Gross Sales Revenue of $110.1 million, Net
Earnings of $18.9 million ($0.09 per share)
(All financial information prepared in accordance with
International Financial Reporting Standards ("IFRS");
all amounts in US$ unless otherwise specified)
VANCOUVER, May 24, 2011 /PRNewswire/ - Capstone Mining Corp.
(CS: TSX) ("Capstone") today announced its financial results for
the three months ended March 31, 2011. Net earnings for the
quarter were $18.9 million and cash flow from operating activities
was $6.7 million. Capstone ended the quarter with cash on
hand of $181.2 million, after repaying C$17.4 million of its
long-term obligations in the first quarter. Copper production
for the quarter at Capstone's two mines, Cozamin and Minto,
totalled 16.1 million pounds of payable copper at an estimated
total cash cost1 of $1.59 per payable pound.
Capstone will hold a conference call Wednesday, May 25, 2011
at 11:30 am Eastern time (8:30 am Pacific time) to discuss these
results; call-in details are provided at the end of this
release. This release should be read in conjunction with
Capstone's unaudited interim consolidated financial statements and
management's discussion and analysis ("MD&A") for the three
months ended March 31, 2011, which are available on Capstone's
website at:
http://capstonemining.com/s/FinancialStatements.asp. An updated
corporate presentation, including results to March 31, 2011, is
also available at http://capstonemining.com/s/Presentation.asp.
2011 Q1 Overview
|
Three months
ended March 31,
2011 |
Three months
ended March 31,
2010 |
Gross sales revenue ($ millions) |
110.1 |
88.0 |
|
|
|
Payable copper produced (millions lbs) |
16.1 |
21.2 |
Total cash cost per payable pound of copper
produced (1) ($) |
1.59 |
1.12 |
|
|
|
Copper sold - (millions lbs) |
22.8 |
21.2 |
|
|
|
Net earnings for the period ($
millions) |
18.9 |
14.8 |
Earnings per common share ($) |
0.09 |
0.07 |
|
|
|
Adjusted net earnings (1)
($ millions) |
16.8 |
21.9 |
Adjusted Earnings (1)
per common share ($) |
0.08 |
0.11 |
|
|
|
Cash flow from operating activities ($
millions) |
6.7 |
4.4 |
Cash flow from operating activities per
common share ($) |
0.03 |
0.02 |
|
|
|
Cash, restricted cash & short-term
deposits ($ millions) |
181.2 |
114.5 |
1The items marked with a "1" are
alternative performance measures; please see "Alternative
Performance Measures" below.
"Revenues and net earnings rose in the first quarter due to
higher metal prices," said Darren Pylot, Capstone President and
CEO. "The higher prices were partially offset by higher cost
of sales and depletion and amortization on higher unit production
costs and deferred stripping amortization. Production was
lower than planned in the first quarter, however so far production
in the second quarter is exceeding targets resulting in a
considerable portion of the first quarter production shortfall
being made up."
"The biggest highlight for Capstone to date in 2011 was our
announced proposed acquisition of Far West Mining and our strategic
partnership with Korea Resources Corporation. Far West's
Santo Domingo Project in Chile is expected to give us 200% growth
in anticipated copper production from 2011 to 2016," continued Mr.
Pylot. "The transaction, if approved by Capstone and Far West
shareholders, is expected to close in mid-June."
Highlights
Financial and Production Highlights for the
Three Months Ended March 31, 2011
- Recorded net earnings of $18.9 million or $0.09 per common
share which included:
-
- Earnings from mining operations of $39.3 million,
-
- Realized copper price of $4.18 per pound.
- Administrative and stock based compensation of $6.4
million, and
- Current and deferred tax expenses of $12.2 million.
- Adjusted net earnings1 were $16.8 million or $0.08
per common share after making adjustments for certain non-cash and
non-recurring items.
- Generated cash flow from operating activities of $6.7 million
or $0.03 per common share.
-
- Includes a realized loss on derivative instruments of $12.6
million.
- Working capital increased to $212.9 million at March 31, 2011
(which included $181.2 million of cash) from $177.0 million at
December 31, 2010.
