Copper Mountain posts strong Q3, lowers cost guidance

In the third quarter, Copper Mountain Mining's (TSX: CMMC) flagship namesake open-pit mine in B.C., 20 km south of Princeton, generated 23.8 million lb. copper-equivalent, at all-in sustaining costs of US$1.43 per lb. copper and all-in costs of US$1.68 per lb. copper.

Gil Clausen, the company's president and chief executive, said in a statement that Copper Mountain "posted another strong quarter" and surpassed expectations in its operating plan.

The company expects its strong operating performance, led by increased grades and recoveries, to continue into the fourth quarter. As a result, it has lowered its 2020 all-in cost guidance to US$1.85-$2 per lb. copper, from US$2.20-$2.35 per lb., previously. The company maintains its 2020 production guidance of 70-75 million lb. copper, with 54.5 million lb. copper produced in the first nine months of the year.

Third-quarter production includes 18.9 million lb. copper, 6,630 oz. gold and 81,418 oz. silver. Revenues for the period stand at $95 million, from the sale of 17.8 million lb. copper lb., 6,232 oz. gold and 67,901 oz. silver.

Revenues have benefited from increased sales and higher metal prices, according to the press release. As a result, the miner recorded $47 million in cash flow from operations, before working capital changes, and closed out the quarter with $53.6 million in cash and equivalents, a $24.6-million increase over the second quarter. Copper Mountain recorded net income in the reporting period of $33.2 million.

In response to the Covid-19 pandemic, the company announced a revised mine plan for the pit in March. The new plan includes a 25% reduction in the mining rate to 120,000-160,000 tonnes per day from 200,000 tonnes per day, previously, to focus on mining lower-cost areas to maintain positive margins at lower metal prices.

In addition, the miner deferred the second stage of a planned mill expansion, which would bring the capacity of the plant to 45,000 tonnes per day from 40,000 tonnes per day.

The first stage, with a cleaner circuit upgrade and installation of Direct Flotation Reactors, was completed in July.

The second portion - installation of a third ball mill - has been postponed to next year. The mill installation is anticipated to start in early 2021, ahead of a commissioning planned for the third quarter of 2021.

"Our plan is to continue to build upon our healthy cash position in anticipation of restarting construction of the third ball mill in early 2021, which is the last stage to complete our 45,000 tonnes per day mill expansion project," Clausen stated.

Processing facilities at the Copper Mountain mine in British Columbia. Credit: Copper Mountain Mining.

According to the mining executive, the additional mill is expected to increase production by 15-18%, from higher throughputs and recoveries, and is the first step of the company's growth plan.

The next step of the plan includes a further mill expansion to 65,000 tonnes per day, with a technical report on the second phase expansion expected in the fourth quarter.

Copper Mountain Mining has a 75% stake in the Copper Mountain mine (Mitsubishi Materials holds a 25% interest). The miner also holds the development-stage Eva copper project in Queensland, Australia.

In a research note to clients, Pierre Vaillancourt of Haywood Securities said he maintains a buy rating on the stock.

"In a stronger metals price environment, with improving grade and expansion plans back on track, CMMC is well-positioned to grow cash flow," he wrote. "Based on performance expectations at the Copper Mountain mine, and assuming the copper price holds up, we believe there is more runway for the stock to appreciate. Longer-term, organic growth opportunities at Copper Mountain, New Ingerbelle, and Eva provide potential to triple production from 2019 levels."

Vaillancourt has a price target of $1.75 per share.

At press time, the company was trading at $1.12 per share within a 52-week trading range of 28 ? and $1.19. It has 191 million common shares outstanding for a $214-million market capitalization.

- This article first appeared in the Canadian Mining Journal, part of Glacier Resource Innovation Group.