Capstone Reports Production & Cash Operating Costs for the First Half of 2010
38.8 million pounds of Copper in Concentrates with an Estimated Total Cash Cost(1) of US$1.23 per pound of payable copper
VANCOUVER, July 19 /CNW/ - Capstone Mining Corp. (CS: TSX) today announced its operating results for the three and six months ended June 30, 2010 from its two operations, the Cozamin and Minto mines. Combined production totalled 17.9 and 38.8 million pounds of copper in concentrates in the second quarter and first six months, respectively, with additional significant by-products of lead, zinc, silver and gold. The total cash costs(1), net of estimated by-product credits and selling costs, were US$1.31 and $1.23 per pound of payable copper produced, respectively. At June 30, 2010 Capstone had a cash balance of US$151.5 million (including restricted cash of US$10.7 million), a significant increase partially attributable to the sale during the quarter of higher than normal concentrate inventory accumulated at the Cozamin Mine in the first quarter of 2010, and sale of some investments. Full financial results will be reported on August 10, 2010, as discussed below.
"As previously disclosed, Capstone's two operations, the Cozamin and Minto mines, were expected to have lower than planned production during the second quarter due to previously discussed production constraints and interruptions," said Stephen Quin, President of Capstone Mining Corp. "Production should return to design levels during the third quarter as the root causes of the production constraints have been identified, are temporary in nature and are being addressed." As a result of these production shortfalls, Capstone has reduced its guidance for 2010 to a total of 80 to 85 million pounds of copper in concentrates, but maintains its guidance for total cash costs of production of US$1.10 to US$1.20/lb of payable copper."
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Q1 2010 Q2 2010 YTD 2010
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Copper in concentrates
(millions of pounds)
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- Cozamin 9.9 7.8 17.7
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- Minto 12.0 10.1 21.1(xx)
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Total 21.9 17.9 38.8
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Total Cash Costs(1)
(US$/lb of payable copper)
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- Cozamin $0.82 $1.27 $1.02
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- Minto* $1.37 $1.34 $1.41
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Average $1.12 $1.31 $1.23
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* Minto's operating costs are adjusted to exclude mining of ore and
waste not related to concentrate produced in the period, these costs
are capitalized or inventoried in the financial statements, then
expensed when the associated ore is processed.
(xx) Minto realized negative adjustments to previously reported copper
production based on the final settlement of copper sales during the
first six months in the amount of one million pounds. As these
amounts are related to shipments made over the first six months, but
relate to production in the latter part of 2009 and early 2010, the
adjustments are only reflected in the year to date column, therefore
certain lines will not sum across.
Operational Highlights for the three and six months ended June 30, 2010
The following is a summary of operational highlights for Capstone during the three and six months, respectively, ended June 30, 2010:
- Production of 17.9 and 38.8 million pounds of copper contained in
concentrates, respectively.
- By-product production of 3.9 and 7.7 million pounds of zinc, 2.3 and
5.8 million pounds of lead and 335,142 and 798,838 ounces of silver
in concentrates, for the three and six months, respectively. Final
gold production is not available since assaying is done off site, but
is estimated at 5,802 and 13,358 ounces for the respective periods.
- Production of 17.3 and 37.4 million pounds of payable copper in
concentrate for the second quarter and first six months of 2010,
respectively.
- Total cash cost per pound of payable copper produced(1) of US$1.31
and $1.23 in the three and six months, respectively, versus
previously published guidance of approximately US$1.10 to $1.20 per
pound.
