Mr. Darren Pylot reports
CAPSTONE MINING SECOND QUARTER 2017 FINANCIAL RESULTS
Capstone Mining Corp. has released its financial results for the three and six months ended June 30, 2017. Cash flow from operating activities for the quarter was $4.1-million or one cent per share and cash flow from operating activities before changes in working capital for the quarter was $26.0-million or seven cents per share. The net income for the quarter was $12.8-million or three cents per share and adjusted net income was $700,000 or break-even on a per-share basis after adjusting for certain non-cash and non-recurring charges. Copper production for the quarter totalled 24,002 tonnes (23,176 tonnes of payable copper) at a C1 cash cost of $1.75 per payable pound produced with copper sales for the quarter of 20,771 tonnes at a C1 cash cost of $1.74 per payable pound sold.
All amounts are in U.S. dollars unless otherwise specified.
"Operational performance in the second quarter was on plan, with costs trending down from the first quarter," said Darren Pylot, president and chief executive officer of Capstone. "Most importantly, Pinto Valley returned to full production, setting quarterly and monthly throughput records.
"For the second half of the year, approximately half of our production is unhedged and completely unhedged in 2018 and beyond," continued Mr. Pylot.
OVERVIEW
Q2 2017 Q2 2016 2017 YTD 2016 YTD
Revenue ($ millions) $115.2 $100.2 $243.2 $226.5
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Copper produced (tonnes) 24,002 28,157 44,952 52,704
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Payable copper produced (tonnes) 23,176 27,200 43,407 50,900
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C1 cash cost per payable pound produced ($/lb) 1.75 1.51 1.85 1.61
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All-in cost per payable pound produced ($/lb) 2.10 1.92 2.35 2.07
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Fully loaded all-in cost per payable pound produced ($/lb) 2.26 2.01 2.51 2.19
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Copper sold (tonnes) 20,771 22,549 42,353 50,534
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Realized copper price per pound sold ($/lb)* 2.56 2.21 2.63 2.20
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Adjusted realized copper price per pound sold ($/lb) ** 2.40 2.21 2.42 2.29
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C1 cash cost per payable pound sold ($/lb) 1.74 1.66 1.72 1.72
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All-in cost per payable pound sold ($/lb) 2.14 2.15 2.23 2.19
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Fully loaded all-in cost per payable pound sold ($/lb) 2.31 2.26 2.39 2.30
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Net income (loss) ($ millions) 12.8 (13.4) 5.4 (26.2)
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Net income (loss) attributable to shareholders ($ millions) 12.9 (13.2) 5.4 (25.9)
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Net income (loss) per common share ($) 0.03 (0.03) 0.01 (0.07)
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Adjusted net income (loss) ($ millions) 0.7 (7.5) (1.7) (9.0)
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Adjusted net income (loss) attributable to shareholders ($ million s) 0.8 (7.3) (1.7) (8.8)
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Adjusted income net (loss) per common share ($) 0.00 (0.02) (0.00) (0.02)
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Cash flow from operating activities 4.1 1.1 26.1 33.3
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Cash flow from operating activities per common share ($) 0.01 0.00 0.07 0.09
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Operating cash flow before changes in
working capital ($ millions) 26.0 21.6 50.1 40.5
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Operating cash flow before changes in
working capital per common share ($) 0.07 0.06 0.13 0.11
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Cash and cash equivalents ($ millions) 82.4 100.2 82.4 100.2
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Net debt ($ millions) 216.5 243.9 216.5 243.9
* The second quarter of 2017 includes a provisional pricing adjustment of $200,000 (2016 -- negative
$5.8-million) related to prior shipments, equivalent to nil per pound (2016 -- 12-cent loss per pound)
of copper sold during the quarter. Year to date 2017 includes a provisional pricing adjustment of
$5.4-million (2016 -- negative $11.5-million) related to prior shipments, equivalent to six cents per
pound (2016 -- 10-cent loss per pound) of copper sold during the six-month period. The second quarter
2017 and 2017 year-to-date provisional pricing adjustments were predominantly related to assay
adjustments. The second quarter 2017 figure of ($200,000) is broken down as $600,000 related to price
adjustments and $400,000 loss related to assay adjustments. This translates into adjustments of nil
and nil, respectively, on a per-pound-sold basis. The year-to-date second quarter 2017 figure of
$5.4-million broken down as $3.7-million related to price adjustments and $1.7-million related to
assay adjustments. This translates into adjustments of four cents and two cents, respectively, on a
per-pound-sold basis.
