All amounts in US$ unless otherwise
indicated
Capstone Copper Corp. (“Capstone” or the “Company”) (TSX:
CS) today reported financial results for the nine months and
quarter ended September 30, 2023 (“Q3 2023”). Copper production in
Q3 totaled 40.3 thousand tonnes at C1 cash costs1 of $2.88 per
payable pound of copper produced. Link HERE for Capstone’s Q3 2023
webcast presentation.
John MacKenzie, CEO of Capstone, commented, "I am encouraged by
the progress we made during the third quarter in executing on our
plan to improve operational reliability and expand margins across
our portfolio. As construction at our flagship Mantoverde
Development Project ("MVDP") approaches completion by year-end, we
look forward to a transformational year in 2024. Our excitement
follows many years of dedicated effort by our mine build team in
Chile. MVDP will drive a significant reduction in our consolidated
unit costs and provide a pathway to record operating cash flow
generation for Capstone Copper."
Q3 2023 OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Net loss of $42.3 million, or $(0.05) per share for Q3 2023
compared to net income of $37.5 million, or $0.05 per share for Q3
2022.
- Adjusted net loss attributable to shareholders1 of $15.8
million, or $(0.02) per share for Q3 2023. Q3 2023 adjusted net
loss attributable to shareholders1 is lower than Q3 2022 adjusted
net loss attributable to shareholders1 of $22.7 million due to
higher copper prices.
- Adjusted EBITDA1 of $62.8 million for Q3 2023 compared to $35.2
million for Q3 2022. The increase in Adjusted EBITDA1 is driven by
a higher copper price of $3.75/lb compared to $3.18/lb (prior to
unrealized provisional pricing adjustments), partially offset by
lower copper sold (38.7 thousand tonnes in Q3 2023 versus 44.2
thousand tonnes in Q3 2022).
- Operating cash flow before changes in working capital of $59.3
million in Q3 2023 compared to $14.4 million in Q3 2022.
- Consolidated copper production for Q3 2023 of 40.3 thousand
tonnes at C1 cash costs1 of $2.88/lb. Copper production in the
third quarter was impacted by an unplanned eight days of cumulative
downtime at Pinto Valley related to the secondary crusher jack
shaft replacement and counter shaft repairs, plus planned
maintenance downtime at Mantos Blancos. Lower production levels and
maintenance expenses were the key drivers related to higher
consolidated cash costs in the quarter.
- The Company reaffirms its H2 copper production guidance of 83kt
to 93kt. C1 cash costs1 are trending towards the upper end of the
H2 guidance range of $2.55/lb to $2.75/lb due to additional
unplanned maintenance expenditures noted in Q3.
- Mantoverde Development Project ("MVDP") overall progress at 93%
and remains on schedule. Construction is progressing well on all
key areas of the project. Total project spend since inception was
$763 million at the end of September 2023, compared to $706 million
at June 2023. The project is on track for construction completion
by year end 2023. As the project nears completion, the updated
total project cost is estimated at $870 million which is a 5%
increase and includes approximately $20 million in project
improvements.
- Total available liquidity1 of $424.5 million as at September
30, 2023, composed of $129.5 million of cash and short-term
investments, and $295.0 million of undrawn amounts on the corporate
revolving credit facility.
1 These are alternative performance measures. Refer to the
section entitled “Alternative Performance Measures” in the
Cautionary Notes
OPERATIONAL OVERVIEW
Refer to Capstone's Q3 2023 MD&A and Financial Statements
for detailed operating results.
