Name(XXX) XXX-XXXXemail @canaccord

Wendell Zerb, PGeol
1.604.643.7485
wendell.zerb@canaccordadams.com
Adam Melnyk
1.604.643.1655
adam.melnyk@canaccordadams.com
SPECULATIVE BUY
CUM : TSX-V : C$2.04
TARGET PRICE: C$3.05
Inside
Mining in British Columbia
Copper market Review and Metal
Price Forecast
Key Themes
Consolidation – Non Producing
Assets
Projects
Copper Mountain Project
Financial Analysis
Canaccord Adams Metal Price
Forecast
3
4
5
Copper Mountain Mining Corp. is a small cap Canadian mineral exploration and
development company. In December 2006, Copper Mountain purchased the inactive
Similco open pit copper mine in southern British Columbia and initiated a drill program
to upgrade and test the reliability of the reported historical resource. In total, the
company conducted 44,000 metres of exploration drilling with 163 drill holes in 2007
and anticipates completing a feasibility study in H1/08, which will be based on an
updated resource estimate. A recent NI 43-101 resource outlined a total in situ resource
of 3.68 billion pounds of copper equivalent at the property. A Preliminary Assessment,
completed in November 2007, outlined a 35,000 t/d operation, producing about 100
million pounds of copper per annum over a 15-year mine life.
9
For 2008, Copper Mountain has planned an aggressive exploration program of over
30,000 metres, including several deep exploration holes to investigate porphyry targets
identified in a Titan 24 IP geophysical survey conducted in 2007.
9
14
14
Valuation and Recommendation
18
Management
21
Investment Risks
Infrastructure drives potential – Initiating
coverage with a SPECULATIVE BUY and
C$3.05 target price
The company expects to have the project back in production by Q4/10.
14
Appendix
Copper Mountain Mining Corp.
6
Capital Structure
Comparative Analysis
Metals and Mining -- Exploration and Development
15
21
23
Our base valuation uses a long-term Cu price of US$1.75/lb. We estimate an after-tax NPV
(8%) for the Copper Mountain project of US$140.7 million. Our total NAV (8%) for Copper
Mountain is US$177 million, or US$5.53 per share. We are setting a 12-month target
price of C$3.05 (rounded) based on a 0.45x multiple of our 2008E NPV (8%). This implies
a rate of return of 49% from the current price of C$2.04/share. As the project advances to
bankable feasibility, we expect the risk profile of the Copper Mountain project to improve
and as such our valuation should move closer into line with our estimated NAV (8%).
We are initiating coverage on Copper Mountain with a SPECULATIVE BUY
recommendation and a 12-month target of C$3.05.
Canaccord Adams is the global capital markets group of Canaccord Capital Inc. (CCI : TSX|AIM)
The recommendations and opinions expressed in this Investment Research accurately reflect the Investment Analyst’s personal,
independent and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For important
information, please see the Important Disclosures section in the appendix of this document or visit
http://www.canaccordadams.com/research/Disclosure.htm.
14 March 2008
2008-057
Company statistics
Price chart
Recommendation:
12-month target:
Price:
52-week Range:
Average daily volume:
Shares outstanding (M):
Shares fully diluted (M):
Cash (M) (US$):
Debt (M):
President, CEO:
Market Capitalization (M):
Website:
SPECULATIVE BUY
C$3.05
C$2.04
$2.77-1.50
67,722
21.8
27.7
$4.5
$0.3
Jim O’Rourke
C$44.5
www.cumtn.com
Earnings summary
Net revenue US$(M)
Operating CFPS C$ (fd)
P/OP CFPS
Payable Cu (000 lbs.)
Total Cash Costs US$ per lb Cu
Copper price US$/lb
C$/US$
Company Description
2010E
$43,752
$0.34
6.00
14,803
$0.92
$2.80
0.95
2011E
$286,565
$2.30
0.89
110,535
$0.87
$2.50
0.93
Source: Company reports, Canaccord Adams estimates
Copper Mountain Mining Corp.
2012E
$217,653
$1.31
1.56
94,073
$0.99
$2.25
0.90
2013E
$204,809
$1.18
1.73
98,776
$0.93
$2.00
0.90
Copper Mountain Mining Corp. is a small cap Canadian
mineral exploration and development company, whose
primary asset is the inactive Similco open pit copper mine in
southern British Columbia.
14 March 2008
3
MINING IN BRITISH COLUMBIA
British Columbia ranks 19th overall (out of 68) in The Fraser Institute’s 2007/2008
annual mining survey, which is on par with Ontario, but still among the lowest-ranking
Canadian provinces. The survey, which seeks to assess how mineral endowments and
public policy factors such as taxation and regulation affect exploration investment, is
based on the polled opinions of executives and exploration managers from mining
companies operating worldwide. BC’s ranking is up from 30th in 2006/2007. In
particular, the survey highlighted First Nations issues, uncertainty over protected land
areas, and a strict (although clear and transparent) regulatory process as key deterrents
to mining development in BC.
The past-producing Similco operation, now owned by Copper Mountain, has a history of
mining dating back to the early 1920s. Newmont operated Similco from 1972 through
1988 before selling its interest to Cassiar Mining, which later became Princeton Mining.
Princeton operated until November 1996, when low copper prices forced the company to
shut down the mine. Total production from the company was 1.7 billion pounds of
copper, 8.4 million ounces of silver and 620,000 ounces of gold.
March 14, 2008
Copper Mountain Mining Corp.
4
COPPER MARKET REVIEW AND METAL PRICE
FORECAST
With global inventories tight, rising long-term price expectations, a lack of recent
exploration success, increasing Chinese demand, a heightened appetite for copper M&A
targets, and continued political uncertainty in Africa, we view the long-term
fundamentals for copper as strong.
Figure 1: Canaccord metals prices and FX estimates
Gold (US$/oz) US$/oz
Silver (US$/oz) US$/oz
Copper US$/lb) US$/lb
Zinc (US$/lb) US$/lb
US/CDN Exchange
US/AUS Exchange
US/EUR Exchange
REAL/US Exchange
Q4/07A % Change vs.
