Mar 8 Nov 2011 22:07
First Quantum gets fresh 'buy' recommendation ahead of Q3 re
November 07, 2011 - 10:02 GMT Location: London
Analysts at independent broker Numis have given copper miner First Quantum Minerals a renewed buy recommendation, with a target share price of 1,450 pence ($23.24) on the London Stock Exchange, ahead of publication of the miner’s third-quarter results on Tuesday
Analysts at independent broker Numis have given copper miner First Quantum Minerals a renewed buy recommendation, with a target share price of 1,450 pence ($23.24) on the London Stock Exchange, ahead of publication of the miner’s third-quarter results on Tuesday.
“We see [third-quarter] production a shade higher at 68,000 tonnes of copper and 48,000 oz of gold, versus 65,000 tonnes and 41,000 oz in [the second quarter],” the analysts said.
Earnings are expected to be in line with consensus, they added, predicting gross profits of $367 million, net income of $174 million, and earnings per share of 37 cents.
“This is a touch above [the second quarter’s] $363 million, $155 million and 36 cents per share,” they said.
“[The] Guelb [Moghrein operation in Mauritania] should improve on the second quarter, when it suffered a two-week plant shut down, but [Zambia’s] Kansanshi output is most likely flat,” the analysts added.
Unit costs are expected to stay at about $1.40 per lb at Kansanshi, due to high waste stripping rates which are likely to persist into 2012, as well as high acid costs, although the smelter project will eventually mitigate this, according to the Numis analysts.
“We do not expect any change to the financial year guidance of 280,000 tonnes of copper and 190,000 oz of gold, at $1.25 per lb average cost,” they said.
The company lowered its forecast for year-end copper production to 280,000 tonnes in August after output fell in the first half of 2011.
Management discussion and analysis is likely to focus on potential revisions to the Zambian tax system under the country’s new government, they added, although full clarity on what this will mean for First Quantum is not expected.
“We believe that initial discussions with the industry have been positive, and we expect First Quantum to strike a generally optimistic tone, with the eventual hit to the bottom line unlikely to be as severe as the market first expected,” Numis said.
Updates on resource and development costs, as well as the timeline for the Zambian Sentinel copper project, are also expected in the near future, according to the analysts.
“Kansanshi expansion should be on track for phase 2 to commission in the first quarter of 2013,” they added. “With the tax issue aside, we expect the positive news flow to ramp up from here, with the focus now shifting firmly to delivery of the growth projects.”
First Quantum's shares were trading at 1,399.39 pence each on the LSE as of 10.17 GMT on Monday.
In the second quarter, gross profits came to $363 million, compared with $240 million in the same period in 2010. Net earnings for the quarter were $187 million.
« L'aventure n'existe pas. Elle est dans l'esprit de celui qui la poursuit, et dès qu'il peut la toucher du doigt, elle s'évanouit pour renaître bien plus loin, sous une autre forme, aux limites de l'imagination. »
( Pierre Mac Orlan )
( Pierre Mac Orlan )