Copper Mountain Karma – Reap What You Sow
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.
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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.
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>