapEx. Guelb Moghrein C1 costs was $0.43 lower than Q1 2015, reflecting fuel savings, optimization of the supply chain and higher by product credit. On to the next slide which is the waterfall chart, so gross profit versus Q1 2015. So the waterfall chart shows that comparison. We've touched on the drivers behind this movement earlier in the presentation. However, this slide demonstrates the impact of our improved cost performance and increased sales volumes which will serve to dampen the significant impact of the lower realized metal prices. In addition the sales hedges in place have mitigated some of the impact of lower market prices. Lower cash costs included lower asset costs at Kansanshi, ongoing cost initiatives across the group and favorable fuel price and U.S. dollar movements across most operations. So turning to the next slide, I would like to focus on our continued successes in cost reduction. The savings generated from our cost saving initiatives in 2015 continue to be evidenced by performance versus prior year quarters with Q1 2016 cash costs, $116 million lower than Q1 2015, excluding the impact of favorable FX. As previously highlighted, the smelter has been a significant driver in reductions at Kansanshi with a net saving of $28 million in smelter costs over Q1 2015. Employee, contractor and maintenance costs have contributed $57 million of savings, driven by cost saving initiatives and reduced use of contractors and headcount reductions. The slide also shows the impact of fuel, power and freight savings as well as a reduction in general and administrative and exploration costs. In addition to these cost savings, the Zambian royalty expense was $38 million lower than the prior year quarter, as prevailing Zambian royalty rates were 20% in Q1 2015 but is 9% in Q1 2016. So moving on to the next slide which is on capital expenditure, our net capital expenditure for the quarter was $116 million, with $93 million net spend on Cobre Panama and $28 million project spent on Trident. The lower table, the table on the slide, breaks out the remaining project spend between First Quantum's share and the third-party share. The estimated remaining First Quantum share of spend is $1.57 billion, with $300 million forecast to be spent over the remainder of 2016. 2017 and 2018 remain forecast at $480 million per annum. So turning to the next slide on long term debt profile, at Q1 2016, the company had $1.8 billion of undrawn facilities and $269 million of unrestricted cash. Strategic initiatives have been advancing to further strengthen the balance sheet and improve the capital structure of the company. During Q1 2016 the company initiated the process to put in place project financing for the Cobre Panama project following the finalization of the related precious metals stream agreement. The total financing of, as Clive said, of up to $2.5 billion is targeted to be completed by the end of the 2016 calendar. Positive discussions continue with the company's wider [ph] banking groups in relation to existing facilities. Now turning to the next slide on Zambian developments, Clive's already touched on the key points in his presentation but to summarize further, the Zambian government has introduced into Parliament a bill for the approval of changes to the mining tax regime. Under this proposal, copper mineral royalties will be reduced to between 4% and 6%, on a step scale basis on a monthly average LME price, the corporation tax retained at 30%. At current copper prices, this would result in a 5% royalty compared to the current 9%. If this royalty rate had been in place during Q1 2016, then royalty expense would have been $14 million lower. The amount DAT approved by the company's Zambian operations at March 31, 2016, was $236 million, of which $220 million related to Kansanshi. During the period, March 2015 to March 2016, Kansanshi made VAT claims and accruals of $102 million of which $29 million has been received and $73 million remains outstanding at March 31, 2016. Management is in regular discussions with the relevant government authorities and continues to consider that the outstanding VAT claims are fully recoverable. In terms of accounting for Zambian electricity, as noted in our MD&A we have an asset of $40 million relating to amounts paid by Kansanshi to Zesco for electricity above the agreed rate of 31, December, 2015. We regard this amount as a prepayment which is recoverable. We have not increased the prepayment from December 31, 2015, when Zesco announced a further increased tariff of $0.1035 per kilowatt hour effective January 1, 2016. These increases are being disputed, discussions with Zesco and the government of Zambia continue. We consider that the statement of earnings of Q1 2016 and our forecasts reflect an appropriate cost pending the outcome of negotiations. So on to the next slide on market guidance, around production C1 costs, all-in sustaining costs and capital expenditure. All guidance is shown for continuing operations and therefore excludes Kavitsa. Copper and zinc production on a continuing basis remain unchanged at 380,000 tons and 26,000 tons respectively. Sentinel guidance remains unchanged and is expected to produce between 135,000 tons and 155,000 tons in 2016 as the ramp up continues. Gold production guidance has been increased by 10,000 ounces and is expected to be 210,000 ounces in 2016 on higher Guelb Moghrein production. Nickel production revised down to 23,000 tons in 2016, based on the most optimal operating plan at Ravensthorpe for the prevailing price environment. Both C1 and all in sustaining cost for copper have been reduced from previous guidance to reflect imbedded cost savings throughout the company. The 2016 C1 cost, excluding Sentinel is expected, to be between $1.10 and $1.25 per pound, down from the previous guidance of $1.15 to $1.35 per pound. Including Sentinel, this is expected to be between $1.20 and $1.35 per pound, down from between $1.25 and $1.45 per pound as the ramp up at Sentinel progresses throughout the year. All-in sustaining costs, excluding Sentinel, is expected to be between $1.50 and $1.70 a pound, down from between $1.20 and $1.90 per pound. Including Sentinel, this is expected to be between $1.65 and $1.85 per pound, town from between $1.75 and $1.95 per pound. Nickel C1 and nickel all-in sustaining cost guidance remain unchanged and we're expected to be between $4.00 and $4.40 per pound and $4.80 and $5.10 per pound respectively. Full year capital expenditure guidance remains unchanged and will consist of $390 million at Cobre Panama, $200 million on capitalized stripping and $120 million on other projects and sustaining capital. Thanks very much. I'll now hand back to Clive.

