Brokers' view: Midas

First Quantum Minerals is a fast-growing mining company, offering an attractive portfolio of producing assets and development prospects. While historically focused on African copper, with operating copper/gold mines in Zambia and Mauritania, the group’s development assets now offer a more diverse geographical and commodity mix, with exciting plays such as the Ravensthorpe nickel project in Australia and the Haquira copper deposit in Peru.

First Quantum Minerals has already demonstrated an impressive track record to date, with compound earnings growth in excess of 29 per cent over the past five years. Within that time frame the group has nearly tripled copper production, a feat that they aim to repeat by 2015.

Despite the group’s attractive growth profile and ambition to become a truly global, diversified mining and metals player, FQM also represents a surprising value proposition on a forward 2012 p/e of 7.9 and EV/EBITDA of 4.7. This, combined with $1.1 billion in cash and minimal debt, also makes the company an intriguing M&A candidate.

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Despite its obvious defensive qualities, the group has also shown solid compound top-line growth of 6.1 per cent over the past five years, and remains on track for moderate growth rates over the next few years.

While the company’s earning quality deserves a premium valuation, it is currently trading at undemanding multiples, with 2012 EV/EBITDA of 8.4 and a 2012 p/e of 14.4. With shifts in the ownership structure possible, we also see the company as a potential takeover target in the coming years.