Clive Newall - President & Director Hannes Meyer - CFO

Matt Murphy - Macquarie Matthew Fields - Bank of America Merrill Lynch Orest Wowkodaw - Scotia Bank Ian Rossouw - Barclays Karl Blunden - Goldman Sachs Brett Levy - Loop Capital Markets Greg Barnes - TD Securities Alexander Pearce - BMO Capital Markets Shane Nagle - National Bank Financial Dalton Baretto - Canaccord Genuity Arjun Chandar - JPMorgan Sean Wondrack - Deutsche Bank

Hello and welcome. My name is Carol and I will be your conference operator today. At this time I would like to welcome everyone to the First Quantum Minerals Q4 and year-end 2016 financial results conference call. [Operator Instructions]. Mr. Clive Newall, you may begin your question.

Thank you, operator. Thanks, everyone, for joining us today. On the First Quantum side we have Hanes Meyer, CFO, Juliet Wall, General Manager, Finance. And Simon MacLean Acting Group Reporting Controller. Before we proceed I have to go through the formalities and draw your attention to the fact that over the course of this conference call we'll be making several forward-looking statements. And as such I encourage you read the accompanying note that accompanies our fourth quarter and year end MD&A as well as the Risk Factors particular to our Company which are detailed in our most recent annual information form and available on our website and www.sedar.com. Following my opening remarks, Hanes will take us through the financial results which were published yesterday after the close of these. After that, we'll open the lines to questions. Just reminder that the presentation which accompanies this conference call is also available on our website and can be accessed either on the events section or on the Q4 end year2016 results conference call button, under the new “news” section of the home page. I would recommend that you do look at those photographs. They have all been taken in the last 48hours and they do really clearly show the great development aftercare Panama, for those of you who have been watching it on quarterly basis. So to get started, we're very pleased with our Company's performance for the quarter and the year. Our operations performed well, with new records established at both the operational and Company levels. In particular, I would highlight las Krupp chess which had an exceptional year and improved plant water balance which combined to produce this great performance. Of course Sentinel's transition into commercial production during the quarter was a milestone for the Company it's fair to say this was long anticipated but the provision of adequate consistent electricity to the operation was the main trigger in making this declaration. Production is expected to steadily ramp up through 2017 as we transition terrace mining which will allow more efficient equipment usage and better drainage. The Kansans smelter also performed well in its full year production and throughput in the fourth quarter exceeded its design annual throughput rate of1.2 million tonnes of concentrate on an annualized basis. Our unit cost of copper production did tick up during the quarter, mostly on seasonal and timing factors which Hanes will get into more detail shortly. This is normal as there usually are fluctuations from quarter to quarter but overall the average for this year is expected to be within the guidance we provided last month, between $1.20 and $1.40per pound. With the healthy copper price increase in the fourth quarter, our net realized price for the period was below the average LME as our hedges matured at lower prices. Nevertheless, the hedge program is fulfilling its purpose which is to protect cash flows while Cobre Panama is under construction. In light of the volatility we have seen in commodity prices over the past18 months, we're very comfortable with the program and we believe it is prudent to keep it in place at least until the project's completion is sufficiently derisked. Turning to the Cobre Panama project, one of the important events recently was the mining concession was extended during the quarter for a second 20-year term, taking throughs to 2037, with a further automatic right of renewal at that time. The project's development is moving along well, with an unchanged scheduled for a phased commissioning in 2018, followed by continuing ramp-up in 2019. Since our Q3 update we have ramped up activities onsite even further with the port [indiscernible] power station early essentially at peak construction and the mine process area growing towards its planned construction peak in Q3or Q4 of this year. As I said, the photos in the presentation really do show the rapid progress that's being made at the moment. As we've said before, focus is on the power station and its associated infrastructure, together with the installation of equipment that we already own such as the mills. We expect to produce first commercial power in Q4this year from the first 150 Megawatt generating set. The second set is planned to follow into operation in the first half of2018. I'm pleased to say that the very challenging earth works part of the project is largely behind us. Process plant earthworks are essentially complete. The tailings management facility earth works are steady and over 61% complete, and the mine pre-strip is now in an operations mode of continuous mining and is 47% complete. In other areas of the project the overall concrete progress is approximately 71% complete, and structural steel 47%. Achieved our target to have 6 of the 7 mills installed by the end of 2016 along with 3 of the large gearless mill drives. Expect to have all 7 mills and their drives fully installed by the middle of this year. So our project procurement activities are focused on ensuring all materials and equipment are correctly sequenced and received onsite during this year to achieve the planned construction effort. Construction is planned -- our target is to achieve 160 million tonnes per annum throughput rate in December 2018 and continue towards steady state operation and further ramp-up in 2019. The project capital cost forecast is unchanged at5.48 billion. To date, roughly3.6 billion of this has already been spent and over a billion is planned for this year's budget on 100% basis. So as you can see, Cobre Panama is very advanced, largely derisked and has some significant milestones upcoming in the not so distant future. In the meantime, the lengthy involved process to secure the project financing continues to go through its various steps. We strongly believe Cobre Panama will be starting production at a very opportune time. The pickup in the copper price and improvement generally in sentiment towards the metal reflects strong positive fundamentals that are becoming a lot more obvious. The metal's largest consumer, China, continues to perform strongly exceeding most expectations, with growth in GDP and IP for the year at --additionally the disruption factor in mine output has all indications of reverting to normal levels after having an abnormally low year in 2016. That's typical of a period of low metal prices. The lessons of the past two years are well learned, however, and despite the improved market sentiment, First Quantum will continue to conduct its activities in a fairly conservative matter and I can point to the maintenance of the sales hedge program as one example. So in summary, we believe the addition of more long life low cost capacity to our production base in Sentineland Cobre Panama within these next two years is both timely and a major step towards quantum becoming a top five copper producers. So with that, I'll ask Hannes to take us through the financial review.

