Capstone cuts copper outlook as restart slips

Capstone Copper (TSX: CS; ASX: CSC) has lowered the bottom of its annual copper production forecast by 5,000 tonnes after delaying the full restart of its Pinto Valley operation in Arizona until mid-December.

The primary crusher needs additional repairs to major mechanical components being manufactured off-site by the original equipment maker, the company said Thursday in an update. Mobile crushers should allow partial processing to resume in mid-November.

While the 5,000-tonne impact is “modest,” it “adds to a difficult operational year at Pinto Valley and [the company’s] Mantoverde” operation in Chile, Jefferies mining analyst Tariq Fahad said Thursday in a note. “In our view, the bigger concern is execution, with investors likely looking for improved operating reliability into 2027.” 

Capstone shares dropped 4.5% to C$10.26 late Friday morning in Toronto, extending Thursday’s 6.5% decline. The company’s market capitalization now stands at about $7.9 billion (US$5.6 billion).

Additional pressure

The setback puts more pressure on a year-end recovery that Capstone was already counting on. In its Oct. 29 results, the company forecast annual production at the bottom of its 200,000-to-230,000-tonne range, with cash costs at the upper end of guidance.

The revised production floor is 195,000 tonnes. Capstone estimated the additional downtime would reduce this year’s copper output by about 5,000 tonnes, depending on restart timing. Temporary mobile crushers could support throughput of up to 40,000 tonnes daily during the interim restart.

That would be about two-thirds of Pinto Valley’s nominal milling capacity. The open-pit operation, about 130 km east of Phoenix, has a 60,000-tonne-per-day concentrator and produces copper and molybdenum concentrates as well as copper cathode.

Supply risk

Capstone is also grappling with the effects of a national strike in Chile. Called by Chilean trucking groups and a civic movement to protest high fuel prices, the stoppage threatens concentrate and cathode shipments and deliveries of fuel and sulphuric acid, Capstone said Thursday.

Preventive measures and on-site storage have so far protected output at Capstone’s two Chilean operations, the company added. Sulphuric acid is used to leach copper from ore, while fuel powers mining equipment.

Together with the delays at Pinto Valley, the Chilean truckers’ strike introduces “incremental downside risk to year-end production,” TD Securities mining analyst Craig Hutchison said in a note.

At National Bank Financial, mining analyst Shane Nagle cut his rating on Capstone to sector perform from outperform, citing the “near-term operational uncertainty.”

Consistent operational performance at Mantoverde and Pinto Valley “will be important to supporting a re-rating which has been materially impacted by [Thursday’s] release,” he said.

Higher grades

Pinto Valley produced 6,358 tonnes of copper in the third quarter, compared with 9,949 tonnes a year earlier. Its nine-month output was 27,115 tonnes, down from 30,960 tonnes, Capstone reported in October.

The plant had restarted with mobile crushers on Oct. 1 before primary crusher commissioning began Oct. 21. Additional repairs were then identified.

Capstone was looking to higher grades at Mantoverde and Mantos Blancos, alongside completion of the Mantoverde concentrator expansion tie-in, to lift fourth-quarter production. Group output totalled 45,218 tonnes in the third quarter, down 18% from a year earlier.

The company agreed in September to sell its Cozamin mine in Mexico to Luca Mining (TSXV: LUCA) for up to $385 million (C$549 million). Closing was expected in the fourth quarter, subject to conditions and approvals, Capstone said in October. The sale would add financial flexibility for the company’s growth projects.

Capstone’s annual production target includes a full year of Cozamin output.