A Member of Pat McKeough’s Inner Circle recently asked for his advice on a copper mining company with operations in Canada and a development project in Australia.
Pat likes the rising revenue and earnings, plus the low political risk of the properties. However, he cautions that copper prices and demand can be fickle and in the meantime, the sharesalready reflect expectations for stronger demand.
Copper Mountain Mining (Symbol CMMC on Toronto; www.cumtn.com) has a 75% stake in the Copper Mountain mine in British Columbia. (Japan’s Mitsubishi Materials holds the remaining 25% interest.)
The miner also owns the development-stage Eva copper project in Queensland, Australia.
The flagship Copper Mountain property is located near the town of Princeton, in B.C.’s south. The mine produces over 100 million pounds of copper equivalent per year. It’s a large resource that remains open to further exploration and reserve expansion.
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The development-stage Eva Copper Project in Queensland, Australia, is expected to add around 100 million pounds of copper output on an annual basis. The company also has 210,000 hectares of highly prospective lands.
In the quarter ended March 31, 2021, Copper Mountain’s revenue jumped 227.3%, to $162.2 million from $49.6 million.
Production was a record 30.4 million pounds of copper equivalent (comprised of 25.5 million pounds of copper, 8,187 ounces of gold, and 160,484 ounces of silver) in the latest quarter. That was up 17.0% from 21.8 million pounds of copper equivalent (comprising of 17.5 million pounds of copper, 6,139 ounces of gold and 80,016 ounces of silver) a year earlier. Revenue also benefited from a big rise in the price of copper.
Copper Mountain earned $0.16 a share in the quarter, up sharply from $0.01.
Inner Circle: Expectations are entirely dependent on the red metal
The company’s revenues and profits have benefited lately from increased output and higher metal prices. Meanwhile, it plans to keep expanding its Copper Mountain operations to produce more of the red metal.
Longer term, Copper Mountain’s growth prospects will come in large part from its Eva copper-gold development project, in Queensland, Australia’s Mount Isa region. The company will finalize its production plan by the end of this year.
Copper Mountain’s shares have jumped along with copper prices. If copper keeps climbing—spurred by very favourable demand, limited global supply and a continuing economic rebound—then the shares could keep rising as well. But if those factors don’t materialize then the shares of Copper Mountain, which already reflect expectations for stronger demand, could drop.
Still, the prospects for increased output at the Copper Mountain mine, plus the longer-term production prospects for Eva, add to the stock’s speculative appeal. Both mine sites are also in low-risk political jurisdictions.
Recommendation in Pat’s Inner Circle: Copper Mountain Mining is a hold.
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