Capstone Mining 2013 Third Quarter Continues to Deliver Strong Cash Flow
(All amounts in US$ unless otherwise specified)
VANCOUVER, Oct. 30, 2013 /PRNewswire/ - Capstone Mining Corp. ("Capstone") (TSX: CS) today announced its financial results for the three and nine months ended September 30, 2013. Capstone posted a net loss for the quarter of $4.6 million. Operating cash flow before changes in working capital(1) was $12.7 million. Capstone ended the quarter with cash on hand of $457.0 million. Copper production for the quarter at Capstone's two operating mines, Cozamin and Minto, totalled 18.9 million pounds in concentrates (18.2 million pounds of payable copper) at a C1 cash cost(1) of $1.57 per payable pound of copper produced.
Capstone will hold a conference call and webcast on Thursday, October 31, 2013 at 11:30 am Eastern Time (8:30 am Pacific Time) to discuss these results; call-in details are provided at the end of this release. This release should be read in conjunction with Capstone's unaudited condensed interim consolidated financial statements and management's discussion and analysis ("MD&A") for the three and nine months ended September 30, 2013, which are available on Capstone's website at: http://capstonemining.com/s/financial-statements.asp and on SEDAR. An updated corporate presentation, including results to September 30, 2013, will also be available at http://capstonemining.com/s/presentations.asp.
|Q3 2013||Q3 2012||2013 YTD||2012 YTD|
|Revenue ($ millions)||79.3||93.0||195.2||233.1|
|Copper in concentrates produced (million lbs)||18.9||22.6||56.9||63.1|
|Payable copper produced (million lbs)||18.2||21.8||54.6||60.8|
|C1 cash cost per payable pound of copper produced(1) ($)||1.57||1.50||1.66||1.44|
|Copper sold (million lbs)||23.6||23.4||55.8||59.6|
|Recognized copper price per pound ($)||3.25||3.84||3.29||3.72|
|Net (loss) earnings ($ millions)||(4.6)||11.4||11.5||38.4|
|Net (loss) earnings per common share ($)||(0.01)||0.03||0.03||0.10|
|Adjusted net (loss) earnings(1) ($ millions)||(6.9)||20.1||12.3||56.2|
|Adjusted net (loss) earnings(1) per common share ($)||(0.02)||0.05||0.03||0.15|
Operating cash flow
before changes in working capital(1) ($ millions)
Operating cash flow
before changes in working capital per common share(1) ($)
|Cash and cash equivalents ($ millions)||457.0||509.4|
"Our earnings before interest and taxes, adjusted for foreign exchange and the one time Pinto Valley transaction costs, were $5 million for the quarter," said Darren Pylot, President and CEO of Capstone. "Cash flow generation remained strong, with $12.7 million generated for the quarter from operating activities, before changes in working capital."
"Looking forward, we have now closed the Pinto Valley acquisition and are working to integrate the mine into Capstone's operations," continued Mr. Pylot. "The ramp-up of operations is going well, with targeted throughput, grade and recoveries frequently being reached. Focus in the fourth quarter will be on achieving steady-state operations and commencing the process of identifying opportunities for cost reductions."
Financial and Production Highlights for the Three Months Ended September 30, 2013
- Net loss of $4.6 million or $0.01 per common share which included:
- Earnings from mining operations of $13.6 million.
- Adjusted net loss(1) of $6.9 million or $0.02 per common share after making adjustments for certain non-cash and non-recurring items.
- Operating cash flow before changes in working capital(1) of $12.7 million or $0.03 per common share.
- Working capital decreased to $480.7 million at September 30, 2013 (which included $457.0 million of cash and cash equivalents) from $536.0 million at June 30, 2013.
- Production of 18.2 million pounds of payable copper at a C1 cash cost(1) of $1.57 per pound of payable copper produced.
- Revenue of $79.3 million on the sale of 23.6 million pounds of copper, 2.8 million pounds of zinc, 1.1 million pounds of lead, 4,565 ounces of gold and 471,605 ounces of silver.
Operational Highlights for the Three Months Ended September 30, 2013
- Produced 11.6 million pounds of copper in concentrates at a C1 cash cost(1) of $1.20 per pound of payable copper.
