Capstone Reports Strong Third Quarter and Year-to-Date Financial Results
Cash Flow from Mining Operations(1) of
64.4 million Pounds of Payable Copper Produced at an Estimated Total Cash Cost(1) of
(All amounts in US$ unless otherwise specified)
Copies of Capstone's financial statements and management's discussion and analysis ("MD&A") are available on Capstone's website at http://capstonemining.com/s/FinancialStatements.asp. This release should be read in conjunction with the third quarter 2009 financial statements and MD&A. Capstone will hold a conference call
"Capstone's mining operations continue to generate strong cash flow as a result of our low cost of production and improving metal prices," said Darren Pylot, Vice Chairman & CEO of Capstone Mining Corp. "Our continued strong cash flow from mining operations(1) of
"Despite some challenges, Capstone's two operations, the Cozamin and Minto mines, continued to deliver strong results during the third quarter of 2009," said
Highlights
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Nine
Months
Three Months Ended Ended
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March June 30, September September
31, 2009 2009 30, 2009 30, 2009
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Earnings (loss) for the period
($ millions) (16.2) 25.8 (10.3) (0.7)
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Earnings (loss) per share ($) (0.10) 0.14 (0.05) (0.00)
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Including:
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- Earnings from mining
operations ($ millions) 19.7 18.6 26.7 65.0
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- Loss on derivative
instruments ($ millions) (35.4) (31.3) (38.0) (104.7)
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- Gain on disposal of
investments ($ millions) - 40.7 0.1 40.8
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Adjusted net earnings(1)
($ millions) 30.5 16.8 18.1 65.4
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Adjusted Earnings(1)
per share ($) 0.19 0.09 0.09 0.36
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Cash flow from mining
operations(1) ($ millions) 26.3 22.6 36.6 85.5
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Cash flow from mining
operations(1) per share ($) 0.16 0.12 0.19 0.47
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Working capital at end of
period ($ millions) 77.0 111.6 106.7 106.7
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Copper sold - (millions lbs) 27.3 17.8 24.6 69.7
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Payable copper produced -
(millions lbs) 25.1 22.2 17.0 64.4
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Total cash cost per payable
pound of copper(1) ($) 0.91 0.97 1.14 0.99
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Comparative information is not provided here as 2008 would only include
the pre-merger Sherwood results.
Overview
Financial and Production Highlights for the Three Months Ended
September 30, 2009
- Recorded a net loss of $10.3 million or $0.05 per common share
which mainly included:
- Earnings from mining operations of $26.7 million; and
- Loss of $38.0 million on derivative instruments, which is
comprised of:
- A realized loss of $1.0 million on instruments settled
during the period; and
- An unrealized non-cash loss of $37.0 million on the
reduction of the derivative instrument asset mark-to-market
value over the period due to the increase in the copper
price.
- Adjusted net earnings(1) were $18.1 million or $0.09 per common
share, after making adjustments for certain non-cash and one-time
items.
- Generated cash flow from mining operations(1) of $36.6 million or
$0.19 per common share.
- Working capital, which includes $94.4 million in unrestricted
cash, was $106.7 million at September 30, 2009 compared with
$111.6 million at June 30, 2009.
- Sold 24.6 million pounds of copper, 2.9 million pounds of zinc,
2.8 million pounds of lead, 9,449 ounces of gold and 446,113
ounces of silver.
- Produced a total of 17.0 million pounds of payable copper at an
estimated total cash cost(1) of $1.14 per pound of payable copper.
Financial and Production Highlights for the Nine Months Ended
September 30, 2009
- Recorded a net loss of $0.7 million or $0.00 per common share
which mainly included:
- Earnings from mining operations of $65.0 million;
- Gain on disposal of investments of $40.8 million; and
- Net loss of $104.7 million on derivative instruments, which is
comprised of:
- A realized gain of $22.9 million on derivative instruments
settled during the period; and
- An unrealized non-cash loss of $127.6 million on the
reduction of the derivative instrument asset mark-to-market
value over the period due to the increase in the copper
price.
- Adjusted net earnings(1) were $65.4 million, or $0.36 per common
share, after making adjustments for certain non-cash and one-time
items.
- Generated cash flow from mining operations(1) of $85.5 million or
$0.47 per common share.