- Cozamin Mine results for the three and six months ended June 30,
2010, respectively, were:
- Produced 7.8 and 17.7 million pounds of copper contained in
concentrates, along with by-products of 3.9 and 7.7 million
pounds of zinc, 2.3 and 5.8 million pounds of lead and 285,933
and 687,370 ounces of silver, respectively, for the second
quarter and first six months of 2010;
- Processed 232,847 tonnes (2,559 tpd) and 492,503 tonnes
(2,721 tpd) of ore averaging 1.69% and 1.80% copper, 1.28% and
1.22% zinc, 0.65% and 0.82% lead, with 55 and 60 grams per
tonne ("g/t") silver respectively, for the second quarter and
first six months;
- Total tonnes processed was below potential capacity of the
process plant because of lower than anticipated production from
the wider, higher grade stopes, which limited the number of
operating days for the process plant. When feed was available,
the plant typically averaged 3,200 to 3,500tpd;
- Produced 14,343 and 32,937 dry metric tonnes ("dmt") of copper
concentrate averaging 24.7% and 24.4%, 3,682 and 7,363 dmt of
zinc concentrate averaging 47.9% and 47.2% and 1,516 and
4,068 dmt of lead concentrate averaging 67.5% and 65.0%; and
- Produced 7.5 and 17.0 million pounds of payable copper at an
estimated total cash cost(1), net of estimated by-product
credits and estimated selling costs, was US$1.27 and $1.02 per
pound of payable copper produced; and
- Copper production in Q2/10 was below plan primarily as a result
of lower than anticipated production from the higher copper
grade, wider stopes, as discussed below.
- Minto Mine results for three and six months ended June 30, 2010,
respectively, were:
- Produced 10.1 and 21.1 million pounds of copper contained in
concentrates, along with by-product 49,210 and 111,468 ounces
of silver and gold estimated at 5,802 and 13,358 ounces,
respectively, for the second quarter and first six months;
- Processed 185,296 tonnes (2,036 tpd) and 414,634 tonnes
(2,291 tpd) of ore averaging 2.66% and 2.48% copper, an
estimated 1.3g/t and 1.3g/t gold and 10g/t and 9.5g/t silver;
- Produced 10,362 and 23,534 dmt of copper concentrate averaging
44.4% and 40.6%;
- Produced 9.8 and 20.4 million pounds of payable copper at an
estimated total cash cost(1) of US$1.34 and $1.41 per pound of
payable copper;
- Copper production in Q2/10 was significantly below plan as a
result of(1) operations being suspended for a week due to a
forest fire within the area which resulted in a seven day
suspension of operations at the mine site and(2) throughput
restrictions in the tailings plant (see discussion below);
- Announced additional high grade copper-gold results from Minto
East on April 27, 2010 and reported a mineral resource estimate
for Minto East on June 23, 2010. Also, on June 8, 2010,
provided information for the proposed Minto mine Phase V
expansion and permit application.
- Kutcho Project:
- Subsequent to quarter end, completed an enhanced preliminary
economic assessment (filed on July 13, 2010) which followed
through on several opportunities identified in the 2009
preliminary assessment, such as enhanced metallurgical
performance and reduction in power expenditures.
Operating Details - Cozamin Mine
Key operating statistics for the Cozamin Mine for the first and second quarter and year-to-date for 2010 are presented below:
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Q2 2010 YTD 2010
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Production(2)
(contained in concentrates)
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- Copper (000s pounds) 7,803 17,743
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- Lead (000s pounds) 2,257 5,826
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- Zinc (000s pounds) 3,891 7,664
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- Silver (ounces) 285,933 687,370
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Mine
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- Tonnes of ore mined 230,150 491,019
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Mill
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- Tonnes processed 232,847 492,503
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- Tonnes processed per day 2,559 2,721
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- Copper grade (%) 1.69 1.80
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- Lead grade (%) 0.65 0.82
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- Zinc grade (%) 1.28 1.22
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- Silver grade (g/t) 55 60
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Recoveries
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- Copper (%) 89.9 90.6
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- Lead (%) 67.4 65.4
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- Zinc (%) 59.2 57.7
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- Silver (%) 69.9 72.5
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Concentrate(2)
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- Copper (dmt) 14,343 32,937
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- Copper (%) 24.7 24.4
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- Silver (g/t) 492 498
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- Lead (dmt) 1,517 4,068
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- Lead (%) 67.5 65.0
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- Silver (g/t) 1,207 1,115
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- Zinc (dmt) 3,682 7,363
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- Zinc (%) 47.9 47.2
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On site Operating Costs (US$/t milled)(1) US$50.19 US$46.55
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Total cash cost per pound of payable copper(1) US$1.27 US$1.02
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(2) Adjustments based on final settlements will be made in future
periods.