- Fully repaid in January 2011 the C$17.4 million owing to Yukon
Energy Corporation related to the spur and main power lines
servicing the Minto Mine, seven years ahead of schedule.
- Produced a total of 16.1 million pounds of payable copper at an
estimated total cash cost1 of $1.59 per pound of payable
copper.
- Recorded gross sales revenue of $110.1 million on the sale of
22.8 million pounds of copper, 3.0 million pounds of zinc, 1.0
million pounds of lead, 7,765 ounces of gold and 348,401 ounces of
silver.
Operating Highlights
Cozamin, Mexico:
- Produced 8.3 million pounds of payable copper at a total cash
cost1 of $1.57 per pound.
- Re-commenced mining in the Avoca stope at the end of March
after extensive rehabilitation efforts were completed, which is now
operating at full capacity.
- Completed 5,461 metres of diamond drilling in 12 holes
underground on the Mala Noche Footwall Zone ("MNFWZ") and the main
Mala Noche Vein. Drilling has expanded the MNFWZ where
drilling continues.
- Completed mapping on three veins in the MNFWZ structure, which
show excellent lateral continuity of the mineralization.
- Completed 3,283 metres of diamond drilling in six holes on
surface at Cozamin on various targets. Surface drilling continues
and results will be released later in the year.
- Mined 13,831 tonnes of exploration development ore in the MNFWZ
with 448 metres of lateral drifting to open access for geological
mapping and to provide material for ongoing metallurgical
testing.
- Awarded the "Clean Industry" certification by the Mexican
environmental authorities in April following a 24 month
implementation process.
Minto, Yukon:
- Produced 7.8 million pounds of payable copper at a total cash
cost1 of $1.62 per pound of payable copper.
- Completed final mining of the Minto Main pit in April.
Stockpiled ore will feed the mill until early 2012, at which time
ore will be available from Area 2.
- Commenced stripping in Area 2 in April 2011.
- The Yukon Water Board issued the amended Water Use License
("WUL") in April 2011. Implementation of the modified license
provisions is underway.
- The Yukon Environmental and Socio-Economic Assessment Board
("YESA") issued the evaluation document for the Phase IV Permit
application. An amendment to the existing Quartz Mining
License ("QML") was issued in March which permitted mining to
commence in Area 2/118 and a new QML for the Minto Phase IV project
was issued in May 2011.
- Completed the Phase V Pre-Feasibility Study in March 2011,
extending the Minto Mine life to 2020, at an average annual
production of 43.0 million pounds of copper in concentrates, at a
total cost per pound of payable copper of $1.34, net of by-product
credits.
- Completed 17,792 metres of exploration drilling in 52 diamond
drill holes mostly in the Copper Keel/Wildfire area, providing
sufficient data to complete an initial mineral resource estimate,
which is expected to be completed by the end of the second
quarter.
Kutcho, British Columbia:
- Completed a Pre-Feasibility Study ("PFS"), that contemplates a
12 year mine life, with an IRR of 27%, NPV of C$155 million
at a 10% discount rate and a 3.4 year payback with average annual
production of 34.7 million pounds of copper, 54.5 million pounds of
zinc and 672,000 ounces of silver.
Outlook
Capstone re-iterates its full year 2011 guidance of 80-85
million pounds of copper in concentrates.
At Cozamin, production grades and tonnes are ramping up as
expected from first quarter levels with the recent restart of
mining in the Avoca area. Much of the higher grade material
previously scheduled in the first quarter is expected to be shifted
to subsequent quarters, limiting the overall impact on the
year. Various initiatives are being pursued in the second and
third quarters to increase mine ore inventory from the principal
mining stopes, which is intended to facilitate increased production
from the mine. In addition, development has been accelerated
in other areas of the mine in order to bring additional stopes into
production by mid-year. This is intended to provide
additional high grade ore and flexibility to the overall
operation.
