Capstone Copper Corp. (“Capstone” or the “Company”)
(TSX:CS) today announced production and financial results for the
quarter ended March 31, 2022 (Q1 2022) and production and cost
guidance for the remainder of 2022. Quarterly consolidated copper
production totaled 22,500 tonnes at C1 cash costs1 of $2.31 per
payable pound of copper produced. Link HERE for Capstone’s Q1 2022
management’s discussion and analysis (“MD&A”) and financial
statements and HERE for the webcast presentation.
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the full release here:
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“It is with great pleasure that I report the inaugural first
quarter’s results of the new Capstone Copper, and I would
particularly like to take this opportunity to thank everybody in
our organization for their tremendous support as we integrate our
business. Despite inflationary pressures facing the entire mining
industry, Capstone delivered strong financial results, highlighted
by adjusted EBITDA of $123 million that included only a nine-day
contribution from our Mantoverde and Mantos Blancos mines since the
combination took effect on March 23, 2022,” said John MacKenzie,
CEO. “This is a transformational year for Capstone as we ramp-up
our new Mantos Blancos mill, construct the Mantoverde sulphides
project and deliver a District Integration Plan for Santo Domingo
with Mantoverde. These are critical steps toward achieving over 40%
copper production growth by 2024 and a further 45% when Santo
Domingo goes into production. In the context of the current
macro-environment we have critically evaluated our business to
provide guidance for the remaining 9-months of 2022, and expect to
produce 136,000 to 150,000 tonnes of copper at C1 cash costs of
$2.55 to $2.70 per pound.”
Q1 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS
- The Transaction to combine with Mantos to create Capstone
Copper Corp. was completed on March 23, 2022. The Transaction
establishes Capstone Copper as a premier copper producer with a
diversified portfolio of high-quality, long-life operating assets
focused in the Americas with an extensive pipeline of near-term
fully-permitted organic growth opportunities.
- Net income of $35.1 million, or $0.08 per share. Adjusted net
income1 of $61.1 million or $0.14 per share for Q1 2022, with the
main reconciling item for Q1 2022 being $19.9 million of
transaction and integration costs related to the Transaction.
Operating results include nine days of earnings from operations of
the Mantos Blancos and Mantoverde mines.
- Adjusted EBITDA1 of $123.4 million compared to $118.7 million
in Q1 2021.
- Operating cash flow before changes in working capital1 of $70.4
million in Q1 2022 compared to $245.0 million in Q1 2021, which
includes a $150 million precious metal stream deposit. The variance
is related to increased operating cash flow of $21.5 million on
copper sales and prices offset by transaction costs of $19.9
million and $22.9 million higher annual tax payment in Mexico
related to 2021 income.
- The Company is in a net cash position of $64.9 million and
total available liquidity1 is $638.1 million. The balance sheet was
further expanded with the acquisition of cash and debt on the
Transaction. The net cash position of $64.9 million as at March 31,
2022 consists of cash and short term investments of $413.1 million
netted against long term debt of $348.2 million.
- Consolidated copper production of 22,500 tonnes at C1 cash
costs1 of $2.31/lb of copper produced for Q1 2022 which consisted
of 14,400 tonnes at Pinto Valley, 5,900 tonnes at Cozamin and the
balance for the Chilean mines for the nine-day stub period. Mantos
Blancos and Mantoverde contributed an additional $0.14 per pound to
the consolidated C1 cash costs1; excluding the stub period
reporting, Capstone Copper's consolidated C1 cash costs1 were $2.17
per pound.
- Mantos Blancos Concentrator Debottlenecking Project ("MB-CDP")
ramp-up to 20,000 tonnes per day (“tpd”) is progressing well.
Throughput averaged over 18,000 tpd during the last week of April.
The focus is on ramping up to name plate capacity, optimization,
and achieving targeted recoveries in Q3 2022.
- Mantoverde Development Project ("MVDP") construction is
progressing well with earthworks mostly completed and major
construction commenced in late March 2022. Numerous marine cargo
shipments of major plant equipment are now en-route to site. The
total project capital budget is now estimated to be $825 million
compared to previously $787 million. The increase relates to diesel
prices impacting pre-stripping costs by $23 million plus additional
contingency of $15 million. The majority of the capital costs are
fixed due to the nature of the lump sum turn-key contract with
Ausenco of $525 million and the purchase of major mining equipment
was price fixed prior to the current inflationary environment for
approximately $140 million.
- The Mantoverde-Santo Domingo District Integration Plan will
outline the approach Capstone Copper is taking to maximize value
creation (including synergies) across the district. The integration
plan will outline the optimized flowsheet to create a world-class
district which is targeted for early Q4 2022 ahead of the Chile
analyst tour and Investor Day during the week of November 14th. The
Company expects the integration plan to contribute to the
feasibility studies for Santo Domingo (H1 2023), Mantoverde Phase
II (H2 2023) and Mantoverde & Santo Domingo cobalt and oxides
(H2 2023).
