Opinions
Michael Giordano
Copper Mountain Mining
CMMC-T
HOLD
May 28, 2013
$1.710
Stock price when the opinion was issued
Mining
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COMMENT
He doesn’t follow this closely and doesn’t know why it is down so much. Copper has been very strong. This is a small, single asset name. If you want to play copper and its relative strength, Teck Resources (TECK.B-T) and First Quantum (FM-T) are good names and are much less risky than in the small-cap mining space.
Mining
BUY
It's had a great run in the past year. They used to carry a lot of debt and ran only one mine, but have since done a great job lowering that debt and growing operations. They now have a promising second asset that'll probably attract more institutional investors and lower stock volatility (less risky with two mines). In time, this will likely be taken over. Has owned this in the past. Likes it.
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WATCH
Copper is probably going higher. He is concentrating on silver right now, but copper will be next. CMMC is impressive with its assets. It is on his radar. The price is very high. There is leverage to the price as well. Look at cost, geopolitical risk, management and reserves on the ground for producers.
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BUY ON WEAKNESS
Owns it but is not buying this name. The valuations are great, and are cheap. You want to buy cyclicals when they are expensive, not when they are cheap. What happens when the commodity prices fall? It may be a supercycle. There are better companies out there, but you can probably accumulate in pullbacks.
Mining
BUY
Highly leveraged to the copper price, and is a major producer. Has a great outlook. They are reducing costs to improve efficiency. Debt is an issue, but the high copper price solves this and enhances margins. It's up 500% in the past year. Too much beta for him though, but this is fine if you can handle this beta. The space is discounting $3 copper, so there's upside.
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TOP PICK
Thematically likes copper. Should continue to do well. Has been sideways in the last 6 months following a run up. Demand is still strong. Relatively low supply. Cheap. BC based with Australian mines. 3.4x free cashflow, 3.5 EBITDA, 7.5x to earnings. High return on equity. Good balance sheet. (Analysts’ price target is $5.10)
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HOLD
Just completed an expansion. A bit more debt leveraged. Fortunes rise and fall with copper, especially with a recession scenario. China's problems aren't helping. Should be back to $3 in next 3-6 months, $4 in a year. Operational issues in Q1. Second half should improve. Sit tight. You could dip your toe in Q4.
Mining
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At best, he would call this a Hold. Have 75% of the Copper Mountain property in BC. This is a new mine and they have been having some challenges with getting the ore grade up and running.