A mineral resource estimate for the MNFWZ is expected to be
completed and a Pre-Feasibility Study (PFS) commenced by the end of
the second quarter. The PFS will apply economic parameters to
the MNFWZ resource block model to determine economic viability. The
PFS will also include a cost benefit analysis to look at increasing
production by expanding key infrastructure, such as increasing
the hoisting capability, mine ventilation and adding
additional mineral processing plant capacity along with a scenario
of an extended mine life using the existing plant and
infrastructure. The study will also examine other
opportunities such as ways to make improvements to bulk mining
techniques of the current mineral reserve.
At Minto, contract crushing which commenced on April 15, has
demonstrated the ability to exceed production targets increasing
throughput rates to a level that is expected to allow recovery of
the first quarter shortfall with production ramping up ahead of
schedule to the levels that were planned for the fourth quarter of
2011. New mill daily and hourly throughput records have been
established in April and May since the implementation of the
contract crushing system. The high grade ore originally
scheduled for March was mined in April. This will shift some
of the production planned for the first quarter into the second
quarter of 2011. The higher throughput and grades at Minto in the
second quarter have significantly reduced the year-to-date
production shortfall carried from the first quarter.
Driven by the recently discovered Wildfire and Copper Keel
deposits at Minto, Capstone also plans a PFS (Phase VI PFS) in
2011. This Phase VI study is scheduled to start in the third
quarter of 2011 using a new mineral resource estimate that is being
completed in two stages. A preliminary resource estimate will
be finished in the second quarter and will determine the initial
scope of the PFS. This will be followed by additional drilling, and
a more robust estimate in the third quarter. The new estimate
will incorporate the Wildfire and Copper Keel deposits into a
larger framework of a combined Area 2/118/Wildfire/Copper Keel
block model. Similar to the Cozamin PFS, this Minto Phase VI
PFS will include a cost benefit analysis using expanded production
scenarios and mine life estimates versus the existing Phase V
plan.
Development activities at Kutcho in 2011 will be focused on
carrying the environmental and socio-economic assessment process
forward and consultations with the goal of obtaining all necessary
permits for mine development by mid-2012, as well as ongoing
exploration.
Update on Proposed Acquisition of Far West Mining Ltd. and
Formation of Strategic Partnership and Joint Venture with Korea
Resources Corporation
On April 17, 2011, Capstone announced that it had entered into
an arrangement agreement (the "Arrangement Agreement") with Far
West Mining Ltd. ("Far West"), pursuant to which, and subject to
the terms and conditions of the Arrangement Agreement, Capstone
will acquire all of the issued and outstanding common shares of Far
West in accordance with an arrangement of Far West under the
Business Corporations Act (British Columbia) (the "Arrangement").
Assuming the Arrangement becomes effective, each Far West
shareholder will be entitled to elect to receive, in exchange for
each Far West share held, (i) 1.825 shares of Capstone and C$1.00
in cash, (ii) 2.047 shares of Capstone and C$0.001 in cash, or
(iii) C$9.19 in cash, subject to proration on the basis of an
aggregate maximum cash amount of approximately C$79 million, and
provided that no Far West shareholder that elects option (iii)
above will receive less than C$1.00 in cash per Far West share.
Capstone has also agreed to form a long-term strategic
relationship with Korea Resources Corporation ("KORES") for the
development of Far West's Santo Domingo project. Concurrent
with the completion of the Arrangement, KORES will (i) acquire a
30% interest in the entity that will own the Santo Domingo project
for cash consideration of up to approximately C$210 million to
Capstone, and (ii) subscribe for an approximate 11% interest in
Capstone for aggregate cash consideration of approximately
C$170-183 million (the "KORES Subscription"). The shares will
be subscribed for at a price of C$4.35 per share, based on a 1%
discount to the volume weighted average price of Capstone shares on
the TSX for the 5 trading days prior to April 17, 2011.
In connection with the Arrangement, Capstone has called the
special meeting of shareholders on June 13, 2011 to consider a
resolution to approve the issuance of (i) the Capstone common
shares forming the consideration to be paid to Far West
shareholders, and (ii) the Capstone common shares to be issued in
connection with the KORES Subscription. The special meeting of
Capstone shareholders is being held concurrently with the meeting
of Far West securityholders, which has been called to consider the
Arrangement. As the Arrangement is conditional upon the receipt of
a number of regulatory, court and securityholder approvals, the
exact timing of completion of the Arrangement cannot be predicted,
but it is expected to be on or about June 16, 2011.
