Company Overview: Copper Mountain Mining Corporation (ASX: C6C) is mainly involved in the exploration and production of copper from the world class mining jurisdictions. C6C owns 75% interest in Copper Mountain Mine, which is located in Southern British Columbia near the town of Princeton. The company also has the development stage Eva Copper Project in Queensland, Australia. The company is listed on Toronto Stock Exchange as well as on the Australian Stock Exchange.

C6C Details

Key Takeaways from Q2FY21 Results:

• Increase in Production: For the June 2021 quarter, C6C reported total copper production of 25.5 million pounds of copper, up from 18.09 million pounds reported in pcp. Further, the company produced 147,973 ounces of silver during Q2FY21, up from 86,126 ounces in Q2FY20.
• Rise in Revenue: For Q2FY21, the company reported total revenue of CAD 142.06 million, taking the total H1FY21 revenue to CAD 304.27 million, which is 116% higher than pcp, driven by higher metal prices and metal sales.
• Improved Bottom line: For Q2FY21, the company reported net income of CAD 38.66 milion, up from CAD 31.93 million in Q2FY20. This took the total net income for H1FY21 to CAD 90.78 million, up from the loss of CAD 11.525 million in H1FY20.
• Rise in Cash Balance: As at 30 June 2021, the company had cash and cash equivalent of CAD 144.46 million, up from the cash balance of CAD 29 million as at 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Metrics: Gross margin for Q2FY21 stood at 60.4%, up from 33.2% in Q2FY20. EBITDA Margin for Q2FY21 stood at 60%, up from 31.7% in Q2FY20. Current ratio for Q2FY21 stood at 2.25x, up from 0.79x in Q2FY20, demonstrating that the company has improved its ability to pay short-term obligations. Debt to Equity ratio for Q2FY21 stood at 1.19x, down from 1.90x in Q2FY20.

Liquidity Profile and Profitability Metrics (Source: Analysis by Kalkine Group)

Latest Developments:

• Positive Drilling Results at Cameron Copper Project: On 12^th October 2021, the company announced positive drill results at Cameron Copper Project in Australia, indicating that there is a potential for a larger mineralized system. Notably, the drilling has discovered intercepts of high-grade mineralization, within long, low-grade mineralized envelopes, with lateral continuity between intercepts of up to 1 kilometre. The company is now putting a systematic program in place to develop the identified targets with additional drilling this year and into 2022.
• Announces Commissioning of the Ball Mill 3 Expansion Project: On 22^nd September 2021, the company announced that it has successfully installed and commenced commissioning of the third ball mill at its Copper Mountain Mine, which will increase plant milling capacity to 45,000 tonnes per day from 40,000 tonnes per day.

Key Risks:

• Fluctuations in Metal Price: The company is exposed to the risks associated with the fluctuations in the price of copper, gold and copper, as it could impact its financials.
• Foreign Currency Risk: Many of the company’s financial items are translated from US dollar to Canadian dollar, exposing it to foreign currency risk.

Outlook: Due to the improved production performance in H1FY21, C6C has increased its FY21 production guidance to 90 to 100 million pounds of copper, compared to the previous guidance range of 85 to 95 million pounds of copper. The company has reaffirmed its annual AIC guidance of US$1.80 to US$2.00 per pound. Looking ahead, the company is focused on improving production efficiencies at Copper Mountain to achieve improved recoveries at throughput rates up to 50,000 tonnes per day. In the next five years, the company plans to triple the production it had achieved in 2020, supported by expected production from Eva Project, which is on track for completion in the fourth quarter of 2021. The company intends to release its Q3FY21 results on 1 November 2021.

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

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 has corrected by ~14.14% in the last three months. The stock has a 52-week high and low of $1.005 - $5.420, respectively. The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at a slight premium to its peers, considering the positive exploration results from the projects, and improved production outlook,  For the valuation purpose, peers such as OZ Minerals Ltd (ASX: OZL), Sandfire Resources Ltd (ASX: SFR), Aeris Resources Ltd (ASX: AIS), have been considered. Considering the company’s improved financial performance in H1FY21, rising cash balance, decent production outlook, valuation, current trading levels, and the key risks associated with the business, we give a "Speculative Buy" rating on the stock at the current market price of $3.41, up by ~4.923% as on 13 October 2021.

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.