Capstone Mining 2015 Operating and Capital Guidance
VANCOUVER, British Columbia, January 20, 2015 /PRNewswire/ --
(All amounts in US$ unless otherwise specified)
Capstone Mining Corp. ("Capstone") (TSX: CS) today provided its production and capital expenditure guidance for 2015. Capstone expects to produce 90,000 tonnes (±5%) of copper in concentrates and cathode from its Pinto Valley, Cozamin and Minto mines at a C1 cash cost(1) of $2.00 to $2.10 per pound of payable copper produced.
"In light of the current copper markets we have developed our 2015 budget in a manner that maintains our financial flexibility, preserves the value of our development projects and maximizes our existing operations," said Darren Pylot, Capstone President and CEO. "We have put a flexible financing structure in place and have developed a capital plan that will allow us to quickly adjust our spending if required."
"Within our capital budget, we have flagged $36 million of capital that may be deferred or cancelled should ongoing low copper prices persist. Our current cash balance and available credit facilities, along with tightly managed capital spending, will allow us to weather the volatility in the copper market well into the foreseeable future."
"Our primary focus for 2015 is to deliver sustainable performance at Pinto Valley and to advance the next stage of cost reduction and operational improvement initiatives at the mine," continued Mr. Pylot. "At Cozamin, activities are underway with the goal of upgrading the resource to extend the mine life and at Minto the focus remains on preparing the Minto North open pit for mining in 2015."
"At Pinto Valley we plan to complete a Pre-Feasibility study to consider resources not in the current mine plan ("PV3 PFS"). We also intend to continue to advance our Santo Domingo development project in Chile in a measured and disciplined manner, with a number of steps in our stage-gate process to be completed prior to large capital expenditure commitments."
The 2015 operating and capital guidance is based on: US$1=CAD$1.18; US$1=MXN$13.25; US$1=CLP$557; Diesel US$3.25/gallon. Diesel, gas and lubricants comprise approximately 9% of Capstone's 2015 budgeted consolidated site operating costs, suggesting potentially meaningful savings based on current spot prices and exchange rates.
2015 Production Guidance - Operating Mines
Pinto Valley Cozamin Minto Total
Tonnes milled (millions) 19.0 1.2 1.4 21.6
Copper grade (%) 0.35 1.59 1.19 0.47
Copper recovery (%) 88.1 93.3 86.4 88.3
Production (contained in concentrates, except as indicated)
Copper (tonnes) 56,300 18,000 13,000 87,300
Copper cathode (tonnes) 2,700 - - 2,700
Total Copper (tonnes) 59,000 18,000 13,000 90,000
Zinc (tonnes) - 8,300 - 8,300
Molybdenum (tonnes) 480 - - 480
Lead (tonnes) - 400 - 400
Silver (million ounces) 0.3 1.4 0.1 1.8
Gold (ounces) - - 17,000 17,000
C1 cash cost per pound of payable
copper produced net of by-product
credits and selling costs(1) $2.00-$2.10 $1.35-$1.45 $3.10-$3.20 $2.00-$2.10
1. This is an alternative performance measure please see "Alternative Performance Measure" at the end of this release.
Pinto Valley: Grade in 2015 is projected to average 0.35% copper in accordance with the PV2 mine plan. While total operating costs and costs on a per tonne mined basis are expected to fall year over year, C1 cash cost(1) on a per pound of payable copper basis will be higher than 2014 due to the grade profile.
The primary focus remains on mill stability and ongoing cost reduction activities. The mill frequently operates at a throughput rate above 50,000 tonnes per day, reaching the highest average monthly throughput in December of 51,180 tonnes per day. Ongoing work however, is needed to reliably sustain that rate. In 2015 we will implement a systematic maintenance program to monitor and address equipment reliability issues in the mill to reduce unplanned downtime.
Cozamin: The majority of the ore will continue to come from the San Roberto blocks in 2015, with the Mala Noche Footwall Zone contributing approximately 37% of ore production in 2015 at an average copper grade of 1.78%. Cost per tonne of ore milled is budgeted to decrease slightly; however C1 cash cost(1) per pound of payable copper is expected to increase over 2014 due to the lower grade.
Minto: The 2015 mine plan at Minto reflects the delay in receiving surface mining permits for Minto North, which contains the highest grade open pit reserves remaining on the property, shifting the bulk of production from Minto North into 2016. Minto's 2015 guidance assumes receipt of all permits and the commencement of pre-stripping Minto North in March.
