(All amounts in US$ unless otherwise
specified)
VANCOUVER, Oct. 26, 2017 /CNW/ - Capstone Mining Corp.
("Capstone" or the "Company") (TSX: CS) today announced its
financial results for the three and nine months ended September 30, 2017. Cash flow from operating
activities before changes in working capital for the quarter was
$41.4 million or $0.11 per share. Net income for the quarter was
$20.2 million or $0.05 per share with an adjusted net loss of
$11.4 million or $0.03 per share after adjusting for certain
non-cash and non-recurring charges. Copper production for the
quarter totalled 22,026 tonnes (21,261 tonnes of payable copper) at
a C1 cash cost1 of $2.00
per payable pound produced with copper sales for the quarter of
22,988 tonnes at a C1 cash cost1 of $2.02 per payable pound sold.
"In the third quarter of 2017 we generated $41 million of operating cash flow," said
Darren Pylot, President and CEO of
Capstone. "Subsequent to quarter end, we continued our debt
reduction program and repaid $14
million, bringing our total debt reduction for the year to
over $40 million."
"As we approach 2018, we regain full exposure to the copper
price, with our entire hedge program concluding in December 2017," continued Mr. Pylot.
Overview
|
|
|
|
|
|
Q3
2017
|
Q3
2016
|
2017
YTD
|
2016
YTD
|
Revenue ($
millions)
|
145.9
|
139.9
|
389.1
|
366.4
|
|
|
|
|
|
Copper
produced (tonnes)
|
22,026
|
32,027
|
66,978
|
84,730
|
|
|
|
|
|
Payable copper
produced (tonnes)
|
21,261
|
30,939
|
64,668
|
81,836
|
C1 cash cost per
payable pound produced1 ($/lb)
|
2.00
|
1.32
|
1.90
|
1.50
|
All-in cost per
payable pound produced1 ($/lb)
|
2.62
|
1.65
|
2.44
|
1.91
|
Fully-loaded
all-in cost per payable pound produced1
($/lb)
|
3.03
|
1.75
|
2.68
|
2.02
|
|
|
|
|
|
Copper sold
(tonnes)
|
22,988
|
30,359
|
65,341
|
80,893
|
Realized copper
price per pound sold ($/lb)*
|
2.99
|
2.18
|
2.76
|
2.19
|
Adjusted realized
copper price per pound sold ($/lb) **
|
2.76
|
2.21
|
2.54
|
2.26
|
C1 cash cost per
payable pound sold1 ($/lb)
|
2.02
|
1.49
|
1.82
|
1.63
|
All-in cost per
payable pound sold1 ($/lb)
|
2.59
|
1.82
|
2.35
|
2.05
|
Fully-loaded
all-in cost per payable pound sold1
($/lb)
|
2.97
|
1.93
|
2.59
|
2.16
|
|
|
|
|
|
Net income
(loss) ($ millions)
|
20.2
|
11.2
|
25.6
|
(15.0)
|
Net income (loss)
attributable to Capstone shareholders ($ millions)
|
20.3
|
11.3
|
25.6
|
(14.7)
|
Net income (loss)
attributable to shareholders per common share ($)
|
0.05
|
0.03
|
0.07
|
(0.04)
|
|
|
|
|
|
Adjusted net
income (loss)1 ($ millions)
|
(11.4)
|
7.8
|
(13.1)
|
(1.2)
|
Adjusted net
income (loss) attributable to Capstone
shareholders1 ($ millions)
|
(0.1)
|
7.9
|
(0.1)
|
(0.8)
|
Adjusted net
income (loss) attributable to shareholders per common
share1 ($)
|
(0.03)
|
0.02
|
(0.03)
|
(0.00)
|
|
|
|
|
|
Cash flow from
operating activities ($ millions)
|
41.7
|
41.1
|
67.7
|
74.4
|
Cash flow from
operating activities per common share1
($)
|
0.11
|
0.11
|
0.18
|
0.19
|
Operating cash
flow before changes in working
capital1 ($ millions)
|
41.4
|
41.5
|
91.6
|
81.9
|
Operating cash
flow before changes in working capital per common share1
($)
|
0.11
|
0.11
|
0.24
|
0.21
|
|
|
|
|
|
Cash and cash
equivalents ($ millions)
|
114.2
|
120.4
|
114.2
|
120.4
|
Net
debt1 ($ millions)
|
184.7
|
224.2
|
184.7
|
224.2
|
|
* Q3 2017 includes
a provisional pricing adjustment of ($2.1) million (2016 – ($1.4)
million) related to prior shipments, equivalent to ($0.04) per
pound (2016 – $(0.02) per pound) of copper sold during the quarter.