Q3 2023
Q3 2022
2023 YTD
2022 YTD
Copper production (000s tonnes)
Sulphide business
Pinto Valley
13.7
14.1
39.2
41.8
Cozamin
5.9
6.4
17.8
18.7
Mantos Blancos
9.1
9.6
28.3
19.0
Total sulphides
28.7
30.1
85.3
79.5
Cathode business
Mantos Blancos
3.0
4.0
9.6
8.0
Mantoverde2
8.6
11.6
25.4
25.8
Total cathodes
11.6
15.6
35.0
33.8
Consolidated
40.3
45.7
120.3
113.3
Copper sales
Copper sold (000s tonnes)
38.7
44.2
116.9
115.2
Realized copper price1 ($/pound)
3.77
3.30
3.87
3.76
C1 cash costs1 ($/pound)
produced
Sulphides business
Pinto Valley
2.83
2.60
2.96
2.67
Cozamin
1.85
1.20
1.73
1.19
Mantos Blancos
2.85
2.17
2.80
2.34
Total sulphides
2.63
2.17
2.65
2.25
Cathode business
Mantos Blancos
2.75
3.87
3.07
3.80
Mantoverde
3.74
3.87
3.89
3.62
Total cathodes
3.48
3.87
3.67
3.66
Consolidated
2.88
2.76
2.96
2.68
2 Mantoverde production shown on a 100%
basis.
Consolidated Production
Q3 2023 copper production of 40.3 thousand tonnes was 12% lower
than Q3 2022 primarily as a result of expected lower oxide
production at Mantoverde on lower ore grade related to the mining
sequence as we are transitioning to sulphide ore for MVDP.
Moreover, Pinto Valley had lower mill throughput due to unplanned
maintenance downtime related to secondary crusher jack shaft
replacement and counter shaft repairs resulting in approximately
eight days of downtime.
Q3 2023 C1 cash costs1 of $2.88/lb were 4% higher than $2.76/lb
Q3 2022 mainly impacted by 12% lower production, partially offset
by higher capitalized stripping at Mantoverde and higher gold
by-product credits at Pinto Valley.
2023 YTD copper production of 120.3 thousand tonnes of copper is
higher than the 113.3 thousand tonnes in 2022 YTD, primarily as a
result of full quarter of production in Q1 2023 versus nine day
production in Q1 2022 at Mantos Blancos and Mantoverde.
2023 YTD C1 cash costs1 of $2.96/lb were 10% higher than
$2.68/lb 2022 YTD mainly on higher operational costs, partially
offset by higher capitalized stripping and by-product credits.
Cathode production is from copper oxide ore that requires
sulphuric acid leaching, solvent extraction and electrowinning
(SX-EW) to produce copper cathodes which are 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.
Pinto Valley Mine
Copper production of 13.6 thousand tonnes in Q3 2023 was 3%
lower than in Q3 2022 mainly on lower mill throughput during the
quarter (Q3 2023 - 47,426 tonnes per day ("tpd") versus Q3 2022 -
48,143 tpd), resulting from unplanned eight-day downtime related to
the secondary crusher jack shaft replacement and counter shaft
repairs. Grade was consistent quarter over quarter (Q3 2023 – 0.34%
versus Q3 2022 - 0.34%). Recoveries were lower compared to the same
period last year (Q3 2023 - 87.4% versus Q3 2022 - 89.1%).
2023 YTD production was 6% lower than 2022 YTD mainly due to
lower mill throughput (47,972 tpd in 2023 YTD versus 51,088 tpd in
2022 YTD) driven by heavy rainfall, including flooding, which
resulted in plugged chutes and screens in Q1, conveyor belt
replacement/structural support rebuild, and unplanned maintenance
on the secondary crusher and associated conveyors which caused the
equivalent of twenty days of downtime during Q2 and Q3. Recoveries
were higher than 2022 YTD (87.4% 2023 YTD versus 86.3% 2022 YTD).
The mill feed grade was consistent with the same period last year
(0.32% in 2023 YTD versus 0.33% in 2022 YTD).
Q3 2023 C1 cash costs1 of $2.83/lb were 9% higher than Q3 2022
of $2.60/lb primarily due to increases in operating costs driven by
higher contractor spend and mechanical parts costs ($0.32/lb) and
lower production ($0.11/lb), partially offset by higher gold
by-product credits and lower treatment and refining costs
(-$0.21/lb).
