Despite hefty production increases, copper miner First Quantum Minerals (FQM) could not escape falling commodity prices in the quarter ended 30 June. Reporting its results for the first time since fully consolidating the assets acquired from Inmet Mining for C$5.1bn (£3.3bn) earlier this year, First Quantum saw cash operating profits fall 27 per cent to $201m (£131m) from $275m.
But with metals prices seemingly stabilising, and mining operations progressing smoothly, we upgrade the shares to hold and close out our copper-price-derived sell tip (1,286p, 7 Feb 2013).
First Quantum is one of the best miners in the business and, after bedding in Inmet's mines, copper production increased 44 per cent in the quarter to 103,694 tonnes. Nickel production rose 33 per cent to 10,875 tonnes and gold production rose 44 per cent to 63,567 ounces. Yet this was not enough to offset big price falls in all three metals.
The principal culprit, was copper. In March, we said: "The price of the red metal has dropped from $3.72 a pound at the time of our sell tip to $3.45, and we foresee continued weakness as the copper market swings into surplus." While there is some debate about whether the market has technically reached a surplus yet, the price of copper fell to around $3.15 a pound over the summer, and it has traded in a tight range ever since.