2017 YTD includes a provisional pricing adjustment of $3.2 million
(2016 –$(12.9) million) related to prior shipments, equivalent to
$0.02 per pound (2016 – ($0.07) per pound) of copper sold during
the nine month period. The Q3 2017 figure of ($2.1) million is
broken down as $2.0 million related to price adjustments and ($4.1)
million related to assay adjustments. This translates into
adjustments of $0.04 and ($0.08) respectively on a per pound sold
basis. The 2017 YTD figure of $3.2 million is broken down as $5.6
million related to price adjustments and ($2.4) million related to
assay adjustments. This translates into adjustments of $0.04 and
($0.02) respectively on a per pound sold basis. The Q3 2016 and
2016 YTD provisional pricing adjustments were predominantly related
to assay adjustments.** Q3 2017 adjusted realized copper price
includes the provisional pricing adjustments noted above and a
realized loss of $11.5 million (2016 gain – $2.0 million)
equivalent to $(0.23) per pound (2016 gain - $0.03 per pound)
related to copper derivative contracts exercised during the
quarter. 2017 YTD adjusted realized copper price includes the
provisional pricing adjustments noted above and a realized loss of
$30.9 million (2016 gain – $2.2 million) equivalent to $(0.21) per
pound (2016 gain – $0.06 per pound) related to copper derivative
contracts exercised during the period.
|
Financial Highlights for the Three Months Ended September 30, 2017
- Net income of $20.2 million or
$0.05 per common share included:
-
- Earnings from mining operations of $29.9
million,
-
- Realized copper price of $2.99
per pound
- A non-cash impairment reversal of $20.6 million related to the Minto mine,
- A non-cash gain on the sale of marketable securities of
$13.6 million
- A commodity derivative loss of $10.6
million, comprising a realized loss of $11.5 million combined with an unrealized loss of
$2.9 million and reversals of
unrealized losses recorded in a previous period of $3.8 million,
- Production costs included a non-cash write-down of $1.6 million of inventory at Minto,
- An income tax expense of $16.0
million.
- Cash flow from operating activities of $41.7 million or $0.11 per common share.
- Operating cash flow before changes in working
capital1 of $41.4 million
or $0.11 per common share.
- Working capital increased $21.2
million to $178.2 million at September 30, 2017 from $157.0 million at June 30,
2017. Cash increased to $114.4
million at September 30, 2017
from $82.4 million at June 30, 2017 largely as a result of disposal of
investments in marketable securities.
- Production of 21,261 tonnes of payable copper at a C1 cash
cost1 of $2.00 per pound
of payable copper produced and fully-loaded all-in cost1
of $3.03 per pound of payable pound
copper produced.
- Revenue of $145.9 million
generated primarily from the sale of 22,988 tonnes of copper.
Financial Highlights for the Nine Months Ended September 30, 2017
- Net income of $25.6 million or
$0.07 per common share which
included:
-
- Earnings from mining operations of $78.0
million,
- A non-cash impairment reversal of $20.6
million related to the Minto mine,
- A non-cash gain on the sale of marketable securities of
$13.6 million,
- Production costs included a non-cash charge of $0.5 million related to the write-down of
$1.6 million of inventory at
Minto and the reversal of an
inventory write down of $1.1 million
at Pinto Valley,
- A commodity derivative loss of $20.7
million, comprising a realized loss of $30.9 million, an unrealized loss of $8.2 million and reversals of unrealized losses
recorded in a previous period of $18.4
million.
- $24.4 million in current and
deferred income tax expense.
- Cash flow from operating activities of $67.7 million or $0.18 per common share.
- Operating cash flow before changes in working
capital1 of $91.6 million
or $0.24 per common share.
- Working capital increased $7.1
million to $178.2 million at September 30, 2017 from $171.1 million at December
31, 2016. Cash decreased to $114.2
million at September 30, 2017
from $130.4 million at December 31, 2016 largely as a result of
$30.0 million in debt repayments and
$33.4 million in payments made
related to the commodity derivatives during 2017 YTD, partially
offset by cash proceeds of $17.2
million on the sale of marketable securities.
