Capstone Reports Financial Results for the Third Quarter and Year-to-Date
VANCOUVER, British Columbia, November 9, 2010 /PRNewswire-FirstCall/ --
- Cash Flow From Operations of US$26.7m in Q3/10, Ending Period With in Cash Equivalents & Investments of US$200m
(All amounts in US$ unless otherwise specified)
Capstone Mining Corp. (CS: TSX) today announced its financial results for the three and nine months ended September 30, 2010, generating cash flow from operating activities of $26.7 million. Capstone ended the quarter with cash on hand of $172.0 million (including restricted cash of $11.1 million and a short-term deposit balance of $20.1 million) and held liquid investments of $28.0 million. Copper produced in the first nine months at Capstone's two mines, Cozamin and Minto, totalled 56 million pounds of payable copper at an estimated total cash cost(1) of $1.28 per payable pound. During the period, Capstone also reduced its net hedge position by 41%, significantly increasing its exposure to higher copper prices.
Capstone will hold a conference call Wednesday November 10, 2010 at 8:30 AM Pacific time (11:30 AM Eastern time) to discuss these results; call-in details are at the end of this release. This release should be read in conjunction with Capstone's third quarter 2010 consolidated financial statements and management's discussion and analysis ("MD&A") which are available on Capstone's website at:
http://capstonemining.com/s/FinancialStatements.asp. An updated corporate presentation, including results to September 30, 2010, is also available at http://capstonemining.com/s/Presentation.asp.
Overview
Three Three Nine Nine
months months months months
ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30,
2010 2009 2010 2009
Gross sales revenue ($ millions) 91.4 79.1 248.6 192.7
Payable copper produced (millions 18.5 17.0 55.9 64.4
lbs)
Total estimated cash cost per pound 1.40 1.14 1.28 0.99
of payable copper (1) ($)
Copper sold - (millions lbs) 23.1 24.6 62.0 69.7
Net earnings ($ millions) 5.3 (10.3) 64.2 (0.7)
Net earnings per share ($) 0.03 (0.05) 0.32 -
Adjusted net earnings (1) ($ 16.7 18.1 48.6 65.4
millions)
Adjusted net earnings (1) per share 0.08 0.09 0.24 0.36
($)
Cash flow from operating activities 26.7 39.6 63.6 70.4
($ millions)
Cash flow from operating activities 0.13 0.20 0.32 0.39
per share ($)(1)
Cash, including restricted cash and 172.0 100.2
short-term deposits ($ millions)
"Capstone's operations have continued to make significant progress during the third quarter of 2010 and should, as a result, end the year with a strong quarter," said Darren Pylot, Vice Chairman and CEO of Capstone Mining Corp. "During the quarter we also delivered exciting exploration results from all three of Capstone's properties, continued to strengthen our balance sheet and are progressing toward the completion of pre-feasibility studies on both the Phase V expansion of the Minto Mine and the Kutcho Copper Project by year-end 2010 with the objective of demonstrating potential for continued organic growth."
Third Quarter Highlights
Financial and Production Highlights for the Three Months Ended September 30, 2010
- Generated cash flow from operating activities of $26.7 million or $0.13
per common share.
- Recorded net earnings of $5.3 million or $0.03 per common share which
included:
- Earnings from mining operations of $32.1 million;
- Gain on disposal of investments of $3.0 million;
- Net loss of $21.2 million on derivative instruments which is comprised
of:
- A realized net loss of $7.5 million on instruments settled during the
period;
- An unrealized non-cash net loss of $13.7 million on instruments
outstanding, as a result of the increase of metal prices over the
period; and
- Current income taxes expense of $4.7 million.
- Adjusted net earnings(1) were $16.7 million or $0.08 per common share
after making adjustments for certain non-cash and non-recurring items,
including the non-cash loss on derivative instruments, future income
taxes and the gain on the disposal of investments.
- Working capital, which included $172.0 million in cash (including
restricted cash) and short-term deposits, increased to $156.3 million
at September 30, 2010 from $142.0 million at June 30, 2010.
- Sold 23.1 million pounds of copper, 3.8 million pounds of zinc, 1.8
million pounds of lead, 9,049 ounces of gold and 379,172 ounces of
silver.
- Produced a total of 18.5 million pounds of payable copper at a total
estimated total cash cost(1) of $1.41 per pound of payable copper.
- Entered into forward purchase contracts for 17.3 million pounds of
copper, offsetting 41% of the 42.1 million pounds of forward sales
contracts for copper. This reduces the outstanding net forward sales of
copper to 24.8 million pounds, of which 6.2 million pounds are expected
to be closed out in Q4/10.
<end_table
Financial and Production and Highlights for the Nine Months Ended September 30, 2010
- Generated cash flow from operating activities of $63.6 million or $0.32
per common share.
- Recorded net earnings of $64.2 million or $0.32 per common share which
included:
- Earnings from mining operations of $97.0 million;
- Gain on disposal of investments of $14.0 million;
- Current income taxes expense of $19.0 million; and
- Future income tax expense of $15.9 million.
- Adjusted net earnings(1) were $48.6 million or $0.24 per common share
after making adjustments for certain non-cash and non-recurring items,
including the non-cash loss on derivative instruments, future income
taxes and the gain on the disposal of investments.
- Working capital, which includes $172.0 million in cash (including
restricted cash) and short-term deposits, increased to $156.3 million
at September 30, 2010 from $86.0 million at December 31, 2009.
