Capstone Reports First Quarter 2011 Financial Results
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: http://www.newswire.ca/en/releases/archive/May2011/24/c7156.html
Capstone Mining Corp.
Cindy Burnett, VP, Investor Relations
Telephone: 604-637-8157
Email: cburnett@capstonemining.com
Website: www.capstonemining.com