Capstone Reports Strong Financial Results for Year Ended December 31, 2009
Record Cash Flow from Operating Activities of $112.1 million,
Adjusted Net Earnings of $65.2 million
86.6 million Pounds of Payable Copper Produced at an Estimated Total
Cash Cost(1) of $1.03 per payable pound
(All amounts in US$ unless otherwise specified)
VANCOUVER, March 22 /CNW/ - Capstone Mining Corp. (CS: TSX) today announced its financial results for the year ended December 31, 2009. Highlights include adjusted net earnings of $65.2 million ($0.35/share), earnings from mining operations of $81.4 million and cash flow from operating activities of $112.1 million ($0.60/share) on sales of 85.3 million pounds of copper. Capstone's two mines, Cozamin and Minto produced 90 million pounds of copper contained in concentrates in 2009, while payable copper totalled 86.6 million pounds which was produced at an estimated total cash cost (1) of $1.03 per payable pound. Capstone ended the year with cash on hand of $115.9 million and liquid investments of $39.1 million as of December 31, 2009.
Capstone will hold a conference call Tuesday March 23, 2010 at 8:30 AM Pacific time (11:30 AM Eastern time) to discuss these results; call-in details are at the end of this release. This release should be read in conjunction with Capstone's 2009 audited consolidated financial statements and management's discussion and analysis ("MD&A") which are available on Capstone's website at http://capstonemining.com/s/FinancialStatements.asp.
2009 Overview
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Total Total
2009 2008(2)
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Gross sales revenue ($ millions) 250.4 122.8
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Payable copper produced (millions lbs) 86.6 71.3
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Total cash cost per payable pound of copper(1) ($) 1.03 1.25
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Copper sold - (millions lbs) 85.3 42.0
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Earnings (loss) for the period ($ millions) (18.3) 131.8
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Earnings (loss) per share ($) (0.10) 1.47
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Adjusted net earnings(1) ($ millions) 65.2 2.9
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Adjusted net earnings(1) per share ($) 0.35 0.03
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Cash flow from operating activities ($ millions) 112.1 18.7
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Cash flow from operating activities per share ($) 0.60 0.21
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Cash on hand ($ millions) 115.9 27.3
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(2) The Total 2008 information only includes results from the Cozamin
Mine from November 24, 2008 to December 31, 2008, except for the
payable copper produced and the cash cost per pounds of payable
copper which are for the full year.
"In 2009, Capstone delivered cash flow from its operating activities of $112.1 million or $0.60 per share, increasing our cash balance to $115.9 million, with an additional $39.1 million held in liquid securities," said Darren Pylot, Vice Chairman and CEO of Capstone Mining Corp. "In the current robust metal price environment, with our debt almost eliminated and expansions completed at both the Cozamin and Minto Mines, we look forward to generating significant cash flow in 2010, building our balance sheet and positioning Capstone for both organic growth (through exploration and mine expansions), and external transactions."
"Capstone's two operations, the Cozamin and Minto mines, benefited from the expansions completed in prior years, delivering record production from both operations," said Stephen Quin, President and COO of Capstone Mining Corp. Due to the seasonal outage of the Yukon River during freeze-up, combined with the time to accumulate a ship load of concentrates for sale, financial results for the Minto Mine in the fourth quarter mostly reflect the operational performance of the third quarter. The strong production performance in the fourth quarter of 2009 will be more fully reflected in the financial results for the first quarter of 2010.
"In addition to our operations' strong performance, successful exploration over the past 2-3 years culminated in the mine lives for both mines being extended to eight years, with further opportunities for increases in mineral resources and mineral reserves apparent in immediate vicinity of the current mining areas," said Mr. Quin. "With the extended mine lives in hand, we are now focused on optimizing the operating parameters at both mines, while vigorously pursuing opportunities for further growth internally and externally."
2009 Highlights
Financial and Production Highlights for the Year Ended December 31, 2009:
- Recorded a net loss of $18.3 million or $0.10 per common share which
mainly included:
- Earnings from mining operations of $81.4 million;
- Gains on disposal of investments of $46.4 million; and
- Loss of $142.1 million on derivative instruments which was
comprised of:
- A realized gain of $17.7 million on metal derivative
instruments settled; and
- A net unrealized loss of $159.8 million on outstanding
derivative instruments, primarily the result of the increase in
the price of copper. This unrealized loss mostly reflects a
reversal of the net unrealized gain of $126.2 million in 2008
as a result of the significant changes in copper prices in the
past 2 years.
- Adjusted net earnings(1) were $65.2 million or $0.35 per common share
after making adjustments for certain non-cash and one-time items.
- Generated cash flow from operating activities of $112.1 million or
$0.60 per common share.
