Intrinsic value of First Quantum Minerals Ltd. - FM

Previous Close

$14.79

  Intrinsic Value

$4.39

stock screener

  Rating & Target

str. sell

-70%

Previous close

$14.79

 
Intrinsic value

$4.39

 
Up/down potential

-70%

 
Rating

str. sell

We calculate the intrinsic value of FM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 10.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.42
  45.00
  41.00
  37.40
  34.16
  31.24
  28.62
  26.26
  24.13
  22.22
  20.50
  18.95
  17.55
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.00
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
Revenue, $m
  3,611
  5,236
  7,383
  10,144
  13,609
  17,861
  22,973
  29,005
  36,004
  44,004
  53,023
  63,069
  74,140
  86,222
  99,300
  113,352
  128,355
  144,286
  161,126
  178,855
  197,463
  216,938
  237,280
  258,491
  280,579
  303,561
  327,456
  352,291
  378,100
  404,920
  432,795
Variable operating expenses, $m
 
  5,379
  7,571
  10,390
  13,929
  18,270
  23,490
  29,650
  36,797
  44,966
  54,176
  64,403
  75,707
  88,045
  101,399
  115,748
  131,068
  147,336
  164,531
  182,636
  201,637
  221,524
  242,296
  263,955
  286,510
  309,977
  334,378
  359,738
  386,093
  413,480
  441,944
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  3,233
  5,379
  7,571
  10,390
  13,929
  18,270
  23,490
  29,650
  36,797
  44,966
  54,176
  64,403
  75,707
  88,045
  101,399
  115,748
  131,068
  147,336
  164,531
  182,636
  201,637
  221,524
  242,296
  263,955
  286,510
  309,977
  334,378
  359,738
  386,093
  413,480
  441,944
Operating income, $m
  378
  -143
  -188
  -246
  -320
  -410
  -518
  -645
  -793
  -962
  -1,153
  -1,333
  -1,567
  -1,823
  -2,099
  -2,396
  -2,713
  -3,050
  -3,406
  -3,781
  -4,174
  -4,586
  -5,016
  -5,464
  -5,931
  -6,417
  -6,922
  -7,447
  -7,992
  -8,559
  -9,149
EBITDA, $m
  1,305
  1,212
  1,709
  2,348
  3,150
  4,135
  5,318
  6,715
  8,335
  10,187
  12,275
  14,601
  17,163
  19,960
  22,988
  26,241
  29,714
  33,402
  37,301
  41,405
  45,713
  50,221
  54,930
  59,841
  64,954
  70,274
  75,806
  81,555
  87,530
  93,739
  100,192
Interest expense (income), $m
  481
  376
  713
  1,155
  1,724
  2,438
  3,314
  4,368
  5,611
  7,053
  8,702
  10,561
  12,631
  14,912
  17,402
  20,098
  22,993
  26,085
  29,368
  32,839
  36,492
  40,327
  44,341
  48,533
  52,904
  57,456
  62,192
  67,116
  72,234
  77,553
  83,080
Earnings before tax, $m
  361
  -519
  -901
  -1,402
  -2,044
  -2,848
  -3,832
  -5,013
  -6,404
  -8,016
  -9,855
  -11,894
  -14,198
  -16,735
  -19,502
  -22,494
  -25,707
  -29,135
  -32,774
  -36,619
  -40,666
  -44,913
  -49,356
  -53,997
  -58,835
  -63,873
  -69,114
  -74,563
  -80,227
  -86,112
  -92,229
Tax expense, $m
  26
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -61
  -519
  -901
  -1,402
  -2,044
  -2,848
  -3,832
  -5,013
  -6,404
  -8,016
  -9,855
  -11,894
  -14,198
  -16,735
  -19,502
  -22,494
  -25,707
  -29,135
  -32,774
  -36,619
  -40,666
  -44,913
  -49,356
  -53,997
  -58,835
  -63,873
  -69,114
  -74,563
  -80,227
  -86,112
  -92,229