Thank you, Juliet. So, operator, could we open the lines for questions now, please.

[Operator Instructions]. The first questions comes from the line of Ian Rossouw from Barclays. Your line is open.

Just two questions from my side. Firstly, on Sentinel, I'm just trying to reconcile the 21,000 ton production figure you've reported to the comments you've made in the release about being close to nameplate capacity and also achieving recoveries of up to 70% to 80%. Do you mind providing a bit of details? I mean, what was the actual average recovery during the period, because I have to assume around 50% recovery and 50% of nameplate to get to 21,000. And then just a second question, still on Sentinel and the second power line, if I heard you correctly, you mentioned that Zesco would only connect the power once the Mumba power plant or other power sources are coming on Line. I think previously you mentioned that Mumba is only commissioning in the middle of the year, so I just wanted to get a sense of what the risks are around production if this power line is delayed by another three months. Thanks.

I think when we talk about nameplate capacity, I think we, for periods, not for all the time, not continuous at the moment because of the limited power, so I'm not sure your calculation would stack up. Have we got an average recovery number from--

Yes. I think if you look at recovery for the quarter, maybe if it includes some off-spec concentrate, then that was probably around 45%, but if you take that out, then that would go up to, I believe around about 57%, 60%.

Okay. So the 21,000 is just on speck or was it all concentrate?

That excludes the off-spec.

So do you want to address the power substation issue?

Sure. We're not at the power station development of Mumba [indiscernible]. I've heard, similarly, middle of the year, etcetera. There's some work going on at the Mumba substation at the moment as well and what Zesco are being concerned about is voltage fluctuations on the line when they energize the second power line. So there's some equipment going in at the Mumba substation that they are very keen to install before they energize the second power line and I think that's a very big factor as to when they turn it on.

Okay. So it's the substation, not the power station. All right. Thanks.

My greater understanding is that that is the case. They're concerned about when they turn the second line on, they don't want to get large fluctuations which upsets the grid and so it's equipment going into the Mumba substation.

The next question comes from the line of Matthew Fields from Bank of America Merrill Lynch. Your line is open.

Just wanted to ask about the project financing, now conceptually, will the project financing debt at Cobre Panama kind of replace the bank debt at the FQM issuer box level?

We didn't process out the project financing so the official theory is that we're working on, within the company. So objective would be to reduce at the corporate level and then introduce debt at the Cobre Panama level, but as we said earlier, that will take up to end of year, possibly a year to put in place. It's a process that we're going through.

