Markets

Analyst Actions: Capstone Mining Corp Down 4% as Q2 Analyzed at Credit Suisse

A generic image of chart
Credit: Shutterstock photo

"Capstone reported Q2 EPS of $0.07, versus our estimate of $0.05 and consensus estimate of $0.08. The EPS beat was driven by both better than expected revenues and costs."

"Cash costs for the period came in at $1.31/lb Cu, versus our estimate of $1.55/lb. Driven largely by higher costs at Cozamin, Capstone has increased its 2011 cost guidance to $1.45-$1.50/lb (from $1.30-$1.35). We estimate 2011 costs of $1.51/lb, improving to less than $1.40/lb thereafter."

Santo Domingo pre-feasibility study - worth the wait. "Capstone also released an updated study on Santo Domingo. Adjusting for metal price and exchange rate assumptions (apples to apples), the highlight of the study was an after-tax NAV (8%) of $1,092M, versus our previous estimate at 8% of $812M. After making adjustments to our model, our new NAV (100% basis, 8% dis. rate) is $1,036M. At the 9% dis. rate we use in our model and at our price deck, Capstone's 70% attributable share has declined only 6% to $606M."

"Despite the 6% decline in NAV, we view the PFS results as positive, since our new estimate continues to include a cost escalation of 15%, and our production estimates are conservative. Even with higher costs, our new LOM average cash cost estimate has declined to $0.07/lb (from $0.24), due to a strong iron by-product credit.

"Added clarity should help de-risk, and revalue the shares. With an updated PFS now published, we expect the new clarity will help remove some of the project uncertainty that we believe has weighed on the stock since the project's acquisition by Credit Suisse."

Valuation: "We continue to rate Capstone 'Outperform', with a C$5.00 target price. Our target price is based on an 80/20 weighting of 1.0x our NAVPS of $5.07 (previously $5.14) and a 2012 EV/EBITDA multiple of 5. Our 2011 Estimate is raised to $0.28 (from $0.26)."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Commodities

Latest Markets Videos

    MTNewswires

    Founded in 1999, MT Newswires (formerly known as Midnight Trader) is a leading provider of original source, multi-asset class, real-time, global financial news and information to most of the largest banks, brokerage firms and professional market data, trading & research applications in North America.

    Learn More