Copper Mountain stock plunges on Q3 disappointment, more guidance cuts

Copper Mountain Mining (TSX: CMMC; ASX: C6C) shares plunged on Wednesday following disappointing results released for the third quarter of 2022, which “clearly did not meet” expectations as described by president and CEO Gil Clausen.

Copper Mountain’s stock dropped 13.5% by 11:00 a.m. ET to $1.60 a share, the lowest since early October. Year-to-date, the stock is down over 55%, bringing the company’s market value to about $336.6 million.

During the quarter, Copper Mountain produced 16.5 million lb. of copper equivalent, including 13.2 million lb. of copper plus 6,053 oz. of gold and 64,331 oz. of silver as credits, from its flagship mine in southern B.C. This was noticeably lower compared to last year’s third quarter, in which 22.4 million lb. of copper, 7,449 oz. of gold, and 134,987 oz. of silver were produced.

According to the company, the weaker quarterly production is a result of lower mill feed grade, mill throughput and copper recoveries. Mill feed grade was 0.24% copper as compared to 0.37% in last year’s third quarter, while copper recovery was 74.4% to 79.7%. Tonnes milled during the most recent period were about 40,000 tonnes lower than the prior-year quarter.

“Lower grade and lower mill throughput impacted our copper output. We experienced a grade reduction as most of the ore processed in the third quarter came from the lower-grade north pit as opposed to the planned Phase 4 of the main pit,” Clausen said in a release.

The lower mill throughput, as well as inflationary pressures, also contributed to higher production costs. Cash cost, net of precious metal credits, was US$3.70 per lb. of copper produced, as compared to US$1.50 in the same period last year. All-in sustaining costs (AISC) were also higher at US$4.50 per lb., compared to US$1.77 in the year-earlier period, due to spending on the mine’s water management systems.

As a result of the lower production and higher costs, Copper Mountain swung into the red, posting a net loss of $39.4 million or 15¢ per share, compared with net income of $25.8 million or 8¢ per share a year earlier. Cash flow from operating activities for the most recent quarter was a negative $7.5 million.

Due to the production issues, Copper Mountain once again slashed its copper production estimates to the range of 55-60 million lb. Previously, it was reduced and set at 65-75 million lb. at the end of the second quarter. This revised annual guidance also reflects a week of unplanned downtime due to repair maintenance of the primary crusher in October.

However, it is expected that production in the fourth quarter will increase and exceed each of the past three quarters as the company is now mining higher-grade ore from Phase 4 of the main pit (of around 0.28% copper) and has lifted production to the plant’s design capacity of 45,000 tonnes per day.

Commenting on possible operational improvements in the fourth quarter and beyond, Clausen said: “In the second half of September, we advanced mining to consistently large zones of continuous higher-grade ore in Phase 4. We expect that result to continue throughout the fourth quarter and solidify into higher-grade ore production through 2023.”

Clausen says the company expects all-in costs to improve to the US$2.90 to US$3.10 per lb. range in the fourth quarter.

Clausen also noted that despite a challenging quarter, the company still managed to complete several of its primary goals, including a 70% increase in  measured and indicated mineral resources compared with the previous resource in November 2020.

An increased mineral reserve base also supported a new life of mine plan with a mill expansion to 65,000 tonnes per day, producing a total of 4.1 billion lb. of copper equivalent over a mine life of 32 years. The open-pit mine is expected to have an after-tax net present value at an 8% discount rate of $1.3 billion.