- Financial Flexibility enhanced with amendment of Revolving
Credit Facility ("RCF") to $500 million plus $100 million
accordion. Subsequent to quarter end, the RCF was amended and will
become available after all the security is in place and other
customary conditions are met, which is expected to occur before
July 2022.
Mantos and Capstone Mining Transaction
On November 30, 2021, Capstone Mining announced it had entered
into a definitive agreement (the "Agreement") with Mantos to
combine, pursuant to a plan of arrangement.
The Transaction was completed on March 23, 2022 and the combined
company was renamed Capstone Copper Corp. Capstone Copper is
headquartered in Vancouver, B.C. and listed on the TSX. Pursuant to
the Agreement, each Capstone Mining shareholder received one newly
issued Capstone Copper share per Capstone Mining share (the
"Exchange Ratio") and the existing Mantos shareholders maintained
their Capstone Copper shares. At completion of the Transaction,
former Capstone Mining and Mantos shareholders collectively owned
approximately 60.75% and 39.25% of Capstone Copper, respectively,
on a fully-diluted basis. Refer to the business combination note in
the condensed interim consolidated financial statements.
Following completion of the Transaction, Capstone Copper
operates four mines, including two mines run by Mantos Copper in
Chile since 2015: The Mantos Blancos (100% owned) open pit copper
mine is located forty-five kilometers northeast of Antofagasta in
the Antofagasta Region and produces copper concentrate and copper
cathodes. The Mantoverde (70% owned) open pit mine is located fifty
kilometers southeast of Chanaral, in the region of Atacama and
produces copper cathodes. Mantoverde is the site of the MVDP
sulphide expansion, currently in construction.
The new Capstone Copper has a broad portfolio of (largely
permitted) brownfield projects located at our sites that facilitate
disciplined capital allocation and a phased approach to growth.
Operational Overview
Refer to Capstone’s Q1 2022 MD&A and
Financial Statements for detailed operating results.
Q1 2022
Q1 2021
Copper production (000s
tonnes)
Pinto Valley
14.4
16.5
Cozamin
5.9
5.2
Total2
22.5
21.7
Copper sales2
Copper sold (000s tonnes)
25.5
22.3
Realized copper price
($/pound)
4.78
4.12
C1 cash costs1 ($/pound)
produced
Pinto Valley
2.60
1.94
Cozamin
1.12
0.91
Consolidated2
2.31
1.70
1
These are alternative performance
measures. Refer to the section entitled “Alternative Performance
Measures” in the Cautionary Notes
2
Includes nine days of Mantos Mines
production, sales and costs.
Consolidated
Q1 2022 consolidated production of 22,500 tonnes of copper is
higher than the 21,700 tonnes in Q1 2021 and primarily relates to
addition of nine-day production at the Mantos Blancos and
Mantoverde mines.
The main driver for the $0.61/lb increase in C1 cash costs1 in
Q1 2022, compared to Q1 2021, is higher unit costs at Pinto Valley
plus the inclusion of the Mantos Blancos and Mantoverde mines which
impacted consolidated C1 cash costs1 by $0.14/lb. Prior to the
inclusion of the Mantos Blancos and Mantoverde results for the stub
period, the Capstone Mining results would have been $2.17/lb. C1
cash costs1 increased from $1.70 to $2.17/lb due to $0.12/lb on
lower production of 1,400 tonnes, $0.09/lb due to higher TCRC's,
$0.05 due to lower by-product revenue and stockpile drawdown and
the balance of $0.20/lb due to inflationary pressures.
Pinto Valley Mine
Q1 2022 production decreased by 13% compared to the same period
last year due to 11% lower head grades for Q1 2022 (0.32% versus
0.36% in Q1 2021) due to mine sequencing and lower recoveries
(82.3% versus 85.7% in Q1 2021) offset partially by higher mill
throughput (58,412 tpd in Q1 2022 versus 58,095 tpd in Q1
2021).
An increase in Q1 2022 C1 cash costs1 of $0.66/lb was primarily
attributable to lower production ($0.30/lb), higher operating costs
related to an inflation price increase on diesel, power, grinding
media; increased spend on rental equipment, mining equipment tools,
contractors and dust suppression ($0.22/lb) and an increase in
treatment and refining rates in 2022 ($0.09/lb).
PV4 Study
During the quarter, work progressed on the pre-feasibility study
("PFS") for PV4 which aims to maximize the conversion of
approximately one billion tonnes of mineral resources to mineral
reserves, significantly extending Pinto Valley’s mine life and
increasing the mine’s copper production profile. The PV4 study is
focused on modest expansion of existing mill throughput to range of
65,000 to 70,000 tpd with an extended life of mine. The PV4 study
is expected to be released in H1 2023. The application of the
following new technologies and innovation is being considered:
- Expansion of the use of Jetti catalytic leach technology which
has the potential to increase mill cut-off-grades and increase
tonnage available for leaching. Column leach and test heap work are
ongoing and the results will be included in the PV4 Study. An
expanded dump leach strategy would translate to higher grades sent
to the mill for processing and increased copper cathode production
by expanding dump leach tonnage.
