Copper is the most critical metal for global economies. With the growing movement to renewable energy sources, the continuing shift to mobile rechargeable electronic devices and copper’s antimicrobial properties demand will continue to grow. This creates an opportunity for investors who get in now. Copper is being called “the new oil” as future energy sources cannot happen without it.

We have issued a Buy Recommendation on Capstone Mining Corporation (CS:TSX) with a price objective of CAD$7.68. In this report we lay out our rationale. Investors can participate in renewable energy and energy storage’s growing opportunity via Capstone Mining as it is an established company that produces two important components, copper and cobalt. The company is geographically diversified, carries no long-term debt, has been and continues to expand upon its innovative approach of greater efficiencies in production. Its size makes it nimble and better to adapt to changes in the industry.

Share Data

52 Week High: $6.640
52 Week Low: $1.230
Currency: CAD

Business Summary

GICS Sector: Basic Materials
GICS Industry: Specialty Mining & Metals

Capstone Mining Corporation, a Canada-based mining company, engages in base metal exploration and production in Canada, United States, Mexico and Chile. Operations are carried out through subsidiaries in each of the countries; Minto Exploration Ltd. in Yukon, Canada, Pinto Valley Mining Corp. Arizona, United States, Capstone Gold, S.A. de C.V.,Zacatecas, Mexico, Capstone Mining Chile SpA and Minera Santo Domingo SCM, Chile. Copper is its primary pursuit.

No Long-term Debt

According to the financial statement ending June 30, 2021, the company has zero long-term debt.


The company is implementing several initiatives to reduce resource use, like water for example, and methods to extract more copper from the mining process. This double win of lower expenses and higher collection efficiency will improve net results.


Cobalt is a significant material in the production of energy storage devices. The company projects that its Santo Domingo cobalt production will be among the top three in the world outside of the Democratic Republic of the Congo. DRC produces the majority of the world’s cobalt.

Joint Venture

In their August 2021 Corporate Presentation, the company informed of a pending strategic partnership
and financing announcement coming in Q3 2021.

Corporate Information

Founded: 1987
Office: 2100 – 510 West Georgia Street
BC V6B 0M3
Web Site:
Key Officers:
CEO, President & Director
Darren M. Pylot
Chairman of the Board
George L. Brack
Senior Vice President & COO
Brad J. Mercer
Senior Vice President & CFO
Raman Randhawa
Employees: 1,049


The 1 Year Growth compared to the previous trailing twelve (TTM) is +1330.8%. Compared to its peer group CS is the smallest player and therefore more nimble to take advantage of opportunities.

Revenue (Sales)

Analysts’ expectation for Capstone revenue increase YoY for Q3 is +47.23%.


Copper use in manufacturing will only increase. It is so widespread now that the metal is often referred to as Dr. Copper jokingly claiming that it has a PhD in the world economy. The world is experiencing a paradigm shift in energy preferences. These new preferences require copper and cobalt. Solar panels, wind turbines, electric vehicles and mobile devices require copper. Rechargeable batteries for mobile devices require both copper and cobalt.

An electric vehicle requires four times more copper than an ICE (internal combustion engine) vehicle. An ICE vehicle uses approximately 20 kg, a hybrid uses 40 kg and a fully EV requires 80 kg. Public transportation buses need between 11 to 18 times as much as an ICE vehicle. Automotive World reports that EV sales will increase from 2.5 million units to between 6 to 11 million units by 2025 and 11 to 19 million units by 2030.

Recharging stations provide another opportunity for copper. The Scottish consulting firm Wood Mackenzie projects that there will be 20 million EV charging points by 2030 leading to a 250% increase in copper consumption than charging points consumed in 2019. In North America the EV infrastructure market is projected to grow from USD$2.7 billion in 2021 to USD$18.6 billion by 2030.

We anticipate that preferences will continue toward renewable energy. While coal use is still the top method of producing electricity, the paradigm shift is to greener renewables where copper is needed in manufacturing of the products to supply this growing market.

