Capstone Copper

Phase A — Understand the business

Lens 1 · Company Overview

Capstone Copper is a pure-play copper producer with all assets in the Americas — formed in March 2022 by merging Capstone Mining (TSX) with Mantos Copper (Orion-backed, Chilean). It is one of the few mid-cap producers offering leveraged, undiluted exposure to the copper price with no meaningful gold/diversified ballast — copper is ~the entire revenue line, with gold and silver as by-product credits.

The four operating mines:

• Mantoverde (Atacama, Chile; 70% owned, Mitsubishi Materials holds the rest) — open-pit copper-gold, oxide heap-leach cathode + a newly commissioned sulphide concentrator; significant gold by-product. This is the growth engine.
• Mantos Blancos (Antofagasta, Chile; 100%) — open-pit copper-silver; recently debottlenecked; a Phase II expansion is in environmental permitting.
• Pinto Valley (Arizona, USA; 100%) — open-pit, operating since 1972; 60,000 t/d concentrator + 11,400 t/y SX-EW. The only US asset — and the one most levered to a Section 232 copper tariff.
• Cozamin (Zacatecas, Mexico; 100%) — underground copper-silver, longhole stoping + cut-and-fill; commercial since 2006; the lowest-cost asset in the portfolio.

Growth pipeline: the fully permitted Santo Domingo Cu-Fe-Au project (~35km from Mantoverde) and the Mantoverde Optimized brownfield expansion. Combined Mantoverde + Santo Domingo is pitched as a >200,000 t/y low-cost district with an optional battery-grade cobalt stream.

Revenue model: sells copper concentrate and copper cathode to smelters/traders at LME/COMEX-linked prices net of treatment & refining charges (TC/RCs). No take-or-pay; fully price-taking on a global commodity. By-product gold/silver credits reduce the reported C1 cash cost — a structurally important lever (Cozamin's C1 was just $0.71/lb in Q1 2026 thanks to silver credits). Customer concentration is low and not the risk here; commodity-price concentration is the whole risk.

Lens 2 · Supply Chain

Map: orebody → mine/mill → concentrate or cathode → smelter/refiner → fabricator → end market (grid, EV, construction, AI-datacenter power). Named stakeholders:

• Upstream inputs: diesel, grid power (Chilean SIC/SING grid — and water, the binding constraint in the Atacama, see Lens 10), grinding media, sulphuric acid (for heap leach), mining equipment (Caterpillar/Komatsu fleets). Chile's power and water are the genuine chokepoints — Mantoverde and Mantos Blancos sit in one of the driest places on earth.
• The company: mills concentrate (sulphides) and produces cathode directly (oxide leach / SX-EW). Cathode is finished metal sold straight to market; concentrate must go to a smelter.
• Smelting/refining chokepoint: Capstone does not own smelters — concentrate is tolled through third-party Asian smelters (predominantly Chinese), so it is exposed to the TC/RC squeeze that has driven spot treatment charges to record-low/negative levels in 2025–26 as smelter capacity outran concentrate supply. This is a tailwind for miners (more of the metal value accrues to the mine), but it means the realized price depends on a smelter market Capstone doesn't control.
• Partner: Mitsubishi Materials (30% of Mantoverde) — strategic Japanese smelter/trader, a built-in concentrate offtake channel.
• End demand: electrification — grid copper, EV wiring, and increasingly AI-datacenter power buildout, the demand narrative underpinning the structural deficit.

Single-source dependency: water in the Atacama is the one true single point of failure — flagged explicitly at Mantos Blancos (Lens 10). Geographic concentration in Chile (3 of 4 assets' value, ~2/3 of production) is the second.