Thanks, Clive, and good day to everyone. Turning to the first Slide -- and I'll cover two slides just covering the annual highlights, and slide 18 of the presentation. The figures in the presentation are stated on a continuous basis and therefore exclude Evita in both the current and --periods -- which completed on the first of June 2016. Copper production and sales involves reached record levels in2016, followed the continual ramp-up at sentinel, record production atlas championship -- an increase of 31% against 2015 while copper sales were 37% higher at 536,000 tonnes. Another highlight was the continued strong performance of the Kansanshi smelter. Smelter processed 1.1 million tonnes of concentrate in 2016,producing 257,000 tonnes of copper anode at an overall recovery rate of 97%. Despite lower realized metal prices, comparative EBITDA was $232 million higher than 2015,driven by higher sales volumes and the impact of cost savings across the group. Comparative is $0.16 below 2015 despite higher comparative EBITDA due to higher depreciation in 2016 and a tax credit that we received in2015. Turning to the next Slide, on 2016 year unit cash costs, the chart shows our cost measures reported in 2014, '15and '16 which removes the seasonality and short end volatility seen in the quarterly numbers -- benefits from the smelter, favorable reduction of certain commodities, and lower royalty. All-in sustaining costs was 30% below 2014 levels, reflecting a 27 production in C1 costs over the 2-year period. Also, at some other capital expenditure and benefit of the royalty rate and G&A costs. Excluding Sentinel, copper C1costs of $0.1 per pound and all-in sustaining costs of $1.31per pound was below our regional guidance and within our latest guidance issued. Turning to the next Slide on Q4 '16highlights, copper production and sales recorded -- reached record levels for the quarter, of 146,000 and 136,000respectively. This was driven by higher sentiment contribution, reflecting its continued ramp-up through the year. Sentiment began commercial production on November the 1st following successful ramp-up and increase in stable available power to136 megawatts. In the two months since commercial production was declared, Sentinel has contributed $46 million of EBITDA. Looking at costs, copper C1 costs excluding Sentinel of $1.16 per pound was$0.19 above the previous quarter. I will cover the reasons behind this later in this presentation. However, quarterly C1 cost measures can fluctuate for a number of reasons can, including seasonal variation and timing of maintenance shutdowns and byproduct sales. Turning to the next Slide on quarterly production, copper production was 26% or 30,000 tonnes aboveQ4 2015, reflecting the Sentinel construction and high production at Kansanshi. As noted earlier, Sentinel declared commercial project November 1st and during the quarter Sentinel produced 48,000 tonnes of copper, of which 35,000 tonnes was produced after entering commercial production. Kansanshi production of 66,000tonnes was 7% above Q4 2015. The Kansanshi smelter achieved record quarterly throughput with340,000 tonnes of concentrate proceed -- copper anode and295,000 tonnes of sulfuric acid were produced. Nickel production was 2,000 tonnes below Q4 2015 due to lower grades, as expected from Ravensthorpe mine plant lower plant throughput. Gold production of 54,000-ounces was in line with the same quarter last year. Turning to the next Slide and the financial'15, driven by lower realized metal prices and higher depreciation. This was partially offset by cost savings and higher volumes including Sentinel. On a full year basis the copper hedging program has added $60 million to revenue or $0.05 per pound to the realized copper price achieved. By $74 million or $0.25 per pound. Those market prices moved above the hedge price. As at yesterday the Company had hedge sales in place for 433,000 tonnes of copper, with maturities to February 2018, at an average price of $2.27 per pound. It is estimated that over 90% of copper sales in the first half of the year hedged at an average price of around $2.20 per pound. In line with planned net debt of $4.4 billion was nearly $200 billion above Q32016 and was over $300 million lower than the corresponding period last year. Turning to the next Slide on quarterly unit cash costs -- and that's Slide13 -- sorry, 23, copper C1excluding Sentinel was$0.19 above the previous quarter