2023 YTD C1 cash costs1 of $2.96/lb were 11% higher compared to
the same period last year of $2.67/lb primarily due to increased
mining costs due to inflationary pressures on explosives, and
higher spend on rental equipment, mining equipment tools and
maintenance contractors ($0.23/lb), lower production ($0.18/lb),
and lower capitalized stripping ($0.05/lb), partially offset by
higher gold and molybdenum by-product credits and lower treatment
costs (-$0.15/lb). The cash costs are expected to trend down in Q4
as result of higher production.
Mantos Blancos Mine
Q3 2023 production was 12.2 thousand tonnes, comprised of 9.1
thousand tonnes from sulphide operations and 3.0 thousand tonnes of
cathode from oxide operations, 11% lower than the 13.6 thousand
tonnes produced in Q3 2022. The lower production was driven
primarily by lower dump throughput, grade and recoveries impacting
cathode production. The mill throughput of 14,176 tpd in Q3 2023
was impacted by mill downtime caused by planned repair and
maintenance of the concentrator plant that lasted six days (liners
and major components change). Recoveries were lower in Q3 2023
compared to the same period last year (76.3% in Q3 2023 versus
79.3% in Q3 2022), mainly driven by ore characteristics in the
upper areas of the mine. A plan to address the plant stability
during the second half of 2023 is underway that includes improved
maintenance and optimization of the concentrator and the tailings
system.
2023 YTD production of 37.9 thousand tonnes, composed of 28.3
thousand tonnes from sulphide operations and 9.6 thousand tonnes of
cathode from oxide operations, was higher than the same period last
year due to full operational Q1 2023 compared to a nine-day stub
period in Q1 2022.
Combined Q3 2023 C1 cash costs1 were $2.82/lb ($2.85/lb
sulphides and $2.75/lb cathodes) compared to combined C1 cash
costs1 of $2.68/lb in Q3 2022, 5% higher than the same period last
year mainly due to lower production ($0.11/lb), an increase in
contracted services and labour cost mainly driven by unfavourable
foreign exchange rate and inflation impact ($0.34/lb), plant
maintenance and spare parts spend ($0.03/lb), partially offset by
lower key consumable prices (-$0.34/lb) (realized acid prices
averaged $141/t in Q3 2023 versus $273/t in Q3 2022 and diesel
price averaged $0.76/l in Q3 2023 versus $0.97/l in Q3 2022).
Combined 2023 YTD C1 cash costs1 of $2.87/lb ($2.80/lb sulphides
and $3.07/lb cathodes) were 3% higher compared to $2.78/lb in 2022
YTD. For the last quarter of 2023, we expect a reduction in
combined C1 cash costs1 as the production mix is expected to have a
higher ratio of concentrates to cathodes and lower acid prices
(average 2023 YTD $171/t and estimated remaining $164/t).
Mantoverde Mine
Q3 2023 copper production of 8.6 thousand tonnes was 26% lower
compared to 11.6 thousand tonnes in Q3 2022. Heap operations grade
was lower as a result of mine sequence (0.32% in Q3 2023 versus
0.45% in Q3 2022), and recoveries were lower (66.5% in Q3 2023
versus 86.7% in Q3 2022) due to lower solubility ratio of the
processed mineral and lower grades, all of which was partially
offset by higher heap throughput (2.7 million tonnes in Q3 2023
versus 2.5 million tonnes in Q3 2022). Throughput from dump
operations was lower compared with the same period last year due to
a temporary sulphuric acid supply shortfall in September, and
grades were consistent with the same period last year.
2023 YTD production of 25.4 thousand tonnes was lower than the
same period last year, despite of full operational Q1 2023 compared
to nine-day stub period in Q1 2022 due to lower heap grades as a
result of mine sequence (0.31% YTD 2023 versus 0.48% YTD 2022) and
lower recoveries due to lower solubility ratio of the processed
mineral and lower grades. Production for the remainder of the year
should be positively impacted by higher expected grades.
Q3 2023 C1 cash costs1 were $3.74/lb, 3% lower than $3.87/lb in
Q3 2022 due to lower sulphuric acid prices ($156/t in Q3 2023
versus $285/t in Q3 2022) and lower mine costs mainly driven by
lower diesel prices ($0.76/l in Q3 2023 versus $1.03/l in Q3 2022),
partially offset by lower production.