- Sold 62.0 million pounds of copper, 10.2 million pounds of zinc, 7.9
million pounds of lead, 25,945 ounces of gold and 1,160,478 ounces of
silver.
- Produced a total of 55.9 million pounds of payable copper at a total
estimated cash cost(1) of $1.29 per pound of payable copper.
- Reduced, through a combination of deliveries and forward purchase
contracts, net forward sales for copper from 66.6 million pounds to
24.8 million pounds.
Additional Highlights
- Minto
- Results of a property-wide, deep penetrating geophysical survey not
only detected all the known deposits, but outlined 73 additional
targets, 19 of which were deemed high priority;
- Discovery of a new area of mineralization as a result of following up
on a geophysical target, which discovery continued to expand and
emerged as two distinct horizons: the shallower "Wildfire" zone and a
significant expansion of the deeper "Copper Keel" zone;
- Reported a 44% increase in the measured and indicated mineral resources
contained in the undeveloped deposits (i.e. excluding the "Main"
deposit currently being mined) based on drilling up to the end of April
2010;
- Drilling of the Minto East deposit defined a high grade, thick core
that tapers out to lower grade and thinner edges.
- Cozamin
- Reported the discovery and subsequent expansion of high grade copper
mineralization in the Mala Noche Footwall Zone ("MNFWZ"), which splays
off the main Mala Noche vein that hosts all of the current mineral
reserves and resources.
- Kutcho
- Announced results of an updated Preliminary Economic Assessment ("PEA")
that significantly enhanced the projected economic return of the
project and recommended moving it forward;
- Based on the recommendations in the PEA, the Company commenced the work
required to support completion of a Preliminary Feasibility Study;
- Mineral resource definition drilling within the Esso deposit
intersected some exceptionally high copper-zinc-silver gold values.
- Appointed Chantal Gosselin to the Board of Directors.
- Adopted a Shareholder Rights Plan to provide Capstone adequate time to:
- Consider and evaluate any unsolicited bid made for the Company;
- Identify, develop and negotiate value-enhancing alternatives (if
considered appropriate) to any such unsolicited bid;
- Encourage the fair treatment of shareholders in connection with any
takeover bid for Capstone; and
- Ensure that any proposed transaction is in the best interests of
Capstone's shareholders.
Highlights Subsequent to September 30, 2010
- Fully repaid the $9.7 million outstanding principal on the Macquarie
Bank Limited subordinated loan facility related to the Minto Mine.
- Barge transportation across the Yukon River ceased earlier than normal
due to low water levels resulting in insufficient concentrate being
able to be trucked to the Port of Skagway to schedule a ship during the
fourth quarter. Therefore, as per the Company's revenue recognition
policy, the Minto Mine anticipates it will not record revenue in the
fourth quarter unless there is an earlier than normal freeze up of the
river, that would allow sufficient concentrate to the trucked to
Skagway. Otherwise the revenue will be recorded in the first quarter of
2011.
- Remaining runoff water was removed from the pit at the Minto Mine
during October, allowing a resumption of mining of higher grade ore
from the pit in the latter part of October, which will allow
significantly higher grades to be mined for the remainder of the year
and into the first quarter of 2011. In addition, sufficient cloths for
the tailings filters are on site and being utilized, removing the
bottleneck related to tailings filtration. As a result of these
developments, mill throughput over the past 15 days has averaged more
than 3,100tpd and, on November 7, 2010, Minto set an all time
daily throughput record of 4,024 tonnes. The copper feed grade has
increased above 2.0% during the same period and will continue to
increase as higher grade ores are extracted from the pit.
- Operations at Cozamin continue to sustain higher throughput levels,
with an average of 3,400tpd processed over the past 15 days, with head
grades similar to those achieved in the third quarter of 2010.
Updated Guidance
As noted on July 19, 2010, Capstone revised its guidance to 80 to 85 million pounds of copper in concentrates in 2010, with total cash costs(1) net of by-product credits anticipated to remain within the prior guidance of US$1.10 to US$1.20 per pound of payable copper, but likely towards the upper end of that range. Given the production of 58.0 million pounds of copper in concentrates to September 30, 2010, Capstone will have to produce an additional 22 million pounds of copper in concentrates in Q4/10 in order to reach the lower end of its guidance. Based on the throughput improvements at Cozamin reported on October 5, 2010, the resumption of mining of higher grade ore in the open pit and higher processing rates following resolution of tailings filter issues at Minto, Capstone believes that it will achieve at least the lower end of its production guidance range of 80 to 85 million pounds of copper in concentrates; however, total cash costs(1) net of by-product credits are expected to average US$1.20 to US$1.25 per pound of payable copper for the year.
Conference Call Details
Capstone will host a conference call on Wednesday, November 10, 2010 to discuss these results. The conference call and webcast details are as follows:
Date: Wednesday, November 10, 2010
Time: 8:30 AM Pacific Time (11:30 AM 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=3242580
Replay: North America - 1-800-642.1687, International - 1-416-849-0833
Replay Pass code: 14853632
The conference call replay will be available until November 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.
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 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 effect of the Shareholder Rights Plan, 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 http://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 of the Company, Robert Barnes, Professional Engineer, Vice President Operations of the Company, and Brad Mercer, Professional Geologist, 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 and six months ended September 30, 2010 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 Or Jason Howe, Investor Relations, at +1-(604)-684-8894 or +1-(866)-684-8894 [email protected]
SOURCE Capstone Mining Corp.
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