Capstone Reports Financial Results for the First Quarter Ended March 31, 2010
Earnings from Mining Operations of $37.9 million, Adjusted Net
Earnings of $21.7 million
(All amounts in US$ unless otherwise specified)
VANCOUVER, May 12 /PRNewswire-FirstCall/ - Capstone Mining Corp. (CS: TSX) today announced its financial results for the three months ended March 31, 2010. Capstone's two mines, Cozamin and Minto, produced 22 million pounds of copper contained in concentrates in the three months ended March 31, 2010, while payable copper totalled 21.2 million pounds which was produced at an estimated total cash cost (1) of $1.12 per payable pound. Capstone ended the quarter with cash on hand of $111.9 million and liquid investments of $43.4 million as of March 31, 2010.
Capstone will hold a conference call Thursday May 13, 2010 at 9:00 AM Pacific time (12:00 PM Eastern time) to discuss these results; call-in details are at the end of this release. This release should be read in conjunction with Capstone's first quarter 2010 consolidated financial statements and management's discussion and analysis ("MD&A") which are available on Capstone's website at:
http://capstonemining.com/s/FinancialStatements.asp.
Overview
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Total Total
Q1-2010 Q1-2009
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Gross sales revenue ($ millions) 88.0 63.4
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Payable copper produced (millions lbs) 21.2 25.1
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Total cash cost per pound of payable copper(1) ($) 1.12 1.05
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Copper sold - (millions lbs) 21.2 28.4
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Earnings (loss) for the period ($ millions) 13.5 (16.2)
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Earnings (loss) per share ($) 0.07 (0.10)
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Adjusted net earnings(1) ($ millions) 21.7 30.7
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Adjusted net earnings(1) per share ($) 0.11 0.19
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Cash flow from operating activities ($ millions) 4.4 10.7
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Cash flow from operating activities per share(1) ($) 0.02 0.07
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Unrestricted cash ($ millions) 111.9 39.8
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Cash flow from operating activities(1) was impacted by build up of concentrate inventory at Cozamin and ore stockpiles at Minto, as discussed below.
"Capstone continues to build its production profile and financial strength," said Darren Pylot, Vice Chairman and CEO of Capstone Mining Corp. "We benefit from low production costs and have a very strong balance sheet, with $112 million in unrestricted cash on March 31, 2010, which positions us well to not only weather the turbulence in markets, but to grow both organically (through exploration and mine expansions), and through external transactions."
"Cash flow from operations at Capstone's two operations, the Cozamin and Minto mines, was impacted by inventory builds at both mines during the first quarter: at Cozamin as we switched concentrate trucking contractors and, in the process, built a copper concentrate inventory of 13,834 tonnes, while at Minto we stockpiled approximately 994,000 tonnes of ore ahead of freshet," said Stephen Quin, President and COO of Capstone Mining Corp. "The excess concentrates at Cozamin should all be trucked to port in the second quarter and Minto is now utilizing the stockpiled ore as its sole source of mill feed, which will reduce the inventory levels during the second quarter and beyond," he said. "Operationally, we look forward to building on our production levels during the coming months."
Senior Management Addition
Capstone also announced today the appointment of Mr. Gregg Bush as Chief Operating Officer for the Company, effective May 24, 2010. Gregg has 30 years experience in the mining industry, most recently as Chief Operating Officer for Minefinders Corporation Ltd. and, prior to that, 17 years with Barrick/Placer Dome where he was Mine General Manager and Operations Manager. Gregg is fluent in Spanish and has very relevant experience, having worked in Alaska, Nevada and Latin America including Mexico. He will be responsible for all of Capstone's mining operations, including the management of the Minto and Cozamin mines.
"I am pleased to welcome Gregg to the Capstone team," said Mr. Pylot. "His experience will be an asset to the Company as we continue to ramp up our operations and his appointment will free up Stephen Quin, President, to focus on the growth aspects of the Company, including business development, exploration and investor relations," he added. "With our strong balance sheet, we are well positioned to build shareholder value through growth and Stephen will be more able to pursue this key aspect of the Company's future."