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,977
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  26,323
  35,378
  49,883
  68,539
  91,952
  120,682
  155,221
  195,978
  243,271
  297,323
  358,264
  426,145
  500,944
  582,584
  670,947
  765,891
  867,261
  974,906
  1,088,686
  1,208,483
  1,334,206
  1,465,800
  1,603,245
  1,746,560
  1,895,807
  2,051,086
  2,212,539
  2,380,347
  2,554,731
  2,735,948
  2,924,292
Adjusted assets (=assets-cash), $m
  24,346
  35,378
  49,883
  68,539
  91,952
  120,682
  155,221
  195,978
  243,271
  297,323
  358,264
  426,145
  500,944
  582,584
  670,947
  765,891
  867,261
  974,906
  1,088,686
  1,208,483
  1,334,206
  1,465,800
  1,603,245
  1,746,560
  1,895,807
  2,051,086
  2,212,539
  2,380,347
  2,554,731
  2,735,948
  2,924,292
Revenue / Adjusted assets
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
Average production assets, $m
  21,438
  31,086
  43,831
  60,224
  80,796
  106,040
  136,389
  172,201
  213,756
  261,250
  314,798
  374,443
  440,167
  511,902
  589,545
  672,970
  762,041
  856,627
  956,602
  1,061,865
  1,172,335
  1,287,963
  1,408,733
  1,534,660
  1,665,800
  1,802,240
  1,944,105
  2,091,554
  2,244,781
  2,404,012
  2,569,505
Working capital, $m
  1,147
  1,309
  1,846
  2,536
  3,402
  4,465
  5,743
  7,251
  9,001
  11,001
  13,256
  15,767
  18,535
  21,556
  24,825
  28,338
  32,089
  36,072
  40,281
  44,714
  49,366
  54,235
  59,320
  64,623
  70,145
  75,890
  81,864
  88,073
  94,525
  101,230
  108,199
Total debt, $m
  7,896
  11,684
  18,937
  28,265
  39,971
  54,336
  71,605
  91,984
  115,630
  142,656
  173,127
  207,068
  244,467
  285,287
  329,468
  376,940
  427,626
  481,448
  538,338
  598,236
  661,098
  726,895
  795,617
  867,275
  941,898
  1,019,538
  1,100,264
  1,184,169
  1,271,361
  1,361,969
  1,456,141
Total liabilities, $m
  13,901
  17,689
  24,942
  34,270
  45,976
  60,341
  77,610
  97,989
  121,635
  148,661
  179,132
  213,073
  250,472
  291,292
  335,473
  382,945
  433,631
  487,453
  544,343
  604,241
  667,103
  732,900
  801,622
  873,280
  947,903
  1,025,543
  1,106,269
  1,190,174
  1,277,366
  1,367,974
  1,462,146
Total equity, $m
  12,422
  17,689
  24,942
  34,270
  45,976
  60,341
  77,610
  97,989
  121,635
  148,661
  179,132
  213,073
  250,472
  291,292
  335,473
  382,945
  433,631
  487,453
  544,343
  604,241
  667,103
  732,900
  801,622
  873,280
  947,903
  1,025,543
  1,106,269
  1,190,174
  1,277,366
  1,367,974
  1,462,146
Total liabilities and equity, $m
  26,323
  35,378
  49,884
  68,540
  91,952
  120,682
  155,220
  195,978
  243,270
  297,322
  358,264
  426,146
  500,944
  582,584
  670,946
  765,890
  867,262
  974,906
  1,088,686
  1,208,482
  1,334,206
  1,465,800
  1,603,244
  1,746,560
  1,895,806
  2,051,086
  2,212,538
  2,380,348
  2,554,732
  2,735,948
  2,924,292
Debt-to-equity ratio
  0.636
  0.660
  0.760
  0.820
  0.870
  0.900
  0.920
  0.940
  0.950
  0.960
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  1.000
  1.000
  1.000
Adjusted equity ratio
  0.479
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -61
  -519
  -901
  -1,402
  -2,044
  -2,848
  -3,832
  -5,013
  -6,404
  -8,016
  -9,855
  -11,894
  -14,198
  -16,735
  -19,502
  -22,494
  -25,707
  -29,135
  -32,774
  -36,619
  -40,666
  -44,913
  -49,356
  -53,997
  -58,835
  -63,873
  -69,114
  -74,563
  -80,227
  -86,112
  -92,229
Depreciation, amort., depletion, $m
  927
  1,355
  1,897
  2,595
  3,470
  4,544
  5,836
  7,360
  9,128
  11,149
  13,428
  15,934
  18,731
  21,783
  25,087
  28,637
  32,427
  36,452
  40,706
  45,186
  49,887
  54,807
  59,946
  65,305
  70,885
  76,691
  82,728
  89,002
  95,523
  102,298
  109,341
Funds from operations, $m