Lens 3 · Competitive Advantages (moats)

Mining moats are asset-quality + cost-curve position + jurisdiction, not brand. Capstone's honest scorecard:

• Scale / pure-play leverage (moat-ish): ~225kt Cu/yr makes it a credible mid-cap; pure-play means it gives institutions cleaner copper beta than a diversified Teck or Freeport. That's a positioning edge, not a durable moat.
• Cost-curve position (weak-to-mid): consolidated C1 of $2.44/lb (2025) rising to $2.45–2.75/lb guided (2026) sits in the middle of the global cost curve — materially above Freeport (~$1.80/lb ) and the great Tier-1 porphyries. Capstone is not a low-cost producer; its margin is leverage to price, not a cost moat. The by-product-credit mines (Cozamin $0.71/lb, Mantoverde sulphides guided $1.25–1.55/lb) are the cost bright spots.
• Growth optionality (real edge): MV-Optimized + Santo Domingo + Mantos Blancos Phase II is a genuine, largely brownfield, mostly permitted growth stack — rarer than it sounds in a world where new Tier-1 copper supply is nearly impossible to permit. The district concept around Mantoverde (shared infrastructure with Santo Domingo) is the closest thing to a durable structural advantage.
• Bargaining power: low over customers (price-taker), improving over smelters (the TC/RC collapse hands miners pricing power), low over the Chilean state and labour (see the Q1 2026 strike).

Verdict on moat: thin. The "moat" is really the commodity's moat — copper's structural supply deficit — plus a better-than-average, mostly-permitted brownfield growth pipeline. This is a price + execution story, not a franchise.

Lens 4 · Segments

No segments.csv on disk — all figures ``. By asset, 2026 production guidance:

Geography: ~2/3 Chile (Mantoverde + Mantos Blancos), ~1/4 USA (Pinto Valley), balance Mexico (Cozamin). Trend: Mantoverde is the accelerant — 2025 production 95,115t, +65% YoY as the sulphide concentrator ramped; it goes higher again when MV-Optimized hits 45ktpd in Q4 2026. Mantos Blancos and Pinto Valley are decelerating into lower-grade mine-sequence zones in 2026 (the explicit reason 2026 C1 guidance steps up). Net: the growth is concentrated in one asset (Mantoverde) in one country (Chile) — a quality-and-concentration trade-off.

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Phase B — Measure performance

Lens 5 · Earnings Result (Q1 2026, reported May 2026)

The latest print, all ``:

• Revenue: $652.5M
• Adjusted EBITDA: $329.1M — 6th consecutive record quarter
• Net income: $112.0M ($102.5M attributable); EPS $0.13 (adj $0.12)
• Operating cash flow (pre-WC): $217.9M
• Realized copper price: $5.92/lb — the swing factor; record copper carried the quarter despite a production hit
• Consolidated production: 47,960t (vs 53,796t Q1 2025, −11%) — sulphide 40,875t + cathode 7,085t
• C1 cash cost: $2.66/lb (vs $2.59/lb Q1 2025)

What drove it: price, not volume. Production fell 11% — a 35-day strike at Mantoverde (early January, resolved Feb 5) cut Q1 output ~16%. The record EBITDA is entirely a copper-price story ($5.92/lb realized vs a ~$4/lb world two years ago). Strip the price tailwind and this was an operationally soft quarter — lower throughput at Mantoverde (strike), lower grades at Mantos Blancos and Cozamin (mine sequence), mill interruptions at Pinto Valley.

Balance sheet: net debt $737.5M (down from $780.1M at Dec-25); cash $394.1M; total liquidity $1.046B ($652.2M undrawn revolver). Net-debt/EBITDA ~0.7x — comfortable. Debt maturities refinanced out to 2026–2033.

Guidance reaffirmed: 200,000–230,000t Cu, C1 $2.45–2.75/lb, total capex ~$495M (sustaining $270M + expansionary $225M; plus capitalized stripping $225M + exploration $70M — a heavy invest year).

Unusual vs own history: record financials despite falling production and a strike is the tell — this company's P&L is now dominated by the copper price. The market reaction was muted (stock ~flat into late June), suggesting the record EBITDA was largely expected and copper, not Capstone-specific execution, is what's priced.

Lens 6 · Earnings Calls (sentiment trend)

No transcripts on disk — ``, directional. Across the 2025 → Q1 2026 calls, management's narrative arc:

• 2024 calls: apologetic/explanatory — Mantoverde and Mantos Blancos ramp-ups ran behind guidance; tone was "typical ramp-up issues, sequential improvement coming".
• 2025 calls: confident — "record" became the recurring word (record production, record EBITDA quarter after quarter); the Mantoverde sulphide concentrator surpassed design capacity by Q2 2025. Management pivoted to growth-funding language (sanctioning MV-Optimized, advancing Santo Domingo and Mantos Blancos Phase II).
• Q1 2026 call: "record EBITDA despite strike" — managing the strike narrative while reaffirming guidance and pointing at MV-Optimized Q4 2026 ramp.