- Working capital, which includes $94.4 million in unrestricted
cash, increased to $106.7 million at September 30, 2009 from $35.4
million at December 31, 2008.
- Repaid $54.9 million of debt related to the project loan facility,
capital leases and the convertible debentures
- Sold 69.7 million pounds of copper, 10.4 million pounds of zinc,
6.6 million pounds of lead, and 26,811 ounces of gold and
1,323,270 ounces of silver.
- Produced a total of 64.4 million pounds of payable copper at an
estimated total cash cost(1) of $0.99 per pound of payable copper.
Additional Highlights
- Purchased three mineral claims that are within the immediate area
of the Cozamin Mine resources and reserves, opening up potential
for the discovery and definition of additional mineral resources
on these newly acquired claims.
- 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.
- Announced additional high grade results from drilling on the Minto
North deposit as infill drilling was completed in preparation for
incorporation of this mineral resource into the Phase IV expansion
of the Minto Mine.
- Received permission from regulators to discharge excess run-off
water collected in the Minto Mine open pit following an unusually
high freshet in Q2/09. Discharge continued throughout Q3/09,
during which there was no access to ore in the pit, forcing the
mill to rely on lower grade stockpiles for the period. Access to
the pit was re- established at the end of Q3/09.
- Announced delays in commencing production from higher grade
portions of the Cozamin deposit, restricting mine production to
less than the available mill capacity.
Highlights Subsequent to the Nine Months Ended September 30, 2009
- Discharge of excess water from the Minto Mine open pit was
essentially complete in the first week of October, allowing
extraction of high grade ore from the open pit for the balance of
the year. Access to the upper benches of pit were re-established
by the end of Q3/09, while pumping of limited quantities of
remaining water continued from deeper areas of the pit into Q4/09.
- Completed development of the higher grade portions of the Cozamin
deposit and commenced production in late October 2009.
- 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 cost of each unit was C$2.50 for a total investment of C$11.25
million. Each whole warrant is exercisable into one common share
for a period of two years from the closing date at a price of C
$3.00 per common share. The investment in Nevada Copper gives
Capstone exposure to a large tonnage, relatively higher grade
copper deposit located in a mining friendly jurisdiction.
Results of Operations
- Cozamin Mine:
- Access to some of the wider, higher grade ore zones was
delayed, resulting in mine output being limited to less than
mill capacity;
- Produced 8.2 million pounds of contained copper in
concentrates, along with by-product 3.2 million pounds of zinc,
5.1 million pounds of lead and 0.4 million ounces of silver;
- Processed 236,938 tonnes (2,581tpd) of ore averaging 1.73%
copper, 1.51% zinc, 0.89% lead and 67 grams per tonne ("g/t")
silver, with mill throughput constrained by ore availability
from underground;
- Produced 14,710 dmt of copper concentrate averaging 25.3%
copper; and
- Produced 7.8 million pounds of payable copper at a total cash
cost(1) of US$0.75 per pound.
- 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;
- Produced 9.5 million pounds of contained copper in
concentrates, along with 3,698 ounces of gold and 45,198 ounces
of silver as by-products;
- Processed 269,411 tonnes (2,870 tpd) of ore averaging 1.76%
copper, 0.6g/t gold and 6.7g/t silver and a single day record
of 4,014 tonnes processed in July and a monthly record of
95,869 tonnes processed in September;
- Produced 10,834 dmt of copper concentrate averaging 40.3%
copper; and
- Produced 9.1 million pounds of payable copper at a total cash
cost(1) of US$1.47 per pound.
Outlook
Despite production delays at both the Cozamin and Minto mines, the current
year continues to unfold positively for Capstone, based on the following:
- Forecast production of approximately 95 million of copper in
concentrates at a total estimated cash cost(1) of approximately
$1.00 per pound, net of by product credits, at the lower end of
its prior production guidance range for 2009.
- At the Cozamin Mine:
- The Company previously provided guidance that the Cozamin Mine
production in 2009 was expected to total 35 to 40 million
pounds of copper in concentrates, with by-product lead, zinc
and silver. This forecast is dependent on sustaining
production from the wider, higher grade stopes for the balance
of the year.