  1,028
  836
  996
  1,193
  1,426
  1,697
  2,004
  2,347
  2,724
  3,133
  3,573
  4,040
  4,532
  5,048
  5,585
  6,143
  6,721
  7,317
  7,932
  8,566
  9,220
  9,894
  10,590
  11,308
  12,050
  12,819
  13,614
  14,439
  15,296
  16,186
  17,112
Change in working capital, $m
  -219
  406
  537
  690
  866
  1,063
  1,278
  1,508
  1,750
  2,000
  2,255
  2,512
  2,768
  3,021
  3,269
  3,513
  3,751
  3,983
  4,210
  4,432
  4,652
  4,869
  5,085
  5,303
  5,522
  5,745
  5,974
  6,209
  6,452
  6,705
  6,969
Cash from operations, $m
  1,247
  430
  460
  503
  560
  634
  726
  839
  974
  1,134
  1,318
  1,528
  1,765
  2,027
  2,316
  2,630
  2,970
  3,334
  3,722
  4,134
  4,568
  5,025
  5,504
  6,005
  6,528
  7,073
  7,640
  8,230
  8,844
  9,481
  10,143
Maintenance CAPEX, $m
  0
  -912
  -1,323
  -1,865
  -2,563
  -3,438
  -4,512
  -5,804
  -7,328
  -9,096
  -11,117
  -13,396
  -15,934
  -18,731
  -21,783
  -25,087
  -28,637
  -32,427
  -36,452
  -40,706
  -45,186
  -49,887
  -54,807
  -59,946
  -65,305
  -70,885
  -76,691
  -82,728
  -89,002
  -95,523
  -102,298
New CAPEX, $m
  -1,542
  -9,648
  -12,745
  -16,393
  -20,572
  -25,244
  -30,348
  -35,812
  -41,555
  -47,494
  -53,548
  -59,645
  -65,724
  -71,735
  -77,643
  -83,425
  -89,072
  -94,585
  -99,976
  -105,262
  -110,470
  -115,628
  -120,769
  -125,928
  -131,139
  -136,440
  -141,865
  -147,449
  -153,227
  -159,231
  -165,493
Cash from investing activities, $m
  -962
  -10,560
  -14,068
  -18,258
  -23,135
  -28,682
  -34,860
  -41,616
  -48,883
  -56,590
  -64,665
  -73,041
  -81,658
  -90,466
  -99,426
  -108,512
  -117,709
  -127,012
  -136,428
  -145,968
  -155,656
  -165,515
  -175,576
  -185,874
  -196,444
  -207,325
  -218,556
  -230,177
  -242,229
  -254,754
  -267,791
Free cash flow, $m
  285
  -10,131
  -13,608
  -17,755
  -22,575
  -28,049
  -34,135
  -40,778
  -47,909
  -55,456
  -63,347
  -71,513
  -79,893
  -88,438
  -97,110
  -105,881
  -114,739
  -123,678
  -132,706
  -141,835
  -151,087
  -160,489
  -170,072
  -179,869
  -189,916
  -200,252
  -210,916
  -221,947
  -233,386
  -245,273
  -257,649
Issuance/(repayment) of debt, $m
  30
  5,521
  7,252
  9,328
  11,707
  14,365
  17,269
  20,379
  23,647
  27,026
  30,471
  33,940
  37,399
  40,820
  44,182
  47,472
  50,685
  53,823
  56,890
  59,898
  62,862
  65,797
  68,722
  71,658
  74,623
  77,640
  80,727
  83,904
  87,192
  90,609
  94,172
Issuance/(repurchase) of shares, $m
  0
  6,030
  8,153
  10,730
  13,750
  17,213
  21,101
  25,392
  30,051
  35,041
  40,326
  45,834
  51,598
  57,555
  63,683
  69,966
  76,392
  82,958
  89,664
  96,518
  103,528
  110,710
  118,079
  125,654
  133,458
  141,512
  149,840
  158,467
  167,419
  176,721
  186,401
Cash from financing (excl. dividends), $m  
  16
  11,551
  15,405
  20,058
  25,457
  31,578
  38,370
  45,771
  53,698
  62,067
  70,797
  79,774
  88,997
  98,375
  107,865
  117,438
  127,077
  136,781
  146,554
  156,416
  166,390
  176,507
  186,801
  197,312
  208,081
  219,152
  230,567
  242,371
  254,611
  267,330
  280,573
Total cash flow (excl. dividends), $m
  279
  1,420
  1,797
  2,303
  2,882
  3,529
  4,236
  4,993
  5,788
  6,611
  7,449
  8,262
  9,104
  9,937
  10,755
  11,556
  12,338
  13,102
  13,849
  14,581
  15,302
  16,017
  16,729
  17,444
  18,165
  18,900
  19,651
  20,425
  21,225
  22,057
  22,924
Retained Cash Flow (-), $m
  505
  -6,030
  -8,153
  -10,730
  -13,750
  -17,213
  -21,101
  -25,392
  -30,051
  -35,041
  -40,326
  -45,834
  -51,598
  -57,555
  -63,683
  -69,966
  -76,392
  -82,958
  -89,664
  -96,518
  -103,528
  -110,710
  -118,079
  -125,654
  -133,458
  -141,512
  -149,840
  -158,467
  -167,419
  -176,721
  -186,401
Prev. year cash balance distribution, $m
 
