VANCOUVER, British Columbia,
February 14, 2018 /PRNewswire/ --
(All amounts in US$ unless otherwise
specified)
Capstone Mining Corp. ("Capstone" or the "Company") (TSX: CS)
today announced its financial results for the three months and year
ended December 31, 2017. For the
three months ended December 31, 2017,
operating cash flow before changes in working
capital[1] was $38.2
million or $0.10 per share,
with net income of $29.5 million and
adjusted net income of $4.4 million
or $0.01 per share after adjusting
for certain non-cash and non-recurring charges. Copper production
totalled 23,417 tonnes (22,600 tonnes of payable copper) at a C1
cash cost[1] of $1.98 per payable pound produced.
For the full year ended December 31,
2017, operating cash flow before changes in working
capital[1] was $129.7
million or $0.34 per share,
with net income of $55.1 million and
adjusted net loss of $8.5 million or
$0.02 per share after adjusting for
certain non-cash and non-recurring charges. Copper production
totalled 90,395 tonnes (87,268 tonnes of payable copper) at a C1
cash cost[1] of $1.92 per payable pound produced.
"We generated positive net income and strong cash flow for the
year," said Darren Pylot, President
and CEO of Capstone. "Increased cash flow, combined with the
monetization of our non-core Kutcho asset, allowed us to pay down
$54 million in debt in 2017, reducing
debt by a total of $74 million over
the past two years."
"We are extremely well positioned entering 2018, with operations
running well and potential organic growth opportunities," continued
Mr. Pylot. "We are now set to take full advantage of strong copper
prices in 2018 after completing our entire copper hedge program at
the end of 2017."
Financial and Operational Overview
Q4 2017 Q4 2016 2017 2016
Revenue ($ millions) 152.8 163.0 541.9 529.4
Copper produced (tonnes) 23,417 29,853 90,395 114,583
Payable copper produced
(tonnes) 22,600 28,828 87,268 110,663
C1 cash cost per payable
pound produced (1) ($/lb) 1.98 1.26 1.92 1.44
All-in cost per payable pound
produced (1) ($/lb) 2.65 1.77 2.49 1.88
Fully-loaded all-in cost per
payable pound produced (1) ($/lb) 2.82 1.85 2.72 1.98
Net income (loss) ($ millions) 29.5 (182.4) 55.1 (197.4)
Net income (loss) attributable to
shareholders ($ millions) 29.6 (125.4) 55.2 (140.0)
Net income (loss) attributable to
shareholders per common share ($) 0.08 (0.33) 0.14 (0.37)
Adjusted net income (loss) (1) ($ millions) 4.4 30.7 (8.5) 29.4
Adjusted net income (loss) attributable
to shareholders(1) ($ millions) 4.5 30.9 (8.4) 30.0
Adjusted net income (loss) attributable
to shareholders per common share (1)($) 0.01 0.08 (0.02) 0.08
Cash flow from operating activities
($ millions) 44.8 50.9 112.5 125.3
Cash flow from operating activities
per common share (1) ($) 0.12 0.14 0.29 0.33
Operating cash flow before changes
in working capital (1) ($ millions) 38.2 75.0 129.7 156.9
Operating cash flow before changes in
working capital per common share (1) ($) 0.10 0.20 0.34 0.41
Cash and cash equivalents ($ millions) 116.2 130.4 116.2 130.4
Net debt (1) ($ millions) 158.7 198.6 158.7 198.6
1. This is an alternative performance measure; please see "Alternative Performance
Measures" at the end of this release.
* Q4 2017 includes a negative provisional pricing adjustment of $(2.4) million
(2016 - $(0.1) million) related to prior shipments, equivalent to $(0.05) per
pound (2016 - $(0.00)) per pound) of copper sold during the quarter. YTD
includes a negative provisional pricing adjustment of $(5.7) million (2016 -
$(12.7) million) related to prior shipments, equivalent to $(0.03) per pound
(2016 - $(0.05) per pound) of copper sold during the year.
** Q4 2017 adjusted realized copper price includes the provisional pricing
adjustments noted above and realized loss of $(14.7) million (2016 - $(8.5)
million) equivalent to $(0.29) per pound (2016 - $(0.13) per pound) related to
copper derivative contracts exercised during the quarter. YTD includes a
realized loss of $(45.6) million (2016 - gain of $3.3 million) equivalent to $(0.24)
per pound (2016 - $0.01 per pound) related to copper derivative contracts exercised
during the year.
