One commodity we think all investors should own is copper; we are recommending a buy on an exciting copper miner that we expect will be a star performer in coming years, asserts growth expert Stephen Leeb, editor Real World Investing.

Domiciled in Canada, First Quantum (FQVLF) s one of the world’s 10 largest copper producers, and chances are high it will come close to cracking the top five within the next couple of years.

First Quantum has eight mines that either are producing or are being developed. The mines are located in Africa, Panama, Spain, Australia, Finland, and Turkey.

The company’s production of both copper and gold (a byproduct of its copper mining) has been rising steadily for more than a decade. This trend should accelerate sharply over the next several years as the company’s largest mine, Panama-based Cobre Panama, comes into production.

Prospects for Cobre have grown brighter with almost every quarterly update. In the recently reported fourth quarter, First Quantum lowered capital expenditure estimates. The mine should begin producing copper by this year’s fourth quarter and continue to ramp up over the following three years.

By 2021 Cobre should be producing about 350,000 tons of copper a year. Cobre production along with net increases in production in other mines will bring the company’s overall production to near one million tons a year.

Assuming average copper prices in 2018 remain near current levels, this year will mark a sharp improvement in virtually all valuation metrics. Revenues should jump by about 25% on an increase in production and higher average copper prices.


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Free cash flow will turn positive after eight years of negative values (the result of developing Cobre and other mines). After a several-year hiatus resulting from high development expenses, profits will turn positive, approaching $1.00 a share.

In 2019 these trends will accelerate, with profits likely to be near $1.50 a share. And they could be considerably higher if our bullish outlook on copper proves on target. Meanwhile, the free cash flow yield will approach 10% based on the stock’s current price.

By 2020 earnings should top $2.00 a share and in 2021 advance to nearly $2.75 a share. Again, that’s based on current copper prices, meaning these figures will prove conservative if copper goes higher than current projections of about $3 a pound.

Beyond Cobre, the company has projects in Argentina and Peru with large potential for copper and other metals. The free cash flow associated with earnings through the early 2020s will sharply reduce the risks in financing future projects.

We expect First Quantum to be one of the fastest-growing major metal producers for at least the next five years. With a P/E of 8 based on a conservative estimate of 2021 earnings, the stock is cheap and is a compelling buy. Due to the thin trading volume, we recommend using a limit order.

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