First Quantum up 23% on takeover talk

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First Quantum Minerals Ltd. [FM-TSX] gained another 13% Friday September 20 after published reports said the company is assessing its options after drawing takeover interest from global miners. That follows a gain of over 10% on September 19, 2019.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania.

The company’s portfolio of assets includes the Kansanshi Mine in Zambia, which ranks as the largest copper mine in Africa. It also has a 90% interest in the Cobre Panama Project in Panama, which is currently the world’s largest new copper mine.

First Quantum, which has lost half of its value over the last five years and now has a market cap of $8.7 billion, has not received any formal takeover offers as yet. So there is no guarantee that any transaction will take place, people with knowledge of the situation told Bloomberg news service.

On Friday, the shares were up 13% or $1.45 to $12.65 on volume of over 5.8 million. The shares are currently trading in a 52-week range of $7.83 and $17.76.

Orest Wowkodaw, a base metals analyst with Scotiabank, said a potential sale of the company does not make sense from First Quantum’s perspective. This is due to the near-term re-rating expected with the ramp-up of Cobre Panama, the current depressed copper environment and the resulting weak share price.

First Quantum recently said 2019 will be another pivotal year for the company as it continues with the ramp up of its huge Cobre Panama Project were the first batch of concentrates were shipped in June, 2019. Commercial production is anticipated by the fourth quarter of 2019.

Cobre Panama is located in the Panamanian jungle, about 120 km west of Panama City. The concession consists of four zones, covering 13,600 acres. First Quantum recently increased its stake in the open pit project to 90%.

The operation is expected to produce up to 175,000 tonnes of copper this year, rising to between 270,000 and 300,000 tonnes in 2020.

In the second quarter of 2019, First Quantum produced a record 168,399 tonnes of copper, including 30,896 tonnes of pre-commercial production at Cobre Panama. That marked a 12% increase compared to the same period in 2018.

The company’s second quarter gold production also rose 28% from year ago levels to 59,647 ounces. That amount included 10,550 ounces of pre-commercial gold production at Cobre Panama.

Rather than an outright sale of the company, Wowkodaw says a potential Zambian asset sale is more likely, a scenario that would improve the company’s balance sheet via a cash infusion that would be positively received by investors, he said.

First Quantum recently declared an interim annual dividend of $0.005 per share.


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