Copper is a required component in mobile devices and other electronics. The use of mobile devices for personal and business purposes continues to expand. As manufacturers aggressively compete for market share with new and innovative products this expansion will accelerate. Even products like office building interior signage and highway billboards are moving to electronic image display consuming even more copper. Electronic tools are essential in the era of remote work. Thirty-eight percent of managers in San Francisco say they will allow workers to continue remotely even post-COVID which will require workers to be up-to-date with electronic and communication devices.

The anti-microbial properties of copper adds another expanding market for the metal. We would not be surprised to see an expansion of copper use in everyday items; door knobs to countertops to hospital equipment in the post-COVID era.

Capstone has successfully completed optimization projects at its Pinto Valley mine. These projects result in lower water usage expense and higher recovery of copper. Phase 2 of PV3 Optimization will be completed during Q3 2021. This program will increase production through 2039 to be followed by PV4 which will extend the mine life 2050.

The Cozamin ramp-up is complete resulting in higher grades of copper and higher recovery. This helped lead to record quarterly cash flow in Q2 2021. Exploration for additional mine sites will continue into 2022.

The Santo Domingo operation is in Region III in Chile and sits in the middle of several copper operations. In August Capstone included in their Corporate Presentation an outline of an extensive financing project. They titled the section “Transformational Growth” with the subtitle ”Capstone 2021-23 Operating Cash Flow (after tax) of ~$1.0 billion assuming $4.00 copper price.” Of course we find this project very attractive. Capstone noted that the partnership and financing is expected to be announced in Q3 2021.

Santo Domingo also has a very attractive cobalt potential as well. Cobalt is an important material for rechargeable battery manufacturing. Capstone says this of its project “If Santo Domingo were in production today it would be a Top 3 global producer of refined battery grade cobalt outside of the DRC and one of the lowest cost at -$4 per pound.” The DRC is the Democratic Republic of the Congo. The conflict torn nation produces 63% of the world’s supply of cobalt. The nation suffers from political turmoil and is often accused of human rights violations according to Human Rights Watch. Santo Domingo and Capstone offer a better alternative.


The stage is set for copper for the next several decades and Capstone is well positioned. Capstone Mining has positioned itself to benefit from this shift in energy sources. Given the investments that they have made and the plans that they continue to implement, we believe, now is the time to take a position in Capstone.

As for the copper industry, Goldman Sachs released its 2021 Copper Report titled “Copper Is The New Oil.” Goldman’s analyst Jeff Currie wrote that the path to sustainable and renewable new energy sources cannot happen without copper. Currie and his team added “We estimate that by-mid decade this growth in green demand alone will match, and then quickly surpass, the incremental demand China generated during the 2000s. Ripple effects into non-green channels mean the 2020s are expected to be the strongest phase of volume growth in global copper demand in history. Indeed, we see the copper market sleepwalking to a classic case of the “Revenge of the old economy”, just as oil did during the 2000s commodity boom.”

The consensus price objective among analysts for Capstone is CAD$7.02 (USD$5.58) with a high end of CAD$7.98 (USD$6.34). With developing news, we are optimistic to the high end. We like that Capstone is smaller and more nimble given how rapidly the field is changing. There is strong support for our thesis among analysts. The consensus among qualitative analysts is “Outperform” and the one quantitative analyst, CFRA, recommends a “Strong Buy” with “Moderate” risk.


We alluded to a joint venture discussed in Capstone’s August Corporate Presentation. We are aware of a plan for BHP Group Ltd. to purchase production from Capstone. Through contacts on the ground in Chile, we know that BHP engineers are doing all the due diligence and processes that a mining company would do prior to a joint venture. This may be the partnership that Capstone will announce in Q3 or this may be an additional partnership. Either way it is promising for Capstone. Joint ventures and partnerships of buying production or sharing costs is a common practice in the mining industry. BHP is a well established large cap player in mining.