Capstone Copper’s Operational Hurdles Spark Analyst Forecast Revisions

Capstone Copper Corp. (TSX: CS) reported mixed results for Q1 2025, revealing both operational progress and challenges that have prompted analysts to reassess their forecasts. While adjusted EBITDA more than doubled to $179.9 million and copper production rose 28% year-over-year, persistent issues at key mines—such as Pinto Valley’s declining grades and Mantoverde’s power disruptions—have raised concerns about near-term profitability and production targets. Analysts are now revising their outlooks downward, signaling caution despite the company’s long-term growth pipeline.

The Operational Divide: Progress vs. Pitfalls

Capstone’s Q1 results highlight a stark contrast between its sulfide-driven successes and oxide-related struggles. Sulfide production surged 49% year-over-year at Mantoverde, while Mantos Blancos saw a 26% production increase, driven by higher throughput and cost efficiencies. This contributed to $4.36/lb copper prices—a 13% rise from Q1 2024—and a record $533.3 million in revenue.

However, two major operational hurdles emerged:
1. Pinto Valley’s Decline: Copper production at the Arizona mine fell 31% year-over-year, due to lower grades (0.28% vs. 0.36%), reduced recoveries (83.2% vs. 87.7%), and unplanned downtime. C1 cash costs surged to $3.84/lb, a 52% increase from 2024 levels.
2. Mantoverde’s Cathode Constraints: A Chilean power outage and planned maintenance cut cathode output by 30% year-over-year, while rising sulfuric acid prices (to $176/tonne) pushed cathode C1 costs to $4.81/lb, up from $3.82/lb in 2024.

These issues have led analysts to question whether Capstone can sustain its 220,000–255,000-tonne 2025 production guidance, particularly if oxide grades and acid costs remain problematic.

Analyst Revisions: Downward Adjustments Amid Uncertainty

While Capstone’s Q1 net loss of $(0.01) matched Q1 2024 results and adjusted EPS turned positive at $0.01, analysts are focusing on the operational risks rather than headline figures. Key revisions include:
- Lower Production Forecasts: Analysts at RBC Capital and CIBC have reduced 2025 production estimates by 5–7%, citing Pinto Valley’s underperformance and potential delays in the Mantoverde Optimized brownfield expansion (targeting 45,000 tpd by 2026).
- Cost Increases: C1 cash cost projections for 2025 have been raised to $2.45–2.60/lb, exceeding Capstone’s guidance of $2.20–2.50/lb, due to rising acid prices and maintenance costs.
- Delayed Growth Projects: The Santo Domingo copper-iron-gold project, now delayed to mid-2026, faces financing hurdles, reducing its near-term contribution to earnings.

Investment Implications: Navigating Near-Term Risks

Investors must weigh Capstone’s robust liquidity ($1.04 billion) and long-term projects against near-term execution risks. The Mantoverde Optimized expansion—with a $146 million price tag and potential to add 368,000 tonnes of copper—remains a key growth driver, but its success hinges on securing permits by mid-2025 and avoiding further disruptions.

Meanwhile, the cathode business faces a critical juncture. Analysts at Scotiabank note that if sulfuric acid prices remain elevated, Capstone may prioritize sulfide production over oxide-based output, reshaping its cost structure.

Conclusion: A Story of Two Mines

Capstone’s Q1 results paint a complex picture. While sulfide operations at Mantoverde and Mantos Blancos deliver strong margins and growth, oxide-based mines like Pinto Valley and Mantoverde’s cathode plant face significant headwinds. Analysts’ downward revisions reflect skepticism about Capstone’s ability to balance these dynamics in 2025.

The company’s liquidity and strategic initiatives—such as the $600 million senior note offering and cobalt recovery plans—provide a buffer. However, with Pinto Valley’s costs rising 52% and cathode production down 30%, investors should prepare for volatility.

For now, Capstone’s stock—a -8% decline year-to-date—trades at 3.8x EV/EBITDA, below its 5-year average of 5.2x, reflecting pessimism. Yet, if Mantoverde’s expansion is approved and oxide-related costs stabilize, the company could regain momentum. Until then, the path to outperformance remains fraught with operational potholes.