- Production of 64,668 tonnes of payable copper at a C1 cash
cost1 of $1.90 per pound
of payable copper produced and fully-loaded all-in cost1
of $2.68 per pound of payable pound
copper produced.
- Revenue of $389.1 million
generated primarily from the sale of 65,341 tonnes of copper.
Production and Additional Highlights for the Three and Nine
Months Ended September 30,
2017
Pinto Valley Mine:
- Produced 14,381 tonnes of copper during Q3 2017 at a C1 cash
cost1 of $2.06 per pound
of payable copper produced and all-in cost1 of
$2.37 per pound of payable copper
produced.
- Produced 41,171 tonnes of copper during 2017 YTD at a C1 cash
cost1 of $2.01 per pound
of payable copper produced and all-in cost1 of
$2.40 per pound of payable copper
produced.
- At Pinto Valley, production was below expectations during Q3
2017 due to mill disruptions. As a result, C1 cash cost1
and all-in cost1 per payable pound of copper produced
for Q2 2017 were higher than planned. Additionally, focus in the
quarter shifted from throughput maximization to overall mill
optimization.
Cozamin
Mine:
- Produced 4,242 tonnes of copper during Q3 2017 at a C1 cash
cost1 of $1.10 per pound
of payable copper produced and all-in cost1 of
$1.86 per pound of payable copper
produced.
- Produced 12,478 tonnes of copper during 2017 YTD at a C1 cash
cost1 of $1.21 per pound
of payable copper produced and all-in cost1 of
$1.84 per pound of payable copper
produced.
- Copper production at Cozamin exceeded expectations, driven
primarily by higher throughput. Mine development continues to
advance ahead of schedule, increasing production flexibility at the
operation.
- During Q3 2017, Capstone entered into an agreement with
Endeavour Silver Corp. ("Endeavour Silver") which allows for the
two companies to exchange access to certain of each other's mining
concessions that abut at the southern boundary of Capstone's
Cozamin mine property and for the sharing of information on the
various concessions covered by the agreement.
- Drill results released during the quarter indicated the
continuation of the Mala Noche Footwall Zone ("MNFWZ") along strike
to the southeast. Copper grades in excess of 4% were encountered in
a 580 metre step-out hole to the southeast from the limits of the
current MNFWZ Indicated Mineral Resource immediately adjacent to
the Endeavour Silver's claims over larger than average widths than
typical of the MNFWZ. Cozamin's 2017 exploration budget has been
increased by a total of $1.1 million
to accelerate testing of the MNFWZ on both sides of the
Capstone/Endeavour Silver boundary.
Minto Mine:
- Produced 3,403 tonnes of copper during Q3 2017 at a C1 cash
cost1 of $2.87 per pound
of payable copper produced and all-in cost1 of
$3.01 per payable pound of copper
produced.
- Produced 13,328 tonnes of copper during 2017 YTD at a C1 cash
cost1 of $2.22 per pound
of payable copper produced and an all-in cost1 of
$2.28 per payable pound of copper
produced.
- At Minto, production for the
quarter was impacted by mine sequencing changes to support the mine
life extension. Underground mining was disrupted to upgrade the
emergency response capacity in the current stoping areas while
development to the Minto East deposit continued. Partially oxidized
ore from the Area 2, Stage 3 open pit and low grade stockpiles
supplemented the mill feed during the quarter to offset the
resulting underground ore shortfall, causing lower head grade and
recoveries than originally planned. The shortfall in production
resulted in higher unit costs during Q3 2017 than planned and as a
result a $1.6 million impairment was
recorded against the carrying value of Minto's concentrate inventory during Q3 2017.
$7.2 million of underground ramp
development costs in 2017 YTD were expensed because they were
incurred before the mine life extension decision was made. This
equates to an increase to Minto's
C1 cash costs1 of $0.25
per payable pound produced YTD. In addition, because it is expected
to take less than 12 months to mine the planned open pit deposits
in 2017, all stripping costs in 2017 are being expensed and not
capitalized, also impacting C1 cash costs1.
- Based on improved copper prices and updates to Minto's mine plan, Management has made the
decision to bring previously written off resources into the mine
plan. This will extend the life of the mine and increase its value.
As a result, an impairment reversal of $20.6
million was recorded during Q3 2017. Key assumptions
included copper price assumptions ranging from $2.93/lb. - $3/lb.
($3/lb. long term) and an 8% discount
rate.