Q1 Highlights
Financial and Production Highlights for the Three Months Ended March 31,
2010
- Recorded net earnings of $13.5 million or $0.07 per common share which
included:
- Earnings from operations of $34.1 million;
- A realized loss of $7.7 million on derivative instruments settled
in the period;
- An unrealized loss of $0.4 million on the derivative instrument
mark-to-market value due to an increase in metal prices; and
- Current and future tax expenses of $10.4 million.
- Adjusted net earnings(1) were $21.7 million or $0.11 per common share
after making adjustments for certain non-cash and one-time items.
- Generated cash flow from operating activities of $4.4 million or $0.02
per common share, which was impacted by the build up of copper
concentrate inventory at the Cozamin Mine and the ore stock pile
inventory at the Minto Mine.
- Working capital was $110.9 million at March 31, 2010, which included
$111.9 million in unrestricted cash.
- Produced a total of 21.2 million pounds of payable copper at an
estimated total cash cost(1) of $1.12 per pound.
- Recorded gross sales revenue of $88.0 million on the sale of 21.2
million pounds of copper, 3.1 million pounds of zinc, 2.5 million
pounds of lead, 10,695 ounces of gold and 352,538 ounces of silver.
Operational Highlights for the Three Months Ended March 31, 2010
Minto
- During the quarter, the first exploration results for the 2010
exploration program at the Minto Mine were reported with encouraging
results from the Minto East discovery and from the south extension of
the Area 2 mineralization.
- During the quarter, the Minto mine experienced throughput constraints,
initially due to crusher limitations and, subsequently, due to the
tailings plant. While reported on May 3, 2010 as having been resolved,
some throughput constraints in the tailings plant have subsequently
re-emerged, as discussed below.
Cozamin
- During the quarter, updated mineral resource estimates were reported
for the Cozamin Mine, with modest increases in contained copper and
silver, but significant increases in contained lead and zinc,
primarily as a result of conversion of mineralized material,
previously below cut off, as a result of higher metal prices.
- Updated mineral reserve estimates were reported for the Cozamin Mine,
incorporating the new mineral resource estimates noted above,
resulting in more than an eight year life for the Cozamin Mine.
Highlights Subsequent to March 31, 2010
- In April 2010, Capstone reported further exploration results from both
the Minto East and Area 2/Copper Keel areas at the Minto Mine, with
encouraging high grade copper-gold intercepts.
- While the previously reported sliming issue at Minto was resolved and
the tailings plant throughput returned to approximately 3,200 tonnes
per day ("tpd"), subsequently the tailings plant throughput fell to
2,800 to 2,900 tonnes as tailings filtration capacity became the
limiting factor to plant throughput. Since the plant has run at well
above these levels for extended periods in the past, Capstone believes
these constraints are temporary, but is working with independent
consultants to obtain an expeditious resolution.
- Capstone commenced exploration drilling at Cozamin, with results
already showing several significant intercepts of copper
mineralization.
Guidance
On December 17, 2009, Capstone provided guidance that it expected to
produce between 90 and 100 million pounds of copper in concentrates at an
estimated total cash cost(1) of $1.10 to $1.20 per pound of payable copper,
net of by-product credits in 2010. Given the production constraints at the
Minto Mine in the first four months of the year, which constraints are not
fully resolved, combined with the Cozamin Mine being at the lower end of its
guidance range, Capstone believes it is appropriate to express some caution as
to its ability to reach its guidance range unless production exceeds nominal
capacity for the balance of the year. Since both the Cozamin and Minto mills
have exceeded their nominal capacities of 3,000tpd and 3,200tpd for extended
periods in the past, Capstone believes this outperformance is achievable and
will be the Company's objective going forward.