2023 YTD C1 cash costs1 were $3.89/lb, 7% higher than $3.62/lb
in 2022 YTD. For the last quarter of 2023, we expect a reduction in
C1 cash costs1 due to lower energy prices (average YTD $0.22/kWh
and estimated remaining $0.16/kWh) and higher production.
Cozamin Mine
Q3 2023 copper production of 5.9 thousand tonnes was lower than
the same period prior year mainly on lower mill throughput (3,567
tpd in Q3 2023 versus 3,829 tpd in Q3 2022). Recoveries and grades
were consistent quarter over quarter.
2023 YTD production was 5% lower than 2022 YTD due to lower
throughput as a result of change in mining method (cut-and-fill)
(3,590 tpd in 2023 YTD versus 3,803 tpd in 2022 YTD). Recoveries
and grades were consistent with the same period last year.
Q3 2023 C1 cash costs1 were 54% higher than the same period last
year mainly due to inflationary price increases on the main
consumables, unfavourable foreign exchange rate, start of paste
plant operations, which resulted in an increase in labour,
contractor and cement costs, changes in mining method and
additional bolting requirements as part of strengthening ground
support ($0.61/lb) and lower copper production ($0.08/lb),
partially offset by stockpile buildup (-$0.07/lb).
2023 YTD C1 cash costs1 were 45% higher than the same period
last year primarily due to the change in mining method which
resulted in an increase in contractor utilization and higher spend
on bolting, and unfavourable foreign exchange rate ($0.42/lb). In
addition, cash costs were impacted by lower production ($0.06/lb)
and lower zinc by-product credits due to planned lower zinc
production ($0.03/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 the mine to process 231 million tonnes of copper sulphide
reserves over a 20-year expected mine life, in addition to existing
oxide reserves. The MVDP involves the addition of a sulphide
concentrator (32,000 tonnes per day) and tailings storage facility,
and the expansion of the existing desalination plant.
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 international
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.
The MVDP is progressing well at approximately 93% complete as at
September 30, 2023 and remains on track for construction completion
by year-end followed by an expected six-month ramp-up to nameplate
production levels in 2024.
Key areas of work completed during Q3 2023 were:
- Stockpiled approximately 5.0 million tonnes of sulphide
ore
- Commenced commissioning of the primary crusher
- Grinding area: lubrication and cooling system installed. Laying
completion of medium-voltage conductors to the Ball/SAG mill.
Rotation of SAG/Ball Mills performed
- Flotation area: All cells installed and water test started
- Filtering area: Filter installed, air blower and tank
mounted
- Tailings Thickener: Rake glide test done, underflow control
valves and metallurgical sampler assembly completed
- Sand Plant: Thickener rake assembly in progress
- Tailings Storage Facilities: Mass excavation completed;
Starting Wall and Cut-off Trench nearing completion
As of September 30, 2023, the MVDP to date costs total $763
million. Our total capital cost for the MVDP is estimated to be 5%
higher at approximately $870 million. The increase from the prior
estimate of $825 million relates to the following main areas (1)
Inflation ($20 million) - impacting the fourth electric shovel, the
diesel price on pre-stripping, and the cost per unit on tailings
infrastructure construction, (2) Project improvements ($20 million)
- additional rotainers for added flexibility in concentrate
transport and storage, water reservoir and additional camp and
warehouse space, and (3) Ramp up / commissioning costs ($5
million).
A virtual tour of the project can be viewed at
https://vrify.com/decks/12698-mantoverde-development-project
Mantos Blancos
Mantos Blancos is currently focused on reliably achieving the
installed capacity of 20,000 tonnes per day. We are executing on a
plan to address plant stability that includes improved maintenance
and optimization of the concentrator and tailings system. During
the third quarter we addressed several bottlenecks in the crushing
and grinding area of the operation. Moving forward, certain
components in the tailings dewatering area, such as new handling
and pumping infrastructure, are expected to be delivered and
installed in early 2024, after which we expect Mantos Blancos to
consistently deliver nameplate throughput rates.
