First Quantum Minerals (TSX:FM) Ltd shares represent good long-term value, as the company will likely realize value from its Cobre Panama mine either via a mine restart, a sale, or arbitration, Jefferies analysts believe.
In an update to clients, the analysts reiterated their ‘Hold’ rating on the stock while estimating the fair value of First Quantum at C$15 per share based on the company's unapproved growth projects.
They cautioned, however, of the risk of value destructive transactions along the way as First Quantum is focused on balance sheet strength, possibly at the expense of long-term shareholder value.
Analysts at Jefferies also noted the loss of cash flows from the low-cost Cobre Panama mine puts First Quantum at risk of breaching its financial covenants.
They added that the company is now in negotiations for the sale of some of its assets, which could include the full sale of smaller non-core assets such as Las Cruces as well as its stakes in core assets in Zambia.
Shares of First Quantum fell 6% to $12.74 in midday trading on Wednesday.