Capstone Copper is on the verge of a massive transformation. Their flagship Mantoverde Development Project (MVDP) is nearing completion, promising to catapult the company's production and dramatically slash costs. Analysts are buzzing, investors are eager, and the future seems bright. But lurking beneath the surface of Capstone's Q1 2024 earnings call transcript is a subtle clue, a potential game-changer that seems to have slipped past everyone's radar.

The clue lies in the interplay between Mantos Blancos, Capstone's other Chilean mine, and the tantalizing prospect of negative treatment charges (TCRCs) for copper concentrate. On the surface, Mantos Blancos appears to be a minor annoyance, plagued by production bottlenecks that are delaying its ramp-up to full capacity. Management assures us these are temporary hiccups, easily solvable with some engineering tweaks and a $35 million investment. But what if those "hiccups" are actually a strategic pause, a deliberate move to time Mantos Blancos' full potential with a seismic shift in the copper concentrate market?

Here's where the negative TCRCs come in. As global copper demand surges, smelters are scrambling for concentrate, leading to a remarkable phenomenon: miners are being *paid* to ship their product. Capstone, with "considerable unencumbered tons to move," is perfectly positioned to capitalize on this unprecedented scenario.

Jerrold Annett, Capstone's SVP of Strategy and Capital Markets, hints at this windfall, noting that the benchmark for TCRCs is "likely to move considerably lower next year." He then drops a bombshell: a $50 decrease in treatment charges would slash Capstone's consolidated C1 costs by over $0.11 per pound in 2025.

Let's do the math. Capstone's guidance pegs 2025 production at roughly 260,000 tons of copper, with a C1 cost around $2 per pound. A $0.11 decrease brings that cost down to $1.89. Now, assuming copper prices stay around $4.50 (current levels), we're looking at a potential EBITDA impact of $275 million.

But here's the kicker: Mantos Blancos, once fully operational, will add another 40,000 to 50,000 tons of copper to Capstone's annual output. That's an additional $44 million to $55 million in EBITDA *at the $2 cost guidance*. Factor in the $0.11 reduction from negative TCRCs, and that figure jumps to $88 million to $110 million.

Suddenly, Mantos Blancos' "bottlenecks" seem a lot less troublesome. Could it be that Capstone is deliberately pacing the mine's ramp-up to coincide with the expected plunge in TCRCs next year? If so, they're sitting on a potential $1 billion secret: a $363 million to $385 million EBITDA boost in 2025, driven by a perfect storm of negative TCRCs and Mantos Blancos hitting its stride.

This scenario, while speculative, raises several intriguing possibilities. First, it suggests Capstone is playing a savvy long game, strategically positioning themselves for maximum profitability. Second, it highlights the company's potential to significantly outperform its current guidance, potentially exceeding $1 billion in EBITDA as early as next year.

Finally, it adds another layer of intrigue to Capstone's already compelling growth story. With the MVDP powering near-term gains, Mantos Blancos poised to unleash its full potential, and the Santo Domingo project on the horizon, Capstone Copper may be quietly shaping up to be one of the most exciting copper stories of the decade.

Production and Cost Projections

The following chart illustrates Capstone Copper's projected production and C1 cash costs from 2023 to 2025. The data for 2024 and 2025 are based on company guidance.

Capstone Copper's Operations

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"Fun Fact: The copper market is expected to experience a significant supply deficit in the coming years as demand for copper for electric vehicles, renewable energy, and infrastructure continues to surge. Capstone Copper, with its growing production profile and low-cost operations, is well-positioned to benefit from this market dynamic."