VANCOUVER, November 7, 2011 /PRNewswire/ --
Cash Flow from Operating Activities of $38.9 million, Net Earnings of $21.1 million or $0.06 per share
(All financial information prepared in accordance with International Financial Reporting Standards ("IFRS"); all amounts in US$ unless otherwise specified)
Capstone Mining Corp. (TSX: CS) ("Capstone") today announced its financial results for the three and nine months ended September 30, 2011. Net earnings for the quarter were $21.1 million and cash flow from operating activities was $38.9 million. Capstone ended the quarter with cash on hand of $484.2 million and no long-term debt. Copper production for the quarter at Capstone's two operating mines, Cozamin and Minto, totalled 20.6 million pounds of copper in concentrates (19.9 million pounds of payable copper) at an estimated total cash cost1 of $1.39 per payable pound.
Capstone will hold a conference call Tuesday, November 8, 2011 at 11:30 am Eastern time (8:30 am Pacific time) to discuss these results; call-in details are provided at the end of this release. This release should be read in conjunction with Capstone's unaudited interim consolidated financial statements and management's discussion and analysis ("MD&A") for the three and nine months ended September 30, 2011, which are available on Capstone's website at: http://capstonemining.com/s/FinancialStatements.asp. An updated corporate presentation, including results to September 30, 2011, will also be available at http://capstonemining.com/s/Presentation.asp.
2011 Q3 Overview
Three Three Nine Nine months months months months ended ended ended ended Sept. Sept. Sept. Sept. 30, 30, 30, 30, 2011 2010 2011 2010 Gross sales revenue ($ millions) 97.9 91.4 287.0 248.6 Payable copper produced (millions lbs) 19.9 18.5 56.5 55.9 Total estimated cash cost per pound of payable copper (1) ($) 1.39 1.40 1.42 1.28 Copper sold - (millions lbs) 23.3 23.1 62.6 62.0 Realized copper price per pound ($) 3.59 3.39 4.00 3.33 Net earnings ($ millions) 21.1 6.6 55.5 66.0 Net earnings per share - basic ($) 0.06 0.03 0.21 0.33 Adjusted net earnings (1) ($ millions) 13.4 16.9 47.9 48.6 Adjusted net earnings (1) per share ($) 0.04 0.08 0.18 0.25 Cash flow from operating activities ($ millions) 38.9 26.7 75.4 63.7 Cash flow from operating activities per share - basic ($)(1) 0.10 0.13 0.28 0.32 Cash, including restricted and short-term investments ($ millions) 484.2 140.9
"Net earnings were significantly higher than the same quarter a year ago," said Darren Pylot, Capstone President and CEO. "The increase was driven by a gain on derivative instruments versus a loss in the comparative quarter, though this was partially offset by lower earnings from mining operations due to higher depletion and amortization and higher taxes."
"We had a solid quarter from an operational standpoint, with both of our mines achieving record throughput levels this quarter, allowing us to remain on target to meet our full year 2011 guidance," continued Mr. Pylot. "On the Santo Domingo Project development front, we released the Pre-Feasibility Study ("PFS"), staffed the key project management positions, awarded the Environmental Impact Study contract, commenced the drill program required for the next stage of development and are advancing to the Bankable Feasibility Study under the timeline detailed in the PFS."
Financial and Production Highlights for the Three Months Ended September 30, 2011
- Recorded net earnings of $21.1 million or $0.06 per common share which included:
- Earnings from mining operations of $25.3 million,
- Administrative and stock based compensation expense of $4.3 million,
- Gain on derivative instruments of $9.0 million,
- Foreign exchange gain of $2.3 million, and
- Current and deferred tax expenses of $12.3 million.
- Adjusted net earnings1 were $13.4 million or $0.04 per common share after making adjustments for certain non-cash and non-recurring items.
- Generated cash flow from operating activities of $38.9 million or $0.10 per common share.
- Working capital increased to $517.6 million at September 30, 2011 (which included $484.2 million of cash) from $177.0 million at December 31, 2010. The reported cash position decreased from June 30, 2011 as a result of the strengthening U.S. dollar. The majority of the Company's cash position is held in Canadian dollars, but reported in U.S. dollars.
