Intrinsic value of First Quantum Minerals Ltd. - FM

Previous Close

$13.22

  Intrinsic Value

$4.37

stock screener

  Rating & Target

str. sell

-67%

  Value-price divergence*

-154%

Previous close

$13.22

 
Intrinsic value

$4.37

 
Up/down potential

-67%

 
Rating

str. sell

 
Value-price divergence*

-154%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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 9.2

 

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
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  3,611
  3,842
  4,083
  4,333
  4,594
  4,866
  5,149
  5,445
  5,754
  6,076
  6,413
  6,765
  7,133
  7,518
  7,920
  8,342
  8,783
  9,245
  9,729
  10,236
  10,767
  11,323
  11,907
  12,519
  13,160
  13,833
  14,538
  15,278
  16,055
  16,869
  17,724
Variable operating expenses, $m
 
  3,955
  4,201
  4,457
  4,723
  5,001
  5,290
  5,592
  5,907
  6,237
  6,581
  6,908
  7,284
  7,677
  8,088
  8,518
  8,969
  9,440
  9,934
  10,452
  10,994
  11,563
  12,159
  12,783
  13,438
  14,125
  14,846
  15,601
  16,394
  17,226
  18,098
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
  3,955
  4,201
  4,457
  4,723
  5,001
  5,290
  5,592
  5,907
  6,237
  6,581
  6,908
  7,284
  7,677
  8,088
  8,518
  8,969
  9,440
  9,934
  10,452
  10,994
  11,563
  12,159
  12,783
  13,438
  14,125
  14,846
  15,601
  16,394
  17,226
  18,098
Operating income, $m
  378
  -113
  -118
  -124
  -129
  -135
  -141
  -147
  -154
  -160
  -168
  -143
  -151
  -159
  -167
  -176
  -186
  -195
  -206
  -216
  -228
  -239
  -252
  -265
  -278
  -292
  -307
  -323
  -339
  -357
  -375
EBITDA, $m
  1,305
  889
  945
  1,003
  1,063
  1,126
  1,192
  1,261
  1,332
  1,407
  1,485
  1,566
  1,651
  1,740
  1,834
  1,931
  2,033
  2,140
  2,252
  2,370
  2,492
  2,621
  2,756
  2,898
  3,047
  3,202
  3,366
  3,537
  3,717
  3,905
  4,103
Interest expense (income), $m
  481
  376
  425
  475
  527
  580
  636
  695
  756
  819
  886
  955
  1,028
  1,104
  1,183
  1,266
  1,353
  1,444
  1,539
  1,639
  1,743
  1,852
  1,967
  2,087
  2,214
  2,346
  2,484
  2,630
  2,782
  2,942
  3,110
Earnings before tax, $m
  361
  -489
  -544
  -599
  -656
  -715
  -777
  -842
  -909
  -980
  -1,053
  -1,098
  -1,179
  -1,263
  -1,350
  -1,442
  -1,538
  -1,639
  -1,745
  -1,855
  -1,971
  -2,092
  -2,219
  -2,352
  -2,492
  -2,638
  -2,792
  -2,953
  -3,122
  -3,299
  -3,485
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
  -489
  -544
  -599
  -656
  -715
  -777
  -842
  -909
  -980
  -1,053
  -1,098
  -1,179
  -1,263
  -1,350
  -1,442
  -1,538
  -1,639
  -1,745
  -1,855
  -1,971
  -2,092
  -2,219
  -2,352
  -2,492
  -2,638
  -2,792
  -2,953
  -3,122
  -3,299
  -3,485

