All amounts in US$ unless otherwise
indicated
Capstone Copper Corp. (“Capstone” or the “Company”)
(TSX:CS) today announced production and financial results for the
quarter ended June 30, 2022 (“Q2 2022”). Quarterly consolidated
copper production totaled 45,200 tonnes at C1 cash costs1 of $2.78
per payable pound of copper produced. Link HERE for Capstone’s Q2
2022 management’s discussion and analysis (“MD&A”) and
financial statements and HERE for the webcast presentation.
John MacKenzie, CEO of Capstone commented, “Capstone delivered a
solid quarter and, despite inflationary pressures that have
impacted the global mining industry, we generated approximately
$115 million of adjusted EBITDA in the quarter. We are now seeing
signs of declining sulphuric acid and diesel prices, and are
benefitting from a weaker Chilean Peso. Our balance sheet remains
strong with total expanded liquidity of $720 million providing good
flexibility for the advancement of our transformational growth
pipeline. We reiterate our production and cost guidance for the
year. We are pleased with construction progress at Mantoverde
Development Project (“MVDP”) which is currently over 60% complete,
and the project remains on schedule and on budget.”
Q2 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Net income of $92.0 million, or $0.11 per share. Adjusted net
loss1 of $10.8 million or $(0.01) per share for Q2 2022, with the
main adjustments for Q2 2022 being $114.6 million of non-cash
unrealized gain on derivative contracts and $14.0 million non-cash
recovery on share-based compensation. Net income and adjusted net
loss1 were impacted by negative provisional pricing adjustments
during the quarter related to the drop in realized copper prices1
(Q2 2022: $3.66/lb versus Q2 2021: $4.78/lb) which amounted to
$58.3 million in losses, compared to positive gain of $13.3 million
in Q1 2022.
- Adjusted EBITDA1 of $114.7 million compared to $128.0 million
in Q2 2021, with the main adjustments being non-cash unrealized
gain on derivative contracts, non-cash recovery on share-based
compensation, and unrealized provisional pricing adjustments on
revenue.
- Operating cash flow before changes in working capital of $40.7
million in Q2 2022 compared to $139.5 million in Q2 2021 which was
inclusive of a $30 million gold precious metal stream deposit. The
variance is related to the decrease in copper prices, increase in
operating costs, and higher cash taxes in Mexico and Chile.
- Consolidated copper production of 45,200 tonnes at C1 cash
costs1 of $2.78/lb of copper produced for Q2 2022, which consisted
of 13,300 tonnes at Pinto Valley, 6,400 tonnes at Cozamin, 12,400
tonnes at Mantos Blancos, and 13,100 tonnes at Mantoverde.
- Production and C1 cash costs1 guidance for the nine-month
period (April 1, 2022 to December 31, 2022) is re-iterated.
- In light of the recent drop in copper prices, the Company has
taken the following proactive measures:
- Capital guidance has been reduced by $40 million mainly at
Santo Domingo and Pinto Valley
- Initiated operating cost reduction reviews at all mine
sites
- Elimination of higher cost Glencore debt facility
- H2 2022 copper hedges in place for 36,000 tonnes with a
weighted average protected price of $3.73/lb, protecting all of the
expected oxide production
- Capital allocation focused on completion of Mantoverde
Development Project ("MVDP"), future pipeline growth yet to be
sanctioned post completion of various optimization studies
underway
- In addition, key input costs for acid, fuel and freight are
starting to decline in Q3 2022
- On July 22, 2022, the Company closed the amendment and
extension of the Capstone corporate revolving credit facility
(“RCF”) from $225 million to $500 million plus $100 million
accordion and extended the RCF by four years to May 12, 2026.
- Mantos Blancos Concentrator Debottlenecking Project ("MB-CDP")
is ramping up to design capacity to achieve targeted throughput
rates and recoveries in Q3 2022.