The capital enhancements will enable future expansion
opportunities as there will be installed capacity in certain parts
of the process in excess of 20,000 tonnes per day. Once nameplate
capacity is reached, we will recommence evaluating the potential to
increase throughput of the Mantos Blancos sulphide concentrator
plant to at least 27,000 tonnes per day using existing process
infrastructure and new technologies, while also evaluating options
to extend the life of copper cathode production.
Chilean Tax Reform
In August 2023, Chile passed the proposed Mining Royalty into
law to be effective on January 1, 2024, replacing the current
Specific Tax on Mining Activity.
The Mining Royalty contains two components, an ad-valorem
component and a mine operating margin component. The ad-valorem
component is applicable to companies with annual sales of copper
that are higher than the equivalent of 50,000 metric tonnes of fine
copper ("MTFC"). If the company's "Adjusted Mining Operational
Taxable Income", or "RIOMA" as it is referred to in Chile, is
negative, the ad-valorem component to be paid will be calculated by
subtracting the negative amount of the RIOMA from the ad-valorem
component. The ad-valorem component of the Mining Royalty will be
deductible when determining First Category income taxes, however,
not for purposes of determining RIOMA. The ad-valorem component is
capped at 1% of gross copper revenues and will be reported in the
royalties line on the income statement.
The mine operating margin ("MOM") component will vary depending
on the sales volume of the company, along with whether more than
50% of its annual production is copper. Mining companies which
derive more than 50% of their income from copper sales and exceed
50,000 MTFC will pay a tax rate that fluctuates between 8% and 26%
based on the following table:
MOM
Maximum effective rate
Less than 20%
8%
greater than 20% but less than
45%
the rate increases linearly to
12%
greater than 45% but less than
60%
the rate increases linearly to
26%
Greater than 60%
26%
The MOM component will not be applicable in cases where the
RIOMA is negative and is calculated based on total mine operating
margin, which includes silver and gold by-products. The Mining
Royalty allows depreciation as a fully deductible operational
expense in the calculation of RIOMA, however, unlike the First
Category deduction, it is on a non-accelerated basis.
The Mining Royalty includes a maximum limit to the total tax
burden, consisting of (1) the corporate income tax paid in the
respective year, (2) the Mining Royalty (both ad-valorem and MOM
components) and (3) withholding taxes to which owners would be
subject to upon distribution of dividends. The calculation of
withholding taxes assumes a 100% distribution, and is calculated
considering a tax burden of 35% of net taxable income, i.e. an
additional 8% to the First Category rate of 27%. The Mining Royalty
establishes that when the sum of three component exceeds 46.5% of
RIOMA, then the Mining Royalty would be adjusted in such a way that
it does not exceed the limit.
As a change in tax law is accounted for in the period of
enactment, rather than from its effective date, the Company
recorded a deferred income tax charge of $31.5 million and a
corresponding increased to deferred income tax liabilities. The
impact to Capstone operating mines is less than expected due to
pre-existing tax losses and accelerated deprecation rates. The
Mining Royalty is not expected to have an impact on Santo Domingo
which has 15 years of tax stability post commencement of commercial
production as a result of Decree Law No. 600 ("DL 600") during
which time it will remain subject to the current Specific Tax on
Mining. Furthermore, given the Company's growth projects in Chile,
we do not expect to incur cash withholding taxes for several years
but the deduction is available when calculating the cap under the
new mining royalty.
Mantoverde - Santo Domingo District Integration Plan
The Company is focused on creating a world-class mining district
in the Atacama region of Chile, targeting over 200,000 tonnes per
year of low-cost copper production with the potential to also
become one of the largest and lowest cost battery grade cobalt
producers in the world outside of China and the DRC. Capstone
Copper has the opportunity to unlock operating cost synergies,
while also enabling additional copper and cobalt production,
infrastructure capital savings, and the potential for significant
tax synergies.
Santo Domingo FS Update
Santo Domingo has completed the flowsheet optimization process
previously announced and Ausenco is currently updating the
Feasibility Study ("FS") with contributions from third parties.