- Surface Mining - The 2015 mine plan calls for the first Minto North ore to the mill in September, with high grade ore release planned to start in December 2015 continuing until December 2016, at which time the Minto North pit will be fully depleted.
- Underground Mining - Minto South underground ore production, which commenced in late 2014, is budgeted to continue until November 2015, pausing while the mill processes Minto North ore and access is developed for the next area of underground mining. Production is expected to resume from underground in mid-2016. The mining method identified in the Minto Phase VI Pre-Feasibility study ("Phase VI PFS") has changed from post-pillar cut-and-fill to include long-hole mining, which will reduce underground mining costs from those anticipated in the Phase VI PFS.
- Mill Operations - The mill will process approximately 70% of its ore from stockpile for the first three quarters of the year, supplemented with ore from underground. In the fourth quarter, production will shift to Minto North, which will provide approximately 70% of the mill feed with the remainder coming primarily from underground.
Cost per tonne of ore milled is expected to be higher in 2015 due to the higher proportion of underground mining. C1 cash cost(1) per pound of payable copper is expected to be very high, owing to the large proportion of low-grade stockpile material being processed in 2015 while the Minto North pit is being stripped.
The 2015 C1 cash cost(1)guidance includes $0.34 per pound of costs allocated from stockpile which was spent in 2014 and earlier, bringing actual cash expended during 2015 to $2.75 to $2.85 per pound of payable copper. The cost profile throughout the year will have significantly higher costs per pound at the start of the year, decreasing each quarter as grade improves.
Despite the high C1 cash cost(1) in 2015 at Minto, the greatest return is achieved by continuing to operate the mill and process low grade material in 2015 to allow for continued operation through to the time when we are able to process the high grade Minto North ore. Under the current economic environment and copper price, it is Capstone's intention to proceed as planned with the stripping of Minto North in 2015. We will, however, continue to review alternate operating profiles to optimize profitability at Minto should depressed copper prices continue for an extended period.
2015 Capital Expenditure Guidance - Operating Mines
US$ millions Pinto Valley Cozamin Minto Total
Sustaining $21.9 $15.9 $11.2 $49.0
PV2 Capital 45.5 - - 45.5
PV3 Study 8.0 - - 8.0
Capitalized Stripping 10.7 - 23.6 34.3
Total 2015 Budgeted Capital Expenditures $86.1 $15.9 $34.8 $136.8
Pinto Valley: Major sustaining capital expenditures at Pinto Valley in 2015 include $6.9 million for mining fleet component replacement and $2.5 million for tailings and water management. The implementation of the PV2 Pre-Feasibility study recommendations to extend the mine life from five to 12 years are budgeted to be $45.5 million in 2015. Of the Pinto Valley total capital guidance, $16.5 million has been flagged as potentially discretionary and could be deferred or canceled should low copper prices persist for an extended period.
An internal scoping study was completed in 2014 that evaluated the significant amount of resources at Pinto Valley not included in the mine plan. As a result, two cases will be advanced to the Pre-Feasibility study level. The PV3 PFS base case will include a 10% to 15% increase in throughput and the possibility of a mine life extension beyond 2026 and a second case will evaluate a throughput increase to 90,000 tonnes per day combined with a potential mine life extension. The PV3 PFS is expected to be completed in the third quarter of 2015, at which time we will evaluate the two alternatives and the best use of capital.
Cozamin: Major capital expenditures at Cozamin include $4.6 million for underground development, $5.1 million for infrastructure and communications, $2.9 million on the construction of a paste fill plant and $2.5 million in underground and surface equipment. Of the Cozamin total capital guidance, $6.7 million has been flagged as potentially discretionary and could be deferred or canceled should low copper prices persist for an extended period.
Minto: Major capital expenditures at Minto include $7.5 million in underground development and equipment and $2.6 million for various improvement projects. Permitting and environmental activities are budgeted to be $1.1 million, related primarily to the Yukon Water Board review that is currently underway to bring all remaining known reserves at Minto into the mine plan. In addition, Minto expects to capitalize stripping costs of $23.6 million from March through December, related to the development of the Minto North pit once permitted, contingent on the final decision to strip Minto North. Depending upon the mine plan followed in 2015, $7.2 million has been flagged as potentially discretionary and could be deferred or canceled should low copper prices persist for an extended period.
2015 Capital Expenditure Guidance - Development Projects
US$ millions Santo Domingo Kutcho Total
2015 Budgeted Capital Expenditures $11.8 $0.8 $12.6
Santo Domingo, Chile: Capstone is advancing the Santo Domingo Project using a stage-gate project management process. In light of current copper market conditions, 2015 guidance above reflects the base case spending plan to advance permitting, social license, and sustain the owners' team. The budget for the full year is $16.9 million (of which Capstone's 70% share is $11.8 million).
