TD UPDATEEvent We have updated our model following the release of Q3/23 results and management's quarterly conference call.
Impact: NEUTRAL 2023 Consolidated Guidance Now Includes Copper Mountain. Guidance for Constancia and Manitoba remain unchanged. Consolidated production guidance now calls for 118,500-148,500t Cu and 266-323koz Au, with cash cost between $0.80-$1.10/lb.
We are forecasting copper production at ~134,000 tonnes and gold production at ~283,000 ozs. Copper Mountain produced 9,303 tonnes of copper-in-concentrate during the quarter, above our forecast of 8,873 tonnes.
Copper Mountain's C1 cost was $2.67/lb, above our forecast of $2.21/lb. HBM will be releasing an updated technical report for the Copper Mountain mine in Q4/23, including an updated mine plan with mill throughput assumptions and cost estimates.
HBM has already achieved improved operating performance at Copper Mountain. Copper recoveries increased to 81% in Q3/23 versus high 70s prior to HBM's ownership and periods of 45,000tpd mill throughput has been seen, but mill reliability remains a key focus area.
HBM is targeting further increases to recovery through: (i) stabilizing the grinding circuit, and (ii) flotation reagent chemistry changes. HBM generated FCF of $111 million in Q3/23, and we expect a further $85 million in FCF generation in Q4/23. 2023 capex for the legacy HBM operations have been reduced by $30 million for 2023 to $270 million. However, this has been offset by guidance for capex of $35 million for 2023 at the Copper Mountain mine ($33 million of sustaining capital and $2 million of growth capital).
TD Investment Conclusion We are maintaining our BUY recommendation; our target price has declined slightly to C$10.00 (from C$10.50). Our lower target price reflects modest changes to our 2024 EBITDA estimate as we refine our forecasts for Copper Mountain.