** Second quarter 2017 adjusted realized copper price includes the provisional pricing adjustments
noted and realized loss of $7.7-million (2016 gain -- $200,000) equivalent to a loss of 16 cents per
pound (2016 gain -- nil per pound) related to copper derivative contracts exercised during the quarter.
Year-to-date 2017 adjusted realized copper price includes the provisional pricing adjustments noted
above and realized loss of $19.3-million (2016 gain -- $9.8-million) equivalent to 21-cent loss per
pound (2016 gain -- nine cents per pound) related to copper derivative contracts exercised during the
period.
Financial highlights for the three months ended June 30, 2017:
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Net income of $12.8-million included:
- Earnings from mining operations of $21.1-million;
realized copper price of $2.56 per pound;
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A commodity derivative gain of $3.8-million, comprising a realized loss of $7.7-million combined with an unrealized gain of $1.3-million and reversals of unrealized losses recorded in a previous period of $10.2-million;
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Production costs included a non-cash reversal of $700,000 related to the writedown of inventory at Pinto Valley;
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An income tax expense of $4.5-million;
- Cash flow from operating activities of $4.1-million or one cent per common share;
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Operating cash flow before changes in working capital of $26.0-million or seven cents per common share;
-
Working capital increased $8.7-million to $157.0-million at June 30, 2017, from $148.3-million at March 31, 2017;
- Cash decreased to $82.4-million at June 30, 2017, from $109.4-million at March 31, 2017, largely as a result of a $10.0-million debt repayment made in April, 2017, and $9-million in payments made related to the commodity derivatives during the second quarter of 2017;
-
Production of 23,176 tonnes of payable copper at a C1 cash cost of $1.75 per pound of payable copper produced and fully loaded all-in cost of $2.26 per pound of payable pound copper produced;
-
Revenue of $115.2-million generated primarily from the sale of 20,771 tonnes of copper.
Financial highlights for the six months ended June 30, 2017:
- Net income of $5.4-million or one cent per common share which included:
- Earnings from mining operations of $48.1-million;
-
Production costs included a non-cash charge of $400,000 related to the writedown of inventory at Pinto Valley;
-
A commodity derivative loss of $10.1-million, comprising a realized loss of $19.4-million, an unrealized loss of $6.0-million and reversals of unrealized losses recorded in a previous period of $15.3-million;
-
$8.4-million in current and deferred income tax expense;
- Cash flow from operating activities of $26.1-million or seven cents per common share;
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Operating cash flow before changes in working capital of $50.1-million or 13 cents per common share;
-
Working capital decreased $14.1-million to $157.0-million at June 30, 2017, from $171.1-million at Dec. 31, 2016;
- Cash decreased to $82.4-million at June 30, 2017, from $130.4-million at Dec. 31, 2016, largely as a result of $30.0-million in debt repayments and $19.3-million in payments made related to the commodity derivatives during 2017 year to date;
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Production of 43,407 tonnes of payable copper at a C1 cash cost of $1.85 per pound of payable copper produced and fully loaded all-in cost of $2.51 per pound of payable pound copper produced;
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Revenue of $243.2-million generated primarily from the sale of 42,353 tonnes of copper.
Production and additional highlights for the three and six months ended June 30, 2017
Pinto Valley mine:
- Produced 15,491 tonnes of copper during the second quarter of 2017 at a C1 cash cost of $1.84 per pound of payable copper produced and all-in cost of $2.17 per pound of payable copper produced;
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Produced 26,791 tonnes of copper during 2017 year to date at a C1 cash cost of $1.98 per pound of payable copper produced and all-in cost of $2.42 per pound of payable copper produced;
-
At Pinto Valley, throughput averaged 58,700 tonnes per day (tpd) for the quarter, setting a quarterly throughput record as well as achieving a new monthly throughput record in May of 60,350 tpd. Grade, recoveries and production were as planned for the quarter.
Cozamin mine:
- Produced 4,106 tonnes of copper during the second quarter of 2017 at a C1 cash cost of $1.19 per pound of payable copper produced and all-in cost of $1.73 per pound of payable copper produced;
-
Produced 8,236 tonnes of copper during 2017 year to date at a C1 cash cost of $1.26 per pound of payable copper produced and all-in cost of $1.84 per pound of payable copper produced;
-
At Cozamin, grade and recoveries were as expected, with throughput continuing ahead of plan with continuing improvement in mine production and mine development;
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On April 4, 2017, the precious metal streaming arrangement with Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) expired; after this date, the full silver byproduct credit is earned by Cozamin resulting in an increase to byproduct credits of 23 cents per payable pound of copper produced in the second quarter of 2017 versus the second quarter of 2016.