- Pyrite Agglomeration, with strong positive environmental,
social and governance ("ESG") implications as it would divert
acid-generating minerals including pyrite and chalcopyrite from
tailings to the dump leach operation. Additional copper recovery
and lower costs via production of sulphuric acid would be key
economic drivers for this project.
Cozamin Mine
Q1 2022 production increased by 15% compared to the same period
last year mainly due to higher mill throughput (3,704 tpd versus
3,345 tpd in Q1 2021) and head grades (1.84% versus 1.79% in Q1
2021). Recoveries were comparable quarter over quarter.
C1 cash costs1 in Q1 2022 were higher than the same period last
year due to planned higher mechanical part spend in order to
increase underground equipment availability and reliability and
some inflationary pressures on steel and explosives ($0.13/lb),
lower zinc by-product credits due to planned lower zinc production
($0.06/lb) and higher treatment and refining costs ($0.03/lb),
partially offset by higher copper production (-$0.06/lb).
Mantoverde Development Project
Construction of the MVDP located at the existing Mantoverde
(oxide) operation continues to progress well. The MVDP is expected
to enable us to process 235 million tonnes of copper sulphide
reserves over a 20-year expected mine life, in addition to our
existing oxide reserves. The MVDP involves the addition of a
sulphide concentrator (12.3 million tonnes per year) and tailings
storage facility, and the expansion of our existing desalination
plant.
We expect completion of the MVDP to increase production from
approximately 49,000 tonnes of copper (cathodes only) in 2021 to
approximately 120,000 tonnes of copper (copper concentrate and
cathodes) post project completion in 2024. In parallel, C1 cash
costs1 are expected to decrease from $2.79/lb in 2021 to under
$1.70/lb to $1.80/lb in 2024. The decline in expected costs will be
driven by the mine's transition to becoming a primary producer of
copper concentrate. The mine will also benefit from the production
of approximately 31,000 ounces of gold per year that will generate
by-product credits. Upon completion of MVDP, approximately 75% of
Mantoverde's production will come from the lower-cost sulphide
copper.
MVDP is being progressed under a lump-sum turn-key engineering,
procurement and construction (EPC) arrangement with Ausenco
Limited, a multi-national engineering, procurement and construction
management company, with broad experience in the design and
construction of copper concentrator projects of this scale in the
international market. The execution plan includes a Capstone Copper
owner’s team working with the contractors during the execution
phase.
As of April 30, 2022, the MVDP had achieved overall progress of
49% and construction progress of 14% and the schedule remains
intact. The target for completion of construction remains late
2023. All contractors have been mobilized to site and all required
permits are in place. Work completed in Q1 includes:
- Bulk earthworks for the Primary Crusher and Grinding Area
Platforms
- Bypass water pipeline with the internal lining, trench
excavation and pipeline installation in the trench
- Drilling for all pumping and monitoring wells at the tailings
storage facility ("TSF") allowing for the commencement of the major
TSF construction activities
- 13 Komatsu 830E haulage trucks have been received according to
plan and are operating at mine site
- Construction camp complete and operational
The costs to date of the major equipment purchases,
pre-stripping, owner’s costs and the EPC lump sum turnkey are
aligned with the budget. Close ongoing monitoring is being done to
identify potential impacts due to an environment marked by
COVID-19, stressed logistics chains and inflation in costs.
The total project capital budget is now estimated to be $825
million and spend to date totals $338 million. The EPC contract
total budget is approximately $525 million of which $220 million
has been spent to date. The total project costs have increased
slightly from $787 million to $825 million due to diesel price
impact on pre-stripping costs of $23 million plus additional
contingency of $15 million. The majority of the capital costs are
fixed due to the nature of the lump sum turn-key contract with
Ausenco of $525 million or 67% of the original capital. Major
mining equipment was price fixed prior to the current inflationary
environment for approximately $140 million or 18% of the total
original capital.
Mantos Blancos Concentrator Debottlenecking Project
The purpose of the MB-CDP is to increase throughput capacity at
the sulphide concentrator plant from 11,000 tpd to 20,000 tpd (or
from 4.2 million tonnes per year to 7.3 million tonnes per
year).
Construction of the MB-CDP was completed, and includes the
modification of certain processes and the installation of new
crushers, one new ball mill, four new rougher flotation cells and a
new thickener. At quarter-end, the project commissioning is
complete and the ramp-up of the project continued to progress.
Throughput of the plant averaged over 18,000 tpd during the last
week of April, representing over 90% of nameplate capacity.
Looking forward, the focus becomes sustaining throughput at
targeted levels, and optimization of the circuit to achieve
targeted recoveries in Q3 2022.
Upon completion of the MB-CDP, we expect Mantos Blancos
production to increase from approximately 45,000 tonnes of copper
in 2021 to approximately 53,000 tonnes of copper in 2023. In
parallel, C1 cash costs1 are anticipated to decrease from current
guidance of $2.81/lb in 2021 to ~$2.00/lb in 2023 as an even
greater share of Mantos Blancos' production is sourced from the
lower cost copper concentrate production.