Right. Is it too early to talk about mechanics of how that might work, whether it's, you know, sending cash up from Cobre Panama or just having the banking group, sort of, replace their commitments or is it still too early days?

I think it is too early. I mean, we've put out in the slides that Juliet showed you -- we have showed the title capital that's still to be spent at Cobre Panama, so when we put in place in a year's time, there could be the possibility of extracting some cash to First Quantum level but we're not at that stage yet so.

Okay. And then second, the Kavitsa asset sale proceeds, can you give us an idea of what you think the sort of net cash proceeds will be net of taxes and fees and what not and then what's your idea on the use of those proceeds, whether it's debt repayment or else or other?

I mean, we've got the 712, a little bit of fees and there's some booking capital adjustments. The final number will be determined at the balance sheet date when we hand over. In terms of the use of proceeds, I mean, we're in discussion as we said earlier with our banking group. Our current agreement provides for reducing of the term loan but we're in discussion of that and then we would probably target expenditure in our capital program over the next year.

Okay. And then lastly, I just wanted to confirm the numbers that I think Juliet mentioned earlier about the existing hedges. Now, these are hedges as of, I guess, today? Be and I thought I heard 200,000 tons of copper at $2.26 and 204,000 tons of nickel at $4.20.

That's correct, and that's as of today. So it's basically post-April.

Your next question comes from the line of Justine Fisher from Goldman Sachs. Your line is open.

The first question is just a quick follow-up to math on the hedges. Could you talk to us about how those hedges are in place over time? Are they front end loaded or are they more weighted to the latter part of the hedge period? And then I guess depending on the answer on that, I suspect there may be more front loaded but would the company consider putting in hedges towards, you know, the latter part of any hedge time period so that you kind of don't have hedges that really don't get you much benefit now and rather you hedge, I don't know, nine, 12 months out where there may be some more price risk?

The hedge is all front loaded so you should look at the hedges as, sort of, covering the next four months of revenue. I think if you plug in a number for the next quarter, so with revenue you can use the $2.25, $2.26 number that we're given you, so how we receive -- on the copper side. When the opportunity comes along, I mean, we might look at hedging out further but, I mean we use the opportunity that arise in the market earlier this month, in March to put in place a few hedges.

Is it expense to hedge farther out, kind of a year out further out? I mean, could you even if you wanted to and go out with a reasonable cost hedge copper at 5000, let's say, a year from now as opposed to four months from now?

You could go out, obviously the credit -- increase, the cost of credit does increase the further you go out. So if you go out three months, six months, it's not too expensive, but once you get further out, then that adds to [indiscernible] if you get a spike in the price, it depends on what you want to solve, what parts do you want to receive. But, I mean we have to if the price, if it's locked in on the period.

And then did you mention in the answer to Matt's question that you were discussing rescheduling the amortization of the term loan?

There is discussions with the banks. I can't go into detail on that. I don't give any of that. If our current agreement provides, banking agreement provides for the proceeds to be applied against the term loan. Thus we’re in discussion with the banks that could include various things but you should probably look at us spinning this on capital over the next year.

Okay. And then, sorry, just last question to follow up on something that Matt asked as well. When you mentioned potentially using some of the proceeds from project finance for First Quantum debt, I know it's too early to talk about the specific mechanics but would that be used to repay loan or maybe you would reduce the revolver availability because you wouldn't necessarily need as much revolver to fund the completion of Cobre Panama, if you had project finance at could he be Panama. So if you talk about reducing debt at First Quantum is it, kind of, reducing available revolver such that the debt would be drawn from that project finance or is it actually replaying loans that are already on the books at First Quantum?

No, we would probably look at reducing the overall availability at funding at First Quantum at that time.

Your next question comes from the line of Orest Wowkodaw with Deutsche Bank.

It's actually Orest Wowkodaw with Scotiabank. I'm just curious whether you're still considering or running a process for asset sales or whether that is now no longer a priority just given, I guess, your improved balance sheet outlook and the come her price. Thank you.

