Investing in quality mining stocks enables you to gain exposure to commodities, which provides portfolio diversification and lowers overall risk. In this article, I aim to analyze First Quantum Minerals (TSX: FM) to see if it is poised to deliver outsized gains to shareholders over the next three years.
Valued at a market cap of $17.3 billion, First Quantum is engaged in the exploration, development, and production of mineral properties. It primarily explores for copper, nickel, pyrite, silver, gold, and zinc ores and produces acid. First Quantum’s flagship project is the 100% owned Kansanshi project located in the northwestern province of Zambia.
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Is the TSX mining stock a good buy?
First Quantum Minerals demonstrated resilience in 2024 despite the continued suspension of its flagship Cobre Panama operation, CEO Tristan Pascall told shareholders at the company’s annual meeting.
First Quantum reported net earnings of US$2 million and EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.49 billion for 2024. Copper production of 431,000 tonnes in 2024 exceeded the guidance of 400,000 to 420,000 tonnes. The strong operational performance came from the Kansanshi and Sentinel mines, which benefited from higher copper prices and improved production volumes.
“2024 was a year of resilience and regrouping at First Quantum as we navigated challenges and recognized some significant achievements across our operations,” Pascall said during the virtual meeting.
First Quantum has taken steps to stabilize its balance sheet following Cobre’s Panama suspension in late 2023. It implemented a refinancing strategy that includes a US$500 million copper repayment agreement, a US$1.6 billion bond offering, and a US$1.15 billion equity deal.
First Quantum continues negotiations with Panama’s government to resolve the issue of restarting the mine. Notably, the mine previously contributed over US$500 million annually in taxes and royalties.
First Quantum’s Kansanshi S3 expansion project remains on track for production in the second half of 2025. The project has achieved 83% construction completion. Moreover, the US$1.25 billion expansion will add 25 million tonnes of annual processing capacity, positioning the company for free cash flow generation.
How did the TSX stock perform in Q1?
First Quantum Minerals reported a net loss of US$23 million for the first quarter as the miner continued strengthening its financial position. In March, it completed a US$1 billion senior notes offering and secured an additional US$500 million copper prepayment agreement, extending its debt maturity profile and boosting liquidity by US$750 million. These moves follow previous refinancing efforts totalling over US$4 billion since the Panama mine suspension in November 2023.
Copper production from Zambian operations totalled 93,000 tonnes in the quarter, with Kansanshi producing 47,000 tonnes and Sentinel contributing 46,000 tonnes. Both mines faced seasonal challenges from Zambia’s rainy season, though imported power contracts maintained steady operations.
Copper cash costs rose 16% to US$1.95 per pound due to lower production volumes and higher maintenance expenses. Enterprise nickel operations ramped up 25% quarter over quarter to 4,600 tonnes as mining progressed through challenging geological zones encountered in late 2024.
Is First Quantum Minerals stock undervalued?
Analysts tracking the TSX stock expect adjusted earnings to improve to US$2.57 per share in 2028, compared to a loss of US$0.02 per share in 2024. Free cash flow is forecast at US$2.88 billion in 2028, compared to US$365 million last year.
If the mining stock is priced at 18 times forward earnings, which is quite reasonable, it will trade around $54 in May 2028, indicating an upside potential of over 150% from current levels.