Mantos Blancos Phase II
Mantos Blancos is currently analyzing the potential to increase
the throughput of the Mantos Blancos sulphide concentrator plant
from 7.3 million tonnes per year to 10.0 million tonnes per year
using the existing (currently unused/underutilized) ball mills and
process equipment. As part of the Mantos Blancos Phase II Project
we are also evaluating the potential to extend the life of copper
cathode production. A pre-feasibility study on the Mantos Blancos
Phase II Project will be completed in Q2 2022 which will be
incorporated into a Feasibility Study (“FS”) in Q4 2022.
Santo Domingo
Upon closing of the Transaction, the Santo Domingo team has been
integrated into the larger Capstone Copper team in Chile. The
integrated project team is focused on identifying and evaluating
the optimal integrated development plan for the Mantoverde-Santo
Domingo district. The Mantoverde operation is located approximately
~30km southwest of the Santo Domingo project. The Company expects
the integrated district plan to study alternatives and identify the
best path forward to develop the copper (sulphides and oxides),
gold, iron, and cobalt across both properties. An integrated
development approach is likely to maximize potential synergies
associated with the proximity of Santo Domingo to the existing
Mantoverde operation, existing infrastructure (including a
desalination plant, roads, power, and pipelines), and integration
of other assets, such as the Santo Domingo port contract with
Puerto Abierto S.A.
The potential synergies the Company expects to be maximized
through an optimal integrated district development plan include the
following:
- Infrastructure synergies (including desalination plant, power,
pipelines, port)
- Integrated mine and process approach
- Construction and supply chain synergies
- Cobalt and sulphuric acid enhancements
- Enabling revenue lines for Mantoverde cobalt and magnetite
- Using excess solvent extraction and electrowinning ("Sx-Ew")
capacity
The revenue enhancing opportunities include using excess
electrowinning capacity at Mantoverde to potentially process both
Santo Domingo oxide material and additional low-grade sulphides
enabled by Jetti catalytic leach technologies which Capstone Copper
has been first to implement at Pinto Valley. In addition, the
potential cobalt plant may unlock cobalt production from Mantoverde
while producing a by-product of sulphuric acid which can then be
used internally to further significantly lower operating costs on
the leaching process at Mantoverde.
Cobalt feasibility study update
The cobalt recovery process consists of a concentration step, an
oxidation step, and a cobalt recovery step. The concentration step
considers a conventional froth flotation circuit treating copper
flotation tails to produce a cobaltiferous pyrite concentrate. For
the base case, the pyrite concentrate, which contains between 0.5%
and 0.7% Co, is oxidized in a fluidized bed roaster to produce a
cobalt calcine and a concentrated sulphuric acid by-product. The
calcine is then subjected to various precipitation, leaching,
solvent extraction and crystallization steps to produce battery
grade cobalt sulphate heptahydrate. At an expected 10.4 million
pounds of cobalt production per year, this would be one of the
largest and lowest cost cobalt producers in the world. Additional
benefits of this project include the generation of carbon-free
energy from waste heat emitted by the roaster, and the production
of by-product sulphuric acid which can be used for heap or dump
leaching to produce low-cost copper cathodes at Mantoverde and
elsewhere in the district.
The prefeasibility study is also evaluating different flow sheet
alternatives for Cobalt production in consideration of potential
synergies between Mantoverde and Santo Domingo. Initial trade-off
studies have confirmed the potential of acid pressure oxidation
(POX) as a potentially lower cost alternative to roasting. The
Company is developing both options in parallel to gain maturity and
provide a robust recommendation on the path forward in Q4 2022.
Along the same timeline (Q4 2022) we intend to release an
updated cobalt resource for Santo Domingo, as well as an initial
cobalt resource for Mantoverde.
Oxide drilling program
Santo Domingo contains oxide ore that could be processed with
available capacity of the electrowinning plant at Mantoverde for
cathode production. During Q1 2022, the Company developed a
preliminary business case and started an exploratory metallurgical
program scheduled to be completed in Q3 2022 which will improve the
understanding of copper solubility and acid consumption. Subject to
positive metallurgical results the company is planning to complete
a subsequent oxide drilling program starting in late 2022 to
delineate an oxide mineral resource. Ultimately, this work will
feed into a further updated Santo Domingo FS in late-2023.
Corporate Exploration Update
Cozamin exploration: The focus
during Q1 2022 was on testing the Mala Noche Footwall Zone and Mala
Noche Main Vein West Target with one surface rig and one
underground rig from the recently completed west exploration
crosscut station.
Copper Cities, Arizona: On January
20, 2022, Capstone Mining announced that it had entered into an
18-month access agreement with BHP Copper Inc. ("BHP") to conduct
drill and metallurgical test-work at BHP's Copper Cities project
("Copper Cities"), located ~10 km east of the Pinto Valley Mine. In
2022, Capstone Copper plans to spend $6.7 million in a two-phase
drill program aimed at twinning historical drill holes, and to
select a portion of these for metallurgical testing. Drilling with
two surface rigs is on-going.
