Copper Mountain reports record Q4 production

After beating its production guidance for 2020 and reporting a record fourth quarter, Copper Mountain Mining (TSX: CMMC) is guiding a further 22% increase in production this year.

The B.C.-based miner’s 75%-owned Copper Mountain mine, 20 km south of Princeton, B.C., produced 77.6 million lb. of copper last year, compared with guidance of 70 to 75 million lb. copper. The mine also produced 29,227 oz. of gold and 392,494 oz. of silver.

In the final quarter of 2020, the open pit operation achieved record quarterly production, churning out 23.1 million lb. copper, 8,959 oz. of gold, and 144,934 oz. of silver.

“Our operating team executed on our operating plan, beating our production guidance for this year,” Gil Clausen, Copper Mountain’s president and CEO, stated in a news release. “We finished the year strong with record production in the fourth quarter as a result of higher grades, which we expect to continue in 2021.”

This year, with increased recoveries and higher grades, the company expects production to grow to 85 to 95 million lb. copper, 25,000 to 30,000 oz. of gold and 500,000 to 550,000 oz. silver. All-in sustaining costs are projected to remain steady, at US$1.80 to US$2 per lb.

Expanded mill capacity will help to drive the increase in production at the conventional crush, grind, flotation operation. Copper Mountain is expanding the mill to 45,000 tonnes per day this year, up from 40,000 tonnes per day, with the installation of a third ball mill. Installation is scheduled to begin early this year, with commissioning following in the third quarter.

About US$33 million is budgeted for expansionary spending in 2021, most of that focused on the mill expansion. Another US$3 to US$4 million will be spent on exploration, focused on reserve expansion.

Last November, the company released a study that looks at a potential further expansion to 65,000 tonnes per day starting in 2024. Clausen noted that once the current expansion is complete, the company will be focusing on the next stage of expansion.

Mitsubishi Materials owns a 25% stake in the Copper Mountain mine.

Pierre Vaillancourt,  an analyst at Haywood Securities, raised his target price on Copper Mountain to $3.00 per share from $2.00 per share following news of the company’s fourth quarter results. (At presstime in Toronto Copper Mountain was trading at $2.38 within a 52-week trading range of 28¢ and $2.42 per share.)

“We believe CMMC offers attractive growth and optionality, and is well positioned to take advantage of a rising copper price,” Vaillancourt said.

“With a reserve at the Copper Mountain mine of 31 years (410 Mt grading 0.25% copper and 0.11 gram gold per tonne), within an M&I resource of 50 years (978 Mt grading 0.21% copper and 0.10 gram gold per tonne), we believe that an expansion to 65,000 tonnes per day is likely, and that further expansion is possible as the New Ingerbelle deposit comes on line,” he commented in a research note. “Precious metals represent 30% of the contained metal value at the deposit, production from New Ingerbelle will increase annual gold production to 50,000 to 75,000 oz.”

The mining analyst also  noted that there is “significant optionality” at the company’s Eva copper project in Australia, about 95 km northeast of Mt. Isa in northwestern Queensland. The company envisions Eva as a conventional open pit operation with a conventional crush, grind, flotation circuit. A feasibility for Eva completed in May 2020 outlined a mine life of 15 years from the iron oxide copper gold deposit with annual production of about 106 million lb. copper-equivalent (about 100 million lb copper and 14,000 oz. gold).

Vaillancourt noted that “options for the project include finding a partner, self-financing, or selling opportunistically.”

Bryce Adams, an analyst who covers Copper Mountain Mining for CIBC, raised his 12-18 month target price on the company’s shares from $2.40 to $2.75.

“Even with a slightly conservative approach to the cost profile, we have a robust FCF [free cash flow] outlook for Copper Mountain, and note that if management is able to deliver costs at the mid or lower end of guidance range, this would represent upside to our cash flow estimates.”

“At spot prices,” he wrote in a research note, “we model 2021E FCF of $90 million, representing a strong FCF yeild of 21% relative to peers at ~11%.”