- Mantoverde Development Project remains on schedule and on
budget. Major construction is progressing well on the primary
crusher, concentrate thickener and tie-in of the water desalination
plant. Procurement, contracts and engineering are over 99%
complete, with manufacturing and fabrication approximately 95%
complete. Overall project completion was 60% as of the end of July
2022.
- Mantoverde-Santo Domingo ("MV-SD") District Integration Plan
will outline the approach Capstone Copper is taking to maximize
value creation (including synergies) across the district. The
integration plan will describe the optimized flowsheet during the
Chile analyst tour and Investor Day during the week of November
14th.
1 These are alternative performance
measures. Refer to the section entitled "Alternative Performance
Measures" in the Cautionary Notes
OPERATIONAL OVERVIEW
Refer to Capstone’s Q2 2022 MD&A and Financial Statements
for detailed operating results.
Q2 2022
Q2 2021
2022 YTD
2021 YTD
Copper production (000s
tonnes)
Sulphides business
Pinto Valley
13.3
13.4
27.7
29.9
Cozamin
6.4
6.3
12.3
11.4
Mantos Blancos
8.7
-
9.4
-
Total sulphides
28.4
19.6
49.4
41.3
Cathode business
Mantos Blancos
3.7
-
4.0
-
Mantoverde2
13.1
-
14.3
-
Total cathodes
16.8
-
18.3
-
Consolidated
production
45.2
19.6
67.7
41.3
Copper sales
Copper sold (000s tonnes)
45.5
19.6
71.0
41.9
Realized copper price1
($/pound)
3.66
4.78
4.06
4.43
C1 cash costs1 ($pound)
produced
Sulphides business
Pinto Valley
2.82
2.33
2.70
2.12
Cozamin
1.25
0.99
1.19
0.96
Mantos Blancos
2.49
-
2.52
-
Total Sulphides
2.36
1.91
2.29
1.80
Cathode business
Mantos Blancos
3.67
-
3.72
-
Mantoverde2
3.40
-
3.42
-
Total cathodes
3.46
-
3.49
-
Consolidated C1 Cash
Costs1
2.78
1.91
2.62
1.80
2 Mantoverde production shown on a 100%
basis.
Consolidated Production
Q2 2022 copper production was 130% higher than Q2 2021 primarily
as a result of including a full quarter of production for the
Mantos Blancos and Mantoverde mines.
2022 YTD consolidated production of 67,700 tonnes of copper is
higher than the 41,300 tonnes in 2021 YTD, primarily as a result of
the addition of Mantos Blancos and Mantoverde mines production.
2022 YTD C1 cash costs1 of $2.62/lb are a mix of sulphide and
cathode business units compared to 2021 which was predominately
sulphide production. Cathode production is from copper oxide ore
that requires sulphuric acid leaching, solvent extraction, and
electrowinning (SX-EW) to produce copper cathodes which is a
finished copper product for the market. Sulphide production
requires a mill that utilizes a grinding and flotation process to
recover sulphide minerals in a copper concentrate saleable as an
intermediate product to smelters and refiners. Capstone’s low-cost
sulphide production is growing significantly with full production
from Mantos Blancos expected in Q3 2022 and with the Mantoverde
Development Project completion and ramp-up late next year. The
cathode business unit was impacted by record high sulphuric acid
prices in Q2 but costs are expected to ease through H2 as acid
prices are currently declining along with other raw inputs.
Pinto Valley Mine
Copper production of 13,300 tonnes in Q2 2022 was consistent
with Q2 2021 mainly due to lower throughput during the quarter (Q2
2022 46,821 tpd versus Q2 2021 49,170) as a result of plant
maintenance and repairs on the tailings thickeners, and offset by
slightly higher grades (Q2 2022 – 0.34% versus Q2 2021 –
0.33%).
2022 YTD production was 7% lower than the same period last year
primarily attributed to slightly lower grades (2022 YTD – 0.33%
versus 2021 YTD – 0.34%), lower recoveries (2022 YTD – 85.0% versus
2021 YTD – 86.9%) as well as lower mill throughput (52,585 tpd in
2022 YTD versus 53,608 tpd in 2021 YTD). The lower grade versus the
same period last year is a function of the mining sequence, the
grade will improve slightly over the remainder of the year as well
as the mill throughput.
