Copper Mountain announces US$250 million senior secured bond issue

Copper Mountain Mining (TSX: CMMC) has successfully priced US$250 million in senior secured bonds in the Nordic bond market. The five-year bonds, bearing interest at 8% per year, will mature in April 2026. The offering is expected to close on April 9.

The Vancouver-based company says it plans to use the funds to refinance all existing debt, and to advance its growth projects at its Copper Mountain mine in southern British Columbia and at its Eva copper project in Queensland, Australia.

“We are pleased to be able to improve the company’s cash liquidity,” Gil Clausen, the company’s president and stated in a press release. “Our expansion plans at the Copper Mountain mine are expected to be fully funded by cash on hand and free cash flow.”

According to Clausen, the company’s “vision is to triple copper production from 2020 production levels within five years and do so in a low risk, financially sound manner.”

The Copper Mountain mine is located near Princeton, B.C., 300 km east of Vancouver, and is 75% owned by the company (the remainder is held by Mitsubishi Materials). The open pit, truck and shovel operation produced 77.6 million lbs of copper, 29,227 oz. gold and 392,494 oz. silver last year. The company estimates 2021 production will increase to 85-95 million lbs. copper, 25,000-35,000 oz. gold and 500,000-550,000 silver.

The company expects to make a construction decision on its Eva project before the end of this year. The development stage project in northwestern Queensland is envisioned as an open pit mine and has measured and indicated resources of 261 million tonnes grading 0.42% copper for 2.4 million lb. of copper.

Rene Cartier, who covers the company for BMO Capital Markets, said the US$250 million bond offering “provides a cleaner, simpler and much more flexible balance sheet.”

“Following the offering, CMMC will now be able to access 100% of the excess free cash flow from the mine,” he wrote in a research note to clients. “CMMC plans to advance a US$260M senior secured loan to the subsidiary that holds the Copper Mountain mine; CMMC will thus be entitled to 100% of mine cash flow until the loan has been repaid, and then reverting to 75%.”

Cartier has an outperform rating on the company and a target price on the stock of $3.25 per share.

At press time Copper Mountain Mining was trading at $2.94 within a 52-week range of 32¢ and $3.57. The company has 207.5 million common shares outstanding for a market cap of about $610 million.