Planalto, Brazil: Step-out drilling
at the Planalto Iron Ore-Copper-Gold prospect in Brazil, under an
earn-in agreement with Lara Exploration Ltd., commenced in Q4 2021
and continued in Q1 2022. Lara is conducting the work and will
report results when appropriate.
2022 Capstone Copper Catalysts
The following chart highlights key catalysts and deliverables
for Capstone Copper. During the planned analyst tour in November,
the Company plans to release the following key items:
- MV-SD District Integration plan
- Cobalt - Initial Mantoverde resource and updated Santo Domingo
resource
- Cobalt flow sheet recommendation
- Mantos Blancos Phase II feasibility study
CAPSTONE COPPER NINE-MONTH GUIDANCE (APRIL-DECEMBER 2022)
Production and Cash Cost Guidance
During the nine months from April 1, 2022 to December 31, 2022,
Capstone Copper expects to produce between 136,000 and 150,00
tonnes of copper at C1 cash costs1 of between $2.55 and $2.70 per
pound payable copper produced.
April 1 – December 31, 2022
Copper Production (‘000s tonnes)
C1 Cash Costs1
(US$ per payable lb Cu Produced)
Sulphides Business
Pinto Valley
41.0 – 45.0
$2.45 – $2.60
Cozamin
18.0 – 20.0
$1.10 – $1.25
Mantos Blancos
32.0 – 35.0
$1.95 – $2.10
Total Sulphides
91.0 – 100.0
$2.00 – $2.15
Cathode Business
Mantos Blancos
10.0 – 11.0
$3.45 – $3.60
Mantoverde*
35.0 – 39.0
$3.60 – $3.80
Total Cathodes
45.0 – 50.0
$3.55 – $3.75
Consolidated Cu Production
136.0 – 150.0
$2.55 – $2.70
*Mantoverde production shown on a 100% basis
The updated C1 cash costs1 guidance reflects the current
inflationary environment and current spot pricing in the sulphuric
acid market for the Chilean mines. In 2022, we have assumed
sulphuric acid prices of $280/tonne which compares to $180/tonne in
the Mantoverde and Mantos Blancos technical reports, which
increases C1 cash costs1 by approximately ~$0.22/lb on a
consolidated basis. The purchase price for approximately 65% of
required sulphuric acid for the balance of 2022 has been fixed with
suppliers.
For the nine month period April 1, 2022 to December 31, 2022,
expected sulphuric acid consumption at Mantoverde and Mantos
Blancos is ~540,000 tonnes and ~140,000 tonnes respectively
(680,000 tonnes total). The impact of a ~$100/tonne price increase
is $68 million dollars or $0.22/lb consolidated. The impact to C1
cash costs1 at Mantoverde are $0.70/lb and at Mantos Blancos either
$0.15/lb overall or $0.66/lb on cathode C1 cash costs1,
respectively. In addition, Mantoverde and Mantos Blancos are
experiencing general cost inflation, most notably increased diesel
prices.
Although sulphuric acid is a significant input cost to our oxide
(cathode) business unit, over time, sulphide production is expected
to increase with the ramp up of MB-CDP and the completion of the
sulphide concentrator at Mantoverde making consolidated C1 cash
costs1 less exposed to changes in acid prices in the future.
Expected 2022 cathode production is ~33% of total copper
production. Cathode production is expected to be only ~18% of total
copper production in 2024 and is expected to further decline to
under 6% with future production contribution from Santo
Domingo.
Pinto Valley C1 cash costs1 are expected to be higher than
guidance in January 2022, primarily due to general observed cost
inflation.
Planned maintenance at Pinto Valley and the ramp up of MB-CDP in
the second quarter are expected to result in lower production in Q2
2022 compared to following quarters with corresponding drop in C1
cash costs1 post Q2 2022.
Capital and Exploration Guidance
Our Capital and Exploration guidance is as follows:
Pinto Valley
Mantos Blancos
Manto- verde
Cozamin
Santo Domingo
Total
Capital Expenditure ($
millions)
Sustaining Capital1
65
20
20
25
-
130
Capitalized Stripping
5
55
65
-
-
125
Expansionary Capital1
15
20
265
25
40
365
Total Capital
Expenditure
85
95
350
50
40
620
Exploration ($
millions)
Brownfield (Cozamin + Chile)
-
1
1
2
2
6
Greenfield (Brazil + Chile)
-
-
-
-
-
2
Greenfield (Copper Cities,
AZ)
7
-
-
-
-
7
Total Exploration
7
1
1
2
2
15
FINANCIAL OVERVIEW
Please refer to Capstone’s Q1 2022 MD&A and Financial
Statements for detailed financial results.
