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Gold stocks rallied as commodities prices shot up as markets stumbled in 2020. This year, another metal could see significant growth. Copper looks promising and on April 27, it rose to a 10-year high of US$ 4.49 a pound (May copper contract). Notably, this was a 91 per cent rise from the previous year and highest since 2011.
According to S&P Global Platts, an uptrend in copper prices will continue throughout the year, majorly due to low inventories and expected bullish demand. Copper will also get support due to the upcoming elections in Chile and ongoing labour negotiations in Peru.
In Canada, market experts are expecting an increase in copper demand as the country is on the path of creating a green economy. The red metal plays an important role in the generation of sustainable energy and is also a major component in electric vehicles.
In this article, we explore First Quantum (TSX:FM), a diversified mining company that majorly produces copper in concentrate and copper anode and cathode. Since the beginning of this year, FM stock grew by 27 per cent and swelled by massive 257 per cent in a year.
Here's What You Should Know About First Quantum (TSX:FM)
First Quantum (TSX:FM) is a global copper company but also have inventories of gold, nickel and cobalt. It is has mining operations in several countries and has approximately 20,000 people employed worldwide. The basic metals company is in the business for 25 years and claims to be among the world's top ten copper producers.
In 2020, the company achieved the highest ever annual copper production of 779kt, an increase of 11 per cent year-over-year (YoY). In Q4 FY20, copper production was 203kt, in line with the projections of the same quarter previous year.
Stock Performance of First Quantum
One-year chart of stock performance of First Quantum (Source: EODHD/Others/Thomson Reuters)
The scrips closed at C$ 29.09 on May 4, down by about eight per cent from its 52-week low of C$ 31.57 on February 25, 2021, and 77 per cent higher than the 52-week low of C$ 7.34 (May 15, 2020). 2.3 million FM shares were traded on an average at the Toronto Stock Exchange (TSX) in the past 30 days.
FM's stock six-month growth sits at 89 per cent. It advanced by 148 per cent in the last nine months and over 16.5 per cent in a month. As per TMX data, the company's market cap is C$ 20.1 billion and offers a 0.25 per cent return on equity (ROE). Its debt-to-equity (D/E) ratio is 0.91 and holds a price-to-cash flow (P/CF) ratio is 10.3.
On the dividend front, it offers a semi-annual dividend of C$ 0.005 and registers a current dividend yield of 0.034 per cent.
FM’s Financial Performance In Q1 FY 2021
In Q1 2021, the company's total copper production was 205,064 tonnes, an increase of five per cent YoY. The gold production was 78,048 ounces, up by 13 per cent from Q1 2020.
The sales revenues increased to US$ 1.7 billion, up from US$ 1.2 billion in the first quarter of 2020. From a gross profit of US$ 147 million in Q1 2020, the company's gross profit increased to US$ 540 million.
First Quantum's cash flow from operating activities was US$ 743 million, an increase of US$ 270 million year-over-year.
Future Of Copper Industry
A study published by ReportLinker claims that the global market for red metal will reach 26.7 million metric tons by 2027. In 2020, it was estimated around 23.8 million metric tons and it will grow at a compound annual growth rate (CAGR) of 1.7 per cent in the next six years.
In Canada, the copper market is expected to grow at a CAGR of 1.3 per cent between periods 2020-2027.
Under these circumstances, scrips of First Quantum may see further growth, making it an attractive proposition for investors.
The above constitutes a preliminary view and any interest in stocks should be evaluated further from an investment point of view.
