Copper Mountain Mining announces 4Q20 financial results

Highlights

• Record quarterly production in 4Q20 of 29.1 million lbs of copper equivalent (comprised of 23.1 million lbs of copper, 8959 oz of gold, and 144 934 oz of silver).
• FY20 production was 77.6 million lbs of copper, exceeding guidance of 70 – 75 million lbs.
• C1 cash cost in 4Q20 was US$1.43/lb copper produced, all-in sustaining cost (AISC) was US$1.58/lb copper and all-in cost (AIC) was US$1.82/lb copper.
• FY20 C1 cash cost was US$1.53/lb copper, AISC was US$1.69/copper, and AIC was US$1.90/lb, meeting the mid-point of improved and revised AIC guidance of US$1.80 to US$2/lb.
• Revenue for 4Q20 was CAN$106.1 million and for the full year was CAN$341.7 million.
• Earnings per share for 4Q20 was CAN$0.10 and for the full year was CAN$0.18.
• Cash flow from operations for 4Q20 was CAN$50.9 million and for the full year was CAN$121.6 million.
• Cash and cash equivalents at the end of 2020 was CAN$85.6 million, an increase of CAN$32 million from the end of the third quarter of 2020 and a CAN$53.4 million increase from 31 December 2019.
• In 4Q20, restarted the Ball Mill 3 Expansion Project to 45 000 tpd which is expected to be completed in 3Q21.
• In 4Q20, a new life of mine plan was announced for the Copper Mountain Mine that includes a further mill expansion to 65 000 tpd, demonstrating increased annual production, lower costs and a significantly higher net present value, when compared to the previous 2019 Technical Report.

“We continued to post another strong quarter with record quarterly production for copper, gold and silver,” commented Gil Clausen, Copper Mountain’s President and CEO. “We finished the year exceeding our annual production guidance and meeting our reduced AIC guidance. Our operating team did an exceptional job in 2020 navigating an uncertain and changing environment. We expect our low cost profile to remain in 2021 and for production to increase by up to 22% to the range of 85 to 95 million lbs of copper this year. Increased production will be driven by higher grades, as already experienced in 4Q20, and increased throughput and recovery following the commissioning of the 45 000 tpd mill expansion planned for completion in 3Q21. We remain focused on advancing our organic growth pipeline, which includes the further mill expansion to 65 000 tpd at the Copper Mountain Mine and the Eva Copper Project, while maximising cash flow to continue to build on our healthy cash position.”

Operating results

4Q20

In 4Q20, the Copper Mountain Mine produced a record 23.1 million lbs of copper, 8959 oz of gold, and 144 934 oz of silver. Average mill feed grade increased to 0.40% copper during the quarter, and 0.44% during the last two months, as compared to average feed grade of 0.31% copper in 4Q19. Mill feed grade increased through the quarter as the mill began to process higher grade Phase 3 ore. The higher-grade ore and improved recoveries were the primary reason for record production in 4Q20.

The mill processed a total of 3.4 million t of ore in 4Q20 as compared to 3.7 million t in 4Q19. Mill tonnage was reduced during the last two months of the year to adjust the mill operation to handle an approximate 40% increase in mill feed head grade. Copper recovery was 77.3% in 4Q20, as compared to copper recovery of 73.0% in 4Q19, and mill availability averaged 94.1% for 4Q20 as compared to 93.1% in 4Q19.

C1 cash cost per pound of copper produced, net of by-product credits, for 4Q20 decreased 31% to US$1.43 when compared to 4Q19. The decrease in cost per pound in 4Q20 was the result of increased production and higher by-product credits, driven by higher gold and silver prices and increased gold and silver production as compared to 4Q19.

AISC per pound of copper produced was US$1.58 in 4Q20, 30% lower than 4Q19. The low AISC carries forward from the low C1 cost per pound with addition of lower sustaining capital, lease and applicable administration expenditures of CAN$4.7 million in 4Q20 as compared to CAN$5.2 million in 4Q19.

AIC per pound of copper produced for 4Q20 improved by 21% to US$1.82 compared to 4Q19. The low AIC carries forward from the low AISC with the addition of CAN$7.2 million in deferred stripping and $nil of low-grade stockpile mining costs incurred in 4Q20 as compared to $nil of deferred stripping and CAN$0.8 million of low-grade stockpile costs in 4Q19.