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
  25,960
  27,585
  29,277
  31,040
  32,877
  34,793
  36,791
  38,877
  41,055
  43,331
  45,709
  48,195
  50,795
  53,516
  56,363
  59,344
  62,465
  65,734
  69,159
  72,748
  76,509
  80,451
  84,585
  88,919
  93,464
  98,232
  103,232
  108,478
  113,981
  119,755
Adjusted assets (=assets-cash), $m
  24,346
  25,960
  27,585
  29,277
  31,040
  32,877
  34,793
  36,791
  38,877
  41,055
  43,331
  45,709
  48,195
  50,795
  53,516
  56,363
  59,344
  62,465
  65,734
  69,159
  72,748
  76,509
  80,451
  84,585
  88,919
  93,464
  98,232
  103,232
  108,478
  113,981
  119,755
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
  22,811
  24,239
  25,725
  27,274
  28,888
  30,572
  32,328
  34,160
  36,074
  38,074
  40,163
  42,348
  44,633
  47,023
  49,525
  52,144
  54,886
  57,759
  60,768
  63,922
  67,226
  70,691
  74,323
  78,131
  82,125
  86,314
  90,707
  95,317
  100,152
  105,226
Working capital, $m
  1,147
  961
  1,021
  1,083
  1,148
  1,216
  1,287
  1,361
  1,438
  1,519
  1,603
  1,691
  1,783
  1,879
  1,980
  2,085
  2,196
  2,311
  2,432
  2,559
  2,692
  2,831
  2,977
  3,130
  3,290
  3,458
  3,635
  3,820
  4,014
  4,217
  4,431
Total debt, $m
  7,896
  6,975
  7,788
  8,634
  9,515
  10,434
  11,391
  12,391
  13,434
  14,523
  15,660
  16,849
  18,093
  19,393
  20,753
  22,177
  23,667
  25,227
  26,862
  28,574
  30,369
  32,249
  34,221
  36,287
  38,455
  40,727
  43,111
  45,611
  48,234
  50,985
  53,873
Total liabilities, $m
  13,901
  12,980
  13,793
  14,639
  15,520
  16,439
  17,396
  18,396
  19,439
  20,528
  21,665
  22,854
  24,098
  25,398
  26,758
  28,182
  29,672
  31,232
  32,867
  34,579
  36,374
  38,254
  40,226
  42,292
  44,460
  46,732
  49,116
  51,616
  54,239
  56,990
  59,878
Total equity, $m
  12,422
  12,980
  13,793
  14,639
  15,520
  16,439
  17,396
  18,396
  19,439
  20,528
  21,665
  22,854
  24,098
  25,398
  26,758
  28,182
  29,672
  31,232
  32,867
  34,579
  36,374
  38,254
  40,226
  42,292
  44,460
  46,732
  49,116
  51,616
  54,239
  56,990
  59,878
Total liabilities and equity, $m
  26,323
  25,960
  27,586
  29,278
  31,040
  32,878
  34,792
  36,792
  38,878
  41,056
  43,330
  45,708
  48,196
  50,796
  53,516
  56,364
  59,344
  62,464
  65,734
  69,158
  72,748
  76,508
  80,452
  84,584
  88,920
  93,464
  98,232
  103,232
  108,478
  113,980
  119,756
Debt-to-equity ratio
  0.636
  0.540
  0.560
  0.590
  0.610
  0.630
  0.650
  0.670
  0.690
  0.710
  0.720
  0.740
  0.750
  0.760
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.850
  0.860
  0.860
  0.870
  0.880
  0.880
  0.890
  0.890
  0.900
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
  -489
  -544
  -599
  -656
  -715
  -777
  -842
  -909
  -980
  -1,053
  -1,098
  -1,179
  -1,263
  -1,350
  -1,442
  -1,538
  -1,639
  -1,745
  -1,855
  -1,971
  -2,092
  -2,219
  -2,352
  -2,492
  -2,638
  -2,792
  -2,953
  -3,122
  -3,299
  -3,485
Depreciation, amort., depletion, $m
  927
  1,003
  1,063
  1,127
  1,193
  1,261
  1,333
  1,408
  1,486
  1,567
  1,652
  1,709
  1,802
  1,899
  2,001
  2,107
  2,219
  2,336
  2,458
  2,586
  2,720
  2,861
  3,008
  3,163
  3,325
  3,495
  3,673
  3,860
  4,056
  4,262
  4,478
Funds from operations, $m
  1,028
  514
  520
  528
  537
  546
  556
  566
  576
  587
  599
  611
  623
  637
  651
  665
  680
  696
  713
  731
  749
  769
  789
  811
  833
  857
  881
  907
  934
  963
  993
Change in working capital, $m
  -219
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  127
  133
  139
  146
  153
  160
  168
  176
  185
  194
  204
  214
Cash from operations, $m
  1,247
  456
  460
  465
  472
  478
  485
  492
  499
  507
  515
  523
  531
  540
  550
  560
  570
  581
  592
  604
  617
  630
  643
  658
  673
  688
  705
  722
  740
  759
  779
Maintenance CAPEX, $m
  0
  -912
  -971
  -1,031
  -1,095
  -1,161
  -1,229
  -1,301
  -1,376
  -1,454
  -1,535
  -1,620
  -1,709
  -1,802
  -1,899
  -2,001
  -2,107
  -2,219
  -2,336
  -2,458
  -2,586
  -2,720
  -2,861
  -3,008
  -3,163
  -3,325
  -3,495
  -3,673
  -3,860
  -4,056
  -4,262
New CAPEX, $m
  -1,542
  -1,373
  -1,428
  -1,487
  -1,549
  -1,614
  -1,683
  -1,756
  -1,833
  -1,914
  -1,999
  -2,090
  -2,185
  -2,285
  -2,390
  -2,502
  -2,619
  -2,742
  -2,872
  -3,009
  -3,153
  -3,305
  -3,464
  -3,632
  -3,808
  -3,994
  -4,189
  -4,394
  -4,609
  -4,836
  -5,074
Cash from investing activities, $m
  -962
  -2,285
  -2,399
  -2,518
  -2,644
  -2,775
  -2,912
  -3,057
  -3,209
  -3,368
  -3,534
  -3,710
  -3,894
  -4,087
  -4,289
  -4,503
  -4,726
  -4,961
  -5,208
  -5,467
  -5,739
  -6,025
  -6,325
  -6,640
  -6,971
  -7,319
  -7,684
  -8,067
  -8,469
  -8,892
  -9,336
Free cash flow, $m
  285
  -1,830
  -1,939
  -2,053
  -2,172
  -2,297
  -2,428
  -2,565
  -2,709
  -2,861
  -3,020
  -3,187
  -3,362
  -3,546
  -3,740
  -3,943
  -4,156
  -4,380
  -4,616
  -4,863
  -5,123
  -5,395
  -5,682
  -5,982
  -6,298
  -6,630
  -6,979
  -7,345
  -7,729
  -8,132
  -8,556
Issuance/(repayment) of debt, $m
  30
  812
  813
  846
  881
  919
  958
  999
  1,043
  1,089
  1,138
  1,189
  1,243
  1,300
  1,360
  1,424
  1,490
  1,561
  1,635
  1,712
  1,794
  1,881
  1,971
  2,067
  2,167
  2,273
  2,384
  2,500
  2,623
  2,752
  2,887
Issuance/(repurchase) of shares, $m
  0
  1,291
  1,356
  1,445
  1,537
  1,634
  1,735
  1,841
  1,952
  2,069
  2,191
  2,287
  2,422
  2,563
  2,711
  2,866
  3,029
  3,200
  3,379
  3,567
  3,765
  3,972
  4,190
  4,419
  4,659
  4,911
  5,175
  5,453
  5,744
  6,051
  6,372
Cash from financing (excl. dividends), $m  
  16
  2,103
  2,169
  2,291
  2,418
  2,553
  2,693
  2,840
  2,995
  3,158
  3,329
  3,476
  3,665
  3,863
  4,071
  4,290
  4,519
  4,761
  5,014
  5,279
  5,559
  5,853
  6,161
  6,486
  6,826
  7,184
  7,559
  7,953
  8,367
  8,803
  9,259
Total cash flow (excl. dividends), $m
  279
  274
  230
  238
  247
  256
  265
  275
  286
  297
  309
  289
  303
  316
  331
  347
  363
  380
  398
  417
  437
  458
  480
  503
  528
  553
  580
  609
  638
  670
  703
Retained Cash Flow (-), $m
  505
  -1,291
  -1,356
  -1,445
  -1,537
  -1,634
  -1,735
  -1,841
  -1,952
  -2,069
  -2,191
  -2,287
  -2,422
  -2,563
  -2,711
  -2,866
  -3,029
  -3,200
  -3,379
  -3,567
  -3,765
  -3,972
  -4,190
  -4,419
  -4,659
  -4,911
  -5,175
  -5,453
  -5,744
  -6,051
  -6,372
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
 
