Scotia report details, second try
Capstone Mining Corp. - Growing copper and cash reserves (1-SECTOR OUTPERFORM)
- Capstone has successfully emerged in Mexico as a low-cost producer with exploration results that we believe will extend the Cozamin mine life to at least 2016. Current reserves suggest that the mine will be depleted in 2011.
- We forecast total cash operating costs to average $.83/lb. of copper for the life of the mine, making Capstone one of the lowest-cost copper producers in our coverage universe. Over 80% of Cozamin's revenues are derived from copper.
- With free cash flow (FCF) growth and no debt, we believe Capstone has the financial flexibility to make an acquisition. Management intends to make an acquisition by the end of 2008, with the goal of doubling Capstone's size and annual cash flow. Given the scarcity of quality late-stage development or producing mines that fit Capstone's criteria, we believe it may wait until 2009 to make an acquisition.