- Produced a total of 19.9 million pounds of payable copper at an estimated total cash cost1 of $1.39 per pound of payable copper.
- Recorded gross sales revenue of $97.9 million on the sale of 23.3 million pounds of copper, 4.7 million pounds of zinc, 0.9 million pounds of lead, 5,633 ounces of gold and 413,093 ounces of silver.
Financial and Production Highlights for the Nine Months Ended September 30, 2011
- Recorded net earnings of $55.5 million or $0.21 per common share which included:
- Earnings from mining operations of $93.8 million,
- Administrative and stock based compensation expense of $15.1 million,
- Gain on derivative instruments of $7.8 million,
- Gain on disposal of investments of $1.5 million,
- Foreign exchange loss of $1.2 million, and
- Current and deferred tax expenses of $33.2 million.
- Adjusted net earnings1 were $47.9 million or $0.18 per common share after making adjustments for certain non-cash and non-recurring items.
- Generated cash flow from operating activities of $75.4 million or $0.28 per common share.
- Produced a total of 56.5 million pounds of payable copper at an estimated total cash cost1 of $1.42 per pound of payable copper.
- Recorded gross sales revenue of $287.0 million on the sale of 62.6 million pounds of copper, 11.0 million pounds of zinc, 2.5 million pounds of lead, 18,037 ounces of gold and 1,102,749 ounces of silver.
Operating Highlights for the Three Months Ended September 30, 2011
- Produced 9.9 million pounds of payable copper at a total cash cost1 of $1.24 per pound of payable copper.
- Following completion of an initial mineral resource estimate for the Mala Noche Footwall Zone ("MNFWZ") in the second quarter, work continued on a follow-up mineral resource estimate incorporating additional drill data. The new resource estimate will be complete in the fourth quarter and used as the basis of engineering studies currently underway.
- Completed 9,204 metres of surface diamond drilling in 9 holes on various targets, and 5,914 metres of underground diamond drilling in 15 holes targeting the MNFWZ. Underground drilling is continuing at the MNFWZ with two rigs for the remainder of 2011 and into 2012. The MNFWZ mineralized structure remains open to the east and down dip.
- Produced 10.0 million pounds of payable copper at a total cash cost1 of $1.55 per pound of payable copper.
- Continued stripping of the next pit in the mining sequence, the Area 2 pit, with ore production anticipated in the second quarter of 2012.
- Following completion of a mineral resource estimate in the second quarter incorporating drilling results from Wildfire/Copper Keel and combining these areas with Area 2/118 (now known as Minto South Deposit or MSD), work continued in the third quarter on a follow-up mineral resource estimate incorporating additional drill data. The new mineral resource estimate will be complete in the fourth quarter and used as the basis for the Phase VI PFS currently underway.
- Completed 6,695 metres of exploration diamond drilling in 18 holes bringing the year to date totals to 38,416 metres in 112 drill holes. Drilling in the third quarter focused mostly on testing new exploration targets and is expected to continue into the fourth quarter as long as weather conditions allow. Drilling is anticipated to restart in early 2012.
Santo Domingo, Chile:
- Completed a Pre-Feasibility Study ("PFS") that contemplates an 18 year mine life, with an after-tax IRR of 22%, NPV of US$1.1 billion at an 8% discount rate and a 3 year payback with average annual production of 144 million pounds of copper, 4.1 million tonnes of iron and 15,000 ounces of gold.
- The core Chilean management team for the project has been recruited, which includes the General Manager announced in August. By quarter end, a Health, Safety, Environmental and Communities Manager was in place, and a Project Manager joined in mid-October. A Legal and Permitting Manager is committed to start by early November. This core leadership team has both operational and project development experience in mines and projects belonging to Codelco, Barrick, Kinross, BHP and Anglo American in Chile.
- The contract for the preparation of the Santo Domingo Environmental Impact Study ("EIS") was awarded to Knight Piésold.