Production constraints underground at the Cozamin Mine limited mill throughput during the quarter. Key high copper grade, wide stopes on the 11 level produced less tonnes than anticipated during the quarter due to a continued focus on ensuring the geotechnical stability of these important production areas. Mine production was supplemented by mining areas higher in the system, which had higher lead and zinc grades, and the opportunistic mining of high lead grade areas in the hanging wall of the main Mala Noche vein system that are not carried in mineral resources or mineral reserves. Production was also affected by the previously reported fatality in April, which resulted in a three-day cessation of operations. Capstone continues to work with its geotechnical consultants to ensure the geotechnical stability of the widest, high copper grade areas, installing additional cable bolts, which reduces productivity from and increases costs in these areas. In order improve mine production, Capstone has advanced development on the 12 level, and has opened up two new high copper grade stopes on this level, which commenced production in early July. As a result of lower tonnage mined and processed, unit operating costs per tonne were higher than anticipated, resulting in higher total cash costs per pound of payable copper, partially offset by higher by-product credits.
During the three months ended June 30, 2010, the Cozamin Mine shipped and recorded as revenue 21,300 dmt of copper, 2,713 dmt of lead and 3,710 dmt of zinc concentrates. These numbers reflect the sale of higher than normal levels of concentrates stockpiled during Q1/10 that were shipped and sold in Q2/10. During the first six months of 2010, a total of 32,509 dmt of copper, 4,628 dmt of lead and 7,332 dmt of zinc concentrates were shipped and recorded as revenue.
Operating Details - Minto Mine
Key operating statistics for the Minto Mine for the first and second quarter and year-to-date for 2010 are presented below:
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Q2 2010 YTD 2010(5)
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Production(3)
(contained in concentrates)
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- Copper (000s lbs) 10,139 21,061
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- Gold (oz)(2) 5,802 13,358
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- Silver (oz) 49,210 111,468
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Mining
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- Waste (tonnes) 1,614,494 4,234,257
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- Ore (tonnes) 317,265 1,116,722
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- Total material mined (tonnes) 1,931,759 5,350,979
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Milling
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- Tonnes processed 185,296 414,634
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- Tonnes processed per day 2,036 2,291
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- Copper grade (%) 2.66 2.48
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- Gold grade (g/t)(2),(3) 1.3 1.3
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- Silver grade (g/t) 10 9.5
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Recoveries
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- Copper (%) 91.6 92.8
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- Gold (%)(2),(3) 77.5 77.1
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- Silver (%) 80.6 80.5
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Concentrate
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- Dry tonnes produced 10,362 23,534
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- Copper grade (%) 44.4 40.6
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- Gold grade (g/t)(2),(3) 17.4 17.7
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- Silver grade (g/t) 148 147
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On site Operating Costs(1) (US$/t milled)(4) US$65.29 US$63.67
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Total cash cost per pound(1) of payable copper(4) US$1.34 US$1.41
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(2) Gold is not assayed on site, resulting in a significant lag in
receiving this data.
(3) Adjustments based on final settlements will be made in future
periods.
(4) Minto's operating costs are adjusted to exclude mining of ore and
waste not related to concentrate produced in the period, these costs
are capitalized or inventoried in the financial statements, then
expensed when the associated ore is processed.
(5) Adjustments are only reflected in year to date column relating to
negative adjustments of previously reported copper production.
Throughput at the Minto Mine continued to be constrained by the performance of the tailings filter plant. The previously reported sliming has not been a significant issue for some time however, the tailings filter plant has continued to underperform previously achieved throughput levels. This underperformance has been partially attributed to degradation of the wear parts in the filter presses, resulting in reduced availability and lower tonnes per hour filtered. A staged replacement of wear parts has gradually improved performance so that plant throughput has steadily increased and has been periodically achieving in excess of 3,000 tpd since early July. However, installation of new filter plates, a key component of the performance improvement process, will not begin until later in July and should be completed by mid-August. As a result, plant performance is expected to slowly ramp up to sustained design levels of 3,200 tpd or more by mid- to late-third quarter.