Capstone will hold a conference call and webcast on
Thursday, February 15, 2018 at
11:30 a.m. Eastern time (8:30 a.m. Pacific time) to discuss these results;
call-in details and information on associated slides are provided
at the end of this release. This release is not suitable on a
standalone basis for readers unfamiliar with Capstone and should be
read in conjunction with Capstone's consolidated financial
statements and management's discussion and analysis ("MD&A")
for the year ended December 31, 2017,
which are available on Capstone's website at
http://capstonemining.com/investors/financial-reporting/default.aspx
and on SEDAR, all of which have been reviewed and approved by
Capstone's Board of Directors. An updated corporate presentation,
including results to December 31,
2017, and 2017 year-end webcast slides will also be
available at
http://capstonemining.com/investors/events-and-presentations/default.aspx.
Financial and Production Highlights for the Quarter Ended
December 31, 2017
- Net income of $29.5 million
included:
- Earnings from mining operations of $39.6
million.
- Realized copper price of $3.17
per pound
- A $17.0 million gain on the sale
of the Kutcho mineral property.
- A commodity derivative loss of $4.1
million, comprising realized losses of $14.7 million and the reversal of unrealized
losses recorded in a prior period of $10.6
million. The zero-cost collar and copper forwards expired in
2017.
- A derivative loss of $3.8 million
primarily related to unrealized losses on the embedded derivative
asset.
- Cash flow from operating activities of $44.8 million or $0.12 per common share.
- Working capital increased $11.2
million to $189.4 million at
December 31, 2017 (which included
$116.2 million of cash and cash
equivalents) from $178.2 million at
September 30, 2017.
- Operating cash flow before changes in working
capital[1] was $38.2
million or $0.10 per
share.
- Produced a total of 22,600 tonnes of payable copper at a C1
cash cost[1] of $1.98 per pound of payable copper produced and
fully-loaded all-in cost[1] of $2.82 per pound of payable pound copper
produced.
- Revenue of $152.8 million
generated primarily from the sale of 22,575 tonnes of copper.
Financial and Production Highlights for the Year Ended
December 31, 2017
- Net income of $55.1 million
included:
- Earnings from mining operations of $117.5 million.
- Realized copper price of $2.86
per pound
- A non-cash impairment reversal of $20.6
million related to Minto
mineral property, plant and equipment.
- A $17.0 million gain on the sale
of the Kutcho mineral property.
- A commodity derivative loss of $24.8
million, comprising realized losses of $45.6 million and the reversal of unrealized
gains recorded in a previous period of $20.8
million. The zero-cost collar and copper forwards expired in
2017 and Capstone has no commodity derivatives in place effective
January 1, 2018.
- An income tax expense of $28.9
million.
- Cash flow from operating activities of $112.5 million or $0.29 per common share.
- Working capital increased $18.3
million to $189.4 million at
December 31, 2017 (which included
$116.2 million of cash and cash
equivalents) from $171.1 million at
December 31, 2016.
- Operating cash flow before changes in working
capital[1] was $129.7
million or $0.34 per common
share.
- Production of 87,268 tonnes of payable copper at a C1 cash
cost[1] of $1.92 per pound of payable copper produced and
fully-loaded all-in cost[1] of $2.72 per pound of payable pound copper
produced.
- Revenue of $541.9 million
generated primarily from the sale of 87,918 tonnes of copper.
Production, Costs and Additional Highlights
Pinto Valley Mine:
- Produced 16,160 tonnes of copper during Q4 2017 at a C1 cash
cost[1] of $1.79 per pound of payable copper produced and
all-in cost[1] of $2.17 per pound of payable copper produced.
- Produced 57,332 tonnes of copper during 2017 at a C1 cash
cost[1] of $1.95 per pound of payable copper produced and
all-in cost[1] of $2.34 per pound of payable copper produced.
- Pinto Valley had a strong fourth quarter, with production
exceeding expectations on higher grade and recoveries. Work in the
later part of the year focused on overall operation optimization.
2017 C1 cash cost[1] and all-in
cost[1] per pound of payable copper produced
were in line with revised 2017 cost guidance.
Cozamin Mine:
- Produced 4,254 tonnes of copper during Q4 2017 at a C1 cash
cost[1] of $1.04 per pound of payable copper produced and
all-in cost[1] of $2.08 per pound of payable copper produced.
- Produced 16,732 tonnes of copper during 2017 at a C1 cash
cost[1] of $1.16 per pound of payable copper produced and
all-in cost[1] of $1.90 per pound of payable copper produced.
- At Cozamin, production for the fourth quarter and full year
exceeded expectations, largely on higher mining and processing
rates as the mine achieved development rates that allowed for
increased flexibility. 2017 C1 cash cost[1]
and all-in cost[1] per pound of payable
copper produced were in line with 2017 guidance.
Minto Mine:
- At the start of 2017, it was Capstone's intention to place the
Minto Mine on care and maintenance at the end of 2017. As a result
of rising copper prices and the downside protection provided by the
renegotiation of the precious metals stream in 2017, Capstone made
the decision to continue operations until at least mid-2021.
