VANCOUVER, May 24, 2011 /CNW/ -- 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 /CNW/ - 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 cost(1) of $1.59 per payable pound. Capstone
will hold a conference call Wednesday, May 25, 2011 at 11:30 am
Eastern time (8:30 am Pacific time) to discuss these results;
call-in details are provided at the end of this release. This
release should be read in conjunction with Capstone's unaudited
interim consolidated financial statements and management's
discussion and analysis ("MD&A") for the three months ended
March 31, 2011, which are available on Capstone's website at:
http://capstonemining.com/s/FinancialStatements.asp. An updated
corporate presentation, including results to March 31, 2011, is
also available at http://capstonemining.com/s/Presentation.asp.
2011 Q1 Overview
____________________________________________________________________
| | Three months | Three months | | |ended March 31,|ended March
31,| | | 2011 | 2010 |
|____________________________________|_______________|_______________|
|Gross sales revenue ($ 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 |
|____________________________________|_______________|_______________|
(1)The 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: o Earnings from mining operations
of $39.3 million, # Realized copper price of $4.18 per pound. o
Administrative and stock based compensation of $6.4 million, and o
Current and deferred tax expenses of $12.2 million. -- Adjusted net
earnings(1) 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. o 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 cost(1) 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 cost(1 )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
cost(1) 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:
Wednesday, May 25, 2011 Time: 11:30 am Eastern Time (8:30 am
Pacific Time) Dial in: North America -- 1.888.231.8191,
International -- 1.647.427.7450 Webcast:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3530780
Replay: North America -- 1.800.642.1687, International --
1.416.849.0833 Replay 66806912 Passcode: 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.
To view this news release in HTML formatting, please use the
following URL:
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Capstone Mining Corp.br/ Cindy Burnett, VP, Investor Relationsbr/
Telephone: 604-637-8157br/ Email: a
href="mailto:cburnett@capstonemining.com"cburnett@capstonemining.com/abr/
Website: a href="http://www.capstonemining.com"
cr="true"www.capstonemining.com/a /p
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