Phrases that recur: "record," "fully permitted," "low-cost growth," "self-funded." What they stopped saying: the 2024 ramp-up apologetics. Sentiment shift: decisively from defensive execution (2024) to offensive growth (2025–26) — appropriate, but it raises the bar: the story is now "we can build," so an MV-Optimized stumble would cut deeper than a routine miss.

Lens 7 · Comps

Multiples below are `` and not all independently sourced to a single dated screen — copper miners are best compared on P/NAV and EV/EBITDA (commodity cyclicals), not P/E. Where a precise multiple isn't sourced, it is marked n/a.

Sector frame: Morgan Stanley (Dec 2025) put quality copper names at 5–7× EV/EBITDA, with <6× "bargain" in a cycle; the cohort historical range is 5–12×. Capstone and First Quantum are repeatedly flagged as trading at the steepest P/NAV discounts among mid-tier copper names — the cheap-but-for-a-reason cohort (Capstone: execution/concentration; FQM: Cobre Panama). The discount is the bull case and the bear case in one number. (Capstone's own EV/EBITDA and P/E are not cleanly sourced to a dated screen and are therefore left n/a rather than fabricated.)

Lens 8 · Stock-Price Catalysts (what moves the stock)

Pattern over the cycle, ``:

• The copper price is the dominant driver — Capstone is a high-beta copper proxy. The 2025–26 run to record COMEX $6.65/lb (May 13, 2026) is the single biggest reason the stock and EBITDA are at records.
• Section 232 US copper tariff — a live, binary macro catalyst (decision due ~mid-June 2026); a 25%+ tariff would widen the CME–LME spread $0.30–0.80/lb and disproportionately benefit Pinto Valley (the US asset). This is the nearest-term identifiable catalyst.
• Mantoverde milestones — first copper (Jun 2024), concentrator surpassing design (Q2 2025), MV-Optimized sanction (Aug 2025), and the Q4 2026 ramp to 45ktpd are all Capstone-specific catalysts.
• Negative catalysts: the Jan 2026 Mantoverde strike, the 2024 ramp-up misses, and the Mantos Blancos groundwater rejection (2024) are the down-moves — execution and Chilean operating/permitting risk.

What the market actually reacts to: ~70% the copper price and macro (deficit headlines, tariffs, China), ~30% Capstone-specific execution (Mantoverde ramp, strikes, permits). Own this name and you are first a copper bull, second a Capstone-execution bull.

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Phase C — Judge people & books

Lens 9 · Management

• CEO — Cashel Meagher (President & CEO since May 2025; President & COO from Jan 2022). The single best thing about this company. Ex-Hudbay SVP & COO (2015–21), where he led the construction and ramp-up of Constancia in Peru — i.e. he has personally built and started up a large Latin American copper mine, exactly the skill MV-Optimized and Santo Domingo require. Geologist by training (St FX), professional geoscientist. Track record: operational, builder, LatAm-native.
• Chair — John MacKenzie — founder of Mantos Copper, ex-Anglo American base metals; CEO 2022–25, moved to Chair May 2025. Architect of the merger; deep copper pedigree. The founder-to-chair, COO-to-CEO handoff is an orderly, internal succession — a positive governance signal (continuity + a builder taking the operating seat as the company shifts from ramp-up to expansion).
• Skin in the game / ownership: Orion (Orion Mine Finance / Orion Resource Partners) ~21–32%, Hadrian Capital ~15%, retail ~42%. So a private-equity anchor (Orion) holds the largest block — aligned on value, but a potential overhang (a fund will eventually monetize). Insider (management) ownership is modest; no insider-transactions.csv on disk to quantify.
• Capital allocation: reinvestment, not return. No dividend, no buyback — every dollar of the record FCF goes into the growth stack (MV-Optimized, Santo Domingo, Mantos Blancos Phase II, capitalized stripping). Net debt is held ~flat at $738M / ~0.7x EBITDA — disciplined leverage. The bet: brownfield copper ounces compound better than cash returned at the top of the cycle. Reasonable if execution holds and copper stays strong; it concentrates risk in build-out.
• Red flags: none egregious. The PE anchor + retail-heavy register is a structural overhang, not misconduct. Watch: a large Santo Domingo sanction (>$2.3B initial capital) would test the self-funded narrative and could force equity dilution or a partner/streaming deal.
• Archetype: professional operators (builders), PE-anchored. The right team for the build-out phase. The question is balance-sheet capacity, not competence.

