Was the Canadian copper producer’s first quarter of 2020 Copper Mountain Mining Corp. (ISIN: CA21750U1012 / TSX: CMMC) Already a clear signal for a positive year, the management was able to lead the company to further improved quarterly results in the 2nd quarter despite the restrictions caused by COVID-19. It is characteristic of the quality of the company’s management that in all areas, from production to cost savings to the financial situation, improvements in results were achieved compared to the same quarter of the previous year.
Due to the revised mine and production plan, the Production for the quarter at 23.9 million pounds copper equivalent consisting of 18.1 million pounds copper, 7,499 ounces gold and 86,126 ounces silver.In addition, the austerity measures implemented also took effect Production costs of around 15% to USD 1.48 per pound of copper were significantly below the 2nd quarter of 2019 at USD 1.74. The total production costs were also reduced by around 10%, from USD 1.85 per pound of copper to USD 1.67 per pound of copper.
Source: Copper Mountain Mining
Of course, this led to a significant increase in revenue in parallel with the better developed copper prices! While it was $ 65 million in the second quarter of last year, the company was only $ 91 million a year later, an increase of 40%!
This resulted in one Gross profit explosion from 1.6 million CAD in Q2-2019 to a whopping 30.3 million CAD, which of course also catapulted earnings per share from 0.1 CAD to 0.12 CAD! Of course, these excellent figures were ultimately also reflected in the cash flow (before deduction of working capital). While it was $ 4.7 million in the comparable quarter of 2019, it shot up to an incredible $ 41.5 million in the past quarter.
But the second quarter of 2020 had much more to offer than just a fantastic set of figures! The project developments also continued well. Because as part of the expansion of the mill capacity, which will take place gradually until the end of the year, the installation of the flotation system was completed in July 2020. And that, within the allotted time and also the budget!
In addition, on May 7, 2020, a revised profitability study for the Australian ‘Eva Copper’ project was announced, which shows significantly better data than the previous version. The new project present value (‘net present value’) is now an excellent USD 437 million and offers an after-tax return of 29%. ‘Eva Copper’ is expected to produce around 1.5 billion pounds of copper in its 15-year term! Another plus point for the project are the already low ‘C1’ costs of 1.44 USD per pound of copper, which are already a good 3% below the costs of the current 1.48 USD of the current one, without economic resource expansion and without planned savings measures Production. This, combined with the annual production output, speaks for good leverage in the future profit margin.
In view of the great progress, it is clear that board member Gil Clausen is also more than satisfied with what has been achieved. He sees the successes that were achieved despite the pandemic primarily as a result of the rapid implementation of the revised mine and production plan at the beginning of March 2020, which, in his opinion, allows the company to react flexibly to market changes. The rising raw material prices in combination with improved production costs are intended to raise capital for the rapid expansion of the second stage of the mill capacity. The first step to 45,000 tons per day was completed in July 2020, the next step is expected to follow in late 2020 or early 2021.
Even if the start of production of ‘Eva Copper’ is not yet certain, the cost savings in production alone and the planned expansion of the mill capacity are expected to produce very profitable results for 2021 and thereafter. Metal prices will make a huge contribution. Gold and silver are already in top form, but the market experts also see increasing demand for the copper that is in demand in the long term and, as a result, also rising prices.
But you don’t have to look so far into the future, the second half of 2020 will also shine with top balance sheet figures. Board member Gil Clausen, who confirms that the annual production of 70-75 million pounds of copper can be maintained, is already laying the foundation stone. The comparison of the average copper prices from the 2nd quarter with the level of the previous 3rd quarter suggests a great leap in profits, because despite the volatility of copper, the increased level should be maintained.
Source: JS Research UG
Lower production costs, better selling prices for copper, gold and silver are the best ingredients for the continuation of Copper Mountain’s upward trend. If, as announced, a new reserve and resource estimate will be published towards the end of the year, Copper Mountain will once again open another chapter in the company’s history.
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