- This production has and will come principally from the recently
accessed 9, 10 and 11 Levels of the mine, and the 12 Level,
which is to be accessed in late 2009. Grades are forecast to
average approximately 2% copper for the year.
- As noted in prior disclosure, access to some of these wider,
higher grade stopes took longer than anticipated, which
resulted in the third quarter having a lower than average
copper grade, but higher lead and zinc grades, for the quarter.
However, given the mill's ability to exceed design throughput
on a sustained basis (when feed is available) and the above
average grade and thickness of the new stopes recently brought
on line, production is expected to remain within guidance for
2009.
- Following the investment in production expansions in prior
years, capital expenditures of only $8.3 million are forecasted
in 2009, including some remaining expenditures related to the
Phase III expansion. The capital programs are primarily
sustaining capital, capital equipment to support the increased
underground mining rate and modest efficiency and throughput
improvements, as well as connecting the mine to a higher
capacity power line that bypasses the city of Zacatecas. As at
September 30, 2009, $3.7 million of the forecast capital had
been spent.
- As a result of the recently completed assessment of the
exploration potential of the Cozamin property, plans for
surface exploration at Cozamin have been expanded, and now
include airborne and ground geophysics, soil geochemistry and
detailed mapping of the Cozamin property, resulting in
anticipated expenditures of $0.8 million in 2009, and providing
the basis for an exploration drilling program in 2010.
- Following the acquisition of the three new claims immediately
adjacent to the resources and reserves at Cozamin, drifting is
underway to provide access for evaluation of these new claims
in 2010.
- At the Minto Mine:
- The production for the remainder of the year will come from the
Phase 3 South of the Minto main pit and from ore stockpiles.
- Now that discharge of the excess water from the pit is
essentially complete, the Company is focused on extracting high
grade ore from the Phase 3 South area of the pit and, combined
with the mill's proven ability to process higher quantities of
ore, the Company anticipates a strong fourth quarter in 2009.
- Overall production is forecast to come in at approximately 55
million pounds in 2009, slightly below the range of the prior
forecast of 60 to 65 million pounds.
- An independent pre-feasibility study, which is designed to
convert a portion of the mineral resources discovered since the
last resource update in 2007 to mineral reserves, and to
incorporate a further Phase IV increase in mining and
throughput to 4,000 tpd, is nearing completion. Additional
consideration of further expansions, either to a larger open
pit operation or a combined open pit-underground operation are
underway;
- Capital expenditures (excluding deferred stripping) of
approximately $10.5 million are forecast for the Minto Mine in
2009, which include sustaining capital and modest efficiency
improvements and advancing the technical and permitting work
related to the proposed Phase IV mine expansion (to 4,000 tpd).
Also included in this capital amount is $5.0 million for the
manufacturing of a larger scale water treatment plant and water
diversion system designed to eliminate the need for future one
off water discharge permits and $0.9 million for the
installation of a new hydra-cone crusher to replace contract
secondary crushing and to sustain planned Phase IV mill
capacities. As at September 30, 2009, $6.4 million of this
capital had been spent;
- Continued exploration is focused on the discovery of new, high
grade, deposits using a combination of geophysics and drilling.
A total of $4.9 million is expected to be spent on exploration
during 2009.
- Continued strong cash flow from operations based on the above
noted production outlook and current higher metal prices, combined
with 9.4 million pounds of copper forward sold in Q4/09 at an
average price of $2.51 per pound.
Conference Call Details
Capstone will host a conference call on
Date: Friday November 13, 2009
Time: 8:00 AM Pacific Time (11:00 AM Eastern Time)
Dial in: North America - 1.800.589.8577, International - 1.416.644.3422
Webcast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2844820
Replay: North America - 1.877.289.8525, International - 1.416.640.1917
Replay Pass code: 4173297 (followed by the number sign).
The conference call replay will be available until
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
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. 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 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
The following employees of Capstone, each a Qualified Person, reviewed Technical Information contained in this news release:
(1) These 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 nine months ended September
30, 2009 as filed on SEDAR and as available on the Company's website
for further details.
For further information: about Capstone, please contact: Darren Pylot, Vice Chairman & CEO or Stephen Quin, President & COO or Investor Relations' Jason Howe at (604) 684-8894 or (866) 684-8894, [email protected]
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