Q3/07A
Q4/06A Q1/08E
16.0%
28%
$925
12.2%
13% $16.50
(6.0%)
2%
$3.15
(17.8%)
(36%)
$1.10
6.6%
16%
$1.00
4.9%
15%
$0.88
5.4%
12%
$1.45
(6.9%)
(17%) R$ 1.80
Q4/06A Q3/07A Q4/07A
$614
$680
$789
$12.60 $12.69 $14.24
$3.21
$3.50
$3.29
$1.90
$1.47
$1.21
$0.88
$0.96
$1.02
$0.77
$0.85
$0.89
$1.29
$1.37
$1.45
R$ 2.16 R$ 1.92 R$ 1.79
Long
2006A
2007E
2008E
2009E
2010E
Term
$605
$697
$950
$825
$775
$700
$11.59 $13.39 $17.00 $15.00 $14.00 $12.50
$3.06
$3.24
$3.24
$3.00
$2.80
$1.75
$1.48
$1.48
$1.10
$1.05
$1.10
$0.75
$0.88
$0.93
$1.00
$0.98
$0.95
$0.90
$0.75
$0.84
$0.88
$0.85
$0.83
$0.80
$1.26
$1.37
$1.45
$1.40
$1.35
$1.30
R$ 2.17 R$ 1.95 R$ 1.80 R$ 1.85 R$ 1.90 R$ 2.00
Source: Canaccord Adams estimates
Figure 2: Copper inventories versus LME price (2005-current)
220000
4.50
200000
4.00
3.50
160000
140000
3.00
120000
2.50
100000
80000
Cu price US$/lb
LME Cu inventories (tonnes)
180000
2.00
60000
1.50
40000
Cu Inventories Tonnes
Jan-08
Feb-08
Oct-07
Nov-07
Jul-07
Sep-07
Jun-07
Apr-07
Jan-07
Mar-07
Oct-06
Dec-06
Jul-06
Sep-06
Jun-06
Mar-06
Apr-06
Jan-06
Dec-05
Nov-05
Sep-05
Jun-05
Aug-05
Mar-05
Jan-05
May-05
1.00
Feb-05
20000
Cu Spot Price
Source: Bloomberg
Copper Mountain Mining Corp.
14 March 2008
5
KEY THEMES
Rising long-term copper price expectations
It has been over four years since the spot price of copper began its ascent to its current
$3.00/lb plus levels. With the spot price now pushing towards the $4.00/lb mark, it is
hard to imagine that copper will return to the historical sub-$1.00/lb levels. In line with
this rise in the copper price, the long-term copper price expectations used by both sellside analysts and corporate executives to evaluate projects have also crept materially
higher in recent periods. We believe that the historical $0.90/lb long-term copper price
assumption has moved to $1.75/lb on average. As a result, projects once considered
marginal due to a variety of factors (low grade, high acid consumption, poor
infrastructure, etc.) are often now considered economic endeavours. This is in part due
to the following realities: depleting mine resources, slow permitting for new mines,
lower-grade Cu assets, high capital intensity, production shortfalls and strong demand
growth (especially in Asia).
Lack of industry exploration success
Despite the massive amount of capital invested by the industry in exploration this cycle,
there have been surprisingly few discoveries of size. Given the dearth of recent
discoveries and few mega projects on the horizon, a large proportion of required new
supply will have to come from previously discovered properties. However, despite the
significant technological advances introduced to the industry in recent years, discovering
a new resource has probably never been more challenging.
Merger and acquisition activity continuing
Merger and acquisition activity has been feverish in the metals complex during the past
three years, with the Canadian senior producers largely removed from the landscape by
larger foreign buyers. In the current metal price environment, many producers are flush
with cash and, in many cases, have limited internal growth opportunities. Faced with the
prospect of escalating capital costs, permitting issues and development delays, producers
have been very motivated to pay up for producing assets. As well, a new trend is also
emerging: Chinese interests have recently acquired several notable copper developers in
an effort on the part of China to become more self-sufficient in feeding its ferocious
internal demand. We anticipate M&A activity in the sector will continue and be a driving
force in the global copper marketplace. We discuss consolidation in the copper industry
in more detail later in this report.
Canaccord Adams’ copper market balance
We reviewed our copper market balance model in late 2007. We expect the global
refined copper market to be in modest surplus of 41,000 tonnes in 2008 and 162,000
tonnes in 2009 and to remain in modest surplus through 2011. However, the market
could easily remain in deficit if supply-side disruptions continue at the current rate or if
lower treatment charges force smelter closures, such that concentrate stockpiles rebuild
at the expense of refined copper. For example, if we were to double our forecast of
supply-side disruptions to 4% of global production, we would be forecasting a 257,000tonne deficit for 2008. We are forecasting global mine production growth of 7.4% in
2008 and 6.8% in 2009 and global consumption growth of 4.4% in 2008 and 5.1% in
2009, following a robust 4.9% in 2007. A global, or even a localized US, recession would
clearly challenge these forecasts.
March 14, 2008
Copper Mountain Mining Corp.
6
CONSOLIDATION – NON-PRODUCING ASSETS
The number of takeover options in the mid-cap through large-cap base metal producers
is shrinking as a result of the recent proliferation of merger and acquisition activity over
the last three years. Furthermore, some of the larger, more advanced base metal assets
controlled by junior companies have been the subject of takeover or partial acquisition
by large Cu miners or refiners. It is these advanced non-producing Cu assets that we
believe will continue to draw the interest of the producers, especially as major and midcap mining companies’ resources deplete and balance sheets grow.
Recent acquisitions of undeveloped Cu projects suggest major base metal producers are
being more aggressive in order to secure base metal assets. This recent spree of
takeovers involving developing Cu projects suggests to us there is a sense of urgency
among the producers to gain control of available strategic development assets. In our
existing universe of developing Cu companies, we believe the top candidates to attract a
takeover offer include: Corriente Resources Inc. (CTQ : TSX : C$5.05 | SPECULATIVE
BUY), Chariot Resources Limited (CHD : TSX : C$0.93 | SPECULATIVE BUY) and Global
Copper (GLQ : C$9.93 | SPECULATIVE BUY). Although we believe Copper Mountain’s
management intends to take the Copper Mountain project to production, the possibility
exists for an established mid-cap producer to show interest in acquiring the asset.
Figure 3: Non-producers’ acquisitions
May-05
Mar-06
Apr-06
May-06
Aug-06
Acquirer
Inmet Mining
Pan Pacific Copper
Antofagasta PLC
Glamis Gold
First Quantum
Target Company
MK Resources
Regalito Copper
Tethyan Copper
Western Silver
Adastra
Feb-07
Zijin Consortium
Mar-07
Apr-07
May-07
Jul-07
Aug-07
Sep-07
Imperial Metals
Anglo Amercian
Teck Cominco
Anglo American
Chinalco
Yamana
Monterrico Metals
PLC
bcMetals
Peru Government
NovaGold
Northern Dynasty
Peru Copper
Northern Orion
Jan-08
Jan-08
Jinchuan Group.
Jiangxi Copper &
China Minmetals
Tyler Resources
Northern Peru
Copper
Main Project
Las Cruces
Regalito
Reko Diq
Penasquito
Kingamyambo/
Musonoi
Rio Blanco
Red Chris
Michiquillay
50% Galore Creek
50% of Pebble
Toromocho
Agua Rica/Baja
Alumbrera
Bahuerachi
El Galeno
Approx Cu
eq lbs (B)
2.3
7.2
35.9
37.7
7.8
Acquisition
cost per in
situ Cu eq lb
(US cents)
4.5
1.9
0.5
3.2
3.1
Approx.Cu
price at time
of acquisition
(US$/lb)
1.50
2.30
2.90
3.60
3.50
$188
20.0
1.0
2.60
$67
$430
$478
$1,425
$840
$2,052
5.4
10
10.7
29.5
30.0
23.3
1.2
4.0
4.5
4.8
2.8
5.3
2.90
3.50
3.50
3.60
3.40
3.50
$214
$455
7.1
14.8
3.0
3.1
3.20
3.20
Approximate
takeover
price US$ (M)
$105
$137
$190
$1,200
$240
Average
2.8
Source: Canaccord Adams
Copper Mountain Mining Corp.
