- Published: 15 May 2009
- Written by Editor
Capstone Reports Strong First Quarter Results as Mining Operations Deliver Record Production
<< Adjusted Net Earnings(1) of US$30.7 million (US$0.19/share) & Cash Flow from Mining Operations(1) of US$26.3 million >>
Capstone Mining Corp. (CS: TSX) today announced its financial results for the three months ended March 31, 2009. Copies of Capstone's financial statements and management discussion and analysis ("MD&A") are available on Capstone's website at http://www.capstonemining.com/investors/financials/. This release should be read in conjunction with the first quarter 2009 financial statements and MD&A. Capstone will hold a conference call Friday May 15, 2009 at 8:00 AM Pacific time (11:00 AM Eastern time) to discuss these results; call-in details are at the end of this release.
"Capstone's first quarter 2009 financial results were very strong as a result of the synergies of the business combination between Capstone and Sherwood completed in the fourth quarter of 2008," said Darren Pylot, Vice Chairman & CEO of Capstone Mining Corp. "We reported adjusted net earnings(1) of US$30.7 million (or US$0.19 per common share), after netting out certain non-cash items, and generated cash flow from mining operations(1) of US$26.3 million for the period. This excellent performance illustrates the earnings and cash generating capacity of our mining operations," he said. "Subsequent to quarter end, we also took the opportunity to restructure our balance sheet and, as of May 12, 2009, Capstone had approximately US$59.4 million in cash, US$29.3 million of long-term debt, a US$40.0 million undrawn bank facility and our Silverstone share holding had a market value of $45.9 million, after taking into account the recent equity financing, as well as the scheduled and early debt repayments noted in our financial statements."
"Both of Capstone's operations, the Cozamin and Minto mines, achieved record copper production during the first quarter of 2009 as both ramped up to their fully expanded capacity during the period," said Stephen Quin, President & COO of Capstone Mining Corp. "With the expansions complete, and both mines producing at design capacity, we are well positioned to deliver favourable production and costs for the balance of 2009, while continuing our organic growth through exploration and production expansions. Our production continues to be supported by a strong hedge book, which had a mark-to-market value of over US$50 million at March 31, 2009."
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Financial Highlights for the three months ended March 31, 2009
- A net loss of US$16.2 million (US$0.10 per share) which includes:
- Income from mining operations of US$19.6 million; and
- A net loss of US$37.9 on derivative instruments, which comprises:
- A realized gain of US$18.0 million on positions settled during
the period for cash, and
- An unrealized loss of US$53.5 million as the value of the
derivative instrument asset was reduced over the period due to
the increase in the copper price.
- Adjusted net earnings(1) of US$30.7 million (or US$0.19 per common
share), after making adjustments for certain non-cash items
(including the unrealized loss on outstanding derivative positions
held at the end of the period noted above) and one-time items (none
during the period).
- Cash flow from mining operations(1) of US$26.3 million.
- Working capital increased to US$77.0 million over the three months
ended March 31, 2009 from US$35.4 million at December 31, 2008. This
amount excludes the proceeds of the bought deal financing (which was
completed in May 2009) and the market value of the Silverstone shares
(see below).
- Sold a total of 28.4 million pounds of copper, 0.8 million pounds of
zinc, 1.7 million pounds of lead, 11,308 ounces of gold, and 496,209
ounces of silver during the period.
- Produced a total of 25.1 million pounds of payable copper at an
estimated total cash cost(1) of US$1.05 per pound of payable copper.
- Arranged a US$40.0 million corporate revolving term credit facility
with the Bank of Nova Scotia (the "RT Facility"). A portion of these
funds were used to facilitate the repurchase of the debentures.
- Repurchased US$31.3 million (C$39.3 million) of debentures tendered
under the December 24, 2008 offer to purchase all outstanding
debentures at a price equal to the 101% of the principal amount of
the debentures, plus accrued and unpaid interest. The outstanding
liability related to the debentures has therefore been reduced to US
$3.7 million (C$4.7 million).
- Announced new mineral resource estimates for the Cozamin Mine and the
Kutcho Copper Project, identifying significant enhancements to those
mineral resources.
- Discovered another high-grade copper-gold zone at the Minto Mine
designated "Minto North". The Minto North discovery is located
approximately 600 metres north-northwest of the current open pit
mining operation. The discovery yielded high-grade mineralization at
relatively shallow depths, similar in grade, thickness and style of
mineralization to that found in the open pit, and is the highest
grade of all the deposit identified to date at the Minto Mine.
