Operating Cash Flow of $28.6 million, Net Earnings of $9.2 million or $0.02 per share
(All amounts in US$ unless otherwise specified)
VANCOUVER, July 30, 2013 /PRNewswire/ - Capstone Mining Corp. ("Capstone") (TSX: CS) today announced its financial results for the three and six months ended June 30, 2013. Net earnings for the quarter were $9.2 million and operating cash flow before changes in working capital(1) was $28.6 million. Capstone ended the quarter with cash on hand of $459.7 million. Copper production for the quarter at Capstone's two operating mines, Cozamin and Minto, totalled 19.3 million pounds in concentrates (18.6 million pounds of payable copper) at a C1 cash cost(1) of $1.70 per payable pound of copper produced.
Capstone will hold a conference call and webcast on Wednesday, July 31, 2013 at 11:30 am Eastern time (8:30 am Pacific time) to discuss these results; call-in details are provided at the end of this release. This release should be read in conjunction with Capstone's unaudited condensed interim consolidated financial statements and management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2013, which are available on Capstone's website at: http://capstonemining.com/s/Financial_Statements.asp and on SEDAR. An updated corporate presentation, including results to June 30, 2013, will also be available at http://capstonemining.com/s/Presentation.asp.
|Q2 2013||Q2 2012||
|Revenue ($ millions)||58.3||69.6||115.9||140.0|
|Copper in concentrates produced (million lbs)||19.3||21.9||37.9||40.5|
|Payable copper produced (million lbs)||18.6||21.1||36.4||39.1|
|C1 cash cost per payable pound of copper produced(1) ($)||1.70||1.36||1.71||1.40|
|Copper sold (million lbs)||17.2||20.0||32.3||36.2|
|Recognized copper price per pound ($)||3.16||3.34||3.33||3.64|
|Net earnings ($ millions)||9.2||11.6||16.2||27.1|
|Net earnings per common share ($)||0.02||0.03||0.04||0.07|
|Adjusted net earnings(1) ($ millions)||13.1||14.1||19.1||36.2|
|Adjusted net earnings(1) per common share ($)||0.03||0.04||0.05||0.10|
Operating cash flow
before changes in working capital(1) ($ millions)
Operating cash flow
before changes in working capital per common share(1) ($)
|Cash and cash equivalents ($ millions)||459.7||489.3|
"Net earnings and cash flow were affected by lower copper prices, although improved from the first quarter of 2013 on higher volumes sold," said Darren Pylot, President and CEO of Capstone.
"Activities related to the purchase of BHP Billiton's Pinto Valley mine continue to advance. In the second quarter the transaction received U.S. Federal antitrust approval, the Pinto Valley mine met the operating condition precedent for the transaction and Capstone filed a National Instrument 43-101 compliant technical report for 968 million tonnes of Measured and Indicated Mineral Resource. The transaction is expected to close following transfer of the operating permits, currently expected to occur near the end of the third quarter," continued Mr. Pylot.
Financial and Production Highlights for the Three Months Ended June 30, 2013
- Net earnings of $9.2 million or $0.02 per common share which included:
- Earnings from mining operations of $13.5 million,
- Recognized copper price of $3.16 per pound,
- Production costs included a $0.8 million non-cash charge related to the write-down of inventories at the Minto Mine,
- $5.6 million in current and deferred tax expenses.
- Adjusted net earnings(1) of $13.1 million or $0.03 per common share after making adjustments for certain non-cash and non-recurring items.
- Operating cash flow before changes in working capital(1) of $28.6 million or $0.08 per common share.
- Working capital decreased to $536.0 million at June 30, 2013 (which included $459.7 million of cash and cash equivalents) from $553.1 million at March 31, 2013.
- Production of 18.6 million pounds of payable copper at a C1 cash cost(1) of $1.70 per pound of payable copper produced.
- Revenue of $58.3 million on the sale of 17.2 million pounds of copper, 3.2 million pounds of zinc, 0.3 million pounds of lead, 4,653 ounces of gold and 385,142 ounces of silver.
Operational Highlights for the Three Months Ended June 30, 2013
- Produced 12.2 million pounds of copper in concentrates at a C1 cash cost(1) of $1.22 per pound of payable copper.
- Completed 5,211 metres of underground exploration drilling in 9 diamond drill holes.
- Produced 7.2 million pounds of copper in concentrates at a C1 cash cost(1) of $2.49 per pound of payable copper.
- Continued underground development of the ramp access by a contractor, with initial development ore release from underground still on track for the third quarter of 2013.