•
In May 2005, Inmet Mining Corporation (IMN : TSX : C$82.61 | HOLD) purchased
70% of the La Cruces copper project in Spain from MK Resources. Inmet paid (issued
5.6 million shares) about 4.5 cents US/lb Cu, based on proven and probable reserves
of 15.97 Mt grading 6.62% Cu.
•
In March 2006, Pan Pacific Copper Company (a joint venture between Nippon
Mining & Metals Company (66%) and Mitsui Mining & Smelting Company (34%))
purchased all of the outstanding shares of Regalito Copper Corp. in an all-cash deal
14 March 2008
7
valued at US$137 million. The project essentially sold for about 1.9 cents US/lb Cu
using the global resource or 3.0 cents US/lb using the M&I resource.
14 March 2008
•
In April 2006, Antofagasta PLC and Barrick Gold Corp. (ABX : NYSE : US$50.64 |
ABX : TSX | HOLD) acquired Tethyan Copper Company Ltd. for about $190 million.
Tethyan’s Reko Diq hosts about 2.4 billion tonnes grading 0.5% Cu and 0.27 g/t Au.
Antofagasta paid about 0.5 cents US/lb Cu eq (all categories).
•
In May 2006, Glamis Gold Ltd. purchased Western Silver for about US$1.2 billion. At
the time, the Penasquito project hosted M&I resources of 870 million tonnes grading
0.45 g/t Au, 29 g/t Ag, 0.32% Pb, and 0.71% Zn. For what it is worth, Glamis paid
3.2 cents US/lb Cu eq.
•
In August 2006, First Quantum Minerals Ltd. (FM : TSX : C$86.51 | BUY) purchased
Adastra Minerals for C$275 million. Based on about 7.7 billion Cu eq pounds, First
Quantum paid about 3.1 cents US/lb.
•
In February 2007, Zijin Consortium purchased Monterrico Metals and its Rio Blanco
asset for a price equating to US$188 million. Based on about 20.0 billion Cu eq
pounds, Zijin paid about 1.0 cents US/lb.
•
In March 2007, Imperial Metals Corporation successfully fended off Taseko Mines
Ltd. in an acquisition battle for bcMetals Corp. and its Red Chris Cu asset. Imperial
acquired bcMetals for C$65 million or about 1.2 cents US/lb of Cu eq based on the
global in situ resource (5.39 billion pounds).
•
In April 2007, Anglo American Corporation was awarded the concession to develop
the Michiquillay copper polymetallic deposit in Peru, containing approximately 10
billion pounds of copper equivalent. Anglo is paying the Peruvian government some
US$430 million staged over the first five years of the project for the opportunity. The
option price equates to about 4.0 cents US/lb Cu eq.
•
In May 2007, Teck Cominco Ltd. (TCK.B : TSX : C$42.87 | BUY) acquired a 50%
interest in NovaGold’s 10.7 billion pound copper equivalent Galore Creek project for
US$478 million, or 4.5 cents US/lb Cu eq. In November 2007, due to rising capital
costs, project development at Galore Creek was suspended.
•
In July 2007, Northern Dynasty Minerals Ltd. and Anglo American established a
50:50 partnership to engineer, permit, construct and operate the 59 billion pound
Cu eq Pebble project. Anglo must fund all project expenditures until it has invested
$1.425 billion in the project, after which expenditures will be split 50:50.
•
In August 2007, Aluminum Corp. of China (Chinalco) acquired Peru Copper and its
Toromocho project for a price tag of $840 million, or 2.8 cents US/lb Cu eq.
•
In September 2007, Yamana Gold Inc. (AUY : NYSE : US$18.28 | YRI : TSX | BUY)
acquired Northern Orion and its 23.3 billion pounds of Cu eq for US$2.05 billion, or
5.3 cents US/lb Cu eq.
•
In January 2008 Canada Jinchuan Resources Ltd. moved to acquire Tyler Resources
and its 14.8 billion pound Cu eq Bahuerachi project for $214 million, or 3.0 cents
US/lb Cu eq.
Copper Mountain Mining Corp.
8
•
Also in January 2008, Northern Peru Copper was taken over by Chinese state-owned
China Minmetals Corp. and Jiangxi Copper Co., a publicly listed Chinese metal
producer, for $455 million, equating to 3.1 cents US/lb Cu eq.
We believe the base metal sector will continue to consolidate and, with the improved
balance sheets of many of the major mining companies, there is new potential for juniors
with quality advanced copper projects to attract interest from major base metal
producers. This is compounded by depleting global reserves and the need to replenish
them. Brook Hunt forecasts that average copper production growth, currently increasing
by approximately 3% per annum, will turn negative by 2011 as production is lost to mine
closures and grade attrition, while global demand will grow at an average annual rate of
3.7% until 2020. This would create an implied global shortfall in mine output of
approximately 0.4 million tonnes per annum in 2012, rising to 3.6 million tonnes per
annum in 2014 and 10.1 million tonnes per annum by 2020. To overcome the shortfall,
additional supply needs to come from known probable resources or new discoveries that
can be developed into mines.
We believe acquisitions over the next three to five years will be driven by majors looking
for companies with large-scale projects that have above-average economic potential.
Smaller-scale producers will be under pressure to consolidate with their peers in order
to reach thresholds that will improve market multiples on cash flow. We believe that,
along with other criteria (growth profile, median cash costs), annual copper production
of at least 125 million pounds per year is necessary to attract the multiples afforded to
mid-cap copper producers.
Copper Mountain Mining Corp.
14 March 2008
9
PROJECTS
COPPER MOUNTAIN PROJECT (100%)
The Copper Mountain project, located 15 kilometres southwest of Princeton, BC, and
approximately 280 kilometres east of Vancouver, consists of 18,000 acres of mining
claims. Copper Mountain Mining Corp. acquired the property in December 2006 by
purchasing the Similco Mines Ltd., which owned 100% of the property. Open pit mining on
the property dates back to 1968. The mine closed down in November of 1996 due to a lack
of low strip ratio reserves and rising production costs. In terms of infrastructure, the
property has paved road access, a water licence capable of supporting an operation of up
to 50,000 t/d, and an existing 138 Kv power line in place.
Copper Mountain retained Giroux Consultants Ltd. to conduct a NI 43-101 compliant
resource estimate for the project, based on more than 4,400 historical boreholes, totalling
more than 400,000 metres, and an additional 84 boreholes the company drilled in 2007.
The report, released in September 2007, specifies the following resource:
Figure 4: Copper Mountain project resources
Cut-off
%Cu
0.15
0.20
0.25
0.30
Measured Plus Indicated Resource
Tons
Contained
(st x 000)
Grade
Copper (lbs)
318,000
0.31
1,990,700,000
227,500
0.37
1,679,000,000
163,100
0.43
1,389,600,000
118,600
0.48
1,145,700,000
Tons
(st x 000)
341,600
197,200
113,600
69,900
Inferred Resource
Grade
0.25
0.31
0.37
0.43
Contained
Copper (lbs)
1,701,200,000
1,202,900,000
833,800,000
595,500,000
Source: Copper Mountain Mining Corp.
