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Copper Mountain rebound

Canada’s Copper Mountain Mining has rebounded strongly from a weak March quarter as increased metal sales and improved margins upped the bottom line.
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BC-based Copper Mountain is expected to outperform this year

Headline earnings per share for the June quarter came in at C1c, above consensus estimates.

Revenues jumped 84% sequentially to $91.1 million, resulting in positive cash flow of $41.5 million and adjusted EBITDA of $15.7 million.

Revenues benefited from the positive mark to market and final adjustment on concentrate sales, as copper and gold prices rose through the quarter. The unadjusted results were weighed down by a non-cash, unrealised foreign exchange gain of $14.5 million, which was mainly related to the company's US-dollar denominated debt.

Net debt was US$223.4 million at quarter-end, including $29 million in cash.

During the quarter, copper, gold and silver output tracked above plan with copper production rising 4% over the prior period to 18.1 million pounds, and gold production rose 22% to 7,499oz.

AISC fell 22% to $1.67/lb.

Haywood Capital Markets mining analyst Pierre Vaillancourt pointed out mining of the finer-grained ore domain was nearly completed before the mining focus would turn to pit three, were higher grades and better recoveries are in the immediate outlook for the eponymous mine, in British Columbia.

Copper Mountain is on track to achieve its production guidance of 70-75Mlb copper this year, at AISC of $2.35/lb.

"With the stronger copper prices, the company plans to continue with its revised operating plan and build its cash position with the target to restart the second stage of the ball mill expansion project by 2021," said Vaillancourt.

Organic growth

The company has a strong growth profile. The ball mill expansion is designed to increase throughput to 45,000t/d, and improve recovery owing to being able to grind ore finer. It will be able to accommodate ore form the Ingerbelle discovery, which can be developed for about C$30 million and extend the mine life by at least 10 years.

Copper Mountain also completed installation of direct flotation reactors in July, which are on schedule and on budget.

The Eva mine, in Australia, now has a feasibility study that could lead to construction of a mine with comparable output to Copper Mountain. Eva also has exploration potential, with the surrounding 4,000sq.km Cloncurry property hosting several priority targets, some of which could become Eva satellites.

The Eva feasibility study has calculated an after-tax NPV of C$437 million and an IRR of 29%. The study also points to total output of 1.5Blb over a 15-year mine life, with cash costs of US$1.44/lb of copper, net of by-product credits.

"In this record gold price environment, we are particularly encouraged by the prospect of additional cash flow," said Vaillancourt.

The company is working towards publishing an updated resource estimate for Copper Mountain and a technical report for a 65,000t/d mill expansion by year end, which is expected to provide more details on an integrated Copper Mountain-Ingerbelle mine plan. It also expects to restart installation of the third ball mill early in 2021.

Haywood reiterated a ‘buy' rating and a target share price of C$1.

Copper Mountain shares (TSX:CMMC) have fallen about 11% over the past 12 months and last traded at C72c, which capitalises the company at $137.8 million (US$102.5 million).