Ausenco is optimizing the Technical Report to take into
consideration recently produced metallurgical testwork data and
updated mine plan. The optimized Technical Report is now expected
to be delivered in the first half of 2024 as we are taking
additional time to finalize key value drivers within the study and
ensure we have selected the optimal project configuration.
MVDP Optimized FS and Phase II
The Company is currently analyzing the next expansion of the
sulphide concentrator. Capstone has identified that the
desalination plant capacity and major components of the comminution
and flotation circuits of the MVDP are capable of sustaining
average annual throughput of approximately 45,000 tonnes per day
with no major capital equipment upgrades. Capstone continues to
work with Ausenco's engineering team to develop the MVDP Optimized
Feasibility Study, including evaluating the costs and timelines of
debottlenecking the minor components of the plant to meet the
potential increased throughput target. The feasibility study is
expected in the first half of 2024.
Given the above, the Mantoverde Phase II opportunity will
evaluate the addition of an entire second processing line, possibly
a duplication of the first line, to process some of the additional
77% of resources not utilized by the MVDP Optimized.
Mantoverde - Santo Domingo Cobalt Study
A district cobalt plant for Mantoverde - Santo Domingo may allow
for low-cost by-product cobalt production while producing a
by-product of sulphuric acid which can then be consumed internally
to further significantly lower operating costs in the cathode
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 which
is expected to contain between 0.5% and 1.0% Co depending on the
ore grade. The oxidation step entails adding the pyrite concentrate
to the Mantoverde heap leach process, which will be converted to a
bioleaching process to oxidize and break down the pyrite, thereby
releasing the cobalt into solution. The cobalt is then recovered
from the heap leach solutions via a continuous ion exchange process
treating the SX raffinate. The approach has been successfully
demonstrated at the bench scale and onsite piloting is expected to
begin before the end of 2023. Pending successful piloting,
engineering would commence for a small plant treating only
Mantoverde pyrite concentrates to produce up to 1,500 tonnes per
annum ("tpa") of contained cobalt. Timing of the studies will
depend on the results of work.
At a combined MV-SD target of 4.5 to 6.0 thousand tonnes of
cobalt production per year, this would be one of the largest and
lowest cost cobalt producers in the world outside of China and the
DRC.
PV District Growth Study
The company continues to review and evaluate the consolidation
potential of the Pinto Valley district. Opportunities under
evaluation include a potential mill expansion and increased
leaching capacity supported by optimized water, heap and dump
leach, and tailings infrastructure. This could unlock significant
ESG opportunities and may transform our approach to create value
for all stakeholders in the Globe-Miami District. Constructive
discussions with key district stakeholders advanced during the
quarter. A district growth study at Pinto Valley is anticipated in
the second half of 2024.
Management Additions
Effective October 17, 2023, Jaime Rivera Machado was appointed
as General Manager, Mantos Blancos. Jaime has over 16 years of
progressive experience at large mining operations in Chile and
previously held the position of General Manager at BHP's Escondida
mine and CODELCO's Ministro Hales and Andina mines.
Effective August 14, 2023, Sergio Gaete joined the Chile team as
Project Director, Mantos Blancos. Sergio has more than 25 years of
experience in metallurgy and copper, gold and molybdenum
concentrator operations and projects. He previously held senior
roles with CODELCO at its Andina, El Salvador, Chuquicamata, and
Radomiro Tomic assets, and with Antofagasta Minerals at its
Esperanza project.
Surety Bond Utilization
In May 2023, Minto Metals Corp. ("Minto") announced that they
had ceased all operations at the Minto Mine located within the
Selkirk First Nation's territory in the Yukon and that the Yukon
Government had assumed care and control of the site.
In conjunction with Capstone's sale of the Minto Mine in 2019,
Minto posted a surety bond of C$72 million to cover potential
future reclamation liabilities. While this surety bond is
outstanding, the Company remains an indemnitor to the surety bond
provider. As Minto defaulted on the surety bond, Capstone
recognized a liability of approximately US$54 million (C$72
million) related to our obligations to the issuer of the surety
bond.
