Dig Deeper With First Quantum As A Long-Term Low Cost Copper Play

| About: First Quantum (FQVLF)

First Quantum (OTCPK:FQVLF) joined the ranks of large copper producers when it completed the acquisition of Inmet Mining in April 2013.

By 2018, First Quantum is expected to produce more copper than BHP Billiton (NYSE:BHP), Southern Copper (NYSE:SCCO) or Rio Tinto (NYSE:RIO) - all "go to" names in the copper space. First Quantum is also a low cost producer with 7 mines in operation worldwide according to its corporate presentation.

The stock has been stuck in a range between $14 and $20 a share for two years and flies below the radar compared to industry leaders like Freeport-McMoRan (NYSE:FCX) and Glencore Xstrata (OTCPK:GLCNF).

Despite the market apathy, First Quantum is on a solid growth trajectory with projects like Cobre Panama starting up this quarter and Sentinel by year end. Cobre Panama is a world class copper mine in Panama containing some 16 billion pounds of copper and about 4 million ounces of gold with by-product silver and molybdenum while Sentinel is located in Zambia and has about 2 billion pounds of copper.

With a market capitalization of about $11 billion and an enterprise value of just over $12 billion First Quantum trades at just over 9 times 2013 estimated EBITDA of $1.4 billion but less than 6 times my forecast 2015 EBITDA of about $2.6 billion. It is not hard to see the stock in the low $20s during 2014 with longer-term growth to the $30 range provided commodity prices don't fall through the floor.

I have no position in First Quantum right now, but am exploring entry points and option strategies and am likely to take a position shortly. I like the company, its relatively clean balance sheet, growth potential and its diversified resource base.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FQVLF, over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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