- Working capital was $86.0 million at December 31, 2009 compared with
$35.4 million at December 31, 2008. The major components of the
working capital at December 31, 2009 included $115.9 million of cash
and $44.4 million of inventories offset by $19.8 million in accounts
payables and accrued liabilities, $16.7 million of advances on
concentrate inventories and $33.6 million of unrealized derivative
liabilities for 2010.
- Produced 90 million pounds of copper contained in concentrates, along
with significant by-products of gold, silver, lead and zinc.
- Produced a total of 86.6 million pounds of payable copper at an
estimated total cash cost(1) of $1.03 per pound of payable copper.
- Recorded gross sales revenue of $250.4 million on the sale of
85.3 million pounds of copper, 15.0 million pounds of zinc,
9.3 million pounds of lead, 31,571 ounces of gold and 1,719,548
ounces of silver.
- Due to the seasonal nature of concentrate transport in the Yukon,
Minto ended the year with significant copper in inventory at the
Minto Mine that will be delivered and sold in the first quarter of
2010.
Additional Highlights
Cozamin
- Completed an updated eight year life-of-mine plan for the Cozamin
Mine, incorporating results to December 31, 2008.
- Purchased three mineral claims that are within the immediate vicinity
of the Cozamin Mine mineral resources and mineral reserves, opening
up potential for mineral resource additions on the newly acquired
claims.
- Subsequent to year end, updated mineral resource and mineral reserve
estimates were completed incorporating activities to December 31,
2009.
Minto
- Completed the Minto Mine Phase IV Prefeasibility Study (the "Phase IV
PFS") that includes:
- An updated eight year life-of-mine plan for the Minto Mine,
incorporating results to May 2009.
- A planned increase in mill throughput to 1.37 million tonnes per
year;
- Opportunities identified that could further increase production
and mineral reserves from underground sources.
- Exploration at Minto led to the discovery of the high grade Minto
North deposit in early 2009, which was drilled to mineral reserve
standards and included in the Phase IV PFS, and a second discovery
of high grade copper-gold mineralization at Minto East towards the
end of 2009.
- Experienced an unusually high freshet in spring 2009, which
necessitated diversion of run-off water into the open pit and
affected access to higher grade ore. Permission was received from
regulators to discharge this excess run-off water and access to the
pit was re-established at the end of the third quarter 2009. Milling
continued during this period by drawing from lower grade stock piles
but did result in lower production in 2009 than originally planned.
Kutcho
- Issued a Preliminary Economic Assessment on the Kutcho Project that
defined a higher grade, lower risk underground development scenario
with a significantly reduced environmental footprint. Recommendations
for going forward included focusing on opportunities for enhanced
returns from improved metallurgical performance and reduced energy
costs.
Financial
- Arranged and drew $40.0 million on a corporate revolving term credit
facility with the Bank of Nova Scotia (the "RTF"). $31.1 million
(C$39.3 million) of these funds were used for the partial repurchase
of the Debentures (as defined below), leaving an outstanding
Debentures balance at December 31, 2009 of $3.7 million (C$4.7
million).
- Exchanged 24,042,340 shares and 2,747,428 special warrants of
Silverstone Resources Corp. ("Silverstone") held by the Company for
4,956,106 shares of Silver Wheaton Corp. ("Silver Wheaton") as per
the plan of arrangement between Silverstone and Silver Wheaton.
Subsequently sold 3,500,000 of the Silver Wheaton shares and recorded
a gain on the exchange and share sale of $46.3 million.
- Fully repaid the $29.9 million balance of the Macquarie project loan
facility (the "PLF").
- Sold, by way of a bought deal equity financing, 31,165,000 common
shares at a price of C$1.85 per common share for gross proceeds of C
$57.7 million ($49.5 million). A portion of net proceeds were used to
fully repay the RTF.
- Purchased 4.5 million units in Nevada Copper Corp. ("Nevada Copper")
by way of a private placement, each unit consisting of one common
share and one-half of a common share purchase warrant. The investment
gives Capstone exposure to a large tonnage, relatively higher grade
copper deposit located in a mining friendly jurisdiction.
Results of Operations
- Minto Mine:
- Benefited from the Phase III mine expansion to a nominal 3,200 tpd
of mill throughput (completed at the end of the first quarter),
supported by increased mine production, with higher throughput
somewhat offsetting lower stockpile grades while access to the pit
was limited;
- Processed 1,031,190 tonnes (2,825 tpd) of ore averaging 2.55%
copper, 1.14g/t gold and 11.0g/t silver;
- Produced 53.7 million pounds of contained copper in concentrates,
and 28,579 ounces of gold and 299,767 ounces of silver as
by-products;
- Produced 59,863 dmt of copper concentrate averaging 40.7% copper;
and
- Produced 51.9 million pounds of payable copper at a total cash
cost(1) of US$1.12 per pound.
