Copper Mountain Mining Corporation

C6C Details

This report is an updated version of the report published on 27 May 2022 at 3:55 PM GMT

Business Updates: Copper Mountain Mining Corporation (ASX: C6C) operates in GICS: Copper sector and is engaged in businesses like mineral exploration, development, and operation of mineral deposits. The company through its subsidiaries owns multiple projects like Copper Mountain Mine, Cameron Copper project, and Eva Copper project.

• On 13^th May company reported the exchange regarding the trading halt however it did not have any material impact on the company’s business operations.
• Management responded to market speculation regarding the Eva Copper Project transaction and stated there were no pending transactions with regards to Eva Copper Project till this time.
• The company announced the addition to the Board of directors after the appointment of Jeane Hull dated 18^th May 2022.

Analysis from Q1 2022:  

• C6C reported a higher All-in cost in Q1 around US$5.08/lb while in the previous corresponding quarter it was US2.76, the reason why the high cost was reported was lower production, non-recurring cost like maintenance expenditure, and sustaining capex.
• The production of copper was lower by 13.2M lbs than Q1FY21.
• The company also achieved its sustainable target of at least “A” or “Yes” rating for each of its Mining Association of Canada’s Towards Sustainable Mining protocols.

Q1FY22 Operating Metrics, (Source: Analysis by Kalkine Group)

Key Risks: The company faces the risk of volatility in copper price which is linked to the major chunk of the company’s revenue. The increase in the cost of production is another risk that impacts its revenue, and it also faces risk from open-pit mining that could impact its sustainable growth targets.

Outlook: The company is expecting stronger H2FY22 results backed by higher production expectation and improved cost.  Production in H1FY22 is expected to increase with throughput surging to 45ktpd and higher-grade ore. The company at least expects production of 80 to 90 million pounds of copper.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

Stock Recommendation: The stock is currently trading below its average 52-week low-high level of $2.400-$4.670, offering a decent opportunity for accumulation. The stock has been down by ~26.75% in the past one month. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a discount to its peers, considering the rise in production cost, decline in production quantity, and decline in margins. For the purpose of this valuation, a few peers like Aeris Resources Ltd (ASX: AIS), Sandfire Resources Ltd (ASX: SFR), BHP Group Ltd (ASX: BHP), and others have been considered. Considering the upside valuation, positive H1FY22 and H2FY22 result expectation, growth in production, decline in All-in cost, current trading level, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $2.880, as on 27 May 2022, 11:55 AM (GMT+10), Sydney, Eastern Australia.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

C6C Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock price

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