EDITOR: | June 13th, 2016 | 3 Comments

Copper Mountain Karma – Reap What You Sow

| June 13, 2016 | 3 Comments
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Betty Joy Leblanc was appointed Manager, Investor Relations for Copper Mountain Mining Corporation in May, 2015. She walked into a gong show of shareholder discontent. Management’s ongoing failure to ever hit its own guidance didn’t make her difficult job any easier.

What do you do when management underperforms, abuses its NSR holders, makes material misstatements in core and non-core disclosure documents, and fails to respond to inquiries about its debt levels? How do you deal with a stock price that plunged from a high of around $7.75 (July, 2011)  to its $0.38 recent closing? What’s the best approach for fixing a negative working capital position and lack of cash?

Here’s what you do. You change the Investor Relations person! It’s not the board’s fault, or the CEO’s fault, or the VP, Ex. Heavens, no! It has to be IR!

So say hello to Dan Gibbons, who was announced last week as the new Investor Relations person at $CUM.V. No mention was made of what happened to Ms. Leblanc. You best strap on your helmet and put in your mouthguard, Mr. Gibbons, for this week’s shareholder meeting. (Circular and proxy can be found here.)

Copper Mountain (TSXV: CUM) owns 75% of the Copper Mountain Mine, near Princeton, British Columbia. Mitsubishi Materials Corporation owns the other 25%.

We’ve been critical of $CUM.V’s management since April of 2015 for numerous obvious failings, and have cast doubt on CUM’s ability to survive.  A search through this website (InvestorIntel.com) will turn up numerous articles providing the factual basis for these serious criticisms.

We’re not the only ones highly doubtful of $CUM.V’s survival. See this article that points to the negative working capital position, the lack of cash, and the possibility of bankruptcy. A websearch turns up another article entitled, “Copper Mountain Mining Is Toying With Bankruptcy”.

There is cosmic karma at work here. $CUM.V has been abusive for many years towards Hornby Bay Mineral Exploration Ltd. (TSXV: HBE). It seems obvious that $CUM.V has been hoping that Hornby Bay would simply run out of cash and financing sources, and would ultimately be de-listed or petitioned into bankruptcy. In either event $CUM.V would not have to answer the difficult questions about its incorrect disclosure concerning the Net Smelter Royalty owned by Hornby Bay.

It hasn’t helped that Hornby Bay’s CEO has been confrontational, loud and focused.

But “tenacious” is a term well-applied to Hornby Bay. Like moss clinging to a rock, $HBE.V survived the multiyear downturn, until this year when Copper Mountain finally started to take ore from the lands over which $HBE.V’s royalty applied. That means Copper Mountain is in debt to $HBE.V for the royalty payments. $HBE.V doesn’t have to rely upon outside financings for cash – its operating cash will come from the royalty payments.

A review of $CUM.V’s behaviour shows it unlikely that $CUM.V will simply open its wallet to make regular accurate payments to Hornby Bay. There will be shenanigans and delays. No doubt $CUM.V is enduring some financial stress from its bankers, who would rather all cash stay in the company to buttress the balance sheet. But these payments must be made. If not, Copper Mountain is insolvent.

There are mechanisms within British Columbia law allowing for fast recoveries of liquidated damages in certain circumstances. Regardless of whether $HBE.V goes that route, if Copper Mountain does not accurately pay HBE on the royalty, $HBE.V will likely be able to petition Copper Mountain into bankruptcy.

The bigger bully on the block pounded the little guy in the playground for years – what a fine piece of cosmic karma it would be if the little guy, all grown up now, got to play by the rules and send the bully to the office.


Peter Clausi

Editor:

Mr. Clausi is an experienced investment banker, executive and director. A graduate of Osgoode Hall Law School called to Ontario's bar in 1990, Mr. Clausi ... <Read more about Peter Clausi>


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Comments

  • Paul Hough

    Bet on the jockey on this one. Have known Jim O’Rourke since his early days at Placer.,Endako ,Gibraltar and earlier Princeton Copper.
    He has demonstrated ability to manage marginal properties . With the projected low world inventories of copper I see this property being profitable. Their proximity to Van gives them low transportation costs. They have a stable workforce and good relations with first nations in area. This is a working mine with long term reserves. One of the big guys now flush with cash will probably come knocking.—Yes I am a shareholder

    June 22, 2016 - 11:16 AM

  • George Mctimm

    O’Rourke has already bankrupted one mining company, Cassiar Mining in the early 90s. Cassiar had a $26 million dollar loan from the BC government and after encountering development problems and cost overruns at its McDame underground project at Cassiar was forced to declare bankruptcy. It was rumoured at the time that O’Rourke threatened to close the Cassiar operation unless the NDP government forgave the loan that had been on the company’s books for years. The NDP subsequently called his bluff but was forced to bail out the workforce at Cassiar with taxpayer money. Just to show you the preponderance of brain dead people in the mining industry, the Mining Association of BC – a lobby group for the industry – appointed him Chairman shortly thereafter. He’s also in the Canadian Mining Hall of Fame – more popularly known at the Mining Hall of Shame!

    June 26, 2016 - 10:24 PM

  • eric fogh

    Thank you Mr. Clausi for the updates on Hornby Bay. We appreciate them. Lets hope everything works out for them….and us.

    July 6, 2016 - 5:06 PM

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