Commodities | Jul 02 2025
Industry rationalisation has made it more challenging to gain exposure to pure copper plays with recently listed Capstone offering growth for a reasonable valuation.
-Capstone offers a pure copper play for investors on a longer term horizon
-Management continues to invest for growth at a reasonable cost
-New CEO to address history of misses on guidance
-Analysts highlight relative discount vis-a-vis Sandfire Resources
By Danielle Ecuyer
Pure copper exposure is becoming harder to achieve
Copper, one of the most sought-after future-facing commodities, which has seen BHP Group acquire Oz Minerals in May 2023 and make an unsuccessful acquisition tilt at Anglo American in 2024.
While the copper price has been impacted by the same macro concerns arising from trade tariff uncertainty and slowing global growth in 2025, the longer-term picture looks anything but downbeat.
Citi is one of many experts with a bullish outlook on the metal due to existing mines struggling to maintain supply with a multi-year electrification demand-driven cycle across electric vehicles, renewables, and increasingly the impact of the AI investment megatrend on data centres development.
As explained by Macquarie, global supplies have been stymied by structural impediments from declining grades, a lack of new discoveries, and rising operating costs.
A brief overview of Capstone
Enter Capstone Copper ((CSC)), a Canadian mid-cap pure copper producer which has a primary listing on the Toronto Exchange and achieved a secondary listing on the ASX via Chess Depository Interests or CDIs, of 7.5% of its listed shares, on February 2, 2024, through a sell-down from its major shareholder of $543m in equity.
The company was formed in 2022 through the merger of Capstone Mining and Mantos Copper, holding four operating assets: Pinto Valley in Arizona, USA; Cozamin in Mexico; Mantos Blancos; and Mantoverde in Chile, plus a development project also in Chile, Santo Domingo.
As highlighted by Wilsons, Capstone is around the world's thirtieth largest global copper producer, with the capacity to move into the top fifteen over the next five years if it can meet its targets of expanding production to circa 400ktpa from almost 165ktpa in 2024.
The company's resource base is described as "massive" at some 14.3mt of contained copper via those four assets across Chile, the US, and Mexico, with upside optionality to grow ex-M&A through organic development of both brownfield and greenfield sites and lowering the cost curve through optimised production.
Wilsons expects Capstone can shift from being fortieth C1 cost quartile producer in 2024 at US$2.70/lb to the middle of the cost curve by 2030 at US$2/lb.
Defining Capstone's assets and growth plans
Breaking down the growth targets for Capstone, Macquarie expands on the capacity outlook from the company's greenfield development projects.
Mantoverde, an open-pit mine in Chile's Atacama, is 70% owned by Capstone.
Through the recently completed Mantoverde Development Project (MVDP), which initiated sulphide processing capabilities to the previously oxide-only operations, the Mantoverde Optimised Project will expand the mine and lift the sulphide concentrator's throughput to 45kt per day from 32kt per day at a low capital cost of -US$150m, underwriting a very low capital intensity of US$7500/t, Macquarie notes.
The expansion is currently awaiting an environmental permit which is expected to be granted by the end of July.
Mantoverde has already operated at a throughput of 45kt per day for a week at a time until mine ore was unable to keep pace. Morgans, the latest FNArena daily-monitored broker to initiate coverage on the stock. views the ramp-up as likely to come in ahead of schedule.
Mantos Blancos is guided to produce 49kt-59kt per annum of copper in 2025 and is an open-pit mine in the Antofagasta region of Chile.
The planned Phase II expansion aims at increasing mill sulphide capacity to 27kt per day (9.9mtpa) from 20kt per day (7.7mtpa) and to raise the cathode production from the underused oxide plant. Results from the feasibility study are expected at the end of 2025. Morgans has not incorporated any growth potential into forecasts as this project is in a study phase, but in principle the analyst is positive due to the scope to lift copper production by around 15kt-20ktpa at a low capital cost by using existing infrastructure.
In other brownfield plans, the Mantoverde Phase II of an additional 65ktpa is not included as a base case in Macquarie's forecasts and remains an option for a second line at Mantoverde for an additional 45kt per day line of 20.4mt per annum.
Santo Domingo is a fully permitted copper, iron-gold project and is a major project site for Capstone, which is expected to add around 110ktpa via a -US$2.3bn greenfield development of a 585mt 0.51% CuEq grade resource with a 65kt per day (23.7mtpa) mill. First copper is expected in 2028.
Capstone has pointed to a 30% sell-down at Santo Domingo, which, Macquarie estimates, could generate US$0.3bn.
The combination of Santo Domingo and Mantoverde Development Project can add around 190ktpa to 2030 copper production, with scope for the possibility of shared infrastructure as the projects are only 35km from each other.
Brownfield expansion of optimising Mantoverde Phase II with Mantos Blancos could add up to potentially circa 100kt per annum.
In terms of rationalising the asset portfolio, management has suggested it may sell non-core assets such as Cozamin, which represented around 11% of 2024 production.
For Pinto Valley, which is guided to produce 51kt-58kt per annum in 2025, the company has a study to consider the potential inclusion of around 1bn tonnes of indicated resource, which would increase the mine's life to 2050 from 2039 currently, with consolidation potential of BHP's Copper Cities project, some 10km from Pinto Valley.
A combination of cost and operating efficiencies across Mantos Blancos and Pinto Valley is expected to lower group operating costs in the near term.
Further out, a rise in Mantoverde production by around 50% in 2026/2027 and the start-up of Santo Domingo in 2029 will further lower operating costs.
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