The company will also receive gold and silver credits at Copper Mountain. However, since
historical boreholes were not assayed for precious metals, the resource estimate does not
include gold and silver. Historically, gold and silver mined at Copper Mountain was 12% of
the value of the copper mined, with gold grading at 0.16 g/t and silver 3.7 g/t. Based on
preliminary estimates, the company expects to mine 37,800 ounces of gold and 878,000
ounces of silver per annum at Copper Mountain.
Subsequently, Copper Mountain commissioned Merit Consultants International Inc. (Merit)
to conduct a Preliminary Assessment (PA) for the project using this updated resource. The
PA was released in November 2007. Using a long-term copper price of US$1.80/lb, Merit
concluded that the project has a pre-tax NPV (5%) of $406 million with an IRR of 26%.
Other highlights of the PA include:
14 March 2008
•
a life-of-mine (LOM) strip ratio of 1.5:1;
•
35,000 t/d of mill feed;
•
Annual production of more than 100 million pounds of Cu;
•
15-year mine life;
•
copper recovery of 87%;
•
capital costs of $366 million;
•
LOM operating costs of US$1.00/lb Cu net of Au and Ag credits; and
•
a payback period of 2.7 years.
Copper Mountain Mining Corp.
10
In December 2007, the company retained Hatch Ltd. to conduct a feasibility study for the
Copper Mountain project. This is expected to be completed in early Q2/08 and will include
an updated resource based on 2007 drilling results. While this updated resource, expected
in Q1/08, is not expected to greatly expand the project’s global resource, Copper Mountain
anticipates Inferred resources moving to the Measured & Indicated class. The company has
purposed to excavate a “superpit”, encompassing and expanding three smaller open pits
which were historically mined at the project and has indicated its intention to have the
project in production by Q4/2010.
Copper Mountain has an aggressive exploration program planned for 2008 of over 30,000
metres of drilling, which includes several deep exploration holes to investigate porphyry
targets identified at depth by a Titan 24 Geophysical survey. To date, this drilling program
has returned good assay results in the area north of historical Pit 1 and west of historical
Pit 2, with intercepts grading as high as 1.05 % Cu over 110 metres released in early
March. The company believes it may have intercepted a fault offset of the high-grade
mineralized trend which was historically mined underground on the property at >1% Cu.
Although these drilling results are positive, due to their wide spacing it is unlikely they will
be included as resources in either the upcoming resource update or the feasibility study.
The company has indicated its intention to conduct further exploration in this area in order
to increase the confidence of these preliminary results. Regardless, we believe the Titan 24
IP survey has outlined at least five high-profile targets that could represent new zones of
copper mineralization on the property. Successful identification of new copper zones could
dramatically improve the current scope of the project.
The Copper Mountain project is an alkalic porphyry copper-gold deposit and is part of the
north-south trending Quesnellia Mesozoic tectonostratigraphic terrane. It is composed of a
volcanic arc overlain by sediments. Mineralization at Copper Mountain consists of
structurally controlled, multi-directional veins and vein stockworks, hosted within the
Nicola group volcanic rocks. Ore minerals are bornite, chalcocite and chalcopyrite, with the
gangue formed primarily by pyrite and magnetite.
Copper Mountain Mining Corp.
14 March 2008
11
Figure 5: Location map
I
Source: www.princetonbc.info
14 March 2008
Copper Mountain Mining Corp.
12
Figure 6: Drillhole plan
Source: Copper Mountain Mining Corp.
Copper Mountain Mining Corp.
14 March 2008
13
Figure 7: Titan 24 geophysics
Source: www.cumtn.com
Figure 8: Aerial view of Copper Mountain property
Source: www.cumtn.com
14 March 2008
Copper Mountain Mining Corp.
14
FINANCIAL ANALYSIS
CANACCORD ADAMS METAL PRICE FORECAST
Figure 9: Metals prices and FX estimates
Gold (US$/oz) US$/oz
Silver (US$/oz) US$/oz
Copper US$/lb) US$/lb
Zinc (US$/lb) US$/lb
US/CDN Exchange
US/AUS Exchange
US/EUR Exchange
REAL/US Exchange
Q4/06A Q3/07A Q4/07A
$614
$680
$789
$12.60 $12.69 $14.24
$3.21
$3.50
$3.29
$1.90
$1.47
$1.21
$0.88
$0.96
$1.02
$0.77
$0.85
$0.89
$1.29
$1.37
$1.45
R$2.16 R$1.92 R$1.79
Q4/07A % Change vs.
Q3/07A
Q4/06A Q1/08E
16.0%
28%
$925
12.2%
13% $16.50
(6.0%)
2%
$3.15
(17.8%)
(36%)
$1.10
6.6%
16%
$1.00
4.9%
15%
$0.88
5.4%
12%
$1.45
(6.9%)
(17%) R$1.80
Long
2006A 2007E 2008E 2009E 2010E
Term
$605
$697
$950
$825
$775
$700
$11.59 $13.39 $17.00 $15.00 $14.00 $12.50
$3.06
$3.24
$3.24
$3.00
$2.80
$1.75
$1.48
$1.48
$1.10
$1.05
$1.10
$0.75
$0.88
$0.93
$1.00
$0.98
$0.95
$0.90
$0.75
$0.84
$0.88
$0.85
$0.83
$0.80
$1.26
$1.37
$1.45
$1.40
$1.35
$1.30
R$2.17 R$1.95 R$1.80 R$1.85 R$1.90 R$2.00
Source: Canaccord Adams estimates
CAPITAL STRUCTURE
Copper Mountain has approximately 21.8 million shares issued and 27.7 million shares
fully diluted. At its current price of C$2.04 the market capitalization is estimated at
approximately C$44.5 million. Cash on hand is approximately $4.5 million and longterm debt is $0.3 million.
Figure 10: Capital structure
Capital
Structure
Shares O/S
Options
Warrants
Other
Fully Diluted
M
21.8
2.6
3.4
Nil
27.7
M
2.6
Options
Price
(avg) $
1.17
Exp
2012
M
1.0
2.0
0.4
Warrants
Price
$
1.10
2.00
1.10
Exp
Dec/08
Dec/08
Feb-Mar/09
Source: Company reports
Copper Mountain Mining Corp.
14 March 2008
15
COMPARATIVE ANALYSIS
Copper in situ
Our copper database relates attributable in situ copper equivalent pounds in National
Instrument 43-101 resource categories (Measured, Indicated and Inferred) to a
company’s enterprise value (EV: market capitalization minus cash plus long-term debt).
In compiling our database, we attempted to use a company’s base-case cut-off or chose a
cut-off grade that most fairly represented the company within the entire group.