While Capstone has not made any payments against the liability
during the current quarter, $21.8 million has been reclassified to
current other liabilities reflecting our estimate of the amount to
be paid within the next 12 months.
Corporate Exploration Update
Cozamin: Q3 2023 infill drilling at the Mala Noche Main
Vein West Target was on hold while the development of the lower
elevation mine cross-cut was completed. Infill drilling will
recommence in early Q4 2023 to support an updated mineral resource
estimate in 2024.
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. An amendment to the agreement was completed in March 2023
extending the term by another six months. A second amendment to the
agreement now extends the term further to September 2024. Drilling
with two surface rigs twinning historical drill holes was completed
in 2022 with metallurgical testing continuing in 2023. As explained
in the PV District Growth Study section, district consolidation
opportunities are being evaluated.
Planalto, Brazil: Subsequent to Q3 2023, Capstone
notified Lara Exploration Ltd. ("Lara") of the intent to relinquish
the Planalto Option Agreement and fully exit the project.
2023 Outlook
The Company re-affirms its H2 copper production guidance of
83,000 to 93,000 tonnes. C1 cash costs1 are trending towards the
upper end of the H2 guidance range of $2.55/lb to $2.75/lb per
payable pound of copper produced due to additional unplanned
maintenance expenditures.
The company re-affirms its full year capital expenditure
guidance (including capitalized stripping) of $620 million with a
reclassification of expenditures by operation as follows:
Capital Expenditures ($ millions)
Updated Guidance
Previous Guidance
Pinto Valley
80
100
Cozamin
35
30
MVDP2
240
225
Mantoverde2
145
145
Mantos Blancos
95
95
Santo Domingo
25
25
Total Expenditures
620
620
2Mantoverde capital expenditures shown on
a 100% basis.
Exploration guidance (brownfield and greenfield) of $10 million
remains unchanged.
FINANCIAL OVERVIEW
Please refer to Capstone's Q3 2023 MD&A and Financial
Statements for detailed financial results.
($ millions, except per share data)
Q3 2023
Q3 2022
2023 YTD
2022 YTD
Revenue
322.2
309.2
991.8
933.9
Net (loss) income
(42.3
)
37.5
(105.2
)
164.5
Net (loss) income attributable to
shareholders
(32.9
)
34.1
(89.4
)
143.1
Net (loss) income attributable to
shareholders per common share - basic ($)
(0.05
)
0.05
(0.13
)
0.24
Net (loss) income attributable to
shareholders per common share - diluted ($)
(0.05
)
0.05
(0.13
)
0.23
Adjusted net (loss) income1
(15.8
)
(22.7
)
(10.5
)
9.8
Adjusted net (loss) income attributable to
shareholders per common share - basic and diluted
(0.02
)
(0.03
)
(0.02
)
0.02
Operating cash flow before changes in
working capital
59.3
14.4
124.3
125.4
Adjusted EBITDA1
62.8
35.2
172.2
275.4
Realized copper price1
($/pound)
3.77
3.30
3.87
3.76
($ millions)
September 30, 2023
December 31, 2022
Total assets
5,783.6
5,380.9
Total non-current financial
liabilities
1,126.1
709.5
Net debt1
(855.5
)
(483.1
)
Attributable net (debt)/cash1
(705.1
)
(483.1
)
CONFERENCE CALL AND WEBCAST DETAILS
Capstone will host a conference call and webcast on Friday,
November 3, 2023 at 08:00 am PT/11:00 am ET. Link to the audio
webcast: https://app.webinar.net/meMBwLPw1kY
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
A replay of the conference call will be available until November
10, 2023. Dial-in numbers for Toronto: (+1) 416-764-8677 and North
American toll free: 888-390-0541. The replay code is 579377#.
Following the replay, an audio file will be available on Capstone’s
website at
https://capstonecopper.com/investors/events-and-presentations/.