Q2 2022 C1 cash costs1 of $2.82/lb in Q2 2022 were higher than
Q2 2021 of $2.33/lb primarily due to increases in operating costs
($0.38/lb), and increases in treatment and refining costs
($0.13/lb).
2022 YTD C1 cash costs1 of $2.70/lb were $0.58/lb higher
compared to the same period last year of $2.12/lb primarily due to
decreased payable copper production ($0.17/lb), increased operating
costs due to inflationary pressures on diesel, power, grinding
media; and higher spend on rental equipment, mining equipment
tools, contractors and dust suppression ($0.31/lb) and an increase
in treatment and refining costs ($0.11/lb).
Cozamin Mine
Copper production of 6,400 tonnes was 2% higher in Q2 2022 than
in Q2 2021 as a result of higher throughput of 3,874 tpd, and
higher grades (1.88% versus 1.86%). The optimized technical report
plan is delivering higher grades in 2022, and the higher throughput
is a result of upgrades to the mill that occurred in Q1 2022.
2022 YTD production was 8% higher than the same period last year
and attributed to the higher mining rates as the mine uses the
availability of the Calicanto ramp increasingly compared to the
prior year and higher throughput as a result of upgrades to the
mill in Q1 2022 (3,789 in 2022 YTD versus 3,588 in 2021 YTD),
higher grades (2022 YTD – 1.86% versus 2021 YTD – 1.83%).
Q2 2022 C1 cash costs1 were 25% higher than the same period last
year due to increases in operating costs ($0.23/lb) as a result of
inflationary pressures on steel (grinding media), explosives, and
insurance premiums, and planned higher spend on mechanical parts to
increase equipment availability. There was also a decrease in
by-product credits ($0.09/lb) as a result of lower zinc production
as well as lower silver production and prices.
2022 YTD C1 cash costs1 were higher than the same period last
year primarily due to inflationary price increases in steel
(grinding media), explosives and insurance premiums, planned higher
spend on mechanical parts to increase equipment availability and
reliability ($0.17/lb), lower zinc by-product credits due to
planned lower zinc production, as well as lower silver prices
($0.07/lb) and higher treatment and refining costs ($0.03/lb),
partially offset by higher copper production (-$0.06/lb).
Mantos Blancos Mine
2022 YTD production (including the nine days in March 2022 after
closing of the Transaction) was 13,400 tonnes, 9,400 tonnes of
copper in concentrate and 4,000 tonnes of cathode. C1 cash costs1
were $2.89/lb combined, $2.52/lb for copper in concentrate and
$3.72/lb for cathode. The sulphide cash costs are expected to
decline with the ramp up of the MB-CDP to full capacity in Q3 2022
and copper cathode cash costs are currently being impacted by high
cost of acid which averaged $275/tonne delivered in Q2 2022.
Mantoverde Mine
2022 YTD production (including the nine days in March 2022 after
closing of the Transaction) was 14,300 tonnes of copper cathode. C1
cash costs1 were $3.42/lb which were also impacted by high cost of
acid.
Mantoverde Development Project
We expect completion of the MVDP to increase production from
approximately 49,000 tonnes of copper (cathodes only) in our
current guidance for the period from April to December 2022
(annualized) to 120,000 tonnes of copper (copper concentrate and
cathodes) post project completion in 2024. In parallel, C1 cash
costs1 are expected to decrease from $3.70/lb in current guidance
for the period from April to December 2022 to between $1.70/lb to
$1.80/lb in 2024 after project completion and ramp up. 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.
The MVDP is progressing under a lump-sum turn-key engineering,
procurement and construction (EPC) contract with Ausenco Limited, a
multi-national EPC 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 June 30, 2022, the MVDP had achieved overall progress of
58% and construction progress of 25% and the schedule remains
intact and the target for construction completion remains late
2023. Work completed in Q2 2022 includes:
- Assembly completed on first electric rope shovel; mine
electrical loop available in mid-August for operational
commissioning.