Lens 10 · Forensic Red Flags

regulatory/regulatory-findings.md confirms no SEC CIK → no EDGAR enforcement search possible; total SEC findings 0 (by construction — it doesn't file). Accounting risk is therefore assessed `` + first principles:

• Revenue recognition: commodity sales at provisional prices with later true-up to settlement — standard for miners; introduces provisional-pricing mark-to-market volatility in revenue (a quarter's print can swing on the copper price between shipment and settlement). Not a red flag, but it means reported revenue/EBITDA carries embedded price-derivative noise.
• By-product accounting: C1 cash cost is reported net of gold/silver credits, which flatters the headline cost (Cozamin $0.71/lb, Mantoverde sulphides $1.25–1.55/lb). This is industry-standard but means the "all-in sustaining cost" (AISC) is the more honest number — and with $495M capex + $225M capitalized stripping in 2026, true all-in economics are well above the C1 optics. Watch capitalized stripping: $225M of stripping is capitalized rather than expensed — a legitimate accounting choice that nonetheless boosts current earnings/cash-from-ops vs. expensing. This is the line a forensic analyst watches most.
• Cash flow vs earnings: FY25 OCF ~$944M vs capex ~$680M → FCF ~$264M; earnings are cash-backed, not accrual-inflated. Good.
• Goodwill/intangibles: the 2022 Mantos merger created acquisition accounting — watch for any Mantoverde or Mantos Blancos impairment if copper rolls over or the Mantos Blancos expansion is denied.
• Going concern / leverage: not a concern at 0.7x net-debt/EBITDA with $1.05B liquidity.

Regulatory findings (required):

• SEC LR / AAER: none — no CIK, not an SEC filer. "No EDGAR enforcement search possible".
• Non-SEC / environmental — MATERIAL: the standout legal/regulatory risk is Chilean environmental permitting at Mantos Blancos. Capstone itself disclosed significant groundwater impacts — the water table rising as much as 40 metres, classified "significant, compounding and cumulative"; environmental officials had issued remediation orders, a less-intensive expansion was abandoned ~2 years prior, and a groundwater mitigation submission was rejected outright in 2024. Capstone re-submitted the Mantos Blancos Phase II environmental study in June 2026. This is a real, named, ongoing regulatory risk to ~1/4 of the asset base — not enforcement misconduct, but a genuine permitting/operating overhang.
• 10-K Item 3: n/a — no 10-K (files on SEDAR+, not EDGAR). Material litigation would appear in the Canadian AIF/MD&A, not reviewed here.
• Summary: No securities-fraud or accounting-enforcement findings. The material regulatory exposure is environmental/water permitting in Chile — verified via the company's own disclosures and Chilean-press reporting as of 2026-06. (SEC EDGAR LR/AAER inapplicable — no CIK.)

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Phase D — Project & stress-test

Lens 11 · Forward Projection (EPS, FY2026–FY2028)

All `` — built bottom-up from FY25 actuals + 2026 guidance + a copper-price scenario set. The copper price is the dominant variable — a mid-cost producer's EPS is enormously price-sensitive.

Anchors: FY25 adj EPS $0.21 on ~225kt at C1 $2.44/lb and a partial-year price benefit; Q1 2026 EPS $0.13 on a $5.92/lb realized price. Annualizing a ~$0.13 strike-impacted quarter naively gives ~$0.50+ — but that embeds record copper.

