Copper Mountain Mining Corporation

C6C Details

Key Positives:

Lower Cash Conversion Cycle (35.0 Days in Q1FY22 vs Industry Median of 53.5 Days), Increased Inventory Turnover Ratio (2.3x in Q1FY22 vs 1.9x in Q1FY21)

Key Negatives:

Negative ROE (-1.7% in Q1FY22 vs +12.8% in Q1FY21), Negative Net Margin (-4.4% in Q1FY22 vs +32.1% in Q1FY21)

Key Investment Risks:

Labour Shortages, Supply Chain Interruptions, Copper Demand Scenario, Regulatory Hurdles, etc.

Reported Q1FY22 Highlights: Copper Mountain Mining Corporation (ASX: C6C) is engaged in Businesses like mineral exploration, development, and operation of mineral deposits.

• Production Level: The production in Q1FY22 stood at 15.6 million pounds of copper equivalent, down by 48% PcP, primarily driven by reduced mill head grade and decreased throughput resulting in a damaged secondary crusher.
• Revenue and Costs: Revenue for the period stood at $93.9 million from selling around 13.5 million pounds of copper, 60,038 ounces of silver, and 5,076 ounces of gold. C1 cash cost per copper pound produced stood at US$3.58, higher than the US$1.15 witnessed in Q1FY21.

Financial Highlights (Analysis by Kalkine Group)

Key Risks: The company faces the risk of changes in metal prices, forex rate fluctuations, demand conditions, higher costs, and capex as it expands operations. 

Outlook: The company expects H2FY22 production to stand strong relative to H1FY22 as throughput rates clock the increased capacity of 45k tonnes/day following the repair of the secondary crusher in April 2022. The second quarter is expected to recover with increased production and lower costs.

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock’s historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of C6C gave negative returns of ~21.80% in the past three months and ~18.11% in the past six months. The stock is currently trading lower than the 52-weeks average price level band of $2.400 - $4.620. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium over its peers’ average EV/Sales multiple, considering the uptrend witnessed in copper and its increased industrial use. For valuation, a few peers like OZ Minerals Ltd (ASX: OZL), Sandfire Resources Ltd (ASX: SRF), Aeris Resources Ltd (ASX: AIS), and others have been considered. Considering the current trading levels, decent financial prospects from H2FY22, robust commodity (copper) outlook, capacity improvements, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $3.120, down by ~1.577% as of 09 June 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic 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 decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and 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 prices.

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