Copper Mountain Trims 2020 Plans as Coronavirus Ravages Market

- March 11th, 2020

The Canadian producer has pushed back capital expenditures and looks set to slow down on mining copper-rich parts of its Copper Mountain mine.

Canadian copper producer Copper Mountain Mining (TSX:CMMC,ASX:C6C) has announced it’s gone back to the drawing board for 2020, deferring capital expenditures and pushing its mining schedule for the year into 2021 in a bid to skip out on cratering copper values.

In a Tuesday (March 10) release, the company said that a revised mine plan and project schedule for the Copper Mountain mine in BC is necessary given the current market conditions.

“These actions allow the company to maintain solid cash flow margins at the mine and run sustainably in the current low copper price environment, without any sacrifice to the long term mine plan.”

 

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It added that saving higher-grade copper due to be mined in 2020 for 2021 “better matches” the company’s expectations of higher copper prices in the future.

“We are committed to protecting our cash flow and minimizing costs given the low and volatile copper price environment that we are currently operating in as a result of the coronavirus impact,” said Gil Clausen, Copper Mountain’s president and CEO. “We have revised our mine plan to protect and grow cash margin so that we are able to comfortably meet all our obligations, including debt service, while continuing with key projects.”

One of those key projects is a mill expansion, which is due to be delayed.

Clausen said that the company is dedicated to being “disciplined and orderly” during the unrest and uncertainty brought about by the spread of the coronavirus that causes COVID-19 and the associated economic impact.

“We will not sacrifice the future of our mine by high-grading and deferring stripping that builds a liability in the future. Our operation is well positioned with mining phases that can be readily re-sequenced without negatively impacting the intermediate and long term,” he said. “While the mine plan we have currently implemented is sustainable longer term at these low copper prices, we believe this market uncertainty is short term and fully anticipate the copper price to recover.”

Looking at numbers, the company has decided to cut its daily mining rate by 25 percent from the current 200,000 metric tons per day, down to between 120,000 and 160,000 metric tons per day for the remainder of the year.

For guidance, Copper Mountain has revised its copper equivalent production for 2020 down to between 86 million and 94 million pounds from the originally forecast 100 million to 113 million pounds.

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The copper price through 2020 has been on an unsteady downward trend thanks to COVID-19, which was classed as a pandemic by the World Health Organization as of Wednesday (March 11).

The red metal started the year at US$6,165 per metric ton on the London Metal Exchange and had fallen by over 9 percent, to US$5,597, by mid-March, effectively doing away with 2020 outlooks that were focused primarily on a lack of supply and trade war concerns — two issues that are old hat now that demand has fallen away.

COVID-19 has now spread to 118 territories around the world, with over 125,000 reported cases, 4,600 deaths and 67,000 recoveries.

While the spread of the virus has seemingly subsided in China, where it originated, in recent weeks attention has been turned to Italy; the entire country of 60 million people has been placed under quarantine.

The recent Prospectors & Developers Association of Canada convention in Toronto — the largest resources industry conference of its sort in the world — was hit by coronavirus fears on Tuesday, with reports that an attendee tested positive upon their return to Sudbury, Ontario.

In a statement, PDAC recommended that Ontario health authorities conduct an investigation of the individual’s whereabouts and contacts throughout their two day attendance of the conference.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

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