Copper Mountain stock plunges on Q3 disappointment, more guidance cuts

During Q3 2022, 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 BC. This was noticeably lower compared to Q3 2021, 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 Q3 2022 production is a result of the mill feed grade, mill throughput and copper recoveries all being down for the quarter. Mill feed grade was 0.24% copper as compared to 0.37% in Q3 2021, while copper recovery was 74.4% to 79.7%. Tonnes milled during Q3 2022 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,” stated Clausen.

The lower mill throughput, as well as inflationary pressures, also contributed to higher production costs for Q3 2022. Cash cost, net of precious metal credits, was $3.70 per pound of copper produced, as compared to $1.50 in Q3 2021. All-in sustaining costs (AISC) were also higher at $4.50 per pound, compared to $1.77 in Q3 2021, due to expenditures on the mine’s water management systems.

As a result of the lower production and higher costs, Copper Mountain swung into the red during Q3 2022, posting a net loss of C$39.4 million or C$0.15 per share, as opposed to a net income of C$25.8 million or C$0.08 per share in Q3 2021. Cash flow from operating activities for Q3 2022 was a negative C$7.5 million.

As a result of production results to date in 2022, the company has 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, where it has been experiencing grades of approximately 0.28% copper and has achieved the design capacity of 45,000 t/d.

Commenting on possible operational improvements in Q4 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.”

“In the fourth quarter, we expect AIC to improve significantly and be in the $2.90 to $3.10 per pound range from our operational turnaround and benefit from the higher grades from Phase 4, where we expect an average of 0.27% copper in Q4,” he added.

Clausen also noted that despite a challenging quarter, the company still managed to complete several primary objectives, including a 70% increase in Copper Mountain’s measured and indicated mineral resources compared to the prior technical report dated November 30, 2020.

An increased mineral reserve base also supported a new life of mine plan with a mill expansion to 65,000 t/d, 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 C$1.24 billion.