driven by higher C1 cash costs at Kansanshi and las crew chess. Kansanshi -- due to higher road maintenance, mining, fuel and freight costs. D1 was also impacted by lower gold byproduct credits resulting from timing of sales and lower gold price. LasCruces Q1 costs -- driven by seasonal electricity prices and a 7-day planned maintenance shutdown. As noted previously the quarter cash costs reported can vary with these seasonal cost fluctuations and timing of these maintenance shutdowns. Turning to the next Slide, the waterfall chart details the Company's gross profit Q4 2016compared to the same quarter in the prior year. We'll touch on the drivers behind the movement earlier in this presentation, however the Slide demonstrates the impact of our ongoing cost performance and higher sales volume achieved which have partly offset the impact of lower realized metal prices, and higher depreciation reflects Sentinel entering commercial production and its associated depreciation. Turning to the next Slide on our long-term debt profile, which outlines our debt maturity profile and current repayments are required in 2017and 2018, comprising mainly of the term loan at the corporate facility and some amortization of the Kansanshi facility. The first bond repayment is only due in 2019, and that will be after we spend all the major capital at Cobre Panama. Looking forward the Company ended the year in a strong position with713 millions of undrawn facilities and $565 million of unrestricted cash. As previously announced, we are putting in place the project financing for Cobre Panama. This is targeted to be completed during the second half of 2017. And on the next Slide I detail some steps. So following the completion of technical, environmental and market consultant's report, project financing for Cobre Panama is officially launched in December 2016. This would follow with meetings in January with a number of ECAs across Asia, Europe and North America. Site visits and term sheet discussions will be held in March with follow-up discussions in Q2. This is a lengthy and involved process with targeted completion set at the second half of 2017. Turning to the next Slide on capital expenditures, our 2016net capital of $772 million in the year included 458 million at Cobre Panama, $99 million of capitalized stripping including $57 million at Kansanshi, and$83 million spent on the Trident project. As you can see in the second table, the estimated remaining First Quantum share totaling just more than a billion dollars is left to be spent at Cobre Panama. Looking 2017 capital expenditures, total as guided of just over a billion dollars which includes640 million at Cobre Panama,200 million of capitalized stripping, and 230 million of other projects and sustaining CapEx. Guided capital expenditures peaks in 2017reflecting Cobre Panama spend's contributions from third parties are forecasted to exceed our share of Cobre Panama, giving rise to the negative [indiscernible] share you see in the table. Moving on to guidance and the beginning of the copper, total copper production for 2017 and 2018,excluding Sentinel, remains essentially the same as the guidance given last year. We have previously given a range for Sentinel production and this year we have provided a more Conservative estimates in light of the delay in ramp-up to commercial production and change in the mine development geometry to a Terrace mining layout. Total copper production apps is estimated to be 570,000 tonnes in 2017, increasing to 600,000tonnes next year, and 605,000tonnes in 2019. Pre-commercial production at Cobre Panama is not included within these guidance figures. Copper C1cost is expected to average between $1.20 and $1.40 per pound in all three years. Copper all-in sustaining cost also expected to average between $1.65 and $1.80 per pound. The increase on 2016partly affects the inclusion of can also vary depending on number of factors including foreign exchange movements, power and fuel prices, and of course byproduct prices and grades. Moving on to nickel, annual production is expected to be 25,000 tonnes over the guidance period, and the nickelC1 cost is expected to average between $4.60 and $4.80 per pound. The all-in sustaining costs for nickel is expected to average between $5.10 and $5.40per pound. And finally, annual gold production is expected to be around 200,000-ounces. Thank you, and I'll now hand it back over to Clive.

