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First Quantum Minerals Higher As Credit Suisse Says Its Focus Remains on Growth After Q1

Credit Suisse has maintained an Outperform rating and $155 target price on First Quantum Minerals Ltd. (FM.TO)

Event: "FM reported 1Q11 FD EPS of $2.18 which compares to our estimate of $2.10 and consensus of $2.60. Revenues of $705Mln were above our estimate of $653Mln on higher copper sales (70.7Kt vs. our estimate of 67Kt). FY11 production guidance is largely unchanged at 300Kt of copper and 200Koz of gold (cash costs up slightly to $1.15/lb vs. $1.10)."

View: "Good quarter on higher copper sales. FM previously reported 1Q11 copper production on (April 19th) of 74.9Kt (Kansanshi: 64.8Kt; Guelb Moghrein 10.1Kt) so there were no surprises in the production results. Compared to our EPS, higher copper sales and lower DD&A (+$0.30 impact) was offset by higher exploration expense and tax rate (-$0.20 impact)."

Catalysts: "Focus on the growth. FM is undertaking an ambitious growth initiative of expansion (Kansanshi, Guelb Moghrein) and new development (Sentinel, Haquira, Ravensthorpe, Kevitsa) that we believe will highlight management's expertise as a mine builder and operator. We see FM as maintaining its strong strategic position within the global copper group with its strong balance sheet, expanding copper and nickel production, high leverage to copper prices, and portfolio of good quality assets. A number of significant milestones in 2011 should reinforce our view, including: Ravensthorpe plant testing (2Q11); an NI 43-101 resource estimate at Sentinel (mid-2011); copper smelter evaluation study (2H11); and Kansanshi oxide expansion (4Q11)."

Valuation: "Maintain Outperform. Our TP of C$155 is based on a 60/40 weighting of 1x our NAVPS of C$148 and 6x FY11/12 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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