- Foundations for the primary crusher, stockpile reclaim, mills
and floatation circuit are advancing well with earthworks on the
truck shop and thickeners near completion.
- Procurement, contracts and engineering are 99% complete, with
manufacturing and fabrication approximately 95% complete.
- Overall project completion was 60% as of the end of July
2022.
As of June 30, 2022, the cost of the different components of the
project, including the EPC lump sum turnkey continue on track with
the budget. The total project capital budget remains at $825
million and spend to date totals $418 million. Capstone is expected
to spend an additional $233 million in H2 2022 and the balance of
$175 million in 2023. The EPC contract total budget is
approximately $525 million of which $263 million has been spent to
date. 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
64% of the revised capital. In addition, the major mining equipment
was price fixed prior to the current inflationary environment for
approximately $140 million or 17% of the revised capital which
brings the total fixed component to 81%.
Mantoverde Phase II
Mantoverde is currently analyzing the next stage of the MVDP.
Alternatives are being considered to expand the plant capacity by
either the addition of a new ball mill and secondary equipment or a
complete new processing line, to process part of the 77% of
resources unutilized by the Phase I of the MVDP. A conceptual study
will be developed during the second half of 2022 to assess the best
option for the next stage of MVDP which will be incorporated into a
feasibility study targeted for H2 2023.
Mantos Blancos Concentrator Debottlenecking Project
The purpose of the MB-CDP is to increase throughput capacity at
the sulphide concentrator plant from 11,000 tonnes per day ("tpd')
to 20,000 tpd (or from 4.2 million tonnes per year to 7.3 million
tonnes per year). This will more than replace declining oxide
production levels at Mantos Blancos.
The ramp-up progress continued in the quarter and the final
modifications and adjustments were finalized in Q2 2022. The
throughput continues to improve with the focus being sustaining
throughput at targeted levels and achieving plant stability
through-out the entire process.
In parallel, C1 cash costs1 are anticipated to decrease from
current guidance of $2.38/lb for the period from April to December
2022 to ~$2.00/lb in 2023 as an even greater share of Mantos
Blancos' production is sourced from the Sulphide concentrator plant
and improving sulphide C1 cash costs1 on higher throughput.
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 was completed in Q2 2022 which will be
incorporated into an Advanced Basic Engineering Study in Q4
2022.
Santo Domingo
Since 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
~35km 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. and the rail option currently being assessed
for products/supply transportation.
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. An updated base Santo
Domingo feasibility study including district integration synergies
will be released in H2 2023.
Santo Domingo contains oxide mineralization, which is located
above the sulphide ore body and is part of the Santo Domingo and
Iris Norte pre-stripping material. During Q2 2022, the Company
continued with the exploration program, which is expected to be
completed in Q3 2022. Preliminary metallurgical test results
suggest the possibility to process Santo Domingo's oxides at
Mantoverde's existing SX-EW plant. The results of the oxide drill
program including an optimized flowsheet will be incorporated into
an updated Santo Domingo feasibility study to be released in H1
2024.
Mantoverde-Santo Domingo Cobalt Feasibility Study
Update
A district cobalt plant for Mantoverde-Santo Domingo may also
unlock cobalt production from Mantoverde while producing a
by-product of sulphuric acid which can then be consumed internally
to further significantly lower operating costs on the leaching
process at Mantoverde.
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 leaching, precipitation,
solvent extraction and crystallization steps to produce battery
grade cobalt sulphate heptahydrate. Capstone is also evaluating
alternatives that may include the direct sale of some or all the
cobalt as intermediate product, such as mixed hydroxide
precipitate, to a partner, JV or an independent third-party
refiner. At an expected 4.7 thousand tonnes of cobalt production
per year from Santo Domingo plus expected additional tonnage from
Mantoverde, 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, Mantos Blancos or sold to other consumers
within the district.