Our long-term pricing projection is based on the following: US$1.75/lb Cu, US$0.75/lb
Zn, US$10.0/lb Co, US$700/oz Au, US$12.50/oz Ag and US$12.00/lb Mo. All metals are
equally weighted except for zinc which we grossed down 0.8 weighting to account for
typically lower netbacks from smelters.
For comparative purposes we have tabled a database of companies with copper projects
that are at a stage of advanced exploration through to pre-development. Our intention is
to comparatively value Copper Mountain’s 100% interest in the Copper Mountain project
with its peers based on an enterprise value (EV) to in-ground attributable Cu equivalent
lbs. basis. In this table of comparables the average EV /attributable Cu equivalent lbs
averages 5.54 cents Cdn. As projects advance to production we expect EV cents
Cdn/attributable Cu equivalent lb to increase.
Copper Mountain is currently being valued on an EV of 1.05 cents Cdn/attributable Cu
equivalent lb, among the lowest values in the group and below the average of 5.48 cents
Cdn/attributable Cu equivalent lb. The deposit tonnage and grade envelope (3.7 billion Cu
Eq lbs; 0.44% Cu Eq) is below the group average. This, combined with the relatively early
stage of project development (preliminary economics released November 2007), discounts
the project relative to its comparable peers. However, we would consider the in situ value
attributed to Copper Mountain to be low, given the existing infrastructure in place and the
project’s location in BC. At an arbitrary value of 4 cents Cdn per lb Cu Eq, Copper
Mountain’s 3,682 million pounds of Cu Eq would equate to a value of C$147.3 million.
14 March 2008
Copper Mountain Mining Corp.
16
Figure 11: Copper database – Enterprise value and related data – Subset non-producers
Company
Los Andes Copper Ltd
Abacus Minerals & Expl Cp
Copper Mountain Mining Corp
Corriente Res Inc
Stingray Copper Incorporated
Redhawk Resources Inc
Nevada Copper Corp
Northern Dynasty Minerals Ltd
Panoro Minerals Ltd
Inca Pacific Resources Inc
Global Copper Corp
Candente Resource Corp
Northern Peru Copper Corp
Continental Minerals Cp
Terrane Metals Corp
New Gold Inc
Chariot Resources Ltd
Ivanhoe Mines Limited
Novagold Res
Arizona Star Res Corp
Metallica Resources Inc
Antares Minerals Inc
Centenario Copper Corp
Equinox Minerals Limited
Aura Minerals Inc
Arithmetic Average
Symbol
: Exch.
LA : TSX-V
AME : TSX-V
CUM : TSX-V
CTQ : TSX
SRY : TSX
RDK : TSX-V
NCU : TSX
NDM : TSX
PML : TSX-V
IPR : TSX-V
GLQ : TSX
DNT : TSX
NOC : TSX
KMK : TSX-V
TRX : TSX
NGD : TSX
CHD : TSX
IVN : TSX
NG : TSX
AZS : TSX-V
MR : TSX
ANM : TSX-V
CCT : TSX
EQN : TSX
ORA : TSX
Price C$
Mar 12/08
$0.56
$0.34
$2.04
$5.05
$0.79
$0.51
$3.25
$10.93
$0.55
$1.64
$9.93
$1.76
$13.70
$1.38
$0.48
$7.70
$0.93
$11.65
$9.84
$17.93
$5.35
$3.80
$5.86
$5.47
$1.28
O/S
Shares
M
36.5
106.5
21.8
74.9
58.7
68.2
36.2
92.0
83.7
36.4
32.7
70.3
33.0
120.8
353.2
37.0
304.7
375.1
104.6
43.0
92.5
54.7
40.9
564.3
520.8
Mkt
Cap.Basic
C$M
20.4
36.2
44.5
378.4
46.4
34.8
117.5
1005.6
46.0
59.7
324.7
123.7
452.1
166.7
169.5
284.5
283.3
4369.9
1029.7
770.6
494.9
207.8
239.9
3086.8
666.6
EV.
C$M
8.9
19.6
38.6
280.7
22.4
32.8
112.6
969.7
39.0
54.5
304.7
112.2
440.1
142.4
151.0
123.2
259.8
4272.0
903.0
758.6
478.1
165.8
173.7
3101.9
570.6
$541.4
Attri Cu
M lbs
2,881
1,843
2,883
23,303
1,733
2,020
7,917
31,726
1,709
1,884
9,599
4,299
10,568
2,420
1,958
1,645
4,982
60,833
7,496
3,815
2,901
1,688
1,503
13,844
1,623
8,283
Attri Cu
eq M lbs
3,517
2,420
3,682
25,582
1,733
2,311
7,917
59,070
2,266
2,746
12,645
4,299
14,837
4,734
4,182
2,427
4,982
71,785
14,557
9,594
5,618
1,688
1,672
15,079
1,896
11,250
EV cents
Cdn/Attrib
Cu eq lbs
0.25
0.81
1.05
1.10
1.29
1.42
1.42
1.64
1.72
1.98
2.41
2.61
2.97
3.01
3.61
5.08
5.22
5.95
6.20
7.91
8.51
9.82
10.39
20.57
30.10
5.48
Average
Cu eq
Grade
%
0.59
0.45
0.44
0.67
0.33
0.87
0.51
0.82
0.90
1.08
0.58
0.50
0.67
0.82
0.45
1.50
0.68
1.36
0.70
0.68
0.70
0.49
0.69
0.76
0.65
0.72
Source: Thomson ONE, Canaccord Adams
Copper Mountain Mining Corp.
14 March 2008
17
Figure 12: Copper subset – Non-producers*
Total Attributable Cu Eq lbs. and EV cents Cdn/M lbs of Attributable Cu Eq
35.00
30.10
80,000
70,000
EV cents Cdn/M lbs Cu Eq
25.00
20.57
50,000
20.00
40,000
Total Attri Cu Eq lbs.
10.39
8.51
7.91
6.20
5.95
10.00
T-ORA
T-CCT
T-EQN
T-MR
V-ANM
T-AZS
T-NG
5.00
T-IVN
5.08
5.22
T-CHD
3.61
V-TRX
2.97
3.01
V-KMK
T-NOC
2.41
2.61
T-DNT
T-GLQ
1.72
1.98
V-IPR
V-PML
1.64
V-NDM
1.42
1.42
V-RDK
T-NCU
1.10
1.29
T-SRY
T-CTQ
0.81
V-CUM
0.25
V-LA
0
V-AME
10,000
1.05
20,000
9.82
15.00
30,000
T-NGD
Total Attrib. Cu Eq M lbs
60,000
30.00
0.00
EV cents Cdn/M lbs Attri Cu Eq.
*Exploration through to early-stage development (greater than 12 months from production).
Source: Thomson ONE, Company reports, Canaccord Adams
Net asset value
Copper Mountain is currently trading at a 0.37x multiple to its 8% NAV per share. As the
project advances and project financing and financial risks improve, we expect the NAV
multiple to increase in line with producers, which commonly trade between 0.70 and
1.2x NAV. In the comparatives table following, numbers for shares outstanding and
market capitalization are based on our 12-month forward looking models.