- Completed 5,757 metres of underground exploration drilling in 11 diamond drill holes.
- Produced 7.3 million pounds of copper in concentrates at a C1 cash cost(1) of $2.14 per pound of payable copper.
- Initial development ore released from underground starting in September 2013.
Santo Domingo Project:
- Work on the definitive feasibility study and basic engineering continued as planned for completion by year-end.
- On October 30, 2013, Capstone formally submitted the Environmental Impact Assessment for the Santo Domingo project. This initiates the formal environmental assessment process, which is expected to take approximately 15 to 18 months.
- In Q3 2013 Capstone entered into an option agreement with Sociedad Química y Minera de Chile S.A. to earn up to 70% of Project Providencia in Region II, Chile which is a very large under-explored land package in the world's most prolific copper jurisdiction. The initial option is on 350,000 hectares (3,500 square kilometres) and would be reduced over time to a maximum of 50,000 hectares if a joint venture is ultimately formed. Capstone is the operator of the project and may earn up to a 70% interest in the property, with the right to withdraw from the project at any time.
- Development activities related to the environmental assessment process, including government and stakeholder consultations and associated engineering support, were largely on hold during Q3 2013 as Capstone focused on the acquisition of Pinto Valley. As a result of that acquisition, Kutcho's production profile and mine life no longer fits within Capstone's growth strategy and strategic alternatives will be evaluated. No additional work will be carried out on the project during the remainder of 2013.
Acquisition of Pinto Valley Mining Operations:
- On October 11, 2013, Capstone and BHP Copper Inc., a subsidiary of BHP Billiton Ltd. ("BHP Billiton") closed the previously announced transaction whereby Capstone acquired BHP Billiton's Pinto Valley copper mining operation and the associated San Manuel Arizona Railroad Company (collectively, "Pinto Valley") in Arizona, US for $650 million.
- The purchase price was paid in cash, from cash on hand and debt facilities. The Company retains a conservative capital structure with approximately $82 million of cash and cash equivalents, as of October 25, 2013.
- The restart of the Pinto Valley mine, which commenced in December 2012, is continuing with a targeted run rate of 50,800 tonnes per day by the end of 2013, with annualized production of 130 million to 150 million pounds of copper per year. Capstone will commence reporting full operating and production information for Pinto Valley with its 2013 annual report.
- An experienced work force remains in place, with 98% of Pinto Valley's 650 employees accepting Capstone's offer of employment, including all key positions. Steve Winkelmann, formerly Capstone's Vice President of North American Operations, has been appointed Pinto Valley's Mine General Manager. Mr. Winkelmann has 40 years of mining experience, including at large mining operations, primarily in the United States and most recently in Arizona.
- Pinto Valley concentrate production continued to ramp up following the successful restart of mining operations during Q4 2012, with production of 59.5 million pounds of payable copper production in concentrate and 7.3 million pounds of payable copper cathode production during the first nine months of 2013.
- The Capstone Pinto Valley team will initially focus on continuing to ramp up production levels and the integration of the operations to achieve the company's targets. At the same time, leadership will identify opportunities for cost reduction, reliability enhancement and throughput maximization.
- Capstone believes that considerable potential exists to upgrade the existing 968 million tonnes of measured and indicated mineral resources (grading 0.35 per cent copper at a 0.25-per-cent cut-off grade) into reserves, potentially extending the operation beyond the current reserve life as reported by BHP Billiton. A preliminary feasibility study ("PFS") is under way, which will target the measured and indicated mineral resources for potential conversion to reserves, with expected completion in early 2014. The PFS will consider the potential to extend operations within the currently permitted boundaries. In addition, Capstone plans to commission engineering and economic studies to consider all remaining current mineral resources and their potential for development.
Capstone's 2013 guidance for Cozamin and Minto of 85 million pounds (± 5%) of copper contained in concentrates at a C1 cash cost(1) of $1.65 to $1.75 per pound of payable copper, net of by-product credits and selling costs, remains unchanged.
Pinto Valley is projected to produce 22 to 27 million pounds of contained copper during Q4 2013, based on the historical operating performance of the mine. There is no associated guidance being provided with respect to cost at this time, given the lack of recent steady-state historical cost information. Further guidance will be provided in early 2014 when Capstone issues its annual production and cost guidance.
