Capstone Reports Financial Results for the Second Quarter and Year-to-Date
Net Earnings of $45.4 million in Second Quarter and $58.9 million in first six months of 2010
(All amounts in US$ unless otherwise specified)
VANCOUVER, Aug. 10 /CNW/ - Capstone Mining Corp. (CS: TSX) today announced its financial results for the three and six months ended June 30, 2010, including net earnings of $45.4 million or $0.23 per share in the Second Quarter and $58.9 million or $0.30 per share in the first six months of 2010. Copper produced in the first six months at Capstone's two mines, Cozamin and Minto, totalled 37.4 million pounds of payable copper at an estimated total cash cost(1) of $1.23 per payable pound. Capstone ended the quarter with cash on hand of $151.6 million (including $10.8 million of restricted cash) and held liquid investments of $18.1 million as of June 30, 2010.
Capstone will hold a conference call Wednesday August 11, 2010 at 8:30 AM Pacific time (11:30 AM Eastern time) to discuss these results; call-in details are at the end of this release. This release should be read in conjunction with Capstone's second quarter 2010 consolidated financial statements and management's discussion and analysis ("MD&A") which are available on Capstone's website at:
http://capstonemining.com/s/FinancialStatements.asp.
Overview
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Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
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Gross sales revenue ($ millions) 69.2 50.2 157.2 113.6
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Payable copper produced
(millions lbs) 17.3 22.2 37.4 47.3
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Total estimated cash cost per
pound of payable copper(1) ($) 1.31 0.97 1.23 0.93
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Copper sold - (millions lbs) 17.7 17.8 38.8 45.1
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Net earnings ($ millions) 45.4 25.8 58.9 9.6
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Net earnings per share ($) 0.23 0.14 0.30 0.05
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Adjusted net earnings(1)
($ millions) 10.0 16.8 31.7 47.3
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Adjusted net earnings(1)
per share ($) 0.05 0.09 0.16 0.27
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Cash flow from operating
activities ($ millions) 32.5 20.1 36.9 30.8
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Cash flow from operating
activities per share ($)(1) 0.16 0.11 0.19 0.18
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Cash, including restricted
($ millions) 151.6 76.8
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"Capstone's operations continue to generate significant cash flow from operating activities which, combined with the sale of some investments, has significantly increased our financial strength," said Darren Pylot, Vice Chairman and CEO of Capstone Mining Corp. "We benefit from low production costs and have a very strong balance sheet, with $141 million in unrestricted cash on June 30, 2010, which positions us well to grow both organically (through exploration and development), and through external transactions."
Q2 Highlights
Financial and Production Highlights for the Three Months Ended June 30,
2010
- Recorded net earnings of $45.4 million or $0.23 per common share
which included:
- Earnings from mining operations of $27.1 million;
- Gain on disposal of investments of $11.0 million; and
- Net gain of $29.1 million on derivative instruments which is
comprised of:
- A realized loss of $7.2 million on instruments settled during
the period; and
- An unrealized non-cash net gain of $36.3 million on instruments
outstanding, as a result of the reduction of metal prices over
the period.
- Adjusted net earnings(1) were $10.0 million or $0.05 per common share
after making adjustments for certain non-cash and non-recurring
items, including the non-cash gain on derivative instruments and the
gain on the disposal of investments.
- Generated cash flow from operating activities of $32.5 million or
$0.16 per common share.
- Working capital, which includes $151.6 million in cash (including
$10.8 million in restricted cash), increased to $142.0 million at
June 30, 2010 from $110.9 million at March 31, 2010.
- Sold 17.7 million pounds of copper, 3.2 million pounds of zinc, 3.6
million pounds of lead, 6,201 ounces of gold and 428,767 ounces of
silver.
- Produced a total of 17.3 million pounds of payable copper at a total
estimated cash cost(1) of $1.31 per pound of payable copper.
Financial and Production and Highlights for the Six Months Ended June 30,
2010
- Recorded net earnings of $58.9 million or $0.30 per common share
which included:
- Earnings from mining operations of $64.9 million;
- Gain on disposal of investments of $11.0 million; and
- Net gain of $21.1 million on derivative instruments which is
comprised of:
- A realized loss of $14.9 million on instruments settled during
the period; and
- An unrealized non-cash net gain of $36.0 million on instruments
outstanding, with the reduction of metal prices over the
period.
- Adjusted net earnings(1) were $31.7 million or $0.16 per common share
after making adjustments for certain non-cash and non-recurring
items, including the non-cash gain on derivative instruments and the
gain on the disposal of investments.
- Generated cash flow from operating activities of $36.9 million or
$0.19 per common share.
- Working capital, which includes $151.6 million in cash (including
$10.8 million in restricted cash), increased to $142.0 million at
June 30, 2010 from $86.0 million at December 31, 2009.
- Sold 38.8 million pounds of copper, 6.3 million pounds of zinc, 6.2
million pounds of lead, 16,896 ounces of gold and 781,307 ounces of
silver.
- Produced a total of 37.4 million pounds of payable copper at a total
estimated cash cost(1) of $1.23 per pound of payable copper.
Additional Highlights
- Commenced exploration drilling at the Cozamin Mine, with underground
drilling intersecting significant copper grades in a zone located in
the footwall of the principal Mala Noche vein (which hosts the
mineral resources and reserves at the Cozamin Mine). Drilling is
continuing, and will expand to other areas of the Cozamin Mine during
the balance of the year.