Figure 13: NAV comparables
Company
Chariot Resources Ltd
Corriente Res Inc
Copper Mountain Min. Corp
Global Copper Corp
Northern Peru Copper Corp
Arithmetic Average
Sym/Exch
T-CHD
T-CTQ
V-CUM
T-GLQ
T-NOC
Price $C
12-Mar-08
$0.93
$5.05
$2.04
$9.93
$13.70
o/s
sh.
M
304.7
74.9
21.8
32.7
33.0
Mkt
Cap.Basic
C$M
283.3
378.4
44.5
324.7
452.1
NAV/sh
US$1.75/lb
Cu
US$
$1.99
$9.44
$5.53
$24.88
$43.26
Multiple
to NAV
0.47x
0.54x
0.37x
0.40x
0.32x
0.42x
NAV
US$ (000)
$600,296
$750,105
$177,057
$870,808
$1,372,662
Est payable
annual Cu
Prod lbs 1
year from
start up
(000)
224,547
679,289
110,535
349,941
433,517
LOM
Cash Op.
Costs/lb
Cu
US$
$0.73
$0.72
$0.96
$0.68
$0.51
0.72
Est prod start
H2/10
H1/10;H2/13
H2/10
H2/13
H2/10
* Includes Mirador and the Panantza/ San Carlos assets
Source: Canaccord Adams
14 March 2008
Copper Mountain Mining Corp.
18
VALUATION AND RECOMMENDATION
Our base valuation uses a long-term Cu price of US$1.75/lb. We estimate an after-tax
NPV (8%) for the Copper Mountain project of US$140.7 million. Our total NAV (8%) for
Copper Mountain Mining is US$177 million, or US$5.53/share. We are setting a 12month target price of C$3.05 (rounded) based on a 0.45x multiple on our 2008E NPV
(8%). This implies a potential rate of return of 50% from the current price of
C$2.04/share. As the project advances to bankable feasibility, we expect the risk profile
for the Copper Mountain project to improve and as such our valuation should move
closer inline to our estimated NAV (8%).
We are initiating coverage on Copper Mountain with a SPECULATIVE BUY
recommendation and a 12-month target price of C$3.05.
Figure 14: Canaccord Adam’s base case assumptions
Initial capital
Mine life
Using Cu US$1.75/lb, Au US$700/oz, US$12.00/lb Mo
US$362 million
15.0 years
After Tax IRR of 17%
After tax NPV (8%) US$140.1 million
US$62 million
35,000 t/d
US$6.53/t
US$0.96/lb
1.55:1
Sustaining capital LOM
Throughput
Estimated LOM operating costs
Estimated cash cost per lb Cu
LOM Strip ratio
Source: Company reports, Canaccord Adams
Figure 15: NAV
Shares out (million)
Cu US$/lb
Exchange C$/US$
Company Properties
Similco
Others
Total NPV US$
Other Assets US$
Exploration
Working Cap US$
Long term debt US$
TOTAL NAV US$ (000)
TOTAL NAV C$ (000)
Current share C$
Disc in price to NAV
Multiple to NAV
32.0
$1.75
0.98
8.00%
$000
$140,057
per share
$4.38
$0.00
10.00%
$000
$97,480
per share
$3.05
$0.00
$140,057
$4.38
$97,480
$3.05
$25,000
$0.78
$0
$0.00
$12,000
$0
$177,057
$172,630
$0.38
$0.00
$5.53
$5.67
$2.04
62%
0.38
$12,000
$0
$109,480
$106,743
$0.38
$0.00
$3.42
$3.51
$2.04
39%
0.61
* zero discount – in situ value
Source: Canaccord Adams
Copper Mountain Mining Corp.
14 March 2008
19
Valuation methodology
For companies with developing assets we establish a risk discount based on the stage of
a company’s most established asset. In our methodology we track established base metal
producers’ average price to NPV (8%) ratio to use as our benchmark for an implied
discount or multiple. We establish an NPV discount for individuals companies by using a
modified version of the Hedonic Pricing Method. The basic premise is that the value of a
product (asset) is related to the sum of its characteristics. In the case of a developing
mining asset, the premium or discount applied to a project is determined by the sum of
achieved critical milestones that will lead it to the next stage of development. For
instance, a company working towards a final feasibility, that has received all necessary
permits, secured critical surface rights and established agreements with the local
communities will command a higher multiple (lower discount) than a company that has
recently completed a prefeasibility and has not completed additional critical milestones.
We test our assumptions by reviewing the market value of companies (i.e., discount to
NPV) at a given stage of development. Given the variance in risks between stages of
development we established a range of potential discounts that companies could fall
within.
Figure 16: NPV risk adjustment
Established Production
Commercial Production
Construction
Bank Financing
Bank Feasibility, Eia % Feas.
Prefeasibility
Implied
NPV
Multiple
0.98x
0.61x
na
0.33x
Generalized
Timeline
Years
10-12 years
8-10 years
7-9 years
6-7 years
4-6 years
3-4 years
Scoping
2-3 years
Discovery
0-1 years
Hi
Multiple
Ranges
Low
1.03x
0.89x
0.84x
0.54x
0.74x
0.49x
0.69x
0.39x
0.49x
0.25x
0.44x
0.20x
Valuation In situ N/A
Overall Risk
Profile
Low to Moderate
High
Spec multiple/discount
Source: Canaccord Adams
14 March 2008
Copper Mountain Mining Corp.
20
Figure 17: Copper Mountain Financial Summary
Tonnes per day (Ave)
2010E
5,495
2011E
34,918
2012E
34,918
2013E
34,918
2014E
34,918
2015E
34,918
2016E
34,918
2017E
34,918
2018E
34,918
2019E
34,918
2020E
34,918
2021E
34,918
Payable Cu (000 lbs.)
Payable Ag (000 oz)
Payable Au (000 oz)
14,803
129
6
110,535
875
42
94,073
717
34
98,776
775
37
105,832
832
39
94,073
746
35
84,665
674
32
82,314
646
31
91,721
717
34
87,017
674
32
87,017
717
34
47,036
359
17
Total cash cost C1
$0.92
$0.87
$0.99
$0.93
$0.80
$0.98
$0.93
$0.95
$0.83
$0.89
$0.87
$1.12
Market Data:
Realized copper price $US/lb.