($ millions, except per share
data)
Q1 2022
Q1 2021
Revenue
268.1
204.1
Net income
35.1
127.0
Net income attributable to
shareholders
34.0
101.0
Net income attributable to
shareholders per common share – basic ($)
0.08
0.25
Net income attributable to
shareholders per common share – diluted ($)
0.08
0.24
Adjusted net income1
61.1
64.4
Adjusted net income
attributable to shareholders1
61.1
64.9
Adjusted net income attributable
to shareholders per common share - basic
0.14
0.16
Adjusted net income attributable
to shareholders per common share - diluted
0.14
0.16
Adjusted EBITDA1
123.4
118.7
Cash flow from operating
activities2
(7.8
)
220.3
Cash flow (used in) from
operating activities per common share1 – basic ($)
(0.02
)
0.55
Operating cash flow before
changes in working capital1,2
70.4
245.0
Operating cash flow before
changes in working capital per common share1 - basic ($)
0.16
0.61
($millions)
March 31, 2022
December 31, 2021
Total assets
5,264.8
1,728.0
Long term debt (excluding
financing fees)
348.2
-
Total non-current financial
liabilities
387.1
38.4
Total non-current liabilities
1,554.1
481.3
Cash and cash equivalents and
short-term investments
413.1
264.4
Net cash1
64.9
264.4
CONFERENCE CALL AND WEBCAST DETAILS
Capstone will host a conference call and webcast on Friday, May
13, 2022 at 08:00 am PT/11:00 am ET.
Link to the audio webcast:
https://produceredition.webcasts.com/starthere.jsp?ei=1540858&tp_key=c09a5f7a12
Dial-in numbers for the audio-only portion of the conference
call are below. Due to an increase in call volume, please dial-in
at least five minutes prior to the call to ensure placement into
the conference line on time.
Toronto: (+1) 416-764-8650 Vancouver: (+1) 778-383-7413 North
America toll free: 888-664-6383 Confirmation #51309954
A replay of the conference call will be available until May 20,
2022. Dial-in numbers for Toronto: (+1) 416‑764‑8677 and North
American toll free: 888-390-0541. The replay code is 309954#.
Following the replay, an audio file will be available on Capstone’s
website at:
https://capstonemining.com/investors/events-and-presentations/default.aspx.
This release is not suitable on a standalone basis for readers
unfamiliar with Capstone and should be read in conjunction with the
Company’s MD&A and Financial Statements for the three months
ended March 31, 2022, which are available on Capstone’s website and
on SEDAR, all of which have been reviewed and approved by
Capstone's Board of Directors.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 our expectations or beliefs regarding
future events and the impacts of the ongoing and evolving COVID-19
pandemic. Forward-looking statements include, but are not limited
to, statements with respect to the estimation of Mineral Resources
and Mineral Reserves, the success of the underground paste backfill
and tailings filtration projects at Cozamin, the timing and cost of
the construction of the paste backfill and dry stack tailings plant
at Cozamin, the success and timing of the Mantos Blancos
Concentrator Debottlenecking Project, the timing and cost of the
Mantoverde Development Project, the timing and results of the PV4
study, timing and success of the Jetti Technology, the successful
execution of a port services agreement with Puerto Abierto S.A.,
the expected reduction in capital requirements for the Santo
Domingo project, the timing and success of the Cobalt Study for
Santo Domingo, the timing and results of the integrated plan for
Mantoverde - Santo Domingo, the realization of Mineral Reserve
estimates, the timing and amount of estimated future production,
the costs of production and capital expenditures and reclamation,
the budgets for exploration at Cozamin, Santo Domingo, Pinto
Valley, Mantos Blancos, Mantoverde and other exploration projects,
the timing and success of the Copper Cities project, the success of
our mining operations, the continuing success of mineral
exploration, the estimations for potential quantities and grade of
inferred resources and exploration targets, our ability to fund
future exploration activities, our ability to finance the Santo
Domingo project and other current or future projects and
expansions, environmental risks, unanticipated reclamation expenses
and title disputes, the success of the synergies and catalysts
related to the Transaction, and the anticipated future production,
costs of production including the cost of sulphuric acid and oil
and other fuel, capital expenditures and reclamation of the
Company's operations and development projects. The potential
effects of the COVID-19 pandemic on our business and operations are
unknown at this time, including Capstone Copper’s ability to manage
challenges and restrictions arising from COVID-19 in the
communities in which Capstone Copper operates and our ability to
continue to safely operate and to safely return our business to
normal operations. The impact of COVID-19 to Capstone Copper is
dependent on a number of factors outside of our control and
knowledge, including the effectiveness of the measures taken by
public health and governmental authorities to combat the spread of
the disease, global economic uncertainties and outlook due to the
disease, supply chain delays resulting in lack of availability of
supplies, goods and equipment, and evolving restrictions relating
to mining activities and to travel in certain jurisdictions in
which we operate.