  -773
  -1,127
  -1,207
  -1,291
  -1,378
  -1,470
  -1,566
  -1,667
  -1,772
  -1,882
  -1,998
  -2,119
  -2,246
  -2,380
  -2,519
  -2,666
  -2,820
  -2,981
  -3,151
  -3,328
  -3,515
  -3,710
  -3,916
  -4,131
  -4,358
  -4,595
  -4,844
  -5,106
  -5,381
  -5,669
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
 
  -729
  -995
  -993
  -982
  -964
  -937
  -903
  -862
  -815
  -762
  -705
  -644
  -582
  -518
  -456
  -395
  -337
  -283
  -233
  -189
  -151
  -117
  -90
  -67
  -49
  -35
  -24
  -16
  -11
  -7
Current shareholders' claim on cash, %
  100
  87.4
  76.6
  67.0
  58.7
  51.3
  44.9
  39.3
  34.3
  30.0
  26.2
  22.9
  20.0
  17.5
  15.3
  13.4
  11.7
  10.2
  8.9
  7.7
  6.7
  5.9
  5.1
  4.4
  3.9
  3.4
  2.9
  2.5
  2.2
  1.9
  1.7

First Quantum Minerals Ltd. engages in the exploration, development, and production of mineral properties. The company primarily explores for copper, nickel, gold, zinc, and platinum-group elements, as well as acid. It is operating mines located in Zambia, Australia, Finland, Turkey, Spain, and Mauritania; and developing the Trident project in Zambia, the Cobre Panama copper project in Panama, and the Taca Taca copper-gold-molybdenum deposit in Argentina, as well as exploring the Haquira copper deposit in Peru. The company was formerly known as First Quantum Ventures Ltd. and changed its name to First Quantum Minerals Ltd. in July 1996. First Quantum Minerals Ltd. was founded in 1983 and is based in Vancouver, Canada.

FINANCIAL RATIOS  of  First Quantum Minerals Ltd. (FM)

Valuation Ratios
P/E Ratio -149.4
Price to Sales 2.5
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 7.3
Price to Free Cash Flow -30.9
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 6.4% 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 692.437 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 $9.2 billion.

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Stock chart of FM 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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