Copper Mountain Mining (CUM-T) is guiding copper production of 80 million lbs. in 2013 from its namesake mine in southern British Columbia, a number that falls within analyst expectations.
Along with the red metal, the Copper Mountain mine should deliver 35,000 oz. gold and 315,000 oz. silver. Anticipated cash costs for 2013 are US$1.80-US$2 per lb. copper, net of precious metal credits.
Raymond James analyst Adam Low, who has listed the company as one of his top picks, notes that while next year’s copper target meets his expectation, the total cash costs are above his estimate of US$1.62 per lb. This is partly because the company is assuming lower realized gold and silver prices of US$1,500 per oz. and US$28.50 per lb., respectively.
The production target is based on a projected mining rate of 175,000 tonnes per day, a mill throughput of 35,000 tonnes per day, and head grade averaging 0.35% copper. Mine site operating costs should total US$13.65 per tonne milled.
Low says that the grade and mill throughput is similar to what he had envisioned, however, comments that the mining rate and cash costs are higher than expected because the Vancouver-based firm plans to recover and stockpile about 16 million tonnes of lower-grade material to process near the end of the mine life. As a result, the junior has included interest and tax expenses related to extracting and stockpiling that material in its predicted cash costs, Low explains in a research note.
The Copper Mountain mine, which officially opened in August 2011, is forecasted to generate 60 million lbs. copper in 2012, its first full-year of production. By the end of the third quarter, the open-pit operation had delivered 42.8 million lbs. copper for the year to date. During that period, the mill also hit its design capacity rate of 35,000 tonnes per day.
For 2013, Copper Mountain aims to continue optimizing the mine to boost copper production and to bring down costs. The junior, which is led by Jim O’Rourke, a recent inductee in the Canadian Mining Hall of Fame, plans to keep drilling to grow resources and the mine life.
It intends to carry on mining both Pit 2 and Pit 3 in the New Year, building upon the exploration drilling it completed in 2012. This year’s program concentrated on the western and northern edges of Pit 2 to test the pit boundaries, mineralization at depth and to convert inferred resources into the measured and indicated categories.
The company will provide an update on its 2012 exploration program early next year.
Using a cut-off grade of 0.15% copper, the mine has about 3.2 million lbs. of contained copper grading 0.31% copper in measured and indicated, and another 1.7 million lbs. copper grading 0.23% in inferred.
The mine’s current resource remains open laterally and at depth, and will need to be explored over the next few years, the firm says.
The 75%-held Copper Mountain mine is 20 km south of Princeton, B.C., and 300 km from Vancouver. Annual copper production should average 100 million lbs. copper, after 12 years. The operation has an estimated 17-year life. Mitsubishi Materials Corp. owns the remaining 25%.
Low has a $5.85 target price and an outperform rating on the stock. He predicts earnings per share growth in 2013 of 63 cents and believes the firm could become a potential acquisition target with its profitable copper mine in B.C., a mining friendly jurisdiction.
The junior closed recently at $3.84 a share. It has a 52-week trading range of $2.43-$6.39 and 98.5 million shares outstanding.
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