Results of Operations
- Minto Mine:
- The Minto Mine was affected by underperformance of the new crusher
system during the first two months of the year, with those issues
resolved in March, followed by unanticipated constraints in the
tailings plant, where excessive sliming caused issues with both the
tailings thickener and tailings filter presses. The cause of this
sliming was identified and resolved in early May. However, as noted
above, tailings throughput remains an issue.
- The Minto Mine was well prepared for the onset of freshet (which
commenced mid-April and ended on May 9), with 994,000 tonnes of ore
in stockpiles outside of the pit (sufficient to sustain milling for
the rest of the year), a water conveyance network in place (to
divert unaffected water around the site and to divert water
affected by operations to the appropriate locations), and a new
water treatment plant completed. Water volumes collected on site
are estimated to be less than one third of the water volume
collected in 2009. Mining is expected to resume this week,
stripping waste from the south side of the pit;
- Processed 229,338 tonnes (2,548 tpd) of ore averaging 2.54% copper,
1.30g/t gold and 10.3g/t silver, with the throughput constraints
noted above limiting production;
- Produced 11.9 million pounds of contained copper in concentrates,
and 7,651 ounces of gold and 62,258 ounces of silver as by-
products;
- Produced 13,172 dmt of copper concentrate averaging 41.0% copper;
and
- Produced 11.7 million pounds of payable copper at a total cash
cost(1) of US$1.37 per pound.
- Cozamin Mine:
- The Cozamin Mine performance was generally in line with
expectations, but was modestly affected by production constraints
from underground (with the mill well able to outperform mine
production), slightly lower copper grades as high lead grade feed
supplemented production, and low zinc recoveries caused by poor
performance of the flash cell (which was rectified at the end of
the quarter). This performance was offset by significantly higher
lead production from opportunistic mining of high lead grade
hangingwall veins, most of which are not part of the mineral
reserve.
- Unit operating costs were marginally higher than expected due to
increased development costs as more production areas are being
developed, unbudgeted increases in electricity rates imposed by the
provider, rental of two scoops used to offset two units being out
for rebuild, and higher reagent costs to manage the higher lead
feed grades;
- Processed 259,656 tonnes (2,885tpd) of ore averaging 1.90% copper,
1.17% zinc, 0.97% lead and 65 grams per tonne ("g/t") silver, with
mill throughput constrained by ore availability from underground;
- Produced 9.9 million pounds of contained copper in concentrates,
along with by-products of 3.8 million pounds of zinc, 3.6 million
pounds of lead and 0.4 million ounces of silver;
- Produced 18,594 dmt of copper concentrate averaging 24.3% copper;
and
- Produced 9.5 million pounds of payable copper at a total cash
cost(1) of US$0.82 per pound.
- Kutcho
- Advanced metallurgical test programs designed to enhance the
metallurgical performance of the Kutcho ores, with encouraging
results indicating that grinding can be coarsened significantly
without negatively affecting recoveries over those assumed in the
Preliminary Economic Assessment ("PEA") announced in September
2009.
- Continued to advance the evaluation of other potential
optimizations from the PEA, including power supply alternatives.
- Will incorporate the results of this work in an updated PEA during
2010 and, if positive, advance towards completion of a pre-
feasibility study and permitting. Expenditures in 2010 are expected
to be approximately $1.4 million.
Conference Call Details
Capstone will host a conference call on Thursday, May 13, 2010 to discuss
these results. The conference call and webcast details are as follows:
Date: Thursday, May 13, 2010
Time: 9:00 AM Pacific Time (12:00 PM 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=3054920
Replay: North America - 1.800.642.1687,
International - 1.416.849.0833
Replay Pass code: 71759000
The conference call replay will be available until May 16, 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.
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.
Non-GAAP Performance Measures
The items marked with a "(1)" 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 months ended March 31, 2010 as filed on SEDAR and as available on the Company's website for further details.
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(1) These are non-GAAP performance measures: please see "Non-GAAP Performance Measures" below.
SOURCE Capstone Mining Corp.
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