Capstone Reports Second Quarter 2011 Financial Results
VANCOUVER, Aug. 15, 2011 /CNW/ --
Cash Flow from Operating Activities of $29.7 million, Net Earnings of
$15.5 million or $0.07 per share
(All financial information prepared in accordance with International
Financial Reporting Standards ('IFRS');
all amounts in US$ unless otherwise specified)
VANCOUVER, Aug. 15, 2011 /CNW/ - Capstone Mining Corp. (TSX: CS)
('Capstone') today announced its financial results for the three and
six months ended June 30, 2011. Net earnings for the quarter were
$15.5 million and cash flow from operating activities was $29.7
million. Capstone ended the quarter with cash on hand of $506.6
million and no long-term debt. Copper production for the quarter at
Capstone's two operating mines, Cozamin and Minto, totalled 20.5
million pounds of payable copper at an estimated total cash cost(1) of $1.31 per payable pound.
Capstone will hold a conference call Tuesday, August 16, 2011 at 11:30
am Eastern time (8:30 am Pacific time) to discuss these results;
call-in details are provided at the end of this release. This release should be read in conjunction with Capstone's unaudited
interim consolidated financial statements and management's discussion
and analysis ('MD&A') for the three and six months ended June 30, 2011,
which are available on Capstone's website at: http://capstonemining.com/s/FinancialStatements.asp. An updated corporate presentation, including results to June 30, 2011,
will also be available at http://capstonemining.com/s/Presentation.asp.
2011 Q2 Overview
_____________________________________________________________________
| |Three months|Three months| Six months | Six months |
| | ended June | ended June |ended June 30,|ended June 30,|
| | 30, 2011 | 30, 2010 | 2011 | 2010 |
|_____________|____________|____________|______________|______________|
|Gross sales | 78.9 | 69.2 | 189.1 | 157.2 |
|revenue ($ | | | | |
|millions) | | | | |
|_____________|____________|____________|______________|______________|
| | | | | |
|_____________|____________|____________|______________|______________|
|Payable | 20.5 | 17.3 | 36.6 | 37.4 |
|copper | | | | |
|produced | | | | |
|(millions | | | | |
|lbs) | | | | |
|_____________|____________|____________|______________|______________|
|Total | 1.31 | 1.31 | 1.44 | 1.23 |
|estimated | | | | |
|cash cost per| | | | |
|pound | | | | |
| of payable | | | | |
|copper ((1)) | | | | |
|($) | | | | |
|_____________|____________|____________|______________|______________|
|Copper sold -| 16.5 | 17.7 | 39.3 | 38.8 |
|(millions | | | | |
|lbs) | | | | |
|_____________|____________|____________|______________|______________|
|Realized | 4.21 | 3.21 | 4.24 | 3.30 |
|copper price | | | | |
|per pound ($)| | | | |
|_____________|____________|____________|______________|______________|
| | | | | |
|_____________|____________|____________|______________|______________|
|Net earnings | 15.5 | 44.7 | 34.4 | 59.5 |
|($ millions) | | | | |
|_____________|____________|____________|______________|______________|
|Net earnings | 0.07 | 0.23 | 0.16 | 0.30 |
|per share - | | | | |
|basic ($) | | | | |
|_____________|____________|____________|______________|______________|
| | | | | |
|_____________|____________|____________|______________|______________|
|Adjusted net | 17.7 | 9.7 | 34.4 | 31.9 |
|earnings ( | | | | |
|(1) )($ | | | | |
|millions) | | | | |
|_____________|____________|____________|______________|______________|
|Adjusted net | 0.08 | 0.05 | 0.16 | 0.16 |
|earnings ( | | | | |
|(1)) per | | | | |
|share ($) | | | | |
|_____________|____________|____________|______________|______________|
| | | | | |
|_____________|____________|____________|______________|______________|
|Cash flow | 29.7 | 32.5 | 36.5 | 37.3 |
|from | | | | |
|operating | | | | |
|activities | | | | |
|($ millions) | | | | |
|_____________|____________|____________|______________|______________|
|Cash flow | 0.13 | 0.17 | 0.16 | 0.19 |
|from | | | | |
|operating | | | | |
|activities | | | | |
|( )per share | | | | |
|- basic ($)( | | | | |
|(1)) | | | | |
|_____________|____________|____________|______________|______________|
| | | | | |
|_____________|____________|____________|______________|______________|
|Cash, | | | 506.6 | 151.6 |
|including | | | | |
|restricted | | | | |
|and | | | | |
| short-term | | | | |
|investments | | | | |
|($ millions) | | | | |
|_____________|____________|____________|______________|______________|
'Earnings from mining operations were slightly higher than the same
periods a year ago as a result of continuing strong metal prices,
partially offset by higher depletion and amortization at Minto where we
continue to process our ore stock piles related to the previously mined
Minto Main pit,' said Darren Pylot, Capstone President and CEO. 'Net
earnings were lower however, as 2010 included gains on unrealized
derivative instruments and realized gains on the disposal of
investments, which were significantly lower in 2011. Second quarter
production improved over the first quarter of 2011 by 27% and, with
both mines running at planned production rates, we remain on target to
meet our full year 2011 guidance of 80-85 million pounds of copper in
concentrates.'
