Capstone Copper Corp T.CS

Alternate Symbol(s): CSCCF

Metals & Mining Copper

Capstone Copper Corp. is a copper producer operating in the Americas. It is engaged in the production of and exploration of base metals in the United States (US), Mexico, and Chile, with a focus on copper. The Company, through a wholly owned Chilean subsidiary, Mantos Copper S.A., owns and operates the Mantos Blancos mine, located 45 kilometers (km) northeast of Antofagasta, Chile and the 70%-owned Mantoverde mine, through a subsidiary, Mantoverde S.A., located 50 km southeast of Chanaral, Chile. It owns and operates the Pinto Valley mine located in Arizona, US, Cozamin mine located in Zacatecas, Mexico, and has a portfolio of exploration properties in Mexico. It also holds the fully permitted Santo Domingo copper-iron-gold-cobalt development project in the Atacama region of Chile, 35km northeast of Mantoverde. Through Compania Minera Sierra Norte S.A., it owns 100% of Sierra Norte, an iron oxide copper gold deposit located in Chile's Atacama Region, that spans over 7,000 hectares.

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Capstone Copper Corp

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Post by Evrytingisawsumon Mar 22, 2021 9:01am

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Post# 32849070

Another BIG upgrade - this time from RBC from 4.50 to 5.50

Sector: Base Metals & Minerals

Rating: Outperform (prev: Sector Perform)
Price Target: CAD 5.50 (prev: 4.50)

Our view:

We are upgrading Capstone to Outperform from Sector Perform as the valuation looks attractive at both our forecast and current spot commodity prices. We expect Capstone shares to continue to re-rate as the company executes on its growth strategy and we forecast copper production to grow by 50% from 2020 to 2023. We have updated our commodity outlook, increasing prices as underlying fundamentals remain strong. Our revised earnings and NAVPS estimates result in our price target increasing to $5.50 from $4.50.

Key points:

Copper production growth to drive strong FCF: We forecast a 50% increase in copper production from 2020 to 2023 driven by debottlenecking at Cozamin from the one-way ramp project and optimization projects at Pinto Valley. At RBCe commodity prices (see here for latest update) we forecast $153M in FCF in 2021 (8% yield), $185M FCF in 2022 (10% yield). At spot commodities we forecast Capstone to generate a 14% FCF yield in 2021 vs. peers at 10%. We could see additional production upside from recovery enhancement projects such as the ongoing test in collaboration with Jetti Resources to increase leach recoveries at Pinto Valley.
Santo Domingo offers further growth potential: Capstone continues to evaluate strategic options to develop the Santo Domingo copper-iron ore project in Chile. Given Capstone's strong balance sheet and strong metal prices, the company believes it is well positioned to realize a good price for a stake sale. Capstone currently owns 70% (KORES owns 30%) and could maintain the current structure and build it itself, or sell down to 50% and let another company operate the project. Santo Domingo has initial capex of U$1.5B which could be funded with a gold stream, having a third party build the port, and a combination of debt and equity. The project has potential to produce 259Mlbs Cu, 3.3Mt Fe and 35koz Au annually in the first five years. We currently value 70% at $592M ($1.49/ share) using a 10% discount rate and $3.50/lb copper. Capstone has been considering partnership opportunities around Santo Domingo for several years so demonstrating the potential value could be a meaningful catalyst, although the timing and terms of a deal remain uncertain.
Attractive valuation: Capstone shares are trading at 0.77x P/NAV versus North American producing peers at 1.07x and at 3.9x 2021E EV/EBITDA versus peers at 5.1x. At spot the shares are trading at 3.7x 2021E EV/EBITDA vs. peers at 5.0x and at 0.50x P/NAV vs. peers at 0.77x. We expect Capstone shares to ...