When copper costs are falling, it’s pure for buyers to get skittish. That’s precisely what’s been occurring this 12 months, and Capstone Copper (TSX:CS) has taken a success. The copper inventory has dropped greater than 27% since its April excessive, reflecting not simply weak point within the commodity but in addition investor nervousness about progress plans and geopolitical danger.
However is the selloff overdone? Or are extra losses forward? Let’s take a more in-depth take a look at Capstone’s newest outcomes and prospects to reply the massive query for July 2025: do you have to purchase, promote, or maintain?
About Capstone
Capstone is a copper miner with operations in Chile, Arizona, and Mexico. Its main draw for buyers is the Santo Domingo undertaking in Chile, which it owns alongside the federal government via a partnership with ENAMI. This large mine ought to drive years of future progress, however that’s additionally the place a number of the present uncertainty lies.
In its first-quarter 2025 earnings, Capstone reported report income of $533 million, up from $340 million a 12 months earlier. The rise was largely because of increased copper costs and a few operational headwinds at its Cozamin mine in Mexico. Adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) got here in at $180 million, virtually double the 12 months earlier than. The copper inventory reaffirmed its full-year manufacturing steerage and pointed to regular progress on Santo Domingo, which stays on observe for first manufacturing in 2027.
What to observe
So, what does this all imply for buyers? On the one hand, Capstone is clearly in funding mode. It’s spending closely to construct out future manufacturing and modernize its operations. That’s a long-term constructive, nevertheless it additionally means short-term money movement is underneath stress. Capital expenditures this 12 months ought to hit $315 million, a lot of it going towards the Chilean undertaking. This has pushed the corporate’s web debt all the way down to $788 million 12 months over 12 months, though it’s increased than it was within the final quarter.
Nonetheless, administration stays assured that the funding will repay. CEO John MacKenzie emphasised within the newest earnings name that copper stays robust and that Capstone ought to profit. That confidence is echoed by analysts, a few of whom nonetheless see the inventory as undervalued based mostly on long-term copper demand from electrification and power infrastructure. And proper now, with copper costs at US$4.50 per pound, it seems as if these beliefs are coming true.
Issues
What makes this tough is timing. In case you’re searching for short-term good points, Capstone would possibly frustrate. Its earnings are tied carefully to copper costs, and proper now the macro image is cloudy. However for those who’re a long-term investor prepared to trip out some volatility, there’s a case to be made that this can be a maintain, or perhaps a purchase on weak point.
At present costs, Capstone trades at round 1.5 occasions guide worth and 25.77 occasions ahead earnings. That’s a steep low cost in comparison with the place it traded a 12 months in the past, and it doesn’t absolutely mirror the potential of Santo Domingo or the rebound in copper many count on by 2026. Nevertheless, that rebound will not be assured, and any delay to the undertaking timeline or sustained value weak point may ship the inventory decrease.
Backside line
In case you already personal shares, holding possible is sensible. The copper inventory isn’t in monetary hassle, and the long-term thesis is unbroken, although it might take endurance. In case you’re considering of shopping for, you’ll wish to be snug with volatility and have an extended funding horizon. Capstone will not be a protected haven. It’s a wager on future copper costs and its capacity to convey Santo Domingo on-line easily.
For brief-term merchants, the latest dip may not be deep sufficient to justify a purchase simply but. However for long-term buyers searching for copper publicity with progress upside, Capstone might be one of many higher choices on the TSX. Simply be ready for a number of bumps alongside the way in which.