Additional highlights:
- Subsequent to period end, Capstone repaid $14.0 million on the senior secured corporate
revolving credit facility ("RCF"), reducing drawn debt to
$284.9 million as at October 18, 2017.
Outlook
Production Guidance:
Capstone expects to reach the low
end of the range of 2017 consolidated production guidance of 94,000
tonnes (±5%) of copper.
Operating Cost Guidance:
There was no change to the
cost guidance at Pinto Valley and Cozamin during the third
quarter.
At Minto, 2017 production is
expected to be lower and costs higher than guided due to mine
sequencing changes to support a mine life extension to 2021 and
delays in reaching underground ore. Additional stripping costs and
underground development costs are being incurred to bring
additional deposits into the mine plan.
Primarily as a result of higher C1 cash costs1 and
all-in costs1 at Minto,
and also increased share-based compensation expenses resulting from
improvements in the Company's share price in 2017 and lower
production expected at Pinto Valley, consolidated C1 cash
costs1 , all-in costs1 and fully-loaded
all-in costs are expected to be higher than previously guided.
|
|
|
|
|
|
Pinto Valley
5
|
Cozamin
5
|
Minto
|
Total
|
Current 2017
guidance
|
|
|
|
|
|
C1 cash cost ($/lb)
1,2
|
$1.95 -
$2.05
|
$1.10 -
$1.20
|
$2.45 -
$2.55
|
$1.90 -
$2.00
|
|
All-in cost ($/lb)
1,3
|
$2.30 -
$2.40
|
$1.90 -
$2.00
|
$2.60 -
$2.70
|
$2.45 -
$2.55
|
|
Fully-loaded all-in
cost ($/lb) 1,4
|
|
|
|
$2.50 -
$2.60
|
|
|
1
|
These are alternative
performance measures. Refer to the MD&A section entitles
"Alternative Performance Measure and Reconciliations".
|
2
|
Per pound of payable
copper produced, net of by-product credits and treatment and
selling costs.
|
3
|
All-in cost is equal
to C1 cash cost plus NSR and production royalties, non-cash
deferred revenue, all sustaining capital expenditures (including
exploration and cash portion of production-phase capitalized
stripping), accretion of reclamation obligations, amortization of
reclamation assets, corporate G&A, share-based compensation,
greenfield exploration, cash portion of pre-production capitalized
deferred stripping, PV3 development and care and maintenance
costs.
|
4
|
Fully-loaded all-in
cost is equal to All-in cost plus interest expense and
taxes.
|
5
|
No changes to Pinto
Valley and Cozamin cost guidance during Q3 2017.
|
2017 Capital and Exploration Guidance
There were no
changes to 2017 exploration cost guidance during the third
quarter.
At Minto, an additional
$3.0 million of capital will be
incurred primarily in relation to underground infrastructure
required as part of the mine life extension, increasing
Minto's total capital guidance for
2017 to $3.6 million.
Conference Call and Webcast Details
Capstone will hold
a conference call and webcast on Friday,
October 27, 2017 at 10:00 a.m.
Eastern time (7:00 a.m. Pacific
time) to discuss these results.
Date:
|
Friday, October 27,
2017
|
Time:
|
10:00 am Eastern Time
(7:00 am Pacific Time)
|
Dial in:
|
North America:
1-888-390-0546, International: +416-764-8688
|
Webcast:
|
http://event.on24.com/r.htm?e=1521082&s=1&k=489A38C7B3561FDCCA3C27399CAE40D9
|
Replay:
|
North America:
1-888-390-0541, International: +416-764-8677
|
Replay
Passcode:
|
218958#
|
The conference call replay will be available until Friday, November 3, 2017. The conference call
audio and transcript will be available on Capstone's website within
48 hours of the call at
http://capstonemining.com/investors/events-and-presentations/default.aspx.
This release should be read in conjunction with Capstone's
consolidated financial statements and management's discussion and
analysis ("MD&A") for the quarter ended September 30, 2017, which are available on
Capstone's website at
http://capstonemining.com/investors/financial-reporting/default.aspx
and on SEDAR. An updated corporate presentation, including results
to September 30, 2017, in addition to
the Q3 2017 webcast slides, will also be available at
http://capstonemining.com/investors/events-and-presentations/default.aspx.
About Capstone Mining Corp.
