Capstone Mining (CS.TO) released its production results of 2015 earlier this year in January followed by the financial results in February and even though we are very pleased with the total production rate in the fourth quarter (wherein 26,000 tonnes of copper were produced, which is 28% of the total production in 2015), we are unsure about the company’s ability to generate a positive free cash flow going forward (Capstone had a negative free cash flow of $97M in 2015)
Capstone has been betting big time on the copper price when it acquired the Pinto Valley copper mine from BHP Billiton (BHP), but unfortunately the copper price only went south since Capstone announced the acquisition of this massive project. Yes, this acquisition catapulted the company to the league of mid-tiercopper producers (and it was particularly nice to see the Pinto Valley mine has been outperforming the expectations), but it comes with a certain price tag, and it’s a pity to see Capstone’s nice cash position has now been evaporated.
Capstone will need to figure things out again, but there’s no doubt that this company will be one of the huge winners should the copper price move back up to $2.75-3/lbs again.
Go to Capstone’s website
The author holds no position in Capstone Mining. Please read the disclaimer