Thanks, Hannes. So, operator, could you now turn the conference over to questions, please? Question and Answer.

[Operator Instructions]. And your first question today comes from Matt Murphy from Macquarie. Please go ahead.

Just wondering if you can tell us some more about the change to the mining layout sentinel. You know, what's driving it and what exactly the Terrace mining layout means. Is it driven by water issues at the site? Or other rationale?

It's essentially -- we're using very big equipment sentinel and Cobre Panama, and they just need a lot more space. But particularly at Sentinel, it's driven to some extent by drainage issues. It's relatively shallow open pit, which will have a long strike length, ultimately. Drainage -- it's unlike at Kansanshi where we've got underground be drainage, which is very efficient. This pit moves forward at quite a pace sentinel, so drainage is crucial, and this rainy season is a particularly wet one, which is good for power, of course. But a young open pit struggles in very wet conditions as I'm sure you're aware. But it's really about mining frequency.

Okay. A second question, if may. Just regarding the project financing, I think last conference call you talked about some process and that I thought you were into what you mentioned as phase 2, where you had been through some rounds with the export credit agency. So just wondering how to square that up with the schedule Hannes just talked about.

Yes, I think -- I mean, our phase 2 was essentially preparing a preliminary information memorandum, which we've now done, and then formally launched to the Lucas. We have had discussion was the ECAs last years but we've launched that process. That's following the completion of the technical and environmental market reports. That's now -- the next step that you should expect is the site visits by the ECAs, site discussions and a few rounds around that. We'll progress to the next stage. We'll go to commercial banks. That's why we're sort of saying second half of this year is probably the likely timing.

Okay, so no surprises relative to your thinking last year?

No, no surprises. I suppose it is a long, tedious process. You've just got to go through the process. It is fairly bureaucratic, and it takes a long time.

Your next question comes from Matthew Fields from Bank of America.

Hey, guys, just want to square up some things hoar. Looking at the revenue for this quarter was $536 million excluding the 150 from Sentinel. That's down about 70 from last quarter, for your existing mines that were in operation in both. But you had pretty consistent production, and gold price decline only explains about $10 million of the decline. Is there something I'm missing here? Can you sort of square up what the Delta is between all the existing mines decline in revenue generation this quarter? Are you factoring in the movement in price?

Yes, when I looked at the copper price, I mean, it's $2.18 this quarter versus $2.23 last quarter. That's not that much. Matt, let's have a quick look and we can respond later on the call?

Okay, great. And then 2019CapEx, obviously the contributions exceed your spending. Is there a catch-up payment from Franco-Nevada at the end of construction?

Yes, that's correct.

Okay. And then last quarter you gave us a Slide about the cadence of the hedges, quarterly quarter. So you said that there are basically at 220 for the first half. Does this mean they're at about 230 for the second half?

Yes, they are hedges at higher prices in the second half. And the ones we've put in place were '18. It's not that significant yet but that's sort of current pricing levels.

So there are basically some2018 hedges at current pricing?

Correct.

Okay, great. And then lastly, just a more conceptual question. So obviously the guidance for 2017 CapEx is about250 higher based on Cobre Panama construction pull-forward. What's the thinking behind pulling forward or accelerating some construction there?

Well, we stretched out the back end of the project, if you recall a year ago or thereabout. To some extent it's pulling that back in bit but it's mainly stripping that we are electing to do now, rather than at the end of the project. It's just -- it's a more efficient way of doing it.

Your next question comes from Orest Wowkodaw from Scotia Bank. Please go ahead.

A little more on the hedges, I would like to just touch on. You mentioned earlier that you planned to keep hedging until Cobre Panama is sufficiently derisked. Does that mean end of construction? I.e., end of 2018? Or does that just mean until you've got the project financing? And you just also mentioned that you have already, I guess, put on some2018 hedges. I don't see any details about that in your us, say, an up-to-date status?

Orest, it's not that significant, the 2018 hedges. I think it's probably -- I have to think -- it's about 20,000 tonnes at about the current pricing levels. Sort of above $2.70. And then, yeah, I think we'll -- I mean, we recognize that we're leveraged, and Cobre Panama is an important project for us, and we want to see that through. So with that in mind, we will continue this heading program. We phase it in now, gradually, over time. That's why we've placed some certain hedges already for next year. And we'll continue to do that because that ensures cash flow certainty and earning certainty for us during this construction period. Project finance gives additional liquidity. But at the same time we want to ensure that we maintain certain earnings levels as well.

So does that mean that you plan to aggressively hedge to the level you've done in '17 as we roll into '18?