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. The full updated cobalt feasibility
study will be released in H1 2024.
Project development costs related to early works as required by
the Environmental Permit to include flora and fauna relocation,
basic and detailed engineering, land tenure costs, the industrial
water pipeline and relocation of Regional Highway C-17. During Q3
2021, the Capstone Mining commenced major earthworks with respect
to the C17 highway by-pass road which provides site access, and
work on the electrical substation connection. Also, Capstone Copper
has begun brownfield expansion drilling between the Santo Domingo
and Iris Norte Pits.
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 a 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 the generation of acid would be key economic
drivers for this project.
Corporate Exploration Update
Cozamin exploration: The focus during Q2 2022 was on
testing the Mala Noche Main Vein West Target with one surface rig
and one underground rig from the west exploration crosscut station.
Since the 2021-2022 exploration program started, approximately
43,500 meters of drilling have been completed from 53 holes and an
additional 5,500 meters of drilling from 8 holes are planned for
the remainder of this year. A proposed lower elevation mine
cross-cut will allow for expedited infill drilling in 2023 to
inform an updated mineral resource estimate in the second quarter
of 2023. Surface drill testing of other targets along strike from
the San Roberto and San Rafael mine areas are also planned for
2022.
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 approximately 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 now complete with metallurgical
testing underway.
Planalto, Brazil: Step-out drilling at the Planalto Iron
Ore-Copper-Gold prospect in Brazil, under an earn-in agreement with
Lara Exploration Ltd. ("Lara"), commenced in Q4 2021 and continued
in Q2 2022. Lara is conducting the work and will report results
when appropriate.
REITERATING NINE-MONTH GUIDANCE (APRIL-DECEMBER 2022)
Production and C1 cash costs1 guidance published in May 2022
is reiterated. Capital guidance has been reduced by $40 million
in relation to the recent drop in copper prices.
During the nine months from April 1, 2022 to December 31, 2022,
Capstone Copper expects to produce between 136,000 and 150,000
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 – $2.70
*Mantoverde production shown on a 100%
basis
Updated Capital and Exploration Guidance (April to December
2022) is as follows:
Pinto
Valley
Mantos
Blancos
Manto-
verde
(100%)
Cozamin
Santo
Domingo
Other
Total
Capital Expenditure ($
millions)
Sustaining Capital1
55
20
20
25
-
-
120
Capitalized Stripping
5
55
-
-
-
-
60
Expansionary Capital1
15
20
305
35
25
-
400
Total Capital
Expenditure
75
95
325
60
25
-
580
Exploration ($
millions)
Brownfield (Cozamin + Chile)
-
1
1
2
2
-
6
Greenfield (Brazil + Chile)
-
-
-
-
-
2
2
Greenfield (Copper Cities,
AZ)
7
-
-
-
-
-
7
Total Exploration
7
1
1
2
2
2
15
As a precaution related to the drop in copper prices, we have
made initial reductions and deferrals to our capital plans. Capital
guidance for April to December 2022 has been reduced from $620
million to $580 million. The $40 million in net reductions includes
a lag in MVDP spending from 2022 to 2023 of $25 million, a
reduction of $15 million at Santo Domingo, related primarily to
reduced scope of work related to the C17 bypass and cobalt study,
and reductions to sustaining capital of $10 million at Pinto
Valley. These were partially offset by an increase to the Cozamin
pastefill project costs of $10 million, primarily a result of scope
changes and increases to estimated piping, raisebore and
underground development costs.
Key assumptions included in the original 2022 guidance are
$280/tonne sulphuric acid prices, $100 per barrel WTI oil price,
$24/oz silver prices and 20:1 Mexican Peso to US dollar foreign
exchange rate and 800 Chilean Peso to US Dollar foreign exchange
rate. Capstone is starting to see relief in input pricing
assumptions including acid, fuel, freight costs plus weakening in
the Chilean peso.