The significant decrease in C1, AISC, and AIC recognised in 4Q20 as compared to past quarters was a result of the company’s strong copper production, cost savings initiatives and operating efficiencies at the Copper Mountain mine, supplemented by an increase in precious metals prices and production for 4Q20.

FY20

For FY20, Copper Mountain Mine produced 77.6 million lbs of copper, exceeding 2020 production guidance. Gold and silver production for 2020 was 29 227 oz of gold and 392 494 oz of silver. This compares to 72 million lbs of copper, 26 747 oz of gold, and 271 835 oz of silver produced in 2019. Production was higher in 2020 as a result of processing higher grade ore from Phase 3 in 4Q20.

During the year, the mine processed a total of 14.2 million t of ore at an average feed grade of 0.32% copper and with a copper recovery of 78%. Mill availability averaged 92.4% in 2020 as compared to 93.2% in 2019, the difference being attributable to the maintenance schedule differences between the periods. The new ball mill transformers and SAG mill screen installed in 2019 performed reliably during 2020.

C1 cash cost per pound of copper produced, net of by-product credits, in 2020 decreased by 20% to US$1.53 when compared to 2019. Cash costs have decreased significantly as a result of the revised operating plan announced in 2Q20 that reduced operating costs by re-sequencing short term production to lower cost mine phases. In addition, stronger precious metal prices experienced in 2020 that resulted in higher by-product credits contributed to lower C1 cash cost.

AISC per pound of copper produced in 2020 decreased by 18% to US$1.69 as compared to 2019, driven by the lower C1 cash cost per pound. AISC includes CAN$16.6 million in sustaining capital, lease and applicable administration expenditures, which compares to CAN$13.6 million for 2019.

AIC per pound of copper produce, for 2020 decreased 22% to US$1.90 as compared to 2019. This is a significant decrease from the prior year and demonstrates the ability for the company to adjust its operating plan to match market conditions to decrease total-all-in costs during the year, while remaining on track with the long-term development plan.

Financial results

4Q20

In 4Q20, revenue was CAN$106.1 million, net of pricing adjustments and treatment charges, compared to CAN$73.7 million in 4Q19. 4Q20 revenue is based on the sale of 18.7 million lbs of copper, 7253 oz of gold, and 96 509 oz of silver. This compares to 17.6 million lbs of copper, 6008 oz of gold and 76 847 oz of silver sold in 4Q19. As noted above, revenue increased significantly during the quarter as a result of increased sales and higher metal prices, including a positive mark to market and final adjustment on concentrate sales of CAN$11.9 million as compared to a positive mark to market and final adjustment of CAN$6.5 million for 4Q19, a differential of approximately CAN$5.4 million. 4Q20 revenue before the mark-to-market adjustment is CAN$94.2 million as compared to CAN$67.2 million for 4Q19.

Cost of sales in 4Q20 was CAN$58.8 million as compared to CAN$72.1 million for 4Q19. A substantial part of the decrease in cost of sales is a result of the company’s cost savings initiatives resulting from the revised operating plan which included utilizing less equipment. 4Q20 cost of sales did not include any mining costs being allocated to the low-grade stockpile and the company allocated CAN$8.4 million to deferred stripping. This is compared to 4Q19 cost of sales which was net of only CAN$0.9 million of deferred stripping and low-grade stockpile costs. The company reported net income of CAN$28.5 million in 4Q20, or CAN$0.10 on a per share basis, as compared to a net loss of CAN$35.7 million, or a loss of CAN$0.14 per share for 4Q19. The variance in the higher net income for 2020, as compared to 2019, was primarily a result of several items including:

• Significantly higher revenue as a result of higher realised copper, gold and silver prices of 25%, 26% and 42%, respectively, as compared to 4Q19.
• The inclusion of a non-cash unrealised foreign exchange gain of CAN$13.9 million in 4Q20 as compared to a non-cash unrealised foreign exchange gain of CAN$5.4 million in 4Q19, a differential of approximately CAN$8.4 million, which was primarily related to the company’s debt that is denominated in US dollars.
• 4Q19 included a one-time non-cash write-down of CAN$48.8 million on the carrying value of the low-grade stockpile. This write-down was the result of the increased reserves and mine life of the Copper Mountain mine which deferred the milling of the low-grade stockpile to 2038. There was no write-down in 4Q20.

