Scotia Capital has lowered its stock rating on
First Quantum Minerals Ltd. (
TSX: T.FM,
Stock Forum) in spite of fourth quarter operating results that it described as “strong.”
Despite higher production, sales volumes of copper and gold were 8% and 11% below our forecast, primarily due to the ongoing shortage of third-party Zambian smelting capacity,’’ Scotia Capital wrote in a research report.
In light of the stock’s recent strong performance and now relatively limited implied return of 8.5% to our target price, we are lowering our investment rating on First Quantum to “sector perform” from “sector outperform,’’ the investment firm said.
Scotia’s 12-month target price is $21.50.
First Quantum shares eased 1% to $19.63 on Monday, leaving a market cap of $11.6 billion, based on 590.8 million shares outstanding. The 52-week range is $21.95 and $14.22.
Canaccord Genuity analyst Gary Lampard said uncertainty over the Cobre Panama open-pit copper project in Panama will remain a “short-term share price overhang,” with the revised capital cost and schedule not planned for the first quarter of 2014.
First Quantum acquired an 80% stake in the Cobre Panama concession by scooping up Inmet Mining in April, 2013.
Lampard's valuation is based on the old Inmet mine plan, including the old Inmet capex estimate of US$6.2 billion.
For those looking to move out of First Quantum to a more conservative comparable would be
Teck Resources Ltd. (
TSX: T.TCK.A,
Stock Forum) (
TSK: T.TCK.B,
Stock Forum) or
Freeport-McMoran Copper & Gold Inc. (
NYSE: FCX,
Stock Forum) in the U.S., Scotia said.
Capstone Mining Corp. (
TSX: T.CS,
Stock Forum) is a small cap alternative, with somewhat higher volatility than FM.