No, we'll probably hedge at a reduced pace, and sort of gradually hedge that over time and have a more front-loaded hedge of a time, you know, that we'll have -- a larger proportion of the next 6 months hedge, but months 7 to 12 more composed to the copper price.

Okay. So the hedging -- you don't anticipate the hedging to really ease off, even if you secure the Cobre Panama financing say by the end of the year?

I think if we ease off, we can probably go to a level of sort of -- I don't know --know, at any point in time, sort of half, 50% hedged or so.

A lot of it depends where the market is, and sentiment, plus our capital commitments decrease in ensuing years after this year. There's a lot of moving parts to how much we'll hedge, but it will certainly be less than now.

Yes.

Okay. And then just shifting gears, if I could, at Kansanshi, can you maybe talk about the 2and a half project, i.e., when do you think you need to begin moving that forward in order to, I guess, prevent a material decline in production at Kansanshi, and then what the profile with that project, what do you think Kansanshi will produce on an average basis in the call it 2020 to '30 period per a Mum?

Well, the -- and s3 because ultimately we do need the full capacity of S 3, that would maintain production at current levels. The timing of S2.5determines whether there is a bit of an increase in production before it levels back off again, as the oxides fade away, that's -- so that's determined by a number of other factor as well including fiscal stabled in Zambia. -- stability in Zambia. But the other big question Mark is we need additional smelting capacity and there are a number of other smelters in the copper belt, as you know, which we use. But the availability of them going forward is still not entirely clear, so obviously we wouldn't to spend a lot of money building a new smelter right now if suddenly there was lots of spare capacity available in the region coming up soon. And of course lastly but by no means least, our balance sheet. Smelters are expensive, as you know. And so it's not just the concentrator and the stripping that we've got to take account of. It's also the need for additional smelting. So it's decision we're constantly looking at. If we started building it now, we would get a significant bump in production. But that's unlikely because we've still got work to do on the balance sheet and we need a longer period of fiscal stability. But if we start it within the next two or three years we still get some benefit from it.

I see. And what would the estimated capital be on S3?

Well, these are kind of loose numbers but I think it's 300 million and 400 or so on the plant and there's some stripping as well.

Incremental to the 2.5,which I think was about 700 million?

No, no, sorry, I'm talking about that two and a half. It will be done in two steps, almost certainly, although --depends where the market goes and maybe not necessarily. But that's the current thinking. It would be done in two steps, as2.5 and then doubling it up.

Your next question comes from Ian Rossouw from Barclays London. Please go ahead.

Hi, guys. I just had a quick question more broadly about your guidance for this year, on the cost and CapEx side. And you mentioned that this was sort of a high maintenance period at Kansanshi, Las Cruces and you're guiding to 120 to 140. Is that just introducing some level of conservativism, or I realize you have a full year of Sentinel that should push costs up a little bit. But is there some specific reason why the costs are going up? And just likewise on the CapEx, aside from the Cobre Panama increase which you're bringing forward some spending, could you maybe just give an idea where the additional stripping costs are being allocated to?

In terms of our -- looking at the costs first of all, so in terms of our full year guidance next year, 120 to 140, Mass include the full year sentinel. So that will increase it as well. And then in terms of production as well, levels of production will impact C1 and we highlight the impact of gray, for example, next year on Kansanshi. So that it would be the major changes. It is abroad range. I mean, typically we include -- start off with abroad range, because as Hannes has highlighted there are a number of factors, and some outside of our control, that can impact C1 such as exchange and prices of byproducts. So we start with a broad range. Butte would typically hope that we can come in, in the bottom half of the range.

We have one of two would have maintenance events, so as well we have a smelter shut down this year at Kansanshi for three weeks, I think, a month?

Close to a month, which has a cost -- it costs money to do it, but it also has an impact on costs as well. A few things like that were just taken into account.

Just on the grade at Kansanshi, you in their lease said that you expect costs to be broadly flat year-on-year. Is that correct?

What we said was that the full year is a better indicator than looking at the fourth quarter because there is short period.

So you still expect on a full year basis the cost to go up?

No, at Kansanshi, we expect the full year to be broadly in line with our full year costs for last year.

Okay. All right. Because you make it sound like it's a Kansanshi issue that's pushing the overall costs up but Kansanshi's costs on year-on-year basis doesn't change, so obviously it comes from --

No, it doesn't change very much. It does reflect the full year of Sentinel and maintenance [indiscernible] some items. But if you look at our guidance for 2016 we start with broad range and we've come in very much at the low end of that.

Okay. And your expectations at Sentinel for the full year, if you can maybe give some color?

