Monday, December 16, 2013

Seeking Alpha: Execution And Commodity Risks Have First Quantum At An Appealing Price

Mining stocks have generally been varying shades of horrible this year, with major producers like BHP Billiton (BHP), Rio Tinto (RIO), Vale (VALE), Glencore Xstrata, and Vedanta all in the red for the last 12 months. The reasons aren't all that hard to uncover, as commodity prices have softened on weaker Chinese demand and new projects adding supply to the market. So too with First Quantum (OTCPK:FQVLF) (FM.TO), as this growing copper miner has seen its shares retreat as copper prices have fallen more than 10% in the past year.

It's not just falling copper prices hurting First Quantum. The company is looking to deliver copper production growth greater than any other major miner over the next four years, but investors are rightly concerned about the prospect of the company taking on billions more in debt to fund the development of its crown jewel Cobre Panama project. I believe that the market is undervaluing First Quantum's demonstrated ability to deliver on mining projects, and while I cannot and will not wave off the risk of further copper price erosion, I believe investors are getting enough compensation in the stock's valuation today.

For those investors looking to investigate First Quantum more thoroughly, I'd suggest doing so under the Canadian and British tickers (FM.TO and FQM.L, respectively), as the company's U.S. ADRs are of the dreaded "F" variety.

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Execution And Commodity Risks Have First Quantum At An Appealing Price

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