Broker Stifel GMP continues to rate copper producer First Quantum Minerals (TSX:FM) (TSX:FQM) a 'Buy' with a target price of C$39 a share despite current cost pressures and the miner lowering output guidance for the full year 2022.
In the third quarter to end September, First Quantum reported adjusted earnings of $0.14 a share, which was broadly in line with the Wall Street consensus of $0.15 a share.
Copper production in the three months came in at 195,000 tonnes, which was higher than the 193,000 tonnes in Q2, but lower than the consensus of 206,000 tonnes, noted Stifel analysts.
The main culprit for the lower output was the Kansanshi mine in Zambia, which generated 10,000 tonnes less copper than in Q2, hurt by lower grades and reduced quantities of ore to feed the mill, they added.
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However, the Cobre Panama (Panama) and Sentinel mine (Zambia) both had good quarters.
First Quantum expects production issues at Kansanshi to linger until the completion of the S3 expansion project and have thus lowered full-year company-wide production guidance to between 755,000 and 785,000 tonnes of copper, from 790,000 to 855,000 tonnes previously, said the analysts.
"Lower production at Kansanshi also drove per pound cash costs higher in the quarter, to $1.82/lb, slightly higher than the consensus expected $1.80/lb," they added.
"Costs were also pushed-up by general inflationary pressure that saw higher prices for fuel, explosives, sulphur, freight, and labour."
Full-year cost guidance at First Quantum has been raised to between $1.70 and $1.80 per pound, up from between $1.45 and $1.60 previously.
First Quantum shares are changing hands in Toronto at around C$25 each.