Minto mine:
- Produced 4,406 tonnes of copper during the second qarter of 2017 at a C1 cash cost of $1.93 per pound of payable copper produced and all-in cost of $1.95 per payable pound of copper produced;
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Produced 9,926 tonnes of copper during 2017 year to date at a C1 cash cost of $2 per pound of payable copper produced and an all-in cost of $2.03 per payable pound of copper produced;
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At Minto, production for the quarter was impacted by mine sequencing changes to support a mine life extension. Throughput continued higher than planned, but head grade and recoveries were lower than originally guided due to a higher percentage of partially oxidized ore feeding the mill from the area 2, stage 3 open pit and underground mining running slightly behind schedule.
- At current copper prices, Capstone anticipates the continuation of operations at Minto until mid-2020, subject to permitting and regulatory approvals. Capstone is also evaluating further deposits for reinclusion into reserves, which may support additional mine life beyond 2020.
Additional highlights:
- Capstone repaid $10-million on the senior secured corporate revolving credit facility (RCF) on April 19, 2017, reducing drawn debt to $298.9-million.
Outlook
Production guidance
Capstone expects to be within the range of 2017 consolidated production guidance of 94,000 tonnes (plus or minus 5 per cent) of copper. Minto and Cozamin are expected to complete the year on, or above, plan, largely offsetting Pinto Valley's first quarter deficit.
Operating cost guidance
Capstone anticipates that consolidated C1 cash cost, all-in cost and fully loaded all-in cost will end the year between 15 cents and 20 cents per pound of payable copper produced higher than originally guided.
At Minto, C1 cash cost and all-in cost are expected to increase by approximately 50 cents per pound of payable copper produced. The mine sequencing changes to support the mine life extension have resulted in lower production than initially guided in the first half of 2017. In addition, the revised Minto mine plan that extends operations beyond 2017 brings the Minto East underground and an extension of the area 2 open pit into the mine plan. Development to access the Minto East deposit is continuing and the stripping of the extension of the area 2 pit will commence in the second quarter of 2017, with resulting ore processed primarily in 2018. Because the development and stripping activities related to Minto East and the extension of the area 2 pit are planned to take less than 12 months, all development and stripping costs will be expensed in 2017. The area 2 open-pit extension will supplement the ore mined from the higher-grade underground deposits.
At Pinto Valley, increased costs related to the first quarter production deficit are expected to add between 10 cents and 20 cents to Pinto Valley's C1 cash cost and all-in cost1per pound of payable copper produced.
Cozamin's 2017 C1 cash cost and all-in cost are expected to be slightly higher than guided as a result of lower byproduct credits per payable pound of copper produced and additional planned capital, respectively.
Capital and exploration guidance
At Cozamin, an additional $1-million in capital development is planned to be spent by year-end as the mine has been advancing at higher-than-planned development rates. As a result Cozamin's 2017 sustaining capital guidance is increased from $18-million to $19-million.
Also at Cozamin, a further $1.1-million has been approved to test brownfield targets along strike from the Mala Noche footwall zone (MNFWZ) and east of the San Rafael zinc zone, and as a result, Cozamin's 2017 capitalized exploration guidance is increased from $5-million to $6.1-million.
At Minto, $600,000 has been added to the 2017 second half capital budget for definition drilling at Minto East and Ridgetop in support of the design of the extended mine plan.
All other capital and exploration guidance remains unchanged.
Conference call and webcast details
Capstone will hold a conference call and webcast on Monday, July 31, 2017, at 11:30 a.m. Eastern Time (8:30 a.m. Pacific Time) to discuss these results.
Date:
Monday, July 31, 2017
Time: 11:30 a.m. Eastern Time (8:30 a.m. Pacific Time)
Dial in:
North America: 1-888-390-0546
International: 416-764-8688
Replay:
North America: 1-888-390-0541
International: 416-764-8677
Replay pass code: 103102 followed by the number sign
The conference call replay will be available until Monday, Aug. 7, 2017. The conference call audio and transcript will be available on Capstone's website within 48 hours of the call.
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 June 30, 2017, which are available on Capstone's website and on SEDAR. An updated corporate presentation, including results to June 30, 2017, in addition to the second quarter 2017 webcast slides, will also be available at the company's website.
About Capstone Mining Corp.
Capstone Mining is a Canadian base metals mining company, focused on copper. The company is committed to the responsible development of its assets and the environments in which it operates. Its three producing mines are the Pinto Valley copper mine located in Arizona, United States, 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-per-cent-owned copper-iron Santo Domingo project in Region III, Chile, in partnership with Korea Resources Corp., and the 100-per-cent-owned Kutcho copper-zinc project in British Columbia, Canada, as well as exploration properties in Chile and the United States.
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