- Cozamin Mine:
- Access to some of the wider, higher copper grade ore zones was
delayed, resulting in mine output being limited to less than mill
capacity. In the interim, while access was being developed,
additional production came from areas with higher lead and zinc
grades;
- Processed 975,728 tonnes (2,673tpd) of ore averaging 1.84% copper,
1.17% zinc, 0.69% lead and 66 grams per tonne ("g/t") silver, with
mill throughput constrained by ore availability from underground;
- Produced 36.1 million pounds of contained copper in concentrates,
along with by-product 15.5 million pounds of zinc, 10.1 million
pounds of lead and 1.5 million ounces of silver;
- Produced 66,977 dmt of copper concentrate averaging 24.5% copper;
and
- Produced 34.6 million pounds of payable copper at a total cash
cost(1) of US$0.90 per pound.
- Kutcho
- Published a Preliminary Economic Assessment ("PEA") in September
2009 that defined the potential for the development of a higher
grade, lower cost, underground mine with a significantly reduced
environmental footprint as compared to the lower grade open pit
operation. Two of the principal recommendations contained in the
PEA were to focus on enhanced project returns by (a) improving
metallurgical performance and (b) reducing power costs.
- Only minimal exploration work was carried out 2009, and was
primarily focused on regional targets, with encouraging results.
Outlook
2010 Production Forecast
(All numbers approximate)
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Cozamin Minto Total
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Tonnes milled (millions) 1.1 1.2 2.3
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Copper grade (%) 2.0% 2.2% 2.1%
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Copper recovery (%) 92% 92% 92%
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Contained copper (millions of pounds) 40 to 45 50 to 55 90 to 100
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Total cash cost per pound of payable copper $0.80 $1.30 $1.10
to $0.90 to $1.40 to $1.20
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- The Company has approximately 35% of the 2010 copper production sold
forward at an average price of $2.38 per pound and approximately 12%
or 66.6 million of the total pounds in the life of mine plans, at an
average price of $2.51 per pound.
- As a result of ongoing expansions and operations optimization
including implementation of Phase IV expansion at the Minto Mine,
production rates will ramp up throughout 2010.
Cozamin Mine
- The Company provided guidance that the Cozamin Mine production in
2010 is expected to total 40 to 45 million pounds of copper in
concentrates, with by-product lead, zinc and silver, at a cash cost
of approximately $0.80 to $0.90 per pound of payable copper.
- Capital expenditures for 2010 are forecast to total $5.7 million and
are primarily focused on completing items related to the Phase III
expansion, such as connecting to grid power, installation and
commissioning of the in-mine crusher and shaft deepening.
- Additionally, a total of $3.0 million is expected to be spent on
exploration at the Cozamin Mine, primarily focused on exploring for
extensions to high grade mineral reserves immediately adjacent to the
current workings, but also exploring additional targets along strike
for possible new deposits.
Minto Mine
- The Company has provided guidance that production from the Minto Mine
in 2010 of approximately 50 to 55 million pounds of copper in
concentrate at a total cash cost of approximately US$1.30 to $1.40
per pound of payable copper.
- Additionally, a total of $5.3 million is expected to be spent on
exploration during 2010, focused on (a) evaluating the potential of
the Minto East discovery, (b) on testing for expansions of the
mineralization in the Area 2/118 area that may be amenable to
underground mining and (c) continuing the exploration on the balance
of the prospective Minto Mine property.
- Capital expenditures at the Minto Mine are forecast to total $12.7
million and include completion of the installation and commissioning
water conveyance network and water treatment plant, community
infrastructure development and permitting and regulatory costs
related to implementation of the Phase IV expansion.
Kutcho
- Work is underway to follow up on both of the principal
recommendations in the PEA. Metallurgical testing on core collected
in the 2008 drill program is being conducted at SGS Lakefield and at
the Company's Cozamin Mine metallurgical facilities. Expenditures in
2010 are expected to be approximately $1.4 million
Conference Call Details
Capstone will host a conference call on Tuesday, March 23, 2010 to
discuss these results. The conference call and webcast details are as
follows:
Date: Tuesday, March 23, 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=2937660
Replay: North America - 1.800.642.1687,
International - 1.416.849.0833
Replay Pass code: 51468567
The conference call replay will be available until April 6, 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.
(1) These are non-GAAP performance measures and readers should refer to
Non-GAAP Performance Measures in the Company's Annual Management's
Discussion and Analysis for the year ended December 31, 2009 as filed
on SEDAR and as available on the Company's website for further
details.
The TSX does not accept any responsibility for the adequacy or accuracy of this press release.
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 and Chief Operating Officer of the Company, Robert Barnes, P.Eng., Vice President Operations of the Company, and Brad Mercer, P.Geo., Vice President Exploration of the Company, all Qualified Persons under NI 43-101.
For further information: about Capstone, please contact: Darren Pylot, Vice Chairman & CEO or Stephen Quin, President & COO or Investor Relations' Zobeida Slogan at (604) 684-8894 or (866) 684-8894, [email protected]
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