- Entered into a voting agreement with Silver Wheaton Corp. whereby the
Company agreed to vote its shares in Silverstone Resources Corp. in
favour of the proposed plan of arrangement between Silverstone and
Silver Wheaton whereby Silver Wheaton will acquire all of the
Company's shares and special warrants in Silverstone at a ratio of
0.185 shares of Silver Wheaton per common share or special warrant of
Silverstone held by the Company. The Company currently holds
24,042,340 shares and 2,747,428 special warrants of Silverstone. The
market value of these holdings at May 12, 2009 was US$45.9 million,
of which US$6.7 million is carried as a long term asset in the
Company's financial statements.
Production Results
- Cozamin Mine:
- Completed the Phase III mine expansion to 3,000 tonnes per day
("tpd") of throughput and established access to wider, higher
grade ore zones that are now in production, with sustained
processing of over 3,000tpd achieved February 2009 onwards;
- Produced 9.8 million pounds of contained copper in concentrates,
along with by-product 2.4 million pounds of zinc, 1.2 million
pounds of lead and 0.3 million ounces of silver;
- Processed 248,325 tonnes (2,759tpd) of ore averaging 1.96% copper,
0.81% zinc, 0.33% lead and 56 grams per tonne ("g/t") silver and a
single day record of 3,787 tonnes processed in April;
- Produced 18,461dmt of copper concentrate averaging 24.1% copper;
and
- Produced 9.4 million pounds of payable copper at a total cash
cost(1) of US$1.00 per pound.
- Minto Mine:
- Completed the Phase III mine expansion to 3,200tpd of mill
throughput, supported by increased mine production, which rates
were regularly achieved in March 2009 and beyond;
- Produced 16.3 million pounds of contained copper in concentrates,
along with 7,624 ounces of gold and 0.1 million ounces of silver
as by-products;
- Processed 233,529 tonnes (2,595tpd) of ore averaging 3.39% copper,
1.4g/t gold and 16.2g/t silver and a single day record of
3,611 tonnes processed in April;
- Produced 17,283 dmt of copper concentrate averaging 42.6% copper;
- Produced 15.7 million pounds of payable copper at a total cash
cost(1) of US$1.09 per pound.
- Discovered the high grade, near surface, thick Minto North deposit
600m northeast of the current open pit mining operation.
- Kutcho Project:
- Reported a robust, high grade resource for the Kutcho Copper
Project; and
- Commenced internal evaluation of options for the development of a
smaller tonnage, higher grade operation, likely with underground
extraction of the ore, with robust project economics.
Subsequent Events
Subsequent to March 31, 2009, Capstone reported the following significant
events:
- Closed a bought-deal equity financing with a syndicate of
underwriters led by Canaccord Capital Corporation and including
BMO Capital Markets, Scotia Capital Inc., Haywood Securities Inc. and
PI Financial Corp., for the sale of 31,165,000 common shares of the
Company at a price of C$1.85 for gross proceeds of C$57.7 million
(US$49.5 million), including exercise of an over-allotment option.
The net proceeds will be used for future acquisition opportunities,
debt repayment and general working capital purposes.
- Repaid an additional US$13.4 million of the Macquarie project loan
facility (the "PLF"), US$5.5 million of which was scheduled and the
balance were early payments made at the Company's election. These
payments reduce the balance owing under the PLF to US$16.5 million,
which balance is scheduled to be fully repaid by December 31, 2009.
- Repaid the US$40.0 million RT Facility with the Bank of Nova Scotia
from the proceeds of the bought deal equity financing. The US$40.0
million facility can be redrawn over the next three years, but is
subject to an US$8.0 million reduction each six months starting
January 2010.
- At May 12, 2009, after the above noted financings and long-term debt
repayments, the Company had approximately US$59.4 million in cash,
US$29.3 million of long-term debt, a US$40.0 million undrawn
RT Facility and the Silverstone holding had a market value of
US$45.9 million.
- Announced the assay results for exploration drill holes completed in
areas south of the Minto Mine open pit, including several high-grade
copper-gold intersections from the southeast portion of the Ridgetop
deposit, an area not previously known for high-grade mineralization.
- Announced additional drill results from the Minto North discovery at
the Minto Mine, including some exceptional high grade copper-gold
intercepts over significant thicknesses - the best intercepts ever
drilled on the Minto Mine property in 35 years of exploration.
