Capstone Copper Corp (CS.TO)

You would think that this would do a little better, but it is very volatile. That is really tied to the higher cost structure. Very leveraged to copper prices. A little less detached from very specific operational issues. They had 3 North American mines. Nice growth profile, but very sensitive to copper prices given the elevated cost structure. Not his way of doing things. Low cost structure wins in any environment.

(Top Pick Jan 6/17, Up .75%) It did a U-turn. It will benefit from base metal prices over the next couple of years.

He likes their operating performance, but hates their balance sheet. There are easier ways to make money in copper mining with companies that have lower financial leverage.

Hold or Sell? A high cost producer in the $2.20-$2.30 range, all-in costs for its copper production. A very high beta stock with strong reaction to the price of copper. They had a pretty good 4^th quarter and were able to generate some free cash flow, which was encouraging. This is kind of in the “wait and see” box.

This has done well but charts show it getting a little toppy. Longer-term, this is a play on copper. Copper prices look like they have broken out recently, which would be quite positive for a lot of Canadian mining and copper companies over the coming 12 months. Ranks in the top 3% of his database.

This has just become free cash flow positive. Cash flow grew by $.21 on a year-over-year basis and is now basically breakeven. They have $158 million in cash on hand, 32% of their market cap, so their ability to service their debt from free cash flow looks pretty good. Trading at 6.7X enterprise value to EBITDA, 4^th quarter trailing. (Analysts’ price target is $1.36.)

Copper has had an enormous run, up over 20% in the last 3 weeks or so. Thinks it has had too much of a run and doesn’t see it being sustainable. This has decent fundamentals, but he thinks copper will pull back. However, in general, you want to be in some of the material names, and he would rate Teck Resources (TCK.B-T) much higher than this company.

This really depends on your view on copper. Copper is probably in the process of bottoming at the $2 range. If so this one should survive. A tough balance sheet, so one of the riskier plays. A safer play would probably be Hudbay Mining (HBM-T) which has zinc, copper, growth in assets and growth in production. Also, the balance sheet is in better shape.

(Market Call Minute) It will survive if copper does not break below $2.

He was buying this one this week. They upped their copper production. Their balance sheet is a little stretched, however. The market was reflecting the absolute worst for copper producers. There is not a lot of political risk. It is a small sized producer building into a mid-sized producer. He wanted to put some money into the sector into one of the higher torqued names and this was it.

It is a difficult environment with copper prices coming off. It is going to be a tough go here. This is smaller some other names. If you believe copper prices are going to come back, then this one has more leverage to copper. If copper prices stay low for another year this one could be at risk.

A Copper mining company that was crushed. They are a pretty high cost producer. They may go out of business. He has a small short position, but covered a bit today. He does not think the mine is economic.

Likes the people but feels nervous about copper. There will be margin contraction because of the declining prices. The balance sheet is challenging.

Had a position in this, but took most of it off. Has been buying at around $1.18. Good management and feels the copper space is weak overall. This has flat lined here, and if you look out a year or so, you should have some nice gains. They are getting kicked out of the index, so there is going to be a lot of selling going on. When he sees a stock trading sideways for a while and the fundamental stays the same, he usually likes to enter as he knows that most people have gotten out that wanted to get out. If there is a little more stability in copper prices, this stock could easily get back to $1.70. Good risk/reward.

Copper’s move could be sustainable. But CS-T is a little too steady as it goes so not his first choice.