DCF Studio

    FM.TO · TOR · Basic Materials

    First Quantum Minerals Ltd.

    Also onConsensus Drift

    Implied value per share

    CAD -2.30

    Market price

    CAD 43.57

    Implied upside

    -105.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.3982

    AdjustedReports in USD, trades in CAD. Modelled in USD, converted at the end.
    AdjustedCapital expenditure runs at 21.0% of revenue against depreciation of 15.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Current EV/EBITDA of 22.9x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    CAD -2.30-105.3%
    Exit multiple
    CAD 14.45-66.8%
    Market price
    CAD 43.57

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m251m502mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.6bnUSD 4.1bnUSD 3.6bnUSD 3.2bnUSD 2.8bn-11.8%
    EBITUSD 974.5mUSD 859.7mUSD 758.5mUSD 669.2mUSD 590.4m-11.8%
    NOPATUSD 716.2mUSD 631.9mUSD 557.5mUSD 491.9mUSD 433.9m-11.8%
    Add depreciation & amortisationUSD 697.5mUSD 615.4mUSD 542.9mUSD 479.0mUSD 422.6m-11.8%
    Less capital expenditureUSD -968.8mUSD -854.7mUSD -754.1mUSD -665.3mUSD -587.0m-11.8%
    Less increase in working capitalUSD 56.9mUSD 50.2mUSD 44.3mUSD 39.1mUSD 34.5m+11.8%
    Free cashflow to firmUSD 501.8mUSD 442.8mUSD 390.6mUSD 344.6mUSD 304.1m-11.8%
    Discount factor0.94550.84520.75550.67540.6037-
    Present valueUSD 474.5mUSD 374.2mUSD 295.1mUSD 232.8mUSD 183.6m-21.1%
    Present Value Of The ForecastUSD 1.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.692Reported 2.033, pulled toward 1.0 (Blume)
    Cost of equity12.61%Risk-free + beta x equity risk premium
    Cost of debt9.95%Interest expense / average total debt
    Market capitalisationUSD 36.3bn86.0% of capital
    Total debtUSD 5.9bn14.0% of capital, book value as a proxy
    Tax rate26.5%Effective, capped at statutory
    WACC11.87%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD -1.64

    59% of EV

    Forecast FCFF, final year
    USD 304.1m
    Capex at depreciation, working capital in reinvestment
    USD 433.9m
    Less reinvestment at g/ROIC (21.1% of NOPAT)
    USD -91.4m
    Capitalised
    USD 342.5m
    ROIC (WACC floor)
    11.9%
    Terminal value, undiscounted
    USD 3.7bn
    Terminal value, discounted
    USD 2.3bn
    Enterprise value
    USD 3.8bn
    Less net debt
    USD 5.2bn
    Equity value
    USD -1.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 10.33

    89% of EV

    Terminal value, undiscounted
    USD 20.3bn
    Terminal value, discounted
    USD 12.2bn
    Enterprise value
    USD 13.8bn
    Less net debt
    USD 5.2bn
    Equity value
    USD 8.6bn

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.87%-0.78-0.76-0.75-0.73-0.71
    10.87%-1.27-1.25-1.24-1.22-1.21
    11.87%-1.67-1.66-1.64-1.63-1.62
    12.87%-2.01-2.00-1.99-1.98-1.96
    13.87%-2.30-2.29-2.28-2.27-2.26

    Outlined: this model. Green text: above today's price of 31.16. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-11.8%44.6%+56.4pp
    Discount rate11.9%3.1%-8.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.