- Temporarily ceased operations at the Cozamin Mine from May 1 to
May 5, 2009 in accordance with a Mexican Presidential Decree, which
ordered all non-essential government and private sector activities
suspended for this period (except for essential services and those
needed to help fight the H1N1 flu). Although five days of production
were lost as a result of this closure, the Company does not expect
this short interruption to affect the Cozamin Mine's production
forecasts for 2009.
Outlook for 2009
The current year, despite the challenges of the financial markets, looks
to be an exciting one for Capstone, based on the following:
- Forecast production of 95 million to 105 million pounds of copper at
a total cash cost(1) of US$1.00 per pound, net of by product credits.
- At the Cozamin Mine:
- Production of 35-40 million pounds of copper, with by-product
lead, zinc and silver, at an average total cash cost(1) of
approximately US$1.00 per pound, net of by-product credits;
- Completion of a new mine plan, building off the enhanced mineral
resource announced February 18, 2009, which should result in a
significantly increased mineral reserve and mine life;
- Capital expenditures of US$7.4 million, comprised of
US$7.1 million related to the remains of the Phase III mine
expansion, connection to higher voltage electrical transmission
line and sustaining capital, plus US$0.3 million in exploration
expenditures; and
- A comprehensive evaluation of the exploration potential of the
Cozamin Mine property, including the potential for additional
mineral resource discoveries (a) in the remaining, largely
unexplored four kilometres of the principal Mala Noche vein
system, and (b) in parallel, unexplored veins on the property.
- At the Minto Mine:
- Production of 60-65 million pounds of copper, with by-product gold
and silver, at a total cash cost(1) of approximately US$1.00 per
pound, net of by-product credits;
- Completion of an updated mineral resource estimate, which will
incorporate the results of the 2008 and early 2009 successful
drill programs;
- The updated mineral resource estimate will provide the basis for
an independent pre-feasibility study designed to (a) convert a
significant portion of these new mineral resources to mineral
reserves and (b) incorporate a further Phase IV increase in mining
and throughput to somewhere in the range of 4,000tpd to 5,000tpd;
- Capital expenditures of approximately US$8.9 million comprised of
US$4.8 million in process plant improvements and sustaining
capital, plus an additional US$4.1 million in exploration
expenditures on the Minto Mine property; and
- Continued exploration focused on following up on the new, high
grade, shallow Minto North discovery, both with in-fill drilling
and exploring for more such deposits.
- Strong cash flow from operations based on the above production and
supported by 26.0 million pounds of copper forward sold for delivery
in remainder of 2009 at an average price of US$2.59 per pound.
- The Company's total remaining forward sales position at
March 31, 2009 is 87.3 million pounds at an average of US$2.49 per
pound, to be delivered mostly between 2009 and 2011, with minor
quantities for delivery in 2012 and 2013.
- At the Kutcho Project, completion of technical studies in support of
a more robust underground or open pit project based on the recently
announced high grade mineral resource.
(1) These are non-GAAP performance measures and readers should refer to
Non-GAAP Performance Measures in the Company's Interim Management
Discussion and Analysis for the three months ended March 31, 2009 as
filed on SEDAR for further details.
Conference Call Details
Capstone will host a conference call on Friday, May 15 to discuss these
results. The conference call and webcast details are as follows:
Date: Friday May 15, 2009
Time: 8:00 AM PST (11:00 AM EST)
Dial in: North America - 1.800.731.6941, International - 1.416.644.3433
Webcast:
www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2649020
Replay: North America - 1.877.289.8525,
International - 1.416.640.1917
Replay Passcode: 21305229 followed by the number sign.
The conference call replay will be available until May 29, 2009. A
transcript of the call will also be made available on Capstone's website
(www.capstonemining.com) 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", "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 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 document ("Technical Information") based on information contained in the technical reports and news releases (collectively the "Disclosure Documents") available under Capstone Mining Corp.'s and Sherwood Copper 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.
Stephen Quin, Professional Geologist reviewed all Technical Information in this document.
SOURCE: Capstone Mining Corp.
about Capstone, please contact: Darren Pylot, Vice Chairman & CEO, Stephen Quin, President & COO; Or Investor Relations' Mark Patchett at (604) 684-8894 or (866) 684-8894, This email address is being protected from spambots. You need JavaScript enabled to view it.
