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Re. copper stocks deep in the doo-doo, here's the piece IKN327 last Sunday about Capstone (

Capstone Mining ( is one of the stocks in the "Copper Basket" at the IKN Weekly, 15 stocks which we track as a bunch (not buy or reco, just track) to gauge the state of play in the copper space. Here's the bit on CS from three days ago and as you'll see, it's hardly the first time we've warned loudly about the sector, or this specific stock's near-term future (or lack of):


Capstone Mining ( In IKN319 the call was to get out of the copper space, with part of that piece saying "the big players happy to run their big mines at full speed because they're still highly profitable at the current copper prices, but the small players, the medium-sized and those left holding exploration projects are now being priced out".

In IKN324 we zeroed in on as a prime candidate for real share price pressure going forward as copper's price drop started to bite:

"If my scenario plays out, we're not just going to see a few stocks come under share price pressure, we're going to see companies with weak balance sheets get overrun by their debt positions and call for bankruptcy protection and from the state the 1q15 balance out of Capstone (, this company is a candidate for such a fate.

"The problem CS has is with its Senior Secured debt, which stood at $298m as at 1q15. According to the terms of the financing deal, CS has to keep ratio of debt-minus-pledged-cash to rolling EBITDA to 3:1. In real terms, CS has to show rolling EBITDA of over $50m or so (debt minus cash at 3 to 1) over its quarters in order to be in good stead, and as it has some decent quarters in the bag (in EBITDA terms at least) it's currently in compliance. But as the last quarter's EBITDA was negative $11m, it's not going to take many more of those to drag the ratio over 3:1, at which point CS is in non-compliance with its covenant and could be called into receivership by its creditors."

And indeed the scenario is playing out. Here's a two month price chart which illustrates to 40.6% drop in the share price of between IKN319 and today:

That's pretty hairy and unlike the precious metals plays, there's been little relief in the last few days. It's my contention that things have to get worse in the copper space before they get any better and that probably means a few headline-making corporate casualties before the market turns around. One of the prime candidates for bankruptcy protection is the highly leveraged so you may think this weekend's 76c price is wildly cheap. I think the cheap is going to get a lot cheaper.

UPDATE: And good morning to you Cindy Burnett, VP Investor Relations and Communictaions at Capstone Mining (

Nice to see you've decided to use the feed option and become a regular reader, too. Have a pleasant day, Cindy. And perhaps you'd like to spend a little time this afternoon learning about internet anonymity. Or the lack of it.