- The environmental assessment, which is the first step towards permitting all new reserves identified in the Phase V and VI pre-feasibility studies, was submitted to the Yukon Environmental Socio-Economic Assessment Board (YESAB) for evaluation on July 5, 2013.
Santo Domingo Project:
- Work on the definitive feasibility study and basic engineering continued as planned for completion by year-end.
- Work on the environmental impact assessment for the project remains on track for completion and submission by year-end.
- The project environmental assessment continued to advance during Q2 2013, with further work identified to address technical development and stakeholder comments.
- A combination of Kutcho technical development and resource demands related to Capstone's proposed acquisition of Pinto Valley has slowed progress on Kutcho's development.
- Further work is required to refine the project concept, to evaluate engineering design alternatives and to update project economic expectations. In light of the time required to complete this additional work, the environmental assessment will not be submitted in Q3.
Proposed Pinto Valley Acquisition:
- On April 28, 2013, Capstone and BHP Copper Inc., a subsidiary of BHP Billiton Ltd. ("BHP Billiton") announced that they had entered into a definitive agreement pursuant to which Capstone will acquire BHP Billiton's Pinto Valley copper mining operation and the associated San Manuel Arizona Railroad Company in Arizona, USA for $650 million.
- The purchase price is being paid in cash and is subject to customary adjustments. The purchase price will be satisfied from Capstone's existing $200 million Senior Secured Revolving Credit Facility ($176 million available) and from a new 2.5-year $200 million Senior Secured Reducing Revolving Credit Facility, that are respectively committed and underwritten by The Bank of Nova Scotia, as well as with cash on hand. The new facility will include customary covenants and closing conditions, including closing of the Pinto Valley acquisition, and will bear interest at market rates. The acquisition agreement is not conditional upon financing.
- On June 11, 2013, Capstone announced that the proposed transaction was approved by the U.S. Federal Trade Commission under the Hart-Scott Rodino Antitrust Improvements Act. Additionally, Capstone announced that the Pinto Valley operation achieved throughput and copper production targets that surpassed the thresholds stipulated in the acquisition agreement as a condition precedent to closing. Over a 20-day period in May, Pinto Valley production averaged 49,100 tonnes per day at an average grade of 0.33% copper, producing 6.5 million pounds of copper. Copper recovery averaged 84.2%, producing a copper concentrate with an average grade of 29.0%. Also, in connection with the transaction, Capstone filed a National Instrument 43-101 compliant technical report in June, related to the 968 million tonne Measured and Indicated Mineral Resource at Pinto Valley.
- Pinto Valley concentrate production continued to ramp up following the successful restart of mining operations during Q4 2012, with production of 35.5 million pounds of payable copper production in concentrate and 5.5 million pounds of payable copper cathode production during the first six months of 2013.
- Transition teams from BHP Billiton and Capstone have a significant number of transition activities either completed or well underway and Capstone's post-closing integration team is substantially in place. The most significant remaining condition is the transfer of the operating permits. The proposed transaction is expected to close shortly after the permit transfers are complete, which is currently anticipated to occur in late Q3 2013. The proposed transaction remains subject to these and other customary closing conditions and there can be no assurance such conditions will be met or that the transaction will close.
- Capstone's Normal Course Issuer Bid has been suspended until the proposed acquisition of Pinto Valley has been completed.
Capstone's 2013 guidance 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.
Conference Call and Webcast Details
|Date:||Wednesday, July 31, 2013|
|Time:||11:30 am Eastern Time -- 8:30 am Pacific Time|
|Dial in:||North America: 1-888-390-0605, International: +416-764-8609|
|Replay:||North America: 1-888-390-0541, International: +416-764-8677|
The conference call replay will be available until August 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 preferentially focused on copper, with two producing copper mines, the Cozamin copper-silver-zinc-lead mine located 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 Chile in partnership with Korea Resources Corporation and the 100% owned Kutcho copper-zinc-gold-silver project in British Columbia, as well as exploration properties in Canada, Chile, Mexico and Australia. Using our cash flow and strong balance sheet as a springboard, Capstone aims to grow with continued mineral resource and reserve expansions, exploration, and through acquisitions in politically stable, mining-friendly regions. Our headquarters are in Vancouver, Canada and we are listed on the TSX. Further information is available at www.capstonemining.com.
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 realization of mineral reserve estimates, the anticipated date of closing of the acquisition of Pinto Valley and the associated financing, 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". 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 Stephen Winkelmann, Registered Member of The Society for Mining, Metallurgy, and Exploration, Inc. ("SME"), Capstone VP 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 six months ended June 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 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.
(1) These are alternative performance measures; please see "Alternative Performance Measures" at the end of this release.
SOURCE Capstone Mining Corp.