Morning Commentary: First Quantum active on court ruling; Summit book tops deal size

By Paul A. Harris

Portland, Ore., Nov. 28 – First Quantum Minerals’ bonds came under pressure on Tuesday morning after Panama’s Supreme Court ruled that the company’s copper mining contract with the Panamanian government is unconstitutional, according to bond traders.

Bonds were initially down as much as 5 points on the news, according a trader active in the minerals and mining sector.

However, by mid-morning the paper had come well off the lows and was trading about 2 points below Monday’s levels.

The First Quantum Minerals Ltd. 6 7/8% senior notes due October 2027 opened Tuesday in a context of 77 bid, another trader said, noting that those notes went out Monday at 80 3/8 bid.

However, by mid-morning the 6 7/8% notes changed hands at 79 and appeared headed back toward 80, the source added.

The same issuer’s 8 5/8% senior notes due June 2031 got as low as 77¾ bid after closing on Monday at 80¼ bid, the source said.

By mid-morning on Tuesday those bonds changed hands at 79½, the trader added.

Last week a maritime blockade of key supplies prompted First Quantum to cease operations at the Cobre Panama mine, which produces 300,000 tons of copper per year, equivalent to 1.5% of global copper production as of 2023.

Some analysts judge that First Quantum's yearly payments of $375 million in tax and royalty revenue to the Panamanian government generously favor the operator.

Amid active protests in Panama, politics are in play, a trader asserted, noting that general elections in the country are scheduled to take place in early May.

As the mine makes a significant contribution to Panama’s gross domestic product, there appears to be confidence in the market that Panama and First Quantum will reach a reconciliation, the trader said.

Away from that situation the broad high-yield bond market opened unchanged on Tuesday.

Among recent issues the Ineos Quattro Finance 2 plc dollar-denominated 9 5/8% senior secured notes due March 2029 (Ba3/BB/BB+) were 103¾ bid, unchanged on the morning, according to the trader, who is active in mines and minerals.

The $400 million issue priced at par on Nov. 9.

The primary market failed to generate news on Tuesday morning, with just one dollar-denominated offering on the active forward calendar.

Summit Materials, LLC and Summit Materials Finance Corp. are shopping an $800 million offering of seven-year senior notes (Ba3/BB).

The deal, which was announced on Monday, is in the market with initial guidance in the high-7% to 8% area and is playing to $2 billion of interest, a trader said, adding that the bonds might price on Wednesday.

More deal announcements are anticipated soon, sources say.

Clients are hearing that JPMorgan is primed to announce a pair of deals later this week, a trader said.

Fund flows

High-yield ETFs saw $212 million of daily cash inflows on Monday, according to a market source.

Actively managed high-yield funds sustained $26 million of outflows on the day, the source said.

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