'We completed the acquisition of Far West Mining Ltd. and our strategic
partnership with Korea Resources Corporation in the second quarter, and
subsequent to quarter end released a Pre-Feasibility Study ('PFS') on
the Santo Domingo Project. The economics of the project are
compelling, with an NPV (8%) of US$1.1 billion and a three year
payback. With the positive PFS we are advancing development to the
permitting and feasibility study stage,' continued Mr. Pylot. 'The
Santo Domingo Project enhances Capstone's robust portfolio, which now
includes two operating mines, both with significant ongoing exploration
and expansion potential , and two development projects, all located in
the Americas.'
Highlights
Financial and Production Highlights for the Three Months Ended June 30,
2011
-- Recorded net earnings of $15.5 million or $0.07 per common
share which included:
o Earnings from mining operations of $29.2 million,
o Administrative and stock based compensation expense of $4.4
million,
o Gain on derivative instruments of $0.1 million,
o Gain on disposal of investments of $0.1 million,
o Foreign exchange loss of $1.5 million, and
o Current and deferred tax expenses of $8.7 million.
-- Adjusted net earnings(1) were $17.7 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 $29.7 million
or $0.13 per common share.
-- Working capital increased to $553.2 million at June 30, 2011
(which included $506.6 million of cash) from $177.0 million at
December 31, 2010.
-- Produced a total of 20.5 million pounds of payable copper at an
estimated total cash cost(1) of $1.31 per pound of payable
copper.
-- Recorded gross sales revenue of $78.9 million on the sale of
16.5 million pounds of copper, 3.3 million pounds of zinc, 0.6
million pounds of lead, 4,639 ounces of gold and 341,255 ounces
of silver.
Financial and Production Highlights for the Six Months Ended June 30,
2011
-- Recorded net earnings of $34.4 million or $0.16 per common
share which included:
o Earnings from mining operations of $68.5 million,
o Administrative and stock based compensation expense of $10.7
million,
o Loss on derivative instruments of $1.2 million,
o Gain on disposal of investments of $1.5 million,
o Foreign exchange loss of $3.6 million, and
o Current and deferred tax expenses of $20.9 million.
-- Adjusted net earnings(1) were $34.4 million or $0.16 per common
share after making adjustments for certain non-cash and
non-recurring items.
-- Generated cash flow from operating activities of $36.5 million
or $0.16 per common share.
-- Produced a total of 36.6 million pounds of payable copper at an
estimated total cash cost(1) of $1.44 per pound of payable
copper.
-- Recorded gross sales revenue of $189.1 million on the sale of
39.3 million pounds of copper, 6.3 million pounds of zinc, 1.6
million pounds of lead, 12,404 ounces of gold and 689,656
ounces of silver.
Operating Highlights for the Three Months Ended June 30, 2011
Cozamin, Mexico:
-- Produced 10.0 million pounds of payable copper at a total cash
cost(1 )of $1.19 per pound.