- A 12-hole geotechnical drilling program and a 12,000 metre in-fill drilling program are underway to provide support for the Bankable Feasibility Study stage.
Kutcho, British Columbia:
- During the third quarter, detailed engineering continued to support the compilation of the Environmental Application. This includes optimizing the access road design, completion of a hydrogeology-drilling program and excavating test pits required for the soils baseline study.
- Electromagnetic anomalies generated by a Versatile Time Domain Electromagnetic ("VTEM") survey flown earlier this year were drill tested in the third quarter. The results are still being compiled, but no new economically significant mineralization was discovered and no further drilling is contemplated in 2011.
- During October 2011 the Company entered into copper forward purchase contracts at $3.08 per pound to offset its remaining outstanding copper forward sales contracts. This decision was made to allow the Company to participate in any future copper price increases. As at October 31, 2011, 100% of the outstanding copper forward sales contracts had been offset. The offsetting copper forward purchase contracts entered into in October 2011 locked in an approximate $1.0 million gain on an equivalent number of copper forward sales contracts.
Capstone reaffirms full year 2011 production guidance. With year to date production of 58.5 million pounds of copper in concentrates and both mines presently operating on plan, the expectation is that production will reach 80 million pounds for the year. In the fourth quarter, production at Cozamin is expected to be above third quarter levels as the mine plan calls for higher grade ore. At Minto, the successful contract pre-crushing will continue until permanent improvements are implemented, and continuing high throughput is expected to offset the processing of lower grade material from stockpile. Cost guidance remains at the previously revised $1.45 to $1.50 per payable pound of copper.
Work on engineering studies at Cozamin that will apply economic parameters to the MNFWZ resource block model to determine economic viability continued in the third quarter, with completion targeted in the fourth quarter of 2011.
At Minto, driven by a new mineral resource estimate, Capstone has a PFS ("Phase VI PFS") scheduled to be completed in early 2012. The preliminary resource estimate released in the second quarter determined the initial scope of the PFS. A more robust estimate incorporating additional drilling, originally targeted to be complete in the third quarter, is underway with completion expected shortly.
In addition to the Phase VI PFS, a separate internal scoping study is being conducted of a larger open pit/milling scenario. The resource update and the result of the internal scoping evaluation of the larger throughput scenario are expected in the fourth quarter of 2011.
At Santo Domingo the critical activity for the fourth quarter is the bidding process and awarding of the Bankable Feasibility Study. A request for proposal (the "RFP") is being prepared and the contract award is scheduled to be completed by year-end.
Development activities at Kutcho for the remainder of 2011 will be focused on the environmental and socio-economic assessment process and consultations towards permitting mine development.
Conference Call and Webcast Details
Capstone will host a conference call on Tuesday, November 8, 2011 to discuss these results. The conference call and webcast details are as follows:
Tuesday, November 8, 2011 11:30 am Eastern Time (8:30 am Pacific Time) Date: North America -- 1.888.231.8191, International -- Time: 1.647.427.7450 Dial in: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3688080 Webcast: North America -- 1. 855.859.2056, International -- Replay: 1.416.849.0833 Replay Passcode: 15954378
The conference call replay will be available until November 22, 2011. A transcript of the call will also be made available on Capstone's website (http://capstonemining.com/s/ConferenceCalls.asp) within approximately 24 hours of the call.
About Capstone Mining Corp.
Capstone Mining Corp. is a Canadian mining company 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 at properties in Chile, British Columbia and Australia. Using its cash flow and strong balance sheet as a springboard, Capstone aims to grow organically through continued mineral resource and reserve expansions and through acquisitions in politically stable, mining-friendly regions. Capstone is included in the S&P/TSX Composite Index and S&P/TSX Global Mining Index. Additional 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 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", "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. 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; 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 Technical Information contained in this news release has been prepared under the supervision of, and its disclosure has been reviewed by, John Sagman, P. Eng., Capstone's Vice President, Technical Services (technical information related to mining and production) and Brad Mercer, P. Geol., Capstone's 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 for Capstone, 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, 2011 as filed on SEDAR and as available on the Company's website for further details.
SOURCE Capstone Mining Corp.