Conference Call and Webcast Details
Capstone will host a conference call on
Wednesday, May 25, 2011 to discuss these results. The
conference call and webcast details are as follows:
Date:
Time:
Dial in:
Webcast:
Replay:
Replay Passcode: |
Wednesday, May 25, 2011
11:30 am Eastern Time (8:30 am Pacific Time)
North America -- 1.888.231.8191, International --
1.647.427.7450
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3530780
North America -- 1.800.642.1687, International --
1.416.849.0833
66806912 |
The conference call replay will be available until June 1, 2011.
A transcript of the call will also be made available on Capstone's
website (http://capstonemining.com/s/ConferenceCalls.asp) within 24
hours of the call.
Cautionary Note Regarding Forward-Looking
Information
This document may contain "forward-looking
information" within the meaning of Canadian securities legislation
and "forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995
(collectively, "forward-looking statements"). These forward-looking
statements are made as of the date of this document and Capstone
Mining Corp. (the "Company") does not intend, and does not assume
any obligation, to update these forward-looking statements, except
as required under applicable securities legislation.
Forward-looking statements relate to future
events or future performance and reflect Company management's
expectations or beliefs regarding future events and include, but
are not limited to, statements with respect to the timing and
implementation of the proposed transaction with Far West,
estimation of mineral reserves and mineral resources, the
realization of mineral reserve estimates, the timing and amount of
estimated future production, costs of production, capital
expenditures, success of mining operations, environmental risks,
unanticipated reclamation expenses, title disputes or claims and
limitations on insurance coverage. In certain cases,
forward-looking statements can be identified by the use of words
such as "plans", "expects" or "does not expect", "is expected",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or
variations of such words and phrases or statements that certain
actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved" or the negative of these
terms or comparable terminology. By their very nature
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to actual results of
current exploration activities; changes in project parameters as
plans continue to be refined; future prices of resources; possible
variations in ore reserves, grade or recovery rates; accidents,
labour disputes and other risks of the mining industry; delays in
obtaining governmental approvals or financing or in the completion
of development or construction activities; as well as those factors
detailed from time to time in the Company's interim and annual
financial statements and management's discussion and analysis of
those statements, all of which are filed and available for review
on SEDAR at www.sedar.com. Although the Company has attempted to
identify important factors that could cause actual actions, events
or results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue
reliance on forward looking statements.
43-101 Compliance
Unless otherwise indicated, Capstone has
prepared the technical information in this news release ("Technical
Information") based on information contained in the technical
reports, news releases and MD&A's (collectively the "Disclosure
Documents") available under Capstone Mining Corp.'s company profile
on SEDAR at www.sedar.com. Each Disclosure Document was prepared by
or under the supervision of a qualified person (a "Qualified
Person") as defined in National Instrument 43-101 Standards of
Disclosure for Mineral Projects of the Canadian Securities
Administrators ("NI 43-101"). Readers are encouraged to
review the full text of the Disclosure Documents which qualifies
the Technical Information. Readers are advised that mineral
resources that are not mineral reserves do not have demonstrated
economic viability. The Disclosure Documents are each
intended to be read as a whole, and sections should not be read or
relied upon out of context. The Technical Information is
subject to the assumptions and qualifications contained in the
Disclosure Documents.
The Technical Information contained in this news
release of has been prepared under the supervision of, and its
disclosure has been reviewed by, John Sagman, P. Eng., Capstone's
Vice President, Technical Services and Brad Mercer, P. Geo.,
Capstone's Vice President, Exploration, both Qualified Persons
under NI 43-101. In addition, Gregg Bush, Senior Vice President and
Chief Operating Officer for Capstone, reviewed all Technical
Information in this news release.
Alternative Performance Measures The items marked
with a "1" are Alternative performance measures and
readers should refer to Alternative Performance Measures in the
Company's Interim Management's Discussion and Analysis for the
three months ended March 31, 2011 as filed on SEDAR and as
available on the Company's website for further details.
SOURCE Capstone Mining Corp.