Conference Call and Webcast Details
|Date:||Thursday, October 31, 2013|
|Time:||11:30 am Eastern Time -- 8:30 am Pacific Time|
|Dial in:||North America: 1-888-390-0546, International: +416-764-8688|
|Replay:||North America: 1-888-390-0541, International: +416-764-8677|
The conference call replay will be available until November 14, 2013. The conference call audio and transcript will be available on Capstone's website within approximately 24 hours of the call at http://capstonemining.com/s/conference-calls.asp.
About Capstone Mining Corp.
Capstone Mining Corp. is a Canadian base metals mining company, committed to the responsible development of our assets and the environments in which we operate. We are focused on copper, with three producing mines; the Pinto Valley copper-molybdenum-silver mine located in Arizona, US, the Cozamin copper-silver-zinc-lead mine in Zacatecas State, Mexico and the Minto copper-gold-silver mine in Yukon, Canada. In addition, Capstone has two development projects; the large scale 70% owned Santo Domingo copper-iron-gold project in Region III, Chile, in partnership with Korea Resources Corporation, and the 100% owned Kutcho copper-zinc-gold-silver project in British Columbia, Canada, as well as exploration properties in Canada, Chile and Mexico. Using our cash flow and strong balance sheet as a platform, Capstone's strategy is to continue to grow with mineral resource and reserve expansions and exploration, and through acquisitions in politically stable, mining-friendly regions. We will pace our growth with our financial capacity, ensuring we retain, as a priority, sufficient financial flexibility to meet the requirements of our existing operations and our committed development projects, while maintaining an adequate cushion to deal with market volatility and operating risks inherent in the mining industry. Our headquarters are in Vancouver, Canada and we are listed on the Toronto Stock Exchange (TSX). Further information is available at www.capstonemining.com.
(1) These are alternative performance measures; please see "Alternative Performance Measures" at the end of this release.
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 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 mineral resources, the conversion of mineral resources to mineral reserves, the timing of completing the PFS and follow-on engineering and economic studies for Pinto Valley, the anticipated production from the Pinto Valley Mine, 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 "scheduled", "guidance", "plan", "planned", "estimated", "projections", "projected" and "expected". Forward-looking statements are based on a number of assumptions which may prove incorrect, including, but not limited to, the exploration and development potential of the project, current and future commodity prices and exchange rates and continued daily operation of the Pinto Valley Mine. 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 mineral resources; possible variations in ore reserves, grade or recovery rates; accidents; dependence on key personnel; labour pool constraints; labour disputes; availability of infrastructure required for the development of mining projects; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; and other risks of the mining industry 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.
National Instrument 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, news releases and MD&A's (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 of the Technical Information contained in this news release has been reviewed and approved by Brad Skeeles, P. Eng., Vice President of North American Operations (Technical Information related to mining and production) and Brad Mercer, P. Geol., Vice President, Exploration (Technical Information related to mineral exploration activities), both Qualified Persons under NI 43-101. In addition, Gregg Bush, Senior Vice President and Chief Operating Officer reviewed all Technical Information in this news release.
Alternative Performance Measures
The items marked with a "(1)" are alternative performance measures and readers should refer to Alternative Performance Measures in the Company's Interim Management's Discussion and Analysis for the three and nine months ended September 30, 2013 as filed on SEDAR and as available on the Company's website for further details.
Cautionary Note to United States Investors
This news release contains disclosure that has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Without limiting the foregoing, this news release refers to a technical report that uses the terms "indicated" and "inferred" resources. U.S. investors are cautioned that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Under U.S. standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. U.S. investors are cautioned not to assume that all or any part of indicated resources will ever be converted into reserves. U.S. investors should also understand that "inferred resources" have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of "inferred resources" will ever be upgraded to a higher category. Therefore, U.S. investors are also cautioned not to assume that all or any part of inferred resources exist, or that they can be mined legally or economically. Accordingly, information concerning descriptions of mineralization and resources contained in this news release may not be comparable to information made public by U.S. companies subject to the reporting and disclosure requirements of the SEC.
SOURCE Capstone Mining Corp.