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Analyst Actions: Credit Suisse Analyzes First Quantum Q2

Event: "Adjusting for the 5-for-1 share split, FM reported 2Q11 FD EPS of $0.33, in-line with our estimate. Revenues of $660Mln were above our estimate of $579Mln on higher copper sales (65.5Kt vs. our 59.9Kt). FY11 production targets were revised down to 280Kt copper (from 300Kt), and 190Koz gold (from 200Koz), while cash costs guidance goes to $1.25/lb copper (from $1.15).

View: "Slight negative on lower guidance. FM previously reported 2Q11 copper production on July 7th of 64.5Kt (Kansanshi: 56.2Kt; Guelb Moghrein 8.4Kt) so there were no surprises in the production results. Compared to our EPS, higher copper sales and lower DD&A and interest expense (+$0.12 impact) was offset by higher cash costs and income tax (-$0.19 impact). Our FY11/12/13 EPS estimates go to $1.43/2.11/2.05 (from $1.63/2.24/2.14) to account for lower production and higher operating costs and Kansanshi and GM."

Catalysts: "FM is undertaking an ambitious growth initiative of expansion (Kansanshi, Guelb Moghrein) and new development (Sentinel, Haquira, Ravensthorpe, Kevitsa). A number of significant milestones in 2011 should reinforce our view, including: Ravensthorpe plant commissioning and ramp-up (2H11); an NI 43-101 resource estimate at Sentinel (2H11); copper smelter evaluation study (2H11); and Kansanshi oxide expansion (4Q11)."

Valuation: "Our TP of C$31 is based on a 60/40 weighting of 1x our NAVPS of C$28 and 6x FY12 EV/EBITDA. FM remains our favorite way to play the consolidation theme in the global copper space as an attractively-valued producer with a strong growth profile that can provide a strategic fit for mining consolidators looking for near-term copper cash flows, low gearing, optionality on nickel markets, and development projects in proven mining jurisdictions."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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