Scenario set (FY2026, ~215kt midpoint, C1 ~$2.60/lb, ~480M shares):

• Bear (copper averages ~$4.25/lb): EPS ~$0.20 ``
• Base (copper ~$5.25/lb): EPS ~$0.45 ``
• Bull (copper holds ~$6.00/lb+): EPS ~$0.70+ ``

FY2027–28: MV-Optimized at 45ktpd adds ~20kt Cu + ~6koz Au/yr from late 2026, lifting consolidated production toward ~245kt and (at a constant price) EPS modestly; Mantos Blancos / Pinto Valley grade declines partly offset. Santo Domingo is the step-change but also the funding risk — if sanctioned, 2027–28 sees heavy capex/possible dilution before any production. The dominant FY27–28 swing factor is unchanged: the copper price, not Capstone's volume.

No forecast.ts created (watchlist/unattended mode — per skill, log a Brier forecast only on a genuinely committed base case). Base-case scoreable claim for future logging: "CS FY2026 adjusted EPS ≥ US$0.40, p≈0.55, resolves 2027-02" — contingent on copper averaging ≳$5/lb.

Lens 12 · Bull vs Bear

Bull case. Copper is in a structural multi-year deficit — Morgan Stanley 600kt, JPM 330kt 2026 shortfall — driven by electrification + AI-datacenter power, against a supply side where new Tier-1 mines are nearly un-permittable. Capstone offers pure, undiluted, Americas-jurisdiction copper beta with a mostly-permitted brownfield growth stack (MV-Optimized Q4 2026; Santo Domingo "fully permitted"; Mantos Blancos Phase II) — growth that doesn't depend on discovering or permitting greenfield. It trades at one of the steepest P/NAV discounts among mid-tier copper names, run by a proven LatAm mine-builder (Meagher/Constancia), with a clean 0.7x balance sheet and a live Section 232 tariff kicker for its US asset. Record EBITDA six quarters running funds the build self-sufficiently. If copper holds $5–6/lb and Mantoverde executes, the discount closes and earnings compound — a 30%+ re-rate to the analyst average target is the consensus path.

Bear case. Three things could permanently impair or de-rate this:

1. Copper mean-reverts. Goldman explicitly forecasts prices declining from record highs ($10–11k/t H1 2026 vs the $13k+ spike). As a mid-cost producer (~$2.60/lb C1, true AISC well higher), Capstone's EPS is brutally geared — a return to ~$4/lb roughly halves earnings (Lens 11). The "record EBITDA" is a copper artifact, not an operational achievement.
2. Concentration + execution. Growth is concentrated in one asset (Mantoverde) in one country (Chile), where the company has already shown 2024 ramp-up slippage, a 2026 strike, and a rejected water permit (2024). A Mantos Blancos Phase II denial or a Mantoverde operating setback hits a meaningful slice of NAV.
3. The growth is also the funding risk. Santo Domingo's >$2.3B initial capital cannot be self-funded at this scale without dilution, a streaming/royalty deal, or partner sell-down — any of which caps the upside the bulls are paying for.

Pre-mortem (18 months out, thesis broke): copper rolled from $6 back toward $4 as the deficit proved smaller/later than the bulls modeled; Mantos Blancos Phase II was denied on groundwater; MV-Optimized ramped slowly (echoing 2024); and the discount widened because Capstone is a high-beta, mid-cost, single-country name precisely when investors wanted quality and low cost. The stock is the cohort's loser, not its winner.

Are multiples too high? No — the opposite. The stock is cheap on P/NAV. The risk isn't a rich multiple de-rating; it's the denominator (copper-driven NAV/earnings) falling so the "cheap" multiple was on peak numbers.

Contrarian view (what the market is refusing to see): the bull consensus treats the copper deficit as near-certain and the discount as pure opportunity. The contrarian read: Capstone's discount is partly deserved — mid cost-curve position + Chilean water/labour/permitting + single-asset growth concentration are real, structural reasons it should trade below Tier-1 peers, and the record EBITDA flatters a company whose operations (production down 11% YoY in Q1) are running into grade declines and disruptions. You are buying copper-price leverage at record copper, dressed up as a value trade.