-- Completed an initial mineral resource estimate for the Mala
Noche Footwall Zone ('MNFWZ') adding 74 million pounds of
copper in the measured and indicated category and 163 million
pounds in the inferred category.
-- Continued both surface and underground drilling in the MNFWZ
with four drills. The MNFWZ remains a significant exploration
target and the main focus of the 2011 exploration program at
the Cozamin Mine. The mineralized structure is still open,
toward the east and down dip and an update to the mineral
resource model suitable for feasibility work is planned for
later this year.
Minto, Yukon:
-- Produced 10.5 million pounds of payable copper at a total cash
cost(1) of $1.44 per pound of payable copper.
-- Completed final mining of the Minto Main pit. Stockpiled ore
will feed the mill until early 2012, at which time ore will be
available from Area 2, where development of the underground
portal and pre-stripping is proceeding.
-- The implementation of contract pre-crushing for the SAG mill
feed starting in mid-April allowed mill throughput to exceed
expectations. May mill throughput set a monthly record of
115,913 tonnes, or 3,739 tonnes/day, and throughput has been
sustained in excess of 3,700 tonnes/day.
-- The Yukon Environmental and Socio-Economic Assessment Board
issued a new Quartz Mining License for the Minto Phase IV
project.
-- Completed a mineral resource estimate, adding 219 million
pounds of copper in the measured and indicated category. Recent
drilling has demonstrated geological continuity between the
Wildfire/Copper Keel area and the Area 2/118 deposit. The
combination of the four areas is now known as the Minto South
Deposit or MSD. Additional drill data will be incorporated
into a further model update, which will support a Phase VI PFS,
which has commenced.
Santo Domingo, Chile:
-- Completed the arrangement with Far West Mining Ltd. ('Far
West') on June 17, 2011, pursuant to which Capstone acquired
all of the issued and outstanding common shares of Far West.
Far West is now held through a newly-formed subsidiary of
Capstone, owned 70% by Capstone and 30% by Korea Resources
Corporation ('KORES').
-- Formed a long-term strategic partnership with KORES for the
development of the Santo Domingo Project. KORES will arrange
for a debt financier to offer to provide funding, on then
prevailing market terms, for 65% of the capital costs of the
Project and fund 30% of the balance of the capital requirements
at the Project and will enter into an off-take agreement for
50% of all copper and iron concentrate produced from the
project over the life of the mine, at market terms.
-- Concurrent with the completion of the Far West arrangement,
KORES (through affiliated companies) subscribed for
approximately 40.2 million common shares of Capstone,
representing an approximate 11% interest in Capstone, at a
price of C$4.35 per share.
-- Completed a PFS in early August, that contemplates an 18 year
mine life, with an after tax IRR of 22%, NPV of US$1.1 billion
at an 8% discount rate and a 3 year payback with average annual
production of 144 million pounds of copper, 4.1 million tonnes
of iron and 15,000 ounces of gold.
Kutcho, British Columbia:
-- Submitted the Project Description to provincial and federal
agencies May 30 initiating the informal pre-application phase
and are actively engaged in discussions with the interested
First Nations groups. A project application is expected to be
submitted to the B.C. Environmental Assessment Office in early
2012, at which time a review will begin with legislated
timelines.
-- Completed an airborne VTEM survey totaling 1,649 kilometres of
flight lines spaced 100 metres apart, covering 14,700
hectares. Drilling is underway to test anomalies generated by
the VTEM survey.
Outlook
Based on the improved operating results in the second quarter, Capstone
reaffirms full year 2011 production guidance of 80-85 million pounds of
copper in concentrates, however is increasing cost guidance from the
originally projected $1.30 to $1.35 per payable pound of copper to
$1.45 to $1.50 per payable pound of copper.
