FIRST QUANTUM MINERALS SELLS FINNISH MINE FOR US$ 712 M.

Gets US$712M cash for Finnish nickel facility

First Quantum Minerals Ltd. has struck a much- needed deal to sell a nickel mine and bring relief to its debt- laden balance sheet.

The Toronto- based company said on Thursday that it will sell its Kevitsa mine in Finland to Boliden AB for US$712 million in cash. The transaction with the Swedish firm should close in May.

Shareholders liked the deal. They pushed the stock up 83 cents, or 13.3 per cent, to $7.09 in Toronto trading.

First Quantum wants to cut its debt by US$1 billion in the first quarter of 2016, and this sale gets the company most of the way to its goal. Analysts cheered the deal, as Kevitsa fetched a higher price than most of them expected in a weak nickel market.

“We believe this is a more than fair transaction for ( First Quantum),” Dundee Capital Markets analyst Joseph Gallucci said in a note.

Like many other large mining companies, First Quantum has leverage problems because it borrowed and spent too much money during the commodity boom and was vulnerable when metal prices plummeted. In 2013, the base metals miner acquired Inmet Mining Corp. for $4.9 billion of cash and stock. The Inmet deal gave First Quantum the Cobre Panama copper project, and the company has been plowing borrowed money into the US$5.5-billion mine ever since.

First Quantum exited 2015 with US$ 4.6 billion of debt against just US$365 million of cash. The company has very large debt repayments coming due in a few years, including about US$1.1 billion in 2020, US$ 1.1 billion in 2021, and US$839 million in 2022.

A more immediate problem is that First Quantum is in danger of tripping coven- ants on its debt this year. It needs to maintain a net debt to EBITDA ratio of less than 5.5 times to avoid a breach in the first half of 2016, and less than 4.5 times in the second half. Last month, the company had to issue a warning that there is “significant doubt” it can continue as a going concern because of its debt.

However, analysts and investors are confident that First Quantum will overcome these challenges. The Kevitsa sale provides crucial liquidity, and the miner has good relations with lenders and has been able to renegotiate debt terms with them in the past.

First Quantum also ran a sale process for its Ravensthorpe mine in Australia. However, it failed to attract any bidders, according to The Australian newspaper.

The company still needs to raise almost US$300 million to meet its debt reduction target for the first quarter. President Clive Newall has said the company will consider metal stream sales to raise money in addition to outright asset sales.

First Quantum was fortunate that the nickel price rallied over the l ast few weeks as it was trying to sell Kevitsa. Nickel bottomed out below US$ 3.50 a pound in mid- February before jumping above US$ 4.20 in the first week of March.

Shane Nagle, an analyst at National Bank, credited First Quantum for getting a US$ 712- million capital infusion “without having to resort to fire-sale prices and/or sacrifice growth.”