Capstone Mining Corp. is a
Canadian base metals mining company, focused on copper. We are
committed to the responsible development of our assets and the
environments in which we operate. Our three producing mines are the
Pinto Valley copper mine located in Arizona, US, the Cozamin polymetallic mine in
Zacatecas State, Mexico and the
Minto copper mine in Yukon, Canada. In addition, Capstone has two
development projects; the large scale 70% owned copper-iron
Santo Domingo project in Region
III, Chile, in partnership with
Korea Resources Corporation, and the 100% owned Kutcho copper-zinc
project in British Columbia,
Canada, as well as exploration properties in Chile and US. Capstone's strategy is to focus
on the optimization of operations and assets in politically stable,
mining-friendly regions, centred in the Americas. Our headquarters
are in Vancouver, Canada and we
are listed on the Toronto Stock Exchange (TSX). Further information
is available at www.capstonemining.com.
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
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. Forward-looking statements include, but are not
limited to, statements with respect to the estimation of mineral
resources and mineral reserves, the realization of mineral reserve
estimates, the timing and amount of estimated future production,
costs of production and capital expenditures, the success of our
mining operations, environmental risks, unanticipated reclamation
expenses and title disputes. In certain cases, forward-looking
statements can be identified by the use of words such as "plans",
"expects", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates", "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.
In this document certain forward-looking statements are identified
by words including "guidance", "outlook", "planned", "expects" and
"expected". 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, future prices
of copper and other metals, compliance with financial covenants,
surety bonding, our ability to raise capital, Capstone'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, changes in general economic conditions, 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, impact of
climatic conditions on our Pinto Valley, Cozamin and Minto operations, aboriginal title claims and
rights to consultation and accommodation, land reclamation and mine
closure obligations, uncertainties and risks related to the
potential development of the Santo Domingo Project, increased
operating and capital costs, challenges to title to our mineral
properties, maintaining ongoing social license to 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 energy prices, competition in the mining
industry, risks associated with joint venture partners, our ability
to integrate new acquisitions into our operations, cybersecurity
threats, legal proceedings 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 management's
discussion and analysis of those statements, all of which are filed
and available for review under the Company's profile on SEDAR at
www.sedar.com. Although the Company has attempted to identify
important factors that could cause our actual results, performance
or achievements to differ materially from those described in our
forward-looking statements, there may be other factors that cause
our results, performance or achievements not to be as anticipated,
estimated or intended. There can be no assurance that our
forward-looking statements will prove to be accurate, as our actual
results, performance or achievements could differ materially from
those anticipated in such statements. Accordingly, readers should
not place undue reliance on our forward-looking statements.
National Instrument 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 in this news release ("Technical
Information") 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"). The disclosure of the Technical Information contained in
this news release has been reviewed and approved by Gregg Bush, P. Eng., Senior Vice President and
Chief Operating Officer. Technical Information related to mineral
exploration activities has been reviewed and approved by
Brad Mercer, P. Geol., Senior Vice
President, Exploration. Both are Qualified Persons under NI
43-101.
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
Consolidated Management's Discussion and Analysis for the quarter
ended September 30, 2017 as filed on
SEDAR and as available on the Company's website.
Cautionary Note to United States Investors
This news
release contains disclosure that has been prepared in accordance
with the requirements of Canadian securities laws, which differ
from the requirements of US securities laws. Without limiting the
foregoing, this news release may refer to technical reports that
use the terms "indicated" and "inferred" resources. US investors
are cautioned that, while such terms are recognized and required by
Canadian securities laws, the SEC does not recognize them. Under US
standards, mineralization may not be classified as a "reserve"
unless the determination has been made that the mineralization
could be economically and legally produced or extracted at the time
the reserve determination is made. US investors are cautioned not
to assume that all or any part of indicated resources will ever be
converted into reserves. US investors should also understand that
"inferred resources" have a great amount of uncertainty as to their
existence and as to whether they can be mined legally or
economically. It cannot be assumed that all or any part of
"inferred resources" will ever be upgraded to a higher category.
Therefore, US investors are also cautioned not to assume that all
or any part of inferred resources exist, or that they can be mined
legally or economically. Accordingly, information concerning
descriptions of mineralization and resources contained in this news
release may not be comparable to information made public by US
companies subject to the reporting and disclosure requirements of
the SEC.
1.
|
This is an
alternative performance measure; please see "Alternative
Performance Measures" at the end of this release.
|
SOURCE Capstone Mining Corp.