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Bernstein Research pegs First Quantum fair value at C$24 per share

A "fair-value" price for First Quantum Minerals Ltd. would be about C$24 per share in a potential takeover, Bernstein Research analyst Paul Gait said in a recent research note.

While First Quantum is not the subject of a public takeover offer, speculation over the possibility has mounted with Jiangxi Copper Co. Ltd. recently building its stake in the company and reports that Rio Tinto has also expressed interest in First Quantum's assets, which include mines in Zambia and Panama.

"First prize from the perspective of both Rio and Jiangxi would be a full takeout of FQM," Gait said in a Dec. 11 note. "In any case though, both would prefer to get a piece than be left with an empty plate."

Gait said a sensible carve-up of First Quantum assets would be for Jiangxi to acquire the miner's copper mines in Africa, with Rio Tinto getting the Cobre Panama copper mine in Panama.

"As we see it, Sentinel and Kansanshi are worth US$14 billion while Cobre Panama is worth US$7.5 billion," Gait said. "Any price significantly below this undervalues First Quantum's reserves."

First Quantum has recently traded in the mid-C$13 per share range.

In other recent research, Haywood Securities analyst Kerry Smith noted that Barrick Gold Corp. reached US$1.1 billion in assets sales this year, after a deal selling its 90% stake in the Massawa gold project in Senegal to Teranga Gold Corp. for up to US$430 million. Barrick has said it plans to divest about US$1.5 billion in assets by the end of 2020.

The deal, a mix of cash, shares and gold price-linked payments, came at a price below Smith's US$465 million net asset value for Massawa. On news of the deal, Smith reiterated a buy rating for Barrick with a C$28 per share price target.

In a separate note on Alamos Gold Inc., Smith dropped his forecast for the company's 2020 output to 450,000 ounces of gold, down from a previous estimate of 465,000 ounces. Smith also raised his estimated all-in sustaining costs for Alamos from US$700 per ounce of gold to US$785/oz in 2020.

The move comes on the back of a planned shaft shutdown at Alamos' Young-Davidson gold mine in the first half of 2020, which is expected to have a negative impact on the gold miner's production while raising operational costs.

Smith maintained a buy rating on Alamos with a C$10.25 target share price.

"We encourage investors to look past H1/2020 as Alamos has a strong Canadian operational presence with two solid mines delivering over 60% of their production," Smith said.