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TABLE OF CONTENTS Jan 7 - 13, 2013 Volume 98 Number 47 - 0 comments

Copper Mountain aims to produce more copper

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Copper Mountain Mining (CUM-T) is giving guidance that its copper production for 2013 from its namesake mine in southern B.C. will be 80 million lb. — 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 to 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 expectations, 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.

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 envisioned, but comments that the mining rate and cash costs are higher than expected because the Vancouver-based firm plans to recover and stockpile 16 million tonnes of lower-grade material to process near the end of the mine’s life. As a result, the junior has included interest and tax expenses related to extracting and stockpiling this material in its predicted cash costs, Low explains in a research note.  

The Copper Mountain mine, which opened in August 2011, was forecast to generate 60 million lb. copper in 2012, which was its first full year of production. By the end of third-quarter 2012, the open-pit operation had delivered 42.8 million lb. copper and hit its design capacity rate of 35,000 tonnes per day.  

Copper Mountain aims to continue optimizing the mine in 2013 to boost copper production and 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 keep mining 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 in the year.

Using a cut-off grade of 0.15% copper, the mine holds 3.2 million contained lb. copper grading 0.31% copper in measured and indicated, and another 1.7 million lb. copper grading 0.23% in inferred.  

The mine’s resource remains open laterally and at depth, and would need to be explored over the next few years, the firm says.  

The 75%-held Copper Mountain mine is located 20 km south of Princeton, B.C., and 300 km from Vancouver. Annual copper production would average 100 million lb. copper after 12 years. The operation has an estimated 17-year life. Mitsubishi Materials 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¢, and believes the firm could become an acquisition target with its profitable copper mine in B.C., a mining-friendly jurisdiction.    

The junior recently closed at $3.84 a share. It has a 52-week trading range of $2.43 to $6.39, with 98.5 million shares outstanding. 

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Loading up in a pit at Copper Mountain Mining's namesake copper mine, 20 km south of Princeton, British Columbia. Source: Copper Mountain Mining
Loading up in a pit at Copper Mountain Mining's namesak...

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