During the three months ended June 30, 2010, the Minto Mine shipped and recorded as revenue on 8,103 dmt of copper concentrate. For the six months a total of 27,687 dmt were shipped and recorded as revenue. The ice bridge across the Yukon River closed in early April due to the spring break up and, as expected, the barging season commenced in early June 2010, limiting the amount of concentrate that could be trucked from the mine during the second quarter. Two shipments are expected during the third quarter.
Outlook
In order to improve underground production from the high copper grade, widest areas at the Cozamin mine, two additional long hole stopes have been developed on the 12 level and an enhanced cable bolting and geotechnical program has been instituted in the very wide, high copper grade stopes on the 11 level. These additional production areas, along with other operational improvements, are expected to result in underground mine production being ramped up during Q3/10. Given the process plant's proven ability to operate well in excess of the design 3,000 tpd, it can easily handle these higher tonnages. As a result of these factors, guidance for Cozamin production has been reduced to 40 to 42 million pounds of copper in concentrates for 2010, at the lower end of guidance provided on December 17, 2009, requiring sustained stronger performance for the balance of the year. Given improved access to the higher copper grade ore and the plant's ability to process significantly more tonnage than in the previous two quarters, such performance is reasonably achievable with steadily increasing production into Q3/10 and Q4/10. Due to higher than projected lead by-products, cash costs are likely to remain within prior guidance.
As noted above, production at the Minto mine has been hampered by underperformance in the tailings filter plant during 2010, well below previously achieved throughputs. While a number of improvements have been made that have gradually seen an increase in throughout to levels near the original budget by mid-July, sustained higher throughputs require replacement of the filter plates in all five filters, which will be completed between now and mid-August at an approximate cost of C$1.5 million, after which throughput should steadily increase. As a result of the production shortfall to date, the Minto Mine will not achieve the prior guidance of 50 to 55 million pounds of copper in concentrates for 2010, and guidance has been reduced to 40 to 43 million pounds of copper in concentrates for 2010. Given the timing of the change out of the filter plates, mill throughput should increase quarter on quarter in Q3/10 and Q4/10, but copper production is expected to remain relatively constant during this period since higher throughput will be offset by declining grades of stockpiled material over this time. Since there is in excess of one million tonnes of ore in stockpiles awaiting processing, mining will not be a limiting factor in Minto's performance. With lower production, cash costs are expected to be above prior guidance.
Overall, Capstone therefore has 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.
Second Quarter Financial Results Timing
Capstone will report its second quarter 2010 financial results on Tuesday, August 10, 2010 after market close and will host a conference call and webcast to discuss these results as noted below.
Conference call and webcast details are as follows:
Date: Wednesday August 11, 2010
Time: 8:30 AM PST (11:30 AM EST)
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
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 Capstone Mining Corp. (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 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", "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. 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 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. There can be 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 news release ("Technical Information") based on information contained in the technical reports and news releases (collectively the "Disclosure Documents") available under Capstone Mining Corp.'s and Sherwood Copper 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 following employees of Capstone, each a Qualified Person, reviewed Technical Information contained in this news release: Robert Barnes, Professional Engineer reviewed Technical Information related to the Cozamin Mine and Stephen Quin, Professional Geologist reviewed all Technical Information in this news release. In addition, Randall Thompson, General Manager, reviewed Technical Information related to the Minto Mine and Telesforo Martinez, General Manager, reviewed the Technical Information related to the Cozamin Mine.
(1) Non-GAAP Performance Measures
"Total Cash Cost per Pound of Payable Copper" and "On site operating costs per tonne milled" are Non-GAAP Performance Measures. These performance measures are included because these statistics are key performance measures that management uses to monitor performance. Management uses these statistics to assess how the Company is performing to plan and to assess the overall effectiveness and efficiency of mining operations. These performance measures do not have a meaning within GAAP and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance in accordance with GAAP.
For further information: about Capstone, please contact: Darren Pylot, Vice Chairman & CEO or Stephen Quin, President Or Zobeida Slogan, Investor Relations, at (604) 684-8894 or toll free at (866) 684-8894, [email protected]
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