I think we don't have a process on the asset sales, but, you know, it's our duty to our shareholders to consider any realistic sort of offers for any of our non-core assets. So that's the way we're dealing with it.

Okay. And should we still -- I mean, you previously had a $1 billion debt reduction target. Obviously you did the Kavitsa sale. Should we still anticipate there's another piece to come in some form or are we kind of just moving beyond that now?

Well, I think we've moved beyond that with the very big reduction in our cost base. Going forward, the need to do a billion is perhaps receded somewhat.

[Operator Instructions]. The next question comes from the line of Alex Terentiew from Raymond James. Your line is open.

Just a couple questions here. First, all-in sustaining costs, $1.36 per pound in the quarter, so quite low and below your guidance there. Was Q1 just a low spend quarter and should we expect to see spending pick up over the course of 2016 or would that be operating cost or capital? So I just want to get some clarity on that. And also I'm not sure if you mentioned this yet but you plan to realize $150 million through reduction in working capital and just wondering where that is coming from, if you've got some additional copper or other inventories you're looking to monetize or where those funds come from.

Yes. On the first one, on all-in sustaining costs, the one element I would probably highlight is that it was a relatively low quarter for capitalized stripping, so if you look at what we spent in the Q1, then it's relatively low compared to our full year guidance, so we're expecting some increase in capitalized stripping throughout the year.

And then I think in terms of working capital, we struggled some [indiscernible] on route and we should see those levels reducing over the next three to six months so there should still be some working capital reduction on our finished goods in the remainder of the year.

Yes, that's correct. I think we said, you know, we're expecting that to go down to around about 25,000 tons. So we're expecting further reduction. There's obviously been some experienced in Q1 but more to come.

Your next question comes from the line of Sasha Bukacheva from Bank of Montreal. Your line is open.

I was hoping we can just circle back to Sentinel for a moment. So what I'm trying to figure out is, you're guiding to production of 135,000 tons onto 155,000 tons of copper for the mine. In the event that the power line and the second power line amortization is getting delayed by a quarter, how would that affect your production guidance in volume terms?

I think it would be at the lower end of that range. I mean that is what the range reflects. The timing on getting the second power line energized.

Okay. And so in the event that the power line isn't energized this year at all, how would your production guidance be affected then?

Have we done that number, Juliet?

Clive, I don't think it's an unrealistic scenario to consider here. That's not what we're -- that's not what the schedule is. I don't think it's a likely scenario.

The next question comes from the line of Sean Wondrack from Deutsche Bank. Your line is open.

Is Cobre Panama currently a guarantor for the company's existing senior notes?

No, it's not a guarantor.

So will the company's existing senior notes be structurally subordinated to the contemplated project financing debt?

Yes I mean, the project finance debt [indiscernible] ranking compared to the notes on the Cobre Panama and asset specifically.

And the next question comes from the line of Ralph Profiti from Credit Suisse. Your line is open.

Just two questions from me. Clive, can you help me understand the balance, when you're actually encountering this harder ore at Sentinel and what will be the maximum producer drive needed for this ore? Will you basically be satisfied once you get the whole allocation of 160 megawatts?

I think the ideally, when we're in fully hard ground, we need up to 180. But 160 gets us a long way there.

And my next question is a little bit more of a housekeeping. I've noticed that the Kansanshi concentrate grade has been trending down over the last eight quarters and for the last two quarters has been under 20%. Is this simply a function of the or mix or is this related to the strong performance at the smelter and you're basically able to make up the difference?

I think it's the latter, where we, you know, with our own captive smelter -- the main contaminant of the concentrate is pyrite, so it's actually added energy as well, so, you know, we need to be less precise about what we put in it.

I will now turn the call over to the speakers for closing remarks.

Okay. Well, thanks, everybody, for joining us today. If you didn't get to ask your question, feel free to call either Sharon or I today or early next week and we'll try to oblige. So thanks once again and we'll talk to everybody again next quarter. Thank you.

This concludes today's conference call. You may now disconnect.