We don't guide by operation. I mean, obviously we've disclosed the C 1 for the period of commercial production, just below the 150 level. And we've also indicated that obviously in the first quarter there will become impact from maintenance and seasonal factors but we don't guide specifically on individual operations. I think we've said in the past, Ian, the target eventually is to get to about $1.30 but time will tell.

Okay. And maybe just lastly, my question on the CapEx. In terms of stripping? Stripping costs? Was that for sort of 2017? As to where -- the large proportion of that would be at Kansanshi, with also elements Sentinel and Las Cruces.

Was your question not Cobre Panama, Ian?

No, no, it wasn't Cobre. It was specifically outside of Cobre. Is some of that stripping at Kansanshi related to the eventual S2.5, sort of push backs?

Eventually it will be. You know, those pits do flow into each other eventually but it's more designed for this year's plan.

Your next question comes from [indiscernible]. Please go ahead.

I have a few questions for you, please. First on Sentinel, guidance for 2019 of 35,000 tonnes is well below the initial design capacity. Is that purely due to the change of design to the Terrace layout -- new expected production capacity at Sentinel?

No, we still -- it will just steadily ramp up. Future production will continue to rise. We're not pushing it up to the -- once upon a time we were talking about taking it up to 300,000 tonnes. But we're not going to do that at the moment. But it should continue to rise beyond our guidance period.

Okay. Second one for Hannes, relating to the Cobre Panama project financing schedule. Just a bit more clarity. I had saw that the term sheet was done in 2016, and that technical due diligence should have been completed by now. Could you just add a little bit of detail around this, and the timing?

I certainly wish we can do these things as quickly as that. The technical report's done. So that was completed in end of last year. And then the processes you launch that, you need to get everybody around the table and then you have these term sheet discussions. And so we are now about to have those term sheet discussions. So no, we don't have a term sheet yet. And yes, as previously said, it is a long, tedious process. There's a sort of outline term sheet that we have been working off for a long time, but this is now the detail -- now they have done all the detail due diligence, silt around and coming up with the -- sitting around and coming up with the absolute numbers.

Okay, understood. Just one last one on Zambia. There have been some news articles in the last week or so, announcing first minerals planning to invest over -- could you just provide us the latest Company strategy regarding further expansions in Zambia, particularly for the smelter? You've already spoken a bit onS2.5 and S3.

No, that was misreported, that information. It was a conversation between Philip and the Minister of Mines. And it was only half of the conversation was reported, series of conditions about whether and when we spend billion dollars, which is effectively the s3 plus smelter there or there's about. It's a significant amount of money. So it was just a general conversation about these are the things we need to achieve to be able to go ahead and spend that sort of money. So it wasn't --it was misreported, as I say.

Your next question comes from Karl Blunden from Goldman Sachs. Please go ahead.

I just had one on Sentinel. You discussed that you now have a more stable power outlook or at least did to get to production. Should we think of this as the new normal. You mentioned that the rainfall was pretty good. Is there uncertainty going forward or do you feel pretty confident with the supply of power now?

I think the power issue in Zambia is a combination of recovering reservoirs, new capacity because there's a new coal-fired power station online now, and an additional -- some additional hydro capacity coming in. But, really, the swing factor, if you like, is their ability to buy in power. There's a lot of spare power available in southern Africa right now. A lot of it from South Africa. And -- which means that they can provide the power that we need to run our operations optimally. So we have a schedule of rising power availability for Sentinel as we get further and further into fresh rock. Right now we're --I think we're allocated136 megawatts but I think we're only drawing about 120. Because the ore is still a bit softer. But over time, over the balance of this year, that rises to the the end of the year as the bedrock becomes absolutely fresh.

And then just one on the project financing. Conditions have improved pretty dramatically in the copper market. I think a lot of people are pointing to that. As you think about the project financing, is 2.5 still the goal? Has anything changed conceptually around how large you would like it to be, how these of proceeds would be, given that you may not need all that facility anymore? I know it's still a ways off but how should we think about that versus regular corporate debt and refinancing?

I don't think anything has changed from what we've stated previously. It's still the same target amount, yes, nothing's changed.

Your next question comes from Brett Levy from Loop Capital Markets. Please go ahead.

At this point copper is relatively -- near9 billion versus 5 of debt. Andy our ratings are either side of triple c and low single b. Has it been any kind of priority to have the rating agencies rethink little bit? Also, with the risk of any sort of cash shortfall for anything to ramp up Cobre Panama? It feels like variety of things have derisked the credit and yet the rating agencies aren't quite there yet.

