Investing in robust companies when their stock prices dip can be a savvy move for investors. This strategy, often referred to as “buying the dip,” allows one to acquire shares at a discount. Potentially leading to significant returns when the market rebounds. The key lies in identifying companies with strong fundamentals that are temporarily undervalued due to market fluctuations.
First Quantum Minerals (TSX:FM) is a prime example of such an opportunity. As a leading global copper company, First Quantum has a diversified portfolio of mining operations and a track record of resilience in the face of industry challenges. Shares jumped 13% in the last month but are still down 9% from 52-week highs. So, let’s look at this opportunity.
Showing strength
In the third quarter of 2024, First Quantum reported net earnings attributable to shareholders of $108 million, or $0.13 per share, and adjusted earnings of $119 million, or $0.14 per share. This performance was bolstered by increased copper and gold sales volumes as well as stronger realized gold prices. The Canadian stock’s gross profit for the quarter stood at $456 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $520 million.
The Canadian stock’s operations in Zambia have been particularly noteworthy. In the third quarter (Q3) of 2024, First Quantum achieved a 13% increase in copper production compared to the previous quarter, driven by higher output at its Zambian operations. This uptick contributed to a total copper production of 116,088 tonnes for the quarter. Additionally, the Canadian stock’s copper C1 cash cost decreased by 9% quarter over quarter to $1.57 per pound, reflecting improved operational efficiencies.
More to come
Looking ahead, First Quantum is making significant strides with its Kansanshi S3 Expansion project in Zambia, which is on track for completion in mid-2025. This expansion is expected to enhance production capacity and further solidify the Canadian stock’s position in the global copper market. Moreover, the company has been proactive in managing its balance sheet, entering additional derivative contracts to protect against downside price movements and securing a $425 million unsecured term loan facility maturing in September 2028.
It’s also worth noting that First Quantum has been involved in discussions to strengthen its financial position. In October 2024, reports indicated that Saudi Arabia’s Manara Minerals was in advanced talks to acquire a minority stake in First Quantum’s Zambian copper and nickel assets. Such a partnership could provide additional capital and strategic support, further enhancing the company’s growth prospects.
The company has faced challenges, including power restrictions in Zambia and the suspension of its Cobre Panamá operations. Yet its diversified asset base and commitment to operational excellence have enabled it to navigate these obstacles effectively. The Canadian stocks focus on cost management and strategic investments positions it well for future growth.
Bottom line
In conclusion, purchasing shares of strong companies like First Quantum Minerals when the stock prices are down can be a prudent investment strategy. The Canadian stock’s solid financial performance, strategic initiatives, and commitment to growth make it a compelling option for investors looking to capitalize on market opportunities. As always, it’s essential to conduct thorough research and consider one’s investment objectives before making any financial decisions.