Once the EIA is received, anticipated around the end of the first quarter at which point Capstone will have spent approximately $4.6 million ($6.5 million on a 100% basis), Capstone will evaluate the status of the project and communicate the next steps. The decision to proceed to the second gate will reflect, among other factors, ongoing social license, long-term power availability, receipt of the port concession, awarding of the project execution contract, general and project specific market conditions, the financing market, project economics and alternatives available to the company at that time. Should economic conditions improve and the fundamentals of the project continue to warrant it, the budget for Santo Domingo could be increased to up to $33.7 million (of which Capstone's share would be $23.6 million) for the full year.
The decisions related to the Santo Domingo project will be targeted at maximizing the value of the project to Capstone shareholders in a manner that ensures financial flexibility for continued growth and security for the Company's existing operations.
Kutcho, BC: The Kutcho project is not of the size and scope to warrant further development and is held for sale. The 2015 budget of $0.8 million consists primarily of ongoing environmental baseline studies as well as some operational costs related to the camp.
2015 Exploration Program
US$ millions Brownfield Greenfield Total
Cozamin $5.6 - $5.6
Project Providencia* - Chile - $5.4 5.4
Total 2015 Budgeted Exploration Expenditures $5.6 $5.4 $11.0
* Exploration is expected to be expensed for Project Providencia.
As exploration expenditures are discretionary, we will align our expenditures with prevailing market conditions, financing capacity and corporate priorities. The exploration guidance represents the base case 2015 exploration program before any potential reductions.
Brownfield: At Cozamin, the 2015 exploration program includes 18,900 metres of underground infill drilling to add certainty to the block model with the goal to potentially recover some reserve losses identified in the 2014 Pre-Feasibility study, as well as step-out on both the Mala Noche Vein and Mala Noche Footwall Zone mineral resource areas. The continuation of surface drilling, which began in 2014 targeting Mala Noche splays that had not previously been tested, will continue in 2015 with 12,000 metres of surface drilling budgeted.
Greenfield: Greenfield exploration is principally focused on Project Providencia in Chile, Capstone's earn-in project with Sociedad Química y Minera de Chile S.A. (SQM), with 15,000 metres of drill testing budgeted as a continuation of the drill program that began in 2014 plus continuing geophysics and geochemistry work on Project Providencia and an adjacent property. The minimum expenditure required in 2015 under the SQM agreement is $1.5 million.
About Capstone Mining Corp.
Capstone Mining Corp. is a Canadian base metals mining company, focused on copper. We are committed to the responsible development of our assets and the environments in which we operate. Our three producing mines are the Pinto Valley copper mine located in Arizona, US, the Cozamin copper-silver mine in Zacatecas State, Mexico and the Minto copper mine in Yukon, Canada. In addition, Capstone has two copper development projects; the large scale 70% owned copper-iron Santo Domingo project in Region III, Chile, in partnership with Korea Resources Corporation, and the 100% owned copper-zinc Kutcho project in British Columbia, Canada, as well as exploration properties in Chile. 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 http://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 commodity prices, the estimation of mineral reserves and mineral resources, the conversion of mineral resources to mineral reserves, 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 "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; counterparty risks associated with sales of our metals; changes in general economic conditions; increased operating and capital costs; operating in foreign jurisdictions with risk of changes to governmental regulation; impact of climatic conditions on our Pinto Valley, Cozamin and Minto operations; increasing energy prices; 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 http://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
The technical information in this news release ("Technical Information") 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"). 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), Brad Mercer, P. Geol., Vice President, Exploration (Technical Information related to mineral exploration activities), and Gregg Bush, P. Eng., Senior Vice President and Chief Operating Officer, all Qualified Persons under NI 43-101.
Alternative Performance Measures
The item marked with (1) "C1 Cash Cost per Pound of Payable Copper Produced" is an Alternative Performance Measure. This performance measure is included because this statistic is a key performance measure that management uses to monitor performance. Management uses this statistic to assess how the Company is performing to plan and to assess the overall effectiveness and efficiency of mining operations. This performance measure does not have a meaning within IFRS and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. This performance measure should not be considered in isolation as a substitute for measures of performance in accordance with IFRS.
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 may refer to technical reports that use 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.
Cindy Burnett, VP, Investor Relations and Communications, +1-604-637-8157, [email protected]
SOURCE Capstone Mining Corp.
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