On adjusted basis, the company recorded a net income of CAN$5.5 million in 4Q20, or CAN$0.03 on a per share basis, compared to CAN$1.3 million in 4Q19, or CAN$0.01 on a per share basis.

FY20

Revenue for the full year of 2020 was CAN$341.7 million, net of pricing adjustments and treatment charges, compared to CAN$288.5 million in 2019. 2020 revenue is based on the sale of 73.3 million lbs of copper, 26 137 oz of gold and 323 276 oz of silver. This compares to 71.9 million lbs of copper, 26 478 oz of gold and 254 541 oz of silver sold in the same period 2019. The increase in revenue is primarily the result of higher gold and silver prices during the period as well as a positive mark to market adjustment on concentrate sales of CAN$25.2 million as compared to CAN$8.5 million for 2019, a differential of approximately CAN$16.7 million. Mark to market adjustments are higher during periods of increasing copper prices and explains the increase in mark to market from the prior year.

Cost of sales for the full year of 2020 was CAN$237.1 million as compared to CAN$263.4 million for 2019. A substantial part of the decrease in cost of sales is a result of the company’s cost savings initiatives resulting from the revised operating plan which included utilising less equipment. Another contributing factor is lower deferred stripping and low-grade stockpile costs, which were CAN$21.3 million for 2020 and CAN$36.1 million for 2019, a difference of CAN$14.8 million.

The company reported net income of CAN$50.3 million in 2020 compared to a net loss of CAN$25.1 million in 2019. The variance in net income in 2020 was a result of several items including:

• Revenue was higher as a result of higher copper, gold and silver prices of 4%, 28.5% and 27.4%, respectively.
• Revenue included a higher positive mark to market adjustment from provisional pricing on concentrate sales of CAN$16.7 million , compared 2019, as discussed above.
• In 2019, the company recognised a one-time non-cash write-down of CAN$48.8 million on the carrying value of the low-grade stockpile. This write-down was the result of the increased reserves and mine life of the Copper Mountain mine which deferred the milling of the low-grade stockpile to 2038. There were no write-downs in 2020.

On adjusted basis, the company recorded a net income of CAN$20.6 million in 2020, or CAN$0.11 on a per share basis, compared to CAN$0.8 million, or CAN$0 on a per share basis, in 2019.

Project development update

Copper Mountain

Late in 2020, on the strength of stronger metal prices and an increasing cash balance, the company restarted the second and final stage of the Ball Mill 3 Expansion Project. The Ball Mill 3 Expansion Project is designed to increase mill throughput to 45 000 tpd from 40 000 tpd and improve copper recovery as a result of achieving a finer grind of ore. Demolition has been completed in the area where the third ball mill is to be installed and excavation work for the Ball Mill 3 foundations has commenced. The Ball Mill 3 Expansion Project is on track to complete commissioning by the end of 3Q21.

On 30 November 2020, the company announced a new life of mine plan for the Copper Mountain Mine, which included a proposed further mill expansion to 65 000 tpd. The new life of mine plan increased the Copper Mountain Mine’s after-tax net asset value (NPV) at an 8% discount rate to US$1 billion. Average annual production is expected to be approximately 106 million lbs of copper and 60 000 oz of gold at average C1 cash costs of US$1.19 per pound (over the first 10 years). The 65 000 tpd expansion builds upon the 45 000 tpd mill expansion currently underway.

Eva Copper Project

During 4Q20 the company advanced a project development alternative analysis for the Eva Copper Project for Board consideration. The company expects to provide guidance on the project development plan in 2Q21.

Outlook

The company expects production to increase up to the range of 85 to 95 million lbs of copper in 2021 as a result of higher grade. Similar to 2020, the company expects production to be stronger in 2H21 as a result of higher head grades and the commissioning of the Ball Mill 3 expansion project in 3Q21, which will improve recovery and increase throughput to 45 000 tpd.

The company expects AIC to remain low in 2021, estimating AIC to be between US$1.80 to US$2 per pound as a result of higher production and improved grade.

Read the article online at: https://www.globalminingreview.com/finance-business/19022021/copper-mountain-mining-announces-4q20-financial-results/