First credit perspective Quantum improves the progress of Copper Panama

[Ben Graham]

S&P Global Ratings revised First Quantum Minerals’ (TSX: FM) outlook to positive from negative on Tuesday, citing progress toward restarting its Cobre Panama copper mine and stronger liquidity management.

While the mine remains shut, the credit ratings agency now expects a restart in the first half of 2026, followed by a production ramp-up later in the year. 

Momentum has improved in recent months after Panama’s government signalled a more accommodating stance, including plans that could allow First Quantum to process low-grade stockpiles at the site. 

While full authorization has yet to be granted, President José Raúl Mulino has said his government is taking a more constructive approach to resuming operations, which S&P views as a positive step in negotiations. 

The company has continued to position the mine for a restart by selling idled inventory, exporting copper concentrate, restarting the power plant in the fourth quarter of 2025, and advancing an independent audit.

CEO Tristan Pascall on the future of First Quantum Minerals

These steps have strengthened expectations that operations could resume in the second quarter of 2026, with ramp-up beginning shortly after, S&P said.

Under current assumptions, Cobre Panama could contribute about 120,000 tonnes of copper and 40,000 ounces of gold in fiscal 2026, with production accelerating into the third quarter.

The restart is central to First Quantum’s credit profile. S&P said formal government approval and a successful ramp-up would likely strengthen the company’s financial position over the next 18 months. Once the mine reaches sustained commercial production and operates at full capacity for several months, the rating could move above the current B+ level, assuming liquidity remains adequate and debt continues to decline.

Prices on First Quantum’s side

Supportive metal prices add to the positive outlook. S&P forecasts fiscal 2026 copper prices averaging $10,500 per tonne and gold prices at $3,300 per ounce, levels that would significantly benefit First Quantum as a primary copper producer. A $500-per-tonne increase in copper prices is estimated to add about $200 million to adjusted EBITDA in 2026.

That upside will be partially offset by hedging. Roughly half of first-half 2026 production is hedged through copper and gold collars, which could reduce adjusted EBITDA by about $100 million if prices remain near current levels. S&P nonetheless views the hedging program as supportive of cash flow stability.

Given uncertainty around the timing and scale of Panama’s contribution next year, S&P did not include a base-case production forecast from Cobre Panama for 2026. Once the mine reaches full production, however, EBITDA could exceed $5 billion annually at current copper prices, which would likely reduce adjusted debt-to-EBITDA to below 2.0x after excess cash above $1 billion.

Zambian backup

S&P’s positive outlook reflects expectations that First Quantum will receive official approval to restart Cobre Panama and move into a full ramp-up phase, with a formal announcement anticipated within three months. Until then, financial performance in 2026 is expected to be driven primarily by the company’s Zambian operations.

An upgrade to B+ within six months would depend on approval to process existing stockpiles, the ability to export about 40,000 tonnes of copper concentrate per month, clarity on the mine’s legal and fiscal framework, and a clear path to full production within six to twelve months. Maintaining debt-to-EBITDA below 3x would also be required, with a further upgrade to BB- possible once full production is achieved, potentially by mid-2027.

Renewed delays or a breakdown in talks with Panama could reverse the outlook or lead to a downgrade, particularly if combined with disruptions at the company’s Zambian operations. 

For now, S&P said progress at Cobre Panama remains slow but constructive, keeping a 2026 restart firmly in view.