Capstone Mining (CS:TSX) CIBC rate with a “Outperform” rating

Capstone Mining (CS:TSX) CIBC rate with a "Outperform" rating

This analysis provides an overview of Capstone Mining’s Q4/23 operating results and its 2024 guidance, along with a price target calculation and key risks. Here’s a breakdown of the key points:

Operational Results:

  1. Q4/23 Performance:
    • Q4/23 copper production of 44kt Cu was below the analyst’s 49kt estimate but beat Street estimates.
    • Q4 results were the best of 2023, setting up a positive outlook for H1 production.
  2. H2/23 Performance:
    • Production in H2/23 of 85kt was within the company’s guidance (83kt-93kt).
    • H2/23 includes MVDP (nameplate) production and costs, which is considered a key milestone.
  3. 2024 Guidance:
    • Consolidated production guidance for 2024 is 5% below the analyst’s estimates, with costs 20% above expectations.
    • Cash costs are higher due to slower ramp-up at MVDP, Pinto Valley, and Cozamin, transitioning to cut-and-fill mining.

Key MVDP Milestones (Expected in 2024):

  1. First ore to crushing circuit (Complete Q4/23).
  2. First ore to grinding circuit (Q1/24E).
  3. First saleable concentrate (Q2/24E).
  4. Nameplate capacity and operating rates (Q3/24E).

Price Target Calculation:

  • CIBC has a  price target of C$7.75 is derived through a sum-of-parts analysis using a weighted average of P/SFCF and EV/EBITDA (40% each) and a mine-by-mine NAV (20% weight).
  • Target multiples for Capstone operating/project asset NAV, P/SFCF, and EV/EBITDA are 1.0x, 8.0x, and 6.0x, respectively.
  • The EV/EBITDA calculation assumes net debt of $800.4M.

Key Risks to Price Target:

  1. Unexpected slowdown in global economic growth, particularly in China, and its potential negative effects on copper prices.
  2. Operational execution risks.
  3. Execution of Pinto Valley optimization projects.
  4. Development risk at Chilean assets.
  5. Lack of further exploration success at the Cozamin mine.

Capstone Stock Analysis

Average Analyst Target Price:

The average analyst target price for Capstone Mining Corp is CAD 7.78 over the next 12 months.

Analyst Rating:

The average analyst rating is reported as “Strong Buy,” suggesting a positive outlook on the stock.

Stock Target Advisor’s Analysis:

Stock Target Advisor’s own analysis is “Neutral.”
The neutrality is based on 5 positive signals and 6 negative signals.
Recent Stock Performance:

At the last closing, Capstone Mining Corp’s stock price was CAD 6.71.
Over the past week, the stock price has changed by +10.18%.
Over the past month, the stock price has changed by +1.05%.
Over the last year, the stock price has changed by +6.85%.

Summary:
The average analyst target price and positive stock performance indicators suggest a bullish sentiment among analysts. However, Stock Target Advisor’s neutral analysis, influenced by a mix of positive and negative signals, introduces some caution. Investors may consider these factors along with their own research and risk tolerance when making investment decisions.

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