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. Our Sustainable Development Strategy goals and
strategies are based on a number of assumptions, including, but not
limited to, the biodiversity and climate-change consequences;
availability and effectiveness of technologies needed to achieve
our sustainability goals and priorities; availability of land or
other opportunities for conservation, rehabilitation or capacity
building on commercially reasonable terms and our ability to obtain
any required external approvals or consensus for such
opportunities; the availability of clean energy sources and
zero-emissions alternatives for transportation on reasonable terms;
availability of resources to achieve the goals in a timely manner,
our ability to successfully implement new technology; and the
performance of new technologies in accordance with our
expectations.
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
Mantoverde Development Project ("MVDP"), the timing and results of
the Optimized Mantoverde Development Project ("MVDP Optimized FS")
and Mantoverde Phase II study, the timing and results of PV
District Growth Study (as defined below), the timing and results of
Mantos Blancos Phase II Feasibility Study, the expected reduction
in capital requirements for the Santo Domingo project, the timing
and success of the Mantoverde - Santo Domingo Cobalt Feasibility
Study, the timing and results of the Santo Domingo FS Update and
success of incorporating synergies previously identified in the
Mantoverde - Santo Domingo District Integration Plan, the
realization of Mineral Reserve estimates, the timing and amount of
estimated future production, the costs of production and capital
expenditures and reclamation, the timing and costs of the Minto
surety bond obligations and other obligations related to the
closure of the Minto Mine, 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, environmental risks,
unanticipated reclamation expenses and title disputes, the success
of the synergies and catalysts related to prior transactions, in
particular but not limited to, the potential synergies with
Mantoverde and Santo Domingo, the anticipated future production,
costs of production, including the cost of sulphuric acid and oil
and other fuel, capital expenditures and reclamation of Company’s
operations and development projects, our estimates of available
liquidity, and the risks included in our continuous disclosure
filings on SEDAR+ at www.sedarplus.ca. The impact of global events
such as pandemics, geopolitical conflict, or other events, to
Capstone 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
diseases, global economic uncertainties and outlook due to
widespread diseases or geopolitical events or conflicts, 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 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, inflation,
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, 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, introduction or increase in carbon or
other "green" taxes, aboriginal title claims and rights to
consultation and accommodation, risks relating to widespread
epidemics or pandemic outbreaks; the impact of communicable disease
outbreaks 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 epidemics or pandemics,
impacts of inflation, 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 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.sedarplus.ca. 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 Copper 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 Copper’s company profile on
SEDAR+ at www.sedarplus.ca. 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 January 1, 2023, “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., Director,
Mining & Strategic Planning (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 document 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 document.
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 non-GAAP 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 non-GAAP performance measure used by
the Company to assess its financial position and is composed of
Long-term debt (excluding deferred financing costs and purchase
price accounting ("PPA") fair value adjustments), Cost overrun
facility from MMC, Cash and cash equivalents and Short-term
investments.
Attributable Net debt / Net cash
Attributable net debt / net cash is a non-GAAP performance
measure used by the Company to assess its financial position and is
calculated as net debt / net cash excluding amounts attributable to
non-controlling interests.
Available Liquidity
Available liquidity is a non-GAAP performance measure used by
the Company to assess its financial position and is composed of RCF
credit capacity, the $520 million Mantoverde DP facility capacity,
Cash and cash equivalents and Short-term investments. For clarity,
Available liquidity does not include 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 as they are not available for general purposes.
Adjusted net (loss) income attributable to
shareholders
Adjusted net (loss) income attributable to shareholders is a
non-GAAP measure of Net (loss) 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 a non-GAAP measure of net (loss) income before net
finance expense, tax expense, and depletion and amortization.
Adjusted EBITDA
Adjusted EBITDA is non-GAAP measure of EBITDA before the pre-tax
effect of the adjustments made to net (loss) 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 (loss) income attributable
to shareholders 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 of this
non-GAAP measure 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 of this non-GAAP measure 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 pricing and volume adjustments. 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/20231103588152/en/
Jerrold Annett, SVP, Strategy and Capital Markets 647-273-7351
jannett@capstonecopper.com Daniel Sampieri, Director, Investor
Relations & Strategic Analysis 437-788-1767
dsampieri@capstonecopper.com
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