Cozamin production is expected to continue to stabilize at higher levels
as additional stopes are placed into production to provide for
increased flexibility in mine planning. Costs at Cozamin have come
down from the first quarter as much of the overrun in costs in that
quarter were due to one-time charges related to the settlement of
labour disputes and adjustment to labor related provisions. Overall
though, costs in many areas remain higher than expected and as a
result, 2011 Cozamin cost guidance of $0.95 to $1.05 per payable pound
of copper has been revised upwards to $1.20 to $1.30 per payable pound
of copper. Initiatives are ongoing to control costs over the long-term
with positive results, however have not yet offset the additional costs
associated with the program. Costs are expected to remain at current
levels for the third quarter and trend down to previous guidance levels
by the fourth quarter.
A Pre-Feasibility Study has commenced at Cozamin that will apply
economic parameters to the MNFWZ resource block model to determine
economic viability, with completion targeted in the fourth quarter of
2011.
At Minto, contract pre-crushing will continue until permanent
improvements are implemented later in the year. It is expected that
this will allow Minto to remain at approximately 3,750 tonnes per day
throughput for the remainder of the year. Year-to-date costs of $1.44
per payable pound are currently below guidance of $1.60 to $1.70 per
payable pound of copper; however grades are expected to decline
somewhat while recovery is expected to increase during the second half
of the year and there will be a delay in placing tailings into the
Minto Main pit until early 2012 as a result of a slide that occurred
shortly after mining of the pit was completed in the second quarter.
With this upward pressure on unit costs during the second half of the
year, unit costs are expected to return to the higher levels previously
guided for the full year.
At Minto, driven by exploration success in 2010 and 2011, Capstone has a
PFS (Phase VI PFS) planned starting in 2011. This Phase VI study is
scheduled to be completed in early 2012 using a new mineral resource
estimate that is being completed in two stages. The preliminary
resource estimate released in the second quarter will determine the
initial scope of the PFS. This will be followed by a more robust
estimate in the third quarter that will incorporate additional
drilling.
With the positive PFS at Santo Domingo, Capstone will staff up the
development team in Chile, commence the permitting process based on the
parameters in the PFS and commence a full Feasibility Study. The
permitting process and Feasibility Study are targeted for completion in
2013.
Development activities at Kutcho for the remainder of 2011 will be
focused on the environmental and socio-economic assessment process and
consultations towards permitting mine development, as well as ongoing
exploration.
Conference Call and Webcast Details
Capstone will host a conference call on Tuesday, August 16, 2011 to
discuss these results. The conference call and webcast details are as
follows:
Date: Tuesday, August 16, 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=3595240
Replay: North America -- 1.800.642.1687, International -- 1.416.849.0833
Replay 81625702
Passcode:
The conference call replay will be available until August 25, 2011. A
transcript of the call will also be made available on Capstone's
website (http://capstonemining.com/s/ConferenceCalls.asp) within approximately 24 hours of the call.
About Capstone Mining Corp.
Capstone Mining Corp. is a TSX listed Canadian mining company with two
producing copper mines in the Americas: the Cozamin
copper-silver-zinc-lead mine located in Zacatecas State, Mexico and the
Minto copper-gold-silver mine in Yukon, Canada.
Using its operations as a springboard, Capstone aims to grow organically
and through acquisitions in politically stable, mining-friendly
jurisdictions, with a focus in the Americas: organic growth through
continued mineral resource and reserve expansions as well as expanding
operations at its operating mines, development of its large scale 70%
owned Santo Domingo copper-iron-gold project in Chile in partnership
with Korea Resources Corporation, development of its Kutcho
copper-zinc-gold-silver project in British Columbia and exploration at
properties in Chile, British Columbia and Australia. Capstone's cash
flow and strong balance sheet provide the platform to enhance that
growth profile. Capstone is included in the S&P/TSX Composite Index and
S&P/TSX Global Mining Index. Additional 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 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 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, dependence on key personnel, labour pool constraints, labour
disputes; delays in obtaining governmental approvals or financing or in
the completion of development or construction activities; 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 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.
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 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. Geol., 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 and six months ended June 30,
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/August2011/15/c3882.html
Capstone Mining Corp.
Cindy Burnett, VP, Investor Relations
Telephone: 604-637-8157
Email: cburnett@capstonemining.com
Website: www.capstonemining.com