In certain cases, forward-looking statements can be identified
by the use of words such as “anticipates”, “approximately”,
“believes”, “budget”, “estimates”, expects”, “forecasts”,
“guidance”, intends”, “plans”, “scheduled”, “target”, or variations
of such words and phrases, or statements that certain actions,
events or results “be achieved”, “could”, “may”, “might”, “occur”,
“should”, “will be taken” or “would” or the negative of these terms
or comparable terminology. In this document certain forward-looking
statements are identified by words including “anticipated”,
“expected”, “guidance” and “plan”. By their very nature,
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Such factors include, amongst
others, risks related to inherent hazards associated with mining
operations and closure of mining projects, future prices of copper
and other metals, compliance with financial covenants, surety
bonding, our ability to raise capital, Capstone Copper’s ability to
acquire properties for growth, counterparty risks associated with
sales of our metals, use of financial derivative instruments and
associated counterparty risks, foreign currency exchange rate
fluctuations, market access restrictions or tariffs, changes in
general economic conditions, availability and quality of water,
accuracy of Mineral Resource and Mineral Reserve estimates,
operating in foreign jurisdictions with risk of changes to
governmental regulation, compliance with governmental regulations,
compliance with environmental laws and regulations, reliance on
approvals, licences and permits from governmental authorities and
potential legal challenges to permit applications, contractual
risks including but not limited to, our ability to meet the
completion test requirements under the Cozamin Silver Stream
Agreement with Wheaton Precious Metals Corp. ("Wheaton"), our
ability to meet certain closing conditions under the Santo Domingo
Gold Stream Agreement with Wheaton, acting as Indemnitor for Minto
Metals Corp.’s surety bond obligations post divestiture, impact of
climate change and changes to climatic conditions at our operations
and projects, changes in regulatory requirements and policy related
to climate change and greenhouse gas ("GHG") emissions, land
reclamation and mine closure obligations, aboriginal title claims
and rights to consultation and accommodation, risks relating to
widespread epidemics or pandemic outbreak including the COVID-19
pandemic; the impact of COVID-19 on our workforce, risks related to
construction activities at our operations and development projects,
suppliers and other essential resources and what effect those
impacts, if they occur, would have on our business, including our
ability to access goods and supplies, the ability to transport our
products and impacts on employee productivity, the risks in
connection with the operations, cash flow and results of Capstone
Copper relating to the unknown duration and impact of the COVID-19
pandemic, impacts of geopolitical events and the effects of global
supply chain disruptions, uncertainties and risks related to the
potential development of the Santo Domingo project, risks related
to the Mantos Blancos Concentrator Debottlenecking Project and the
Mantoverde Development Project, increased operating and capital
costs, increased cost of reclamation, challenges to title to our
mineral properties, increased taxes in jurisdictions the Company
operates or is subject to tax, changes in tax regimes we are
subject to and any changes in law or interpretation of law may be
difficult to react to in an efficient manner, maintaining ongoing
social licence to operate, seismicity and its effects on our
operations and communities in which we operate, dependence on key
management personnel, potential conflicts of interest involving our
directors and officers, corruption and bribery, limitations
inherent in our insurance coverage, labour relations, increasing
input costs such as those related to sulphuric acid, electricity,
fuel and supplies, increasing inflation rates, competition in the
mining industry including but not limited to competition for
skilled labour, risks associated with joint venture partners and
non-controlling shareholders or associates, our ability to
integrate new acquisitions and new technology into our operations,
cybersecurity threats, legal proceedings, the volatility of the
price of the Common Shares, the uncertainty of maintaining a liquid
trading market for the Common Shares, risks related to dilution to
existing shareholders if stock options or other convertible
securities are exercised, the history of Capstone Copper with
respect to not paying dividends and anticipation of not paying
dividends in the foreseeable future and sales of Common Shares by
existing shareholders can reduce trading 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
MD&A of those statements and Annual Information Form, 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 our actual
results, performance or achievements to differ materially from
those described in our forward-looking statements, there may be
other factors that cause our results, performance or achievements
not to be as anticipated, estimated or intended. There can be no
assurance that our forward-looking statements will prove to be
accurate, as our actual results, performance or achievements could
differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on our
forward-looking statements.
COMPLIANCE WITH NI 43-101
Unless otherwise indicated, Capstone has prepared the technical
information in this document (“Technical Information”) based on
information contained in the technical reports, Annual Information
Form 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.
Disclosure Documents include the National Instrument 43-101
compliant technical reports titled "NI 43-101 Technical Report on
the Cozamin Mine, Zacatecas, Mexico" effective October 23, 2020,
“NI 43-101 Technical Report on the Pinto Valley Mine, Arizona, USA”
effective March 31, 2021 and “Santo Domingo Project, Region III,
Chile, NI 43-101 Technical Report” effective February 19, 2020.
The disclosure of Scientific and Technical Information in this
document was reviewed and approved by Brad Mercer, P. Geo., Senior
Vice President Exploration and Strategic Projects (technical
information related to mineral exploration activities and to
Mineral Resources at Cozamin), Clay Craig, P.Eng, Manager, Mining
& Evaluations (technical information related to Mineral
Reserves and Mineral Resources at Pinto Valley) and Tucker Jensen,
Superintendent Mine Operations, P.Eng (technical information
related to Mineral Reserves at Cozamin), Carlos Guzmán, RM CMC,
FAusIMM, Principal, Project Director, NCL, Gustavo Tapia, RM CMC,
Metallurgical and Process Consultant, GT Metallurgy, and Ronald
Turner, MAusIMM CP(Geo), Golder Associates (technical information
related to Mineral Reserves and Mineral Resources at Mantos Blancos
and Mantoverde), and Cashel Meagher, P.Geo., President and COO
(technical information related to project updates at Santo Domingo)
all Qualified Persons under NI 43-101.