FINANCIAL OVERVIEW
Please refer to Capstone’s Q2 2022 MD&A and Financial
Statements for detailed financial results.
($ millions, except per share
data)
Q2 2022
Q2 2021
2022 YTD
2021 YTD
Revenue
356.6
209.4
624.7
413.5
Net income
92.0
49.4
127.1
176.4
Net income attributable to
shareholders
75.1
49.4
109.1
150.4
Net income attributable to
shareholders per common share – basic ($)
0.11
0.12
0.19
0.37
Net income attributable to
shareholders per common share – diluted ($)
0.11
0.12
0.19
0.36
Adjusted net (loss)
income1
(10.8)
68.7
50.5
133.2
Adjusted net (loss) income1
attributable to shareholders
(4.5)
68.7
57.1
133.2
Adjusted net (loss) income
attributable to shareholders per common share – basic
(0.01)
0.17
0.10
0.33
Adjusted net (loss) income
attributable to shareholders per common share – diluted
(0.01)
0.17
0.10
0.32
Adjusted EBITDA1
114.7
128.0
238.2
246.7
Cash flow from operating
activities2
61.6
168.5
51.8
388.8
Cash flow (used in) from
operating activities per common share1 – basic ($)
0.09
0.42
0.09
0.96
Operating cash flow before
changes in working capital 1, 2
40.7
139.5
111.1
384.4
Operating cash flow before
changes in working capital per common share1 – basic ($)
0.06
0.35
0.20
0.95
2 Q2 2021 includes $30.0 million gold
stream proceeds, 2021 YTD includes $180.0 million silver and gold
stream proceeds
($millions)
June 30,
2022
March 31,
2022
December 31,
2021
Total assets
5,296.8
5,524.6
1,728.0
Long term debt (excluding
financing fees and purchase price allocation fair value
adjustments)1
441.6
348.2
-
Total non-current financial
liabilities
497.1
387.1
38.4
Total non-current liabilities
1,638.7
1,554.1
481.3
Cash and cash equivalents and
short-term investments
350.1
413.1
264.4
Net (debt)/cash1
(91.5)
64.9
264.4
CONFERENCE CALL AND WEBCAST DETAILS
Capstone will host a conference call and webcast on Monday,
August 8, 2022 at 08:30 am PT/11:30 am ET.
Link to the audio webcast:
https://produceredition.webcasts.com/starthere.jsp?ei=1558187&tp_key=741c22feb9
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 #84346483
A replay of the conference call will be available until August
15, 2022. Dial-in numbers for Toronto: (+1) 416‑764‑8677 and North
American toll free: 888-390-0541. The replay code is 346483#.
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 and six
months ended June 30, 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 31, 2020,
“NI 43-101 Technical Report on the Pinto Valley Mine, Arizona, USA”
effective March 31, 2021, “Santo Domingo Project, Region III,
Chile, NI 43-101 Technical Report” effective February 19, 2020, and
"Mantos Blancos Mine NI 43-101 Technical Report Antofagasta /
Región de Antofagasta, Chile" and "Mantoverde Mine and Mantoverde
Development Project NI 43-101 Technical Report Chañaral / Región de
Atacama, Chile", both effective November 29, 2021.
The disclosure of Scientific and Technical Information in this
document was reviewed and approved by Clay Craig, P.Eng., Manager,
Mining & Evaluations (technical information related to Mineral
Reserves at Pinto Valley and Cozamin), and Cashel Meagher, P.Geo.,
President and Chief Operating Officer (technical information
related to project updates at Santo Domingo and Mineral Reserves
and Resources at Mantos Blancos and Mantoverde) 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 sustaining capital and 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.
Realized copper price (per pound)
Realized price per pound is a non-GAAP ratio that is calculated
using the non-GAAP measures of revenue on new shipments, revenue on
prior shipments and provisional pricing changes. Realized prices
exclude the effects of the stream cash effects as well as TC/RCs.
Management believes that measuring these prices enables investors
to better understand performance based on the realized copper sales
in the current and prior period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220808005194/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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