C$/US$ exchange
$2.80
0.95
$2.50
0.93
$2.25
0.90
$2.00
0.90
$1.75
0.90
$1.75
0.90
$1.75
0.90
$1.75
0.90
$1.75
0.90
$1.75
0.90
$1.75
0.90
$1.75
0.90
Net Revenue (NSR)
$43,752
$286,565
$217,653
$204,809
$193,072
$171,906
$154,844
$150,096
$150,096
$150,096
$160,238
$85,308
Cost of goods sold
Total operating costs:
Operating income US$ (000)
$15,980
$22,220
$21,532
$106,637
$130,903
$98,947
$123,098
$98,947
$123,098
$92,656
$116,712
$99,113
$123,266
$85,437
$109,385
$83,886
$107,811
$83,886
$107,811
$83,886
$107,811
$83,886
$107,811
$55,606
$79,107
Net earnings before tax
$21,532
$155,662
$94,555
$81,711
$76,360
$48,640
$45,460
$42,285
$42,285
$42,285
$52,427
$6,201
Income tax 33.0%
($3,230)
($23,349)
($31,203)
($26,964)
($25,199)
($16,051)
($15,002)
($13,954)
($13,954)
($13,954)
($17,301)
($2,046)
$112,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$20,000
$3,000
$3,000
$3,000
$3,000
($88,698)
($350,698)
73,000
$151,979
($198,718)
73,000
$83,018
($115,700)
73,000
$74,413
($41,287)
73,000
$70,828
$29,541
73,000
$52,256
$81,796
73,000
$50,125
$131,921
73,000
$30,997
$162,918
73,000
$47,997
$179,918
73,000
$47,997
$179,918
73,000
$54,793
$234,711
73,000
$23,822
$258,533
73,000
$0.26
$0.34
$1.96
$2.30
$0.96
$1.31
$0.83
$1.18
$0.78
$1.12
$0.50
$0.84
$0.46
$0.81
$0.43
$0.78
$0.43
$0.78
$0.43
$0.78
$0.53
$0.88
$0.06
$0.41
Cash Flow Statement: US$ (000)
Net earnings
Total Capital US$ (000)
Net after tax cash flow US$ (000)
Cum. net after tax cash flow US$ (000)
Fully diluted shares outstanding (000)
EPS fd C$
Operating CFPS fd C$
$18,302
$155,662
$132,313
$94,555
$63,352
$81,711
$54,746
$76,360
$51,161
$48,640
$32,589
$45,460
$30,458
$42,285
$28,331
$42,285
$28,331
$42,285
$28,331
$52,427
$35,126
$6,201
$4,155
Source: Canaccord Adams estimates, company reports
Copper Mountain Mining Corp.
14 March 2008
21
APPENDIX
MANAGEMENT
James C. (Jim) O'Rourke, P.Eng, Chief Executive Officer
Mr. O’Rourke graduated in 1964 with a B.A.Sc. degree in mining engineering from the
University of British Columbia. He gained valuable mine development and operating
experience while involved in the start-up phase of five major mines over 14 years with
Placer Development Limited. Mr. O’Rourke has more than 30 years of hands-on
experience in mine evaluations, financing development, marketing and operations in
Canada, the US, South America and the Philippines. He has served as a director of the
Mining Association of Canada (1987-1990), the Vancouver Board of Trade (1990) and
Chairman (1992) and Director (1987-Present) of the British Columbia Mining Association
and was the 2005 recipient of the Edgar A. Scholz Medal for Excellence In Mine
Development in British Columbia and the Yukon.
Rodney A. (Rod) Shier, CA, Chief Financial Officer
Mr. Shier graduated in 1986 with a Bachelor of Commerce degree from the University of
British Columbia and earned his Chartered Accountant designation in 1989. He has
extensive experience in all aspects of corporate finance including equity and debt
financings, merger and acquisition structuring, negotiation of joint ventures, and
hedging. Mr. Shier is a member of the Institute of Chartered Accountants of British
Columbia.
Donald Graham, BA , Director of Investor Relations
Don received his Bachelor of Arts degree from Simon Fraser University in 1971. Prior to
joining Copper Mountain Mining, he acted as Director of Corporate Communication to
Cardiome Pharma Corp., a TSE/NASDAQ listed company. Don also acted as a selfemployed financial consultant prior to joining Cardiome and developed his extensive
financial experience during his 16 years in the financial securities industry (1984 to
2000). He was a Vice President/Financial Advisor with Midland Walwyn Financial/CIBC
Wood Gundy where he concentrated on the mining industry. Prior to focusing his career
in the brokerage industry, Don was involved in business development, co-founding and
acting as Vice President to Western Scientific Services Ltd., a laboratory supply and
services company.
Peter Holbeck, B.Sc. (Hons) M.Sc., P.Geo, Vice President Exploration
Mr. Holbeck graduated from the University of British Columbia with a Bachelor of
Science degree in science (Hons) in 1981, and a Master of Science degree in 1988. He
has 25 years of experience in mineral exploration and mine development. Prior to
joining Copper Mountain Mining, Mr. Holbeck served as Vice President, Exploration for
Atna Resources Ltd. and as Exploration Manager and Mine Geologist for Princeton
Mining Ltd.
J. Peter Campbell, B.Sc., Vice President Environmental
Mr. Campbell graduated from the University of British Columbia with a B.Sc. in marine
biology in 1976 and has over 30 years’ experience in environmental and permitting in
the mining industry in British Columbia, the Yukon and the Northwest Territories. Prior
14 March 2008
Copper Mountain Mining Corp.
22
to joining Copper Mountain Mining, he served as Vice President, Environmental,
Government and First Nations Affairs with BC Metals Corporation.
Alastair Tiver, MBA, B.Eng., Chief Mining Engineer
Mr. Tiver graduated from the University of South Australia with a bachelor degree in
engineering in 1986 and post-graduate qualifications in business administration. Mr.
Tiver has more than 20 years’ experience in mine operations and consulting within
Australia and Canada. Over his career, he has specialized in open pit mine planning
applications and has worked in a number of operational roles including project engineer,
mine planner and production engineer.
Richard J. Joyes, B.Sc. Geo, Exploration Geologist
Mr. Joyes graduated from the University of Tasmania in 1999 with a bachelor degree
majoring in ore-deposit geology. He then moved to Western Australia to work on
Archean gold-lode deposits within the Yandal Belt as both a production and
underground mine geologist for Normandy and Newmont Mining Ltd.
Robert J. (Bob) Young, B.Sc. Geo, Advisor
Mr. Young graduated in 1962 with a B.Sc. degree in geological engineering from the
University of British Columbia. He joined Placer Development in 1960 and spent 32 years
with that company. He left Placer in 1992 to join Teck Corporation as manager of its
South American office.
Roman Shklanka, PhD Geo, B Com., Advisor
Dr. Shklanka received his doctorate in geology from Stanford University and a Master of
Arts and Bachelor of Commerce degrees from the University of Saskatchewan. He is a
Fellow of the Geological Association of Canada and a member of the Canadian Institute
of Mining and Metallurgy. He is an international mineral explorationist with more than
40 years’ experience in the mining industry. He has been successful in identifying and
developing major deposits around the world and was the PDAC's 2006 co-receiver of the
Viola Macmillan Developer's Award.
John Tapics, P.Eng, Director
Mr. Tapics graduated in 1975 with a B.Sc. degree in mining engineering from Queen’s
University and has over 25 years of mine planning and operation experience. Since
November 2005, Mr. Tapics has been President & Chief Executive Officer of Compliance
Energy Corporation, a mining company. Mr. Tapics became a director of Compliance
Energy Corporation in April 2006. From October 2001 to February 2005, Mr. Tapics
held the positions of President and Chief Executive Officer of the Alberta Electric System
Operator and the Balancing Pool of Alberta, statutory corporations responsible for
operating the electrical system of Alberta and managing certain pooled purchase
arrangements on behalf of Albertans.