Alternative Performance Measures
Alternative performance measures are furnished to provide
additional information. These non-GAAP performance measures are
included in this MD&A because these statistics are key
performance measures that management uses to monitor performance,
to assess how the Company is performing, and to plan and assess the
overall effectiveness and efficiency of mining operations. These
performance measures do not have a standard meaning within IFRS
and, therefore, amounts presented may not be comparable to similar
data presented by other mining companies. These performance
measures should not be considered in isolation as a substitute for
measures of performance in accordance with IFRS.
Some of these alternative performance measures are presented in
Highlights and discussed further in other sections of the MD&A.
These measures provide meaningful supplemental information
regarding operating results because they exclude certain
significant items that are not considered indicative of future
financial trends either by nature or amount. As a result, these
items are excluded for management assessment of operational
performance and preparation of annual budgets. These significant
items may include, but are not limited to, restructuring and asset
impairment charges, individually significant gains and losses from
sales of assets, share based compensation, unrealized gains or
losses, and certain items outside the control of management. These
items may not be non-recurring. However, excluding these items from
GAAP or Non-GAAP results allows for a consistent understanding of
the Company's consolidated financial performance when performing a
multi-period assessment including assessing the likelihood of
future results. Accordingly, these Non-GAAP financial measures may
provide insight to investors and other external users of the
Company's consolidated financial information.
C1 Cash Costs Per Payable Pound of Copper Produced
C1 cash costs per payable pound of copper produced is a measure
reflective of operating costs per unit. C1 cash costs is calculated
as cash production costs of metal produced net of by-product
credits and is a key performance measure that management uses to
monitor performance. Management uses this measure to assess how
well the Company’s producing mines are performing and to assess
overall efficiency and effectiveness of the mining operations and
assumes that realized by-product prices are consistent with those
prevailing during the reporting period.
All-in Sustaining Costs Per Payable Pound of Copper
Produced
All-in sustaining costs per payable pound of copper produced is
an extension of the C1 cash costs measure discussed above and is
also a key performance measure that management uses to monitor
performance. Management uses this measure to analyze margins
achieved on existing assets while sustaining and maintaining
production at current levels. Consolidated All-in sustaining costs
includes Corporate general and administrative costs.
Net debt / Net cash
Net debt / Net cash is a performance measure used by the Company
to assess its financial position and is composed of Long-term debt
(excluding deferred financing costs), Cash and cash equivalents and
Short-term investments.
Available Liquidity
Available liquidity is a performance measure used by the Company
to assess its financial position and is composed of RCF credit
capacity, Cash and cash equivalents and Short-term investments.
Available liquidity excludes undrawn portions of committed funding
arrangements at the mine or project level as these amounts can only
be drawn on a periodic basis in line with the contractual
arrangements and are for use on development project capital.
Because of these limitations on availability and flexibility, we do
not include these undrawn amounts in "Available liquidity". For
clarity, Available liquidity does not include undrawn amounts on
the $520 million Mantoverde DP facility, the Mantoverde $60 million
cost overrun facility from MMC, nor the $260 million undrawn
portion of the Gold stream from Wheaton related to the Santo
Domingo project.
Operating Cash Flow before Changes in Working Capital per Common
Share
Operating Cash Flow before changes in working capital per common
share is a performance measure used by the Company to assess its
ability to generate cash from its operations, while also taking
into consideration changes in the number of outstanding shares of
the Company.
Adjusted Net Income
Adjusted net income is net income attributable to shareholders
as reported, adjusted for certain types of transactions that in our
judgment are not indicative of our normal operating activities or
do not necessarily occur on a regular basis.
EBITDA
EBITDA is net income attributable to shareholders before net
finance expense, tax expense, and depletion and amortization.
Adjusted EBITDA
Adjusted EBITDA is EBITDA before the pre-tax effect of the
adjustments made to adjusted net income (above) as well as certain
other adjustments required under the RCF agreement in the
determination of EBITDA for covenant calculation purposes.
The adjustments made to Adjusted net income and Adjusted EBITDA
allow management and readers to analyze our results more clearly
and understand the cash generating potential of the Company.
Sustaining Capital
Sustaining capital is expenditures to maintain existing
operations and sustain production levels. A reconciliation to GAAP
segment MPPE additions is included within the mine site sections of
this document.
Expansionary Capital
Expansionary capital is expenditures to increase current or
future production capacity, cash flow or earnings potential. A
reconciliation to GAAP segment MPPE additions is included within
the mine site sections of this document.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220512006071/en/
Jerrold Annett, SVP, Strategy and Capital Markets 647-273-7351
jannett@capstonecopper.com
Kettina Cordero, Director Investor Relations &
Communications 604-262-9794 kcordero@capstonecopper.com
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