- Continued exploration at the Minto Mine with exploration drilling on
the margins of the Area 2 deposit and at Minto East, with encouraging
results. In addition, a property-wide, deep penetrating geophysical
survey was commenced.
- Reported a first-time mineral resource estimate for the Minto East
discovery at the Minto Mine, while infill drilling commenced to
increase the confidence to a level suitable for inclusion in a pre-
feasibility study.
- Announced an updated proposed expansion of the Minto Mine and the
permitting process, including amended guidance incorporating the
proposed underground development of certain mineral resources,
resulting in a forecast higher level of copper production in the
first six years subsequent to the expansion.
Highlights Subsequent to June 30, 2010
- The Company entered into forward copper purchase contracts for 9.2
million pounds of copper at prices between $2.93 and $3.42 over 2011
to 2013, an average of $3.19/lb. These forward purchase contracts
effectively offset approximately 18% of the Company's forward copper
sale contracts as at June 30, 2010. The Company has no commitments to
make any further purchases, though the Company's intention is to take
advantage, when favourable market conditions exist, and enter into
additional forward purchase contracts to offset the balance of its
outstanding forward copper sale contracts in the years 2011 through
2014.
- Announced the results of an updated preliminary economic assessment
("PEA") for the Kutcho Project, with improved economic parameters and
a recommendation to proceed to completion of a pre-feasibility study,
which work has commenced.
- Announced the discovery of the Wildfire zone at the Minto Mine as a
result of following up on a strong geophysical anomaly. As a result
of the extent of the anomaly and the encouraging initial results, an
additional drill is to be added to accelerate the evaluation of the
potential of this new discovery.
- Appointed Ms. Chantal Gosselin to the Board of Directors.
Production Guidance
As reported July 19, 2010, the Company revised its guidance to 80 to 85 million pounds of copper in concentrates in 2010, with total cash costs(1) net of by product credits anticipated to remain within the prior guidance of US$1.10 to US$1.20 per pound of payable copper, but likely towards the upper end of that range. Further, given the timing of the production improvements noted above, Q4/10 will likely have higher production than Q3/10. Achieving this guidance is dependent on a number of factors including, but not limited to, increased production from higher copper grade areas supporting sustained higher grade mill throughput at the Cozamin Mine, successful resolution of the constraints in the tailings plant allowing increased mill throughput at the Minto Mine, and removal of sufficient water from the Minto pit to allow access to higher grade ore during Q4/10.
(1) This is a non-GAAP performance measure; please see "Non-GAAP
Performance Measures" below.
Conference Call Details
Capstone will host a conference call on Wednesday, August 11, 2010 to discuss these results. The conference call and webcast details are as follows:
Date: Wednesday, August 11, 2010
Time: 8:30 AM Pacific Time (11:30 AM Eastern Time)
Dial in: North America - 1.888.231.8191, International - 1.647.427.7450
Webcast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3141380
Replay: North America - 1.800.642.1687, International - 1.416.849.0833
Replay Pass code: 87497768
The conference call replay will be available until August 25, 2010. A transcript of the call will also be made available on Capstone's website (http://capstonemining.com/s/ConferenceCalls.asp) within 24 hours of the call.
Cautionary Note Regarding Forward-Looking Information
This document may contain "forward-looking information" within the meaning of Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"). These forward-looking statements are made as of the date of this document and the Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation.
Forward-looking statements relate to future events or future performance and reflect Company management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and mineral resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "outlook", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. In this document, certain forward-looking statements are identified by words including "may", "future", "expected", "intends" and "estimates". By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual financial statements and management's discussion and analysis of those statements, all of which are filed and available for review under the Company's profile on SEDAR at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company provides no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking statements.
43-101 Compliance
Unless otherwise indicated, Capstone has prepared the technical information in this MD&A ("Technical Information") based on information contained in the technical reports and news releases (collectively the "Disclosure Documents") available under Capstone Mining Corp.'s company profile on SEDAR at www.sedar.com. Each Disclosure Document was prepared by or under the supervision of a qualified person (a "Qualified Person") as defined in National Instrument 43-101 - Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ("NI 43-101"). Readers are encouraged to review the full text of the Disclosure Documents which qualifies the Technical Information. Readers are advised that mineral resources that are not mineral reserves do not have demonstrated economic viability. The Disclosure Documents are each intended to be read as a whole, and sections should not be read or relied upon out of context. The Technical Information is subject to the assumptions and qualifications contained in the Disclosure Documents.
The disclosure in this MD&A of all technical information has been prepared under the supervision of Stephen Quin, Professional Geologist, President of the Company, Robert Barnes, Professional Engineer, Vice President Operations of the Company, and Brad Mercer, Professional Geologist, Vice President Exploration of the Company, all Qualified Persons under NI 43-101.
Non-GAAP Performance Measures
The items marked with a "(1)" are non-GAAP performance measures and readers should refer to Non-GAAP Performance Measures in the Company's Interim Management's Discussion and Analysis for the three and six months ended June 30, 2010 as filed on SEDAR and as available on the Company's website for further details.
For further information: Darren Pylot, Vice Chairman & CEO or Stephen Quin, President Or Zobeida Slogan, Investor Relations, at (604) 684-8894 or (866) 684-8894, [email protected]
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