First Quantum Minerals Ltd, on Tuesday 20th February, announced that its Board of Directors had approved a final dividend of $0.005 Canadian Dollar per share in respect of the financial year ending December 31, 2018.
This together with the interim divided announced earlier last year brings the total dividend paid to CDN$0.01 for the 2018 financial year. With its market capitalisation now at 10, 099.6 million Canadian at the time of publishing this article, FQM now seeks to attract investors to buy more shares in the company through what they are calling a “Dividend Reinvestment and Share Purchase Plan” (DRIP).
The Plan would see Canadian resident shareholders in the company being the only ones eligible to participate in the plan by having them reinvest their cash dividends paid on all or a portion of their common shares into additional shares at a discount of 3% off the face value of the average market price. Canadian’s first no doubt!
The miner seeks to benefit from this move because not only does this allow them to raise more capital for the company to use, but it also allows for investors who participate in the DRIP to hold on to stock even in times of stock market declining. Furthermore, the DRIP participants have a keen eye on the investments that company makes because it’s their money that they are putting into the company.
This is a smart way of FQM rolling out shares to investors without the risk associated with issuing of new shares. The shares bought by already existing shareholders during the DRIP cannot be sold anywhere else. In addition, with the consistent dividend track record, they automatically lock the offer price of the shares with the 3% discount fending off new investors who may want to offer a bargain price for the miner’s shares. Conversely, this speaks to miner’s confidence in its financial forecast with Copper and other commodities enjoying improvements in price in recent months.
The company that explores for, mines, and produces copper cathode, copper in concentrate, and gold has seen its share price tumbled in the last 8 months by 35% on the Canadian Stock Exchange, according to data compiled from Bloomberg Terminal (See below). Share price currently trading at 14.65 Canadian Dollars, the stock has traded on average at 16.40. On LuSE, this stock trades as a depository receipt.
FiZ Terminology
A depositary receipt is a negotiable certificate issued by a bank representing shares in a foreign company traded on a local stock exchange. The depositary receipt gives investors the opportunity to hold shares in the equity of foreign countries and gives them an alternative to trading on an international market. Source investopedia