Capstone Copper Delivers Strong Q1 on Record Revenue and Cost Discipline

Capstone Copper (TSX: CSPO) kicked off 2025 with a robust quarter, reporting adjusted earnings per share (EPS) of $0.01 and revenue of $533.3 million, marking a 56.9% year-over-year increase. The results highlight the company’s operational turnaround, driven by record copper production, cost efficiencies, and higher commodity prices. However, challenges such as rising input costs and geographic risks underscore the need for continued discipline.

Financial Performance: Growth Amid Operational Hurdles

Capstone’s Q1 2025 net loss of $6.8 million, or $(0.01) per share, narrowed slightly compared to the $4.8 million loss in Q1 2024. The adjusted EPS of $0.01 reflects a dramatic improvement from an adjusted net loss of $(0.01) in the prior year. This turnaround was fueled by:
- Revenue surge: Copper sales hit $533.3 million, driven by a 28% increase in copper production to 53,796 tonnes and a 13% rise in the realized copper price to $4.36/lb.
- Adjusted EBITDA doubling: To $179.9 million (vs. $80.1 million in Q1 2024), reflecting operational leverage from higher volumes and lower costs.
- Cost discipline: Consolidated C1 cash costs fell 10% to $2.59/lb, with Mantoverde’s sulfide operations achieving an industry-leading $1.53/lb.

Operational Strengths: Sulfide Production Dominates

The company’s focus on sulfide assets, particularly the Mantoverde sulfide concentrator, was a key driver of growth:
- Mantoverde’s record output: Sulfide production rose 138% year-over-year to 16,268 tonnes, with throughput hitting 34,294 tonnes per day (tpd) in March—exceeding its 32,000 tpd capacity.
- Mantos Blancos efficiency: Sulfide production increased 34% to 12,272 tonnes, aided by mill throughput of 19,141 tpd.
- Cathode challenges: Oxide-based cathode production fell 30% to 7,846 tonnes, pressured by lower grades and a nationwide Chilean power outage in February. Rising sulfuric acid prices (up 17% to $176/tonne) further strained margins, pushing cathode C1 costs to $4.64/lb.

Risks and Mitigation Strategies

Capstone faces several headwinds:
1. Geographic concentration: Over 90% of production comes from Chile, exposing it to risks like power outages and regulatory delays. The Mantoverde expansion’s permitting timeline will be critical.
2. Input cost pressures: Sulfuric acid prices are a wildcard for cathode economics, while Pinto Valley’s rising C1 costs ($3.84/lb) highlight the need for operational fixes.
3. Market volatility: While copper prices remain supportive ($4.36/lb in Q1), a downturn could strain margins if costs aren’t controlled.

The company is addressing these risks through:
- Cost-saving initiatives: By-product credits (e.g., gold from Mantoverde) reduced consolidated C1 costs by $0.22/lb.
- Strategic investments: The $146 million Mantoverde Optimized project aims to boost throughput to 45,000 tpd, extending mine life to 25 years.
- Liquidity: With $1.04 billion in available funds, Capstone has flexibility to fund growth and weather short-term hiccups.

Guidance and Growth Outlook

Capstone reaffirmed its 2025 production guidance of 220,000–255,000 tonnes of copper, with C1 cash costs targeting $2.20–$2.50/lb. Key catalysts include:
- Santo Domingo: A $2.3 billion iron-copper-gold project nearing a 2026 sanctioning decision, which could add 106,000 tonnes/year of copper.
- Cobalt opportunity: Plans for a cobalt recovery plant to extract up to 6,000 tonnes/year from tailings by 2026, leveraging low-cost synergies.

Conclusion: A Resilient Miner with Upside Potential

Capstone’s Q1 results underscore its transformation into a low-cost, high-margin sulfide producer, with Mantoverde and Mantos Blancos driving profitability. The company’s liquidity and project pipeline position it well to capitalize on the long-term copper demand from EVs and renewables. However, investors must monitor execution risks at Pinto Valley and the cathode business, as well as broader market conditions.

With adjusted EBITDA up 124% year-over-year, $1.04 billion in liquidity, and a roadmap to sustain growth, Capstone appears poised to deliver shareholder value. The stock’s 12-month forward P/E of 12.5x (assuming full-year EPS of $0.04) suggests reasonable valuation, but upside hinges on cost control and project execution. For investors seeking exposure to the copper cycle, Capstone’s fundamentals merit attention—provided they acknowledge the operational complexities inherent in mining at scale.