VANCOUVER, May 25, 2011 /PRNewswire-FirstCall/ --
- 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)
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 $1.59 per payable pound.
Capstone will hold a conference call Wednesday, May 25, 2011 at 11:30 am Eastern time (8:30 am Pacific time) to discuss these results;
call-in details are provided at the end of this release. This
release should be read in conjunction with Capstone's unaudited
interim consolidated financial statements and management's
discussion and analysis ("MD&A") for the three months ended
March 31, 2011, which are available
on Capstone's website at:
http://capstonemining.com/s/FinancialStatements.asp. An updated
corporate presentation, including results to March 31, 2011, is also available at
http://capstonemining.com/s/Presentation.asp.
2011 Q1 Overview
Three months Three months
ended March ended March
31, 31,
2011 2010
Gross sales revenue ($ 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:
- 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 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.
- 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 Passcode: 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 http://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
http://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.
For further information:
Capstone Mining Corp.
Cindy Burnett, VP, Investor Relations
Telephone: +1-604-637-8157
Email: cburnett@capstonemining.com
Website: http://www.capstonemining.com
SOURCE Capstone Mining Corp.