  244
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -4,366
  -6,356
  -8,427
  -10,869
  -13,684
  -16,866
  -20,399
  -24,262
  -28,431
  -32,876
  -37,572
  -42,494
  -47,618
  -52,928
  -58,409
  -64,054
  -69,856
  -75,816
  -81,937
  -88,226
  -94,693
  -101,350
  -108,211
  -115,293
  -122,612
  -130,189
  -138,042
  -146,194
  -154,664
  -163,476
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  -4,115
  -5,614
  -6,932
  -8,273
  -9,570
  -10,756
  -11,769
  -12,555
  -13,077
  -13,311
  -13,253
  -12,916
  -12,328
  -11,527
  -10,561
  -9,482
  -8,342
  -7,190
  -6,070
  -5,016
  -4,057
  -3,208
  -2,479
  -1,870
  -1,376
  -987
  -689
  -468
  -308
  -197
Current shareholders' claim on cash, %
  100
  62.4
  39.9
  26.2
  17.6
  12.1
  8.5
  6.1
  4.4
  3.3
  2.5
  1.9
  1.4
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0

First Quantum Minerals Ltd. is engaged in the production of copper, nickel, gold, zinc and acid, and related activities, including exploration and development. The Company's segments include individual mine development projects or mine operations and the Corporate & other segment. The Corporate & other segment is responsible for the evaluation and acquisition of mineral properties, regulatory reporting, treasury and finance and corporate administration. It also includes its metal marketing division. Its mines are located in Zambia, Australia, Finland, Turkey, Spain and Mauritania. It operates six mines, namely the Kansanshi copper-gold mine, the Guelb Moghrein copper-gold mine, the Las Cruces copper mine, the Pyhasalmi copper-zinc mine, the Ravensthorpe nickel-cobalt mine and the Cayeli copper-zinc mine. It is developing the Cobre Panama copper project in Panama, exploring the Haquira copper deposit in Peru and the Taca Taca copper-gold-molybdenum deposit in Argentina.

FINANCIAL RATIOS  of  First Quantum Minerals Ltd. (FM)

Valuation Ratios
P/E Ratio -167.1
Price to Sales 2.8
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow -34.6
Growth Rates
Sales Growth Rate 6.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24.3%
Cap. Spend. - 3 Yr. Gr. Rate -15.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 49.6%
Total Debt to Equity 63.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity -0.5%
Return On Equity - 3 Yr. Avg. 1.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 12.7%
Gross Margin - 3 Yr. Avg. 17.4%
EBITDA Margin 49%
EBITDA Margin - 3 Yr. Avg. 42%
Operating Margin 10.5%
Oper. Margin - 3 Yr. Avg. 10.4%
Pre-Tax Margin 10%
Pre-Tax Margin - 3 Yr. Avg. 10.2%
Net Profit Margin -1.7%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 7.2%
Eff/ Tax Rate - 3 Yr. Avg. -214.9%
Payout Ratio -14.8%

FM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FM stock intrinsic value calculation we used $3611 million for the last fiscal year's total revenue generated by First Quantum Minerals Ltd.. The default revenue input number comes from 2016 income statement of First Quantum Minerals Ltd.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FM stock valuation model: a) initial revenue growth rate of 45% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.1%, whose default value for FM is calculated based on our internal credit rating of First Quantum Minerals Ltd., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of First Quantum Minerals Ltd..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FM stock the variable cost ratio is equal to 103%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for FM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.1% for First Quantum Minerals Ltd..

Corporate tax rate of 27% is the nominal tax rate for First Quantum Minerals Ltd.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FM are equal to 593.7%.

Life of production assets of 23.5 years is the average useful life of capital assets used in First Quantum Minerals Ltd. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FM is equal to 25%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $12422 million for First Quantum Minerals Ltd. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 689.307 million for First Quantum Minerals Ltd. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of First Quantum Minerals Ltd. at the current share price and the inputted number of shares is $10.2 billion.

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Financial statements of FM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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