Capstone Mining Corp. (CS), owner of copper mines in Canada and Mexico, is seeking to acquire a producer of the metal in the Americas to boost annual output by as much as 100 million pounds (45,000 metric tons).
Capstone has about $500 million in cash, a debt-free balance sheet and cash flow from its two operating mines, Chief Executive Officer Darren Pylot said yesterday in an interview at Bloomberg’s Vancouver bureau. The company is looking for producing mines in the next three years that would add at least 40 million pounds of output or more.
“We’ve got three different levers to pull to be able to make an acquisition,” he said. “We would be doing it without using any of our equity or shares.”
Capstone, based in Vancouver, is expanding in copper as demand from China and other developing economies helped to push the price of the metal to a record in February. The company plans to produce an average of 200 million pounds of copper a year during the next decade, up from its 2011 forecast output of 80 million pounds, according Capstone’s website.
Companies with mines or development projects in the Americas that may fit Pylot’s acquisition criteria in the next three years include Baja Mining Corp. (BAJ), Mercator Minerals Ltd. (ML), Taseko Mines Ltd. (TKO), Copper Mountain Mining Corp. and Copper Fox Metals Inc. (CUU), said John Hughes, an analyst at Desjardins Securities Inc.
New Supply Source
“There really aren’t that many companies that fit,” Toronto-based Hughes said today in a telephone interview. “It shows just how challenged copper producers are to find and develop new sources of supply.”
Capstone also is looking for opportunities to acquire assets in partnership with Korea Resources Corp., Pylot said. The state-owned Korean company is Capstone’s largest shareholder, with an 11 percent stake, and is a 30 percent partner in Capstone’s proposed $1.2 billion Santo Domingo copper project in Chile.
With Santo Domingo and the Kutcho copper and zinc project in Canada moving toward development, Capstone isn’t interested in acquiring another unfinished mining project at this time, Pylot said.
“Any acquisitions that we would look at would be in the producing space,” he said. The company may be interested in buying development properties after 2014, when Capstone’s new mines in Canada and Chile are expected to start, he said.
Capstone produces copper at the Cozamin mine in Mexico’s Zacatecas state and the Minto mine in Canada’s Yukon Territory. Capstone produced 58.5 million pounds in the first nine months, meaning it must mine 21.5 million pounds to reach its full-year target.
“We are confident as a management team that we will produce at least 21.5 million pounds of copper, which would be another million pounds more than we produced in the previous quarter,” he said.
Capstone rose 2.8 percent to C$3.31 at 2:42 p.m. in Toronto. The shares have dropped 26 percent this year.
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