Lens 13 · Devil's Advocate (short-seller)

• What structurally breaks the money machine? A copper price reversion. Full stop. A mid-cost producer has no cost moat to defend margins — if copper goes from $6 to $4, the "6th consecutive record EBITDA" headline inverts within two quarters.
• Where is revenue concentrated, and what shifts it? ~100% copper, ~2/3 Chile, growth ~all Mantoverde. A single Chilean shock — water-permit denial, a longer strike, a power/grid or community blockade — hits a disproportionate share. The Atacama water issue is already documented by the company itself.
• Why is the moat weaker than bulls think? It isn't really a moat — it's commodity beta + a growth pipeline. Strip the copper price and you have a middle-of-the-cost-curve miner whose 2024 ramp ran behind plan and whose 2026 base assets (Mantos Blancos, Pinto Valley) are grading down.
• Most dangerous competitor bulls underestimate? Not a single rival — it's the cost curve and the smelter/TC-RC cycle. When the TC/RC squeeze normalizes, a chunk of the realized-price tailwind reverses. And on relative value, First Quantum offers similar discount with arguably bigger optionality (Cobre Panama restart) — capital could rotate there.
• Worst capital-allocation risk? Sanctioning Santo Domingo (>$2.3B) near the top of the copper cycle and being forced into dilution or an expensive stream to fund it — destroying the per-share leverage that is the entire thesis.
• What must hold for today's price? Copper ≳$5/lb sustained, Mantoverde executes MV-Optimized on time/budget, no Mantos Blancos permit denial, no prolonged labour disruption. That's four things, three of which the company has already stumbled on once.
• If growth disappoints 20–30% (copper to ~$4.25 + a Mantoverde slip): FY26 EPS ~$0.20 (Lens 11 bear) → the "cheap" stock is suddenly ~25–30× depressed earnings and the P/NAV "discount" evaporates as NAV is re-cut. Downside to CAD ~10–11 is plausible.
• Single scenario that permanently impairs: a structural Chilean water/permitting regime change that strands Mantos Blancos and delays Santo Domingo — turning the "fully permitted growth district" thesis into a stranded-asset story in the world's most water-stressed copper jurisdiction. Plausibility: low-to-moderate, but non-trivial and idiosyncratic to this name.

Lens 14 · Management Questions (ordered by information value)

1. Santo Domingo's initial capital is >$2.3B — exactly how do you fund it without equity dilution, and at what copper price does sanction make sense? What's the streaming/partner appetite?
2. After the 2024 groundwater rejection, what specifically changed in the Mantos Blancos Phase II submission, and what is your honest probability and timeline for approval?
3. MV-Optimized targets 45ktpd exiting Q4 2026 — given the 2024 ramp ran behind plan, what's the downside ramp scenario and how confident are you in the $176M budget?
4. At ~$2.60/lb consolidated C1 you're mid-cost-curve — what's the credible path to structurally lower costs, or is the strategy simply to be levered to price?
5. What is your true all-in sustaining cost (AISC) including capitalized stripping, and how should investors think about it vs. the by-product-netted C1 you headline?
6. With record FCF and no dividend/buyback, what return-of-capital framework triggers — and at what point does reinvestment stop beating returning cash at the top of the cycle?
7. How do you think about Orion's ~21% stake as an overhang — is there a coordinated path to an orderly sell-down?
8. Labour: after the 35-day Mantoverde strike, what's the contract runway across all four assets and the risk of repeat disruption?
9. What's your internal copper-price deck for sanctioning decisions, and how do you stress-test the portfolio at $4/lb?
10. How exposed are realized prices to the TC/RC cycle, and what happens to your margins when treatment charges normalize off record-low levels?
11. Section 232 — quantify the per-pound benefit to Pinto Valley under a 25% / 50% tariff, and is it material enough to change US capital allocation?
12. Grade declines at Mantos Blancos and Pinto Valley are dragging 2026 costs — how durable is that headwind and where do these assets sit in 3 years?
13. Mantoverde is 70% owned with Mitsubishi — does the minority partner constrain expansion pace or capital decisions, and is consolidating it a goal?
14. What's the water-security plan across the Chilean assets independent of the Mantos Blancos permit — desalination, recycling, rights?
15. M&A: at these discounts, are you a buyer, a seller, or a target — and what would make you act?

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