Significant development and stripping costs were expensed in the
second half of 2017 as part of the mine life extension that will
benefit future periods. These additional costs, combined with lower
than planned production for the fourth quarter, impacted C1 cash
cost[1] per pound of payable copper
produced.
- Produced 3,003 tonnes of copper during Q4 2017 at a C1 cash
cost[1] of $4.29 per pound of payable copper produced and
all-in cost[1] of $4.80 per payable pound of copper.
- Produced 16,332 tonnes of copper during 2017 at a C1 cash
cost[1] of $2.60 per pound of payable copper produced and
all-in cost[1] of $2.75 per payable pound of copper produced.
- At Minto, underground
production continued to lag planned rates, resulting in higher
utilization of partially oxidized and low-grade sulphide ore
stockpiles. The lower proportion of sulfide ore in the mill feed
negatively impacted grade and recovery. As a result, 2017 C1 cash
cost[1] and all-in
cost[1] per pound of payable copper produced
were higher than revised 2017 guidance.
Additional Highlights:
- On December 15, 2017, Capstone
completed the sale of its Kutcho development project to Kutcho
Copper Corp. (formerly Desert Star Resources Ltd.). Under the terms
of the agreement, Capstone received C$28.8
million in cash and 4,646,892 common shares of the newly
named Kutcho Copper Corp. Concurrent with the closing of the
transaction, Capstone acquired an additional 3,076,923 shares and
1,538,461 share purchase warrants through a private placement,
resulting in Capstone owning and controlling at December 31, 2017, directly or indirectly,
approximately 16.5% of the current issued and outstanding shares of
Kutcho Copper on a non-diluted basis. As a result, Capstone
recorded a gain on the sale of the Kutcho development project of
$17.0 million.
- Debt repayments totalling $24.0
million were made on the senior secured corporate revolving
credit facility ("RCF") during Q4 2017, with total repayments of
$54.0 for the full year 2017,
reducing the outstanding balance to $274.9
million at December 31,
2017.
- The zero-cost collar and copper forward contracts matured
during 2017. The Company has no commodity derivatives on any copper
sales in 2018 and beyond.
Subsequent Event:
- On February 14, 2018, Capstone
entered into a definitive share purchase agreement (the
"Agreement") pursuant to which it has agreed to sell its Minto Mine
to Pembridge Resources plc ("Pembridge") (the "Transaction"). Under
the terms of the Agreement, Capstone will receive US$37.5 million in cash, plus working capital
adjustments, and common shares representing 9.9% of the issued and
outstanding shares of Pembridge upon completion of the
Transaction.
- The Transaction is subject to closing conditions, including the
requirement for Pembridge to post the required financial security
with respect to the closure bonding requirements at Minto. Capstone has agreed, for a period of
one year post-closing, to retain one-third (approximately
Cdn$24 million) of the existing
surety bond if requested by Pembridge, after which time Capstone
will have no further obligation with respect to the closure of the
Minto Mine.
- The Transaction is expected to close in the second quarter of
2018. Capstone intends to use net proceeds from the sale primarily
to reduce outstanding borrowings under its revolving credit
facility.
2018 Operating and Capital Guidance
In 2018, Capstone expects to produce 90,000 tonnes (±5%) of copper
at a C1 cash cost[1] of $1.85 to $1.95 per
pound of payable copper produced. Capital expenditures for 2018,
including $24 million of capitalized
stripping and $7 million of
brownfield exploration, are expected to be $100 million or $0.50 per pound of payable copper produced.
Consolidated all-in sustaining cost[1]
guidance is $2.50 to $2.60 per pound of payable copper produced.
Conference Call and Webcast Details
Date: Thursday, February 15, 2018
Time: 11:30 am Eastern Time (8:30 am Pacific Time)
Dial in: North America: 1-888-390-0546, International: +416-764-8688
Webcast:
http://event.on24.com/r.htm?e=1559280&s=1&k=9E417F05C934E98FC1A5B362C357B8ED
Replay: North America: 1-888-390-0541, International: +416-764-8677
Replay Passcode: 894303#
The conference call replay will be available until Thursday, February 22, 2018. 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.
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 the
large scale 70% owned copper-iron Santo
Domingo development project in Region III, Chile, in partnership with Korea Resources
Corporation as well as exploration properties in Chile. 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 http://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", "expected", "potentially", "guidance" 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", "planned"
and "expects". 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, assumptions
related to geotechnical condition of tailings facilities, future
prices of copper and other metals, compliance with financial
covenants, surety bonding, our ability to raise capital,
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, 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 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 http://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
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 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., Capstone Senior Vice
President and Chief Operating Officer, a Qualified Person 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 Interim
Management's Discussion and Analysis for the quarter and year ended
December 31, 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.
Cindy Burnett, VP, Investor
Relations and Communications, 604-637-8157,
cburnett@capstonemining.com