I think the [indiscernible] relates to specific bonds. So at the corporate level we're not at that rating. But we can certainly use your help. I think you need to phone them and ask them why they're still at those levels. We are planning to see the ratings agencies anyway, shortly, with our annual updates. I think what you tend to see is rating agencies, they're quick to downgrade when things turn badly. But on the uptick, they do take a bit longer. So I would expect that to increase over time, but, yes, it's a process that we're going through.

And approximately when are you visiting agencies?

Very shortly.

Your next question comes from Greg Barnes from TD Securities. Please go ahead.

Clive, I just want to return to the S2.5 at Kansanshi. I wasn't clear what kind of timing we're looking at for this 2.5. I thought you had to make a decision within the next two years what the CapEx is for that, and what the CapEx is for S.

You're right. The timing is to make sure there isn't a dip in production going forward. For the2.5 we need to start building it sometime in the next few years. The S2.5, I think there's about 300 on the hardware and about 200 on stripping or there's about and the detailed costing of that is currently still being done, so it's still a soft number. To take it up to the S3 would add another 300 million but that hasn't been coasted at all at this point. But the really big item, of course, is the smelter, not the actual expansion itself. If you went to the S3 you would need to build another smelter the size of the one we've already got. So the best part of a billion dollars.

So all-in, S3 with the hardware stripping and the smelter would be 1.2 to1.3 billionish?

And maybe a bit more. I probably don't want to even discuss numbers or the conception this call at the moment. It's too far off.

How far off are we talking about?

Well, S3, as I said earlier on, if we were going to do that, we would do it in 2 steps. We would do the S2.5 and then look at the further expansion down the line somewhere.

Your next question comes from Alexander Pearce from BMO Capital Markets. Please go ahead.

Hey, guys, I just wanted to go back to Sentinel. In Q4 this was a big step change, a big recovery. You had 76 last quarter, looks like 75 in October, and then a big move up to 88% the last two months. Are you now through most of that transitional? Is that what's happened there, to get to such high numbers? I mean, I'm just wondering if something else happened. And then secondly, on the production for the mine, if you just take the last two months and annualized that, you're already at about 211,000tonnes of copper, so well above your 195 guidance and you talk about additional improvements that you guys are making. So I'm just trying to get a bit more color on how conservative do you think you may be? Or is there some things? Other shutdowns or other plans, changes in grade in 2017 that I'm just not aware of, to get to your 195 number?

No, just -- the answer to both, really, is you can't rely on just short periods of time to come up with an annualized number. Yes, it did perform well towards the end of last year, where we were getting into fresh rock, and the targeted recovery level is around that sort of 88, 90% level. So it just indicates that when you're in good rock, that's the sort of recovery you get. But we've been through patches of good rock before. It's not just that month.

It was also the dry season.

Now we're in the rainy season right now, as you probably know. And just the wrong sort of rains as well. Rather than big thunderstorms and it dries up, it's sort of drilling continuously. Keeps everything pretty messy. So that last quarter is just indicative of what it will do when we're constantly in fresh rock. Butte seasonal affects will have an impact. It's a new pit and we're in that period where --and we're in sort of [indiscernible] materials. Until it dries up, it will have an impact. We're taking all of those things into account in our guidance for this year.

Your next question is from Shane Nagle from National Bank Financial. Please go ahead.

Just a couple of quick questions here. Just on the -- kilowatt hour in additional power costs that the dispute is ongoing for Sentineland Kansanshi, is there any guidance you can provide in terms of what the impact might have been on those costs in2016? And presumably with the hydro dams and the domestic power supply improving, the demand for that incremental cost presumably has resided a bit?

I don't think the cost side would change much. I don't want to disclose any details on this, but -- and, look, there is additional hydro facilities that came online. You know, the demand for that cost remains there, but there's sort of regular dialog between ourselves and government and industry and government on these costs fresco, the government's agency. So yes, that's ongoing.

These incremental costs aren't being accrued anywhere on the balance sheet or anything? I couldn't find them anyway.

We've accounted for an amount we say that's -- we have an amount. Believe we're charging an appropriate amount, both in our plan and in our actual results [indiscernible].

Yes, there's an amount that we accrue. We do pay the higher amount, but we do dispute that. And there's an amount that we accrue.

So the higher amount is being paid?

Yes. No, sorry, not all of it. There's a certain amount of that we pay a lower amount, but --and that's what we pay but we don't think any change would have a significant impact on our financials.