Marin Katusa, B.Sc., Director
Mr. Katusa graduated from the University of British Columbia with a Bachelor degree in
Science, then obtained a Degree in Education. His extensive relationships within the
Canadian financial community and has assisted a variety of companies with strategic
focus and corporate finance in the junior resource sector. Mr. Katusa is the Chief
Investment Strategist, Energy Division, for Casey Research, which specializes in finding
undervalued companies in the junior resource sector.
Copper Mountain Mining Corp.
14 March 2008
23
INVESTMENT RISKS
The mining industry by its nature is subject to numerous risks. Investors should be
aware that Copper Mountain faces many uncertainties in maintaining or advancing its
current projects. While we believe Copper Mountain's current management is qualified
and capable of advancing the company's business plan, there are no guarantees they will
be successful. Specific risks investors should be aware of include:
Commodity risk: The company is highly leveraged to both gold and copper prices, which
are subject to periods of downside volatility.
Country Risk: Although the political environment in British Columbia is currently stable
and the province is viewed as a low-risk environment for mining development, there
exists inherent risk to investment in mining projects. The potential exists for negative
project catalysts to arise, such as First Nations land claims, land use permitting issues,
and/or labour disruptions.
Currency risk: The company both operates in and is domiciled in Canada and reports in
Canadian dollars. The company will be exposed to local currency fluctuation in relation
to its operations. The strengthening of the Canadian dollar could result in reduced
margins on the future sale of bullion or copper (priced in US dollars). We have assumed
a long-term C$:US$ ratio of 1.11, versus the current ratio of about 1.00. For our
valuation, which uses a long term copper price scenario of $1.75/lb Cu, we have
assumed a C$:US$ ratio of 0.95.
Project risk: The company’s Copper Mountain project is not an established mining
operation. Our assumptions are based on the continued, successful advancement of the
Copper Mountain project. By the nature of the industry, challenges can develop at any
stage of a project. Currently the project is in the preliminary assessment stage and there
exists uncertainty regarding capital costs, mine production, and the project development
timeline, which adds risk to our production/financial forecasts for the project.
Financing risk: There is no guarantee that future market conditions will facilitate Copper
Mountain’s acquisition of the necessary capital to advance any of its
exploration/development projects to production.
Market risk: Our valuation of the company is in part based on a multiple to the
company’s NAV or projected cash flow. This multiple is based on an opportunity
premium or discount that is largely subjective in nature. In addition, part of our
valuation of the company is based on a comparative analysis that reviews the market
value being allocated for in situ copper resources. The value the market pays per Cu eq
lb is subject to numerous factors and should be considered volatile and high risk.
Investors should recognize that numerous market conditions can affect the premium or
discount afforded to a company’s valuation.
14 March 2008
Copper Mountain Mining Corp.
24
APPENDIX: IMPORTANT DISCLOSURES
Analyst Certification:
Each authoring analyst of Canaccord Adams whose name appears on the front page of this investment
research hereby certifies that (i) the recommendations and opinions expressed in this investment research
accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the
designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage
universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed by the authoring analyst in the investment
research.
Site Visit:
An analyst has visted the issuer's material operations. Partial payment or reimbursement was received from
the issuer for the related travel costs.
Distribution of Ratings:
Global Stock Ratings
(as of 29 February 2008)
Canaccord Ratings
System:
Rating
Buy
Speculative Buy
Hold
Sell
Coverage Universe
#
%
310
60.9%
63
12.4%
119
23.4%
17
3.3%
509
100.0%
IB Clients
%
43.9%
71.4%
22.7%
5.9%
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Adams does not provide research coverage of the relevant issuer.
“Risk-adjusted return” refers to the expected return in relation to the amount of risk associated with the
designated investment or the relevant issuer.
Risk Qualifier:
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental
criteria. Investments in the stock may result in material loss.
Canaccord Research Disclosures as of 14 March 2008
Company
Copper Mountain Mining Corp.
1
2
3
4
5
6
7
8
Disclosure
1A,2,7
The relevant issuer currently is, or in the past 12 months was, a client of Canaccord Adams or its affiliated
companies. During this period, Canaccord Adams or its affiliated companies provided the following services
to the relevant issuer:
A. investment banking services.
B. non-investment banking securities-related services.
C. non-securities related services.
In the past 12 months, Canaccord Adams or its affiliated companies have received compensation for
Corporate Finance/Investment Banking services from the relevant issuer.
In the past 12 months, Canaccord Adams or any of its affiliated companies have been lead manager, co-lead
manager or co-manager of a public offering of securities of the relevant issuer or any publicly disclosed offer
of securities of the relevant issuer or in any related derivatives.
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Finance/Investment Banking services.
Canaccord Adams or any of its affiliated companies is a market maker or liquidity provider in the securities of
the relevant issuer or in any related derivatives.
In the past 12 months, Canaccord Adams, its partners, affiliated companies, officers or directors, or any
authoring analyst involved in the preparation of this investment research has provided services to the
relevant issuer for remuneration, other than normal course investment advisory or trade execution services.
Canaccord Adams intends to seek or expects to receive compensation for Corporate Finance/Investment
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The authoring analyst, a member of the authoring analyst’s household, or any individual directly involved in
the preparation of this investment research, has a long position in the shares or derivatives, or has any other
financial interest in the relevant issuer, the value of which increases as the value of the underlying equity
increases.
Copper Mountain Mining Corp.
14 March 2008
25
9
10
11
12
13
14
The authoring analyst, a member of the authoring analyst’s household, or any individual directly involved in
the preparation of this investment research, has a short position in the shares or derivatives, or has any
other financial interest in the relevant issuer, the value of which increases as the value of the underlying
equity decreases.
Those persons identified as the author(s) of this investment research, or any individual involved in the
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month end if publication is within 10 days following a month end, Canaccord Adams or its affiliate
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other common equity securities of the relevant issuer or held any other financial interests in the relevant
issuer which are significant in relation to the investment research (as disclosed above).
As of the month end immediately preceding the date of publication of this investment research, or the prior
month end if publication is within 10 days following a month end, the relevant issuer owned 1% or more of
any class of the total issued share capital in Canaccord Adams or any of its affiliated companies.
Other specific disclosures as described above.
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Canaccord Adams Inc., Canaccord Adams Limited, and Canaccord Adams, a division of Canaccord Capital
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The authoring analysts who are responsible for the preparation of this investment research have received (or
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14 March 2008
Copper Mountain Mining Corp.
26
recommendations or views expressed in this investment research.
This investment research is provided for information purposes only and does not constitute an offer or
solicitation to buy or sell any designated investments discussed herein in any jurisdiction where such offer or
solicitation would be prohibited. As a result, the designated investments discussed in this investment
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This investment research has been approved by Canaccord Adams, a division of Canaccord Capital
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Canaccord Adams Inc., a US registered broker-dealer, accepts responsibility for this Investment Research and
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Copyright © Canaccord Adams, a division of Canaccord Capital Corporation 2008. – Member IDA/CIPF
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Copper Mountain Mining Corp.
14 March 2008