Yes, we don't think our cost numbers will change, that we've disclosed.

And I don't want to keep going back to the credit facility but just one quick question that wasn't answered previously, have you seen any significant change in the actual syndicate from last year to this year?

No.

Your next question comes from Dalton Baretto from Canaccord Genuity. Please go ahead.

Most of my questions have been answered. But maybe if I can ask a couple more minor questions. First of all, on the dispute with your minority partner Zambia, can you comment a little bit on next steps and what your total liability is?

No. All we can -- look, we reported pretty fully on -- as far as we can in the MD&A and really nothing has changed since the last time we spoke about it, in fact. So it's just going through a process which will take a long time. I mean, past, the arbitrations can take sort of two or three years. So it's going to be a very slow-moving story, I suspect.

Okay. And then maybe just on the new VAT regulations of import tariffs, with Sentineland the smelter built and you guys generating your own assets, are those material to you at all?

Sorry, the VAT on import tariffs?

There's a line in your MD&A that says the [indiscernible] have introduced new VAT regulations as well as higher import tariffs.

Yes, the VAT is just the administration bit around the VAT. The import tariffs, yes, that won't have much of an impact on our -- certainly it won't affect our smelter.

And maybe one last question just on [indiscernible] chess. Can you give us [indiscernible].

Only to the extent that it's well known and public information that there is a primary mineralization beneath the ore body that's being mined right now. And we're carrying out an evaluation of that resource including a pilot plant doing test work on it, view to figure out how to mine and process it once we've completed mining the secondary enriched ore body.

Okay. Do you expect to publish a technical report on that any time in the next year?

There would be, assuming we decide to do something with it, there would be -- inevitably we'll be filing a 43101, but the timing of that isn't entirely clear yet. We've got quite a lot of work still to do.

And your next question comes from Arjun Chandar from JPMorgan. Please go ahead.

Just following up on the VAT, could you update us on any discussions that you have had recently with the IMF [ph]?

No, I can't update you.

And your next question comes from Sean Wondrack from Deutsche Bank. Please go ahead.

Congratulations on commercializing Sentinel. That's great news. First question, when we think about Ravensthorpe over the long-term, what is your plan for that mine? Is that going to -- it's got along life. It doesn't fit your portfolio perfectly but it diversifies it. How do you think that mine? Is that something that you might monetize over time?

Look, I think -- yeah, you're right, Ravensthorpe is -- at these nickel prices is a marginal operation. It makes a little bit of money. Sometimes loses a bit. But essentially it's a kind of wash. As you say, it's a very -- at the right nickel price it's a very attractive project to own. It has done extremely well in the past and our view is that it will do extremely well in the future, but tickly as its product is -- particularly as its product is a mixed hydroxide which is in substantial demand from the bat industry and others -- other -- battery industry and others -- other chemical processes. So it's not something that we would either think about shutting down or selling. It's still a valuable asset for us. It has also the technology, it's a high-pressure acid leach and we have a team there who run it absolutely brilliantly, and we certainly wouldn't want to lose that team either. So there's lots of reasons why it makes sense to keep it go.

And then I know you have a lot of sorts of balance sheet events going on these days. Clearly you have the Cobre Panama project finance debt. Have you -- you had the two credit facilities, you know, one of which is amortizing, and the Kansanshi terminal. With your senior notes having traded up to basically 5.5, 6% yields, have you considered with most of them being callable in 2017, have you considered refinancing them? [indiscernible] now if you have any thoughts about that?

Look, we look at the capital structure of the Company on a continuous basis. Yes, I mean, we'll consider it. We'll look at it, but yeah, I mean, it's an ongoing program where you look and evaluate things and see where you're at in the market.

Okay. But nothing imminent with respect to attempting to refinance those bonds?

We continue to look at all of these things. I can't say yeah or nay.

Fair enough. As I think about some dramatic leaps that you have made in terms of getting Sentinel online and lowering costs, and the hedging program that stabilizes your revenues over time, in a rising interest rate environment, I would think that would kind of be a priority. I can understand that you can only say so much, so I'll leave it at that. I guess I'll stay tuned. Thank you.

On revenues, quarter on quarter, from Q3 to Q4, the difference in revenue is roundabout -- when you pull out Sentinel it's roundabout70 million and that's in line with the 7% fall in copper prices. And obviously there was some movement on gold revenue as well.

Okay, that cleared up that question from earlier on. Thank you, everybody, for listening, and we look forward to talking to you again at the end of the next quarter. So thanks and goodbye.

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