Mr. Darren Pylot reports
CAPSTONE MINING 2017 PRODUCTION RESULTS AND 2018 OPERATING AND CAPITAL GUIDANCE
Capstone Mining Corp. has released production results for the three and 12 months ended Dec. 31, 2017, and provided its operating and capital expenditure guidance for 2018 along with a three-year outlook.
"We ended the year with solid copper production for the fourth quarter," said Darren Pylot, president and chief executive officer of Capstone. "Our operations continue to run well in 2018, positioning us to take advantage of strong copper prices, with our entire copper hedge program now completed.
"We are guiding production for 2018 consistent with our 2017 production. Planned capital expenditures in 2018 of $100-million reflect scheduled haul truck maintenance at Pinto Valley, the continuation of operations at Minto and an increased allocation for exploration at Cozamin, following up on 2017's significant exploration success," continued Mr. Pylot.
2017 production results
Combined production totalled 23,400 and 90,300 tonnes of copper in the fourth quarter and full year, respectively, with additional byproducts of zinc, molybdenum, lead, silver and gold.
2017 COPPER PRODUCTION
(tonnes)
Q1 Q2 Q3 Q4 2017
Pinto Valley 11,300 15,500 14,400 16,100 57,300
Cozamin 4,100 4,100 4,200 4,300 16,700
Minto 5,500 4,400 3,400 3,000 16,300
Total copper production (1) 20,900 24,000 22,000 23,400 90,300
(1) Total production includes copper in concentrate and cathode
production.
Operational highlights:
-
Pinto Valley had a good fourth quarter, with production ahead of plan on higher grade and recoveries.
- At Cozamin, production for the fourth quarter and full year was well ahead of plan, largely on higher mining and processing rates as the mine achieved development rates that allowed for increased flexibility.
- At Minto, underground production continued to lag planned rates, resulting in higher utilization of partially oxidized surface ore stockpiles. The lower proportion of sulphide ore in the mill feed negatively impacted grade and recovery.
FOURTH QUARTER AND FULL-YEAR 2017 OPERATING DETAILS
Pinto Valley Cozamin Minto
Q4 2017 Q4 2017 Q4 2017
Contained production (1)
Copper (tonnes) 16,160 57,331 4,254 16,732 3,003 16,332
Zinc (tonnes) - - 1,015 4,232 - -
Molybdenum (Mo tonnes) 25 32 - - - -
Lead (tonnes) - - 3 50 - -
Silver (ounces) 88,692 315,810 263,285 1,000,313 29,994 170,809
Gold (ounces) (2) 188 3,687 - - 3,112 25,205
Payable copper production (1)
(tonnes) (in concentrate and cathode) 15,611 55,392 4,084 16,076 2,905 15,800
Mine
Ore (tonnes) -- open pit 5,346,957 20,605,344 - - 140,777 941,123
Waste (tonnes) 6,556,346 26,164,913 - - 2,382,430 7,889,701
Ore (tonnes) -- underground - - 219,930 912,000 106,542 327,890
Mill
Tonnes processed 5,164,865 19,654,904 223,532 912,000 349,897 1,439,374
Tonnes processed per day 56,140 53,849 2,430 2,499 3,803 3,943
Copper grade (%) 0.32 (3) 0.32 (3) 1.98 1.91 1.06 1.37
Zinc grade (%) - - 0.71 0.71 - -
Molybdenum grade (%) 0.0054 0.0050 - - - -
Lead grade (%) - - 0.06 0.07 - -
Silver grade (g/t) * * 46.0 43.4 3.7 4.76
Gold grade (g/t) * * - - 0.41 0.79
Recoveries
Copper (%) 95.1 (3) 89.2 (3) 96.2 96.1 81.1 82.6
Zinc (%) - - 64.2 65.5 - -
Lead (%) - - 0.9 8.0 - -
Silver (%) * * 79.7 78.7 71.9 77.6
Gold (%) * * - - 64.3 59.3
Concentrates
Copper concentrate (dmt) 55,204 196,583 15,881 61,473 7,643 37,372
Copper (%) 28.4 28.2 26.8 27.2 39.3 43.7
Silver (g/t) * * 515 502.2 122 142.2
Gold (g/t) * * - - 12.1 18.0
Zinc concentrate (dmt) - - 2,200 8,919 - -
Zinc (%) - - 46.1 47.5 - -
Molybdenum concentrate (dmt) 50 64 - - - -
Lead concentrate (dmt) - - 2 81 - -
Lead (%) - - 58.5 61.7 - -
Silver (g/t) - - 2,532 2,996 - -
Payable copper shipped (tonnes) 14,662 54,196 3,911 15,933 4,004 17,788
(1) Adjustments based on final settlements will be made in future periods.
(2) Pinto Valley gold production reaches payable levels from time to time. Any payable gold production will be
reported in the period revenue is received. At Minto, final gold production is not available since assaying is
conducted off-site, but is estimated in the table.
(3) Grade and recoveries were estimated based on concentrate production.
* Silver and gold have not been estimated in the Pinto Valley resource model. Only recovered silver and
payable gold are reported for this mine.
2018 operating and capital guidance
In 2018, Capstone expects to produce 90,000 tonnes (plus or minus 5 per cent) of copper at a C1 cash cost (1) (2) 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 50 cents per pound of payable copper produced. Consolidated all-in sustaining cost guidance is $2.50 to $2.60 per pound of payable copper produced. The subsequent two-year outlook is included to illustrate the overall trend of the company's existing operations, excluding any further growth through project development or acquisition.
2018 COPPER PRODUCTION AND COST GUIDANCE
Pinto Valley Cozamin Minto Total
Copper production
(tonnes plus or minus 5%) 56,000 15,000 19,000 90,000
C1 cash cost (1) (2) $1.90-$2.00 $1.00-$1.10 $2.35-$2.45 $1.85-$1.95
All-in sustaining cost (1) (3) $2.50-$2.60 $1.75-$1.85 $2.55-$2.65 $2.50-$2.60
(1) This is alternative performance measure; please see alternative performance
measures on the company's website.
(2) C1 cash cost per pound of payable copper produced net of byproduct credits and
selling costs.
(3) All-in sustaining cost per pound of payable copper produced is C1 cash cost plus
NSR (net smelter return) and production royalties, non-cash deferred revenue, all
sustaining capital expenditures (including cash portion of production-phase
capitalized stripping), accretion of reclamation obligations, amortization of
reclamation assets, corporate general and administraive expenses, and cash portion of
preproduction capitalized stripping.
Pinto Valley
In 2018, focus will continue to shift from maximizing throughput to overall plant optimization. Throughput is targeted at, or above, the level contemplated in the PV3 prefeasibility study. Operating costs are expected to remain relatively flat from 2017; however, unit costs on a per-pound basis are expected to be higher as a result of lower grade and a higher strip ratio than 2017 in accordance with the PV3 mine plan. The lowest-grade material for the year will be milled in the first quarter, with higher head grade for the remainder of the year.
Cozamin
Milled tonnes are expected to be similar to 2017 with grade down slightly. The majority of ore will continue to come from the Mala Noche footwall. The 2018 guidance does not include any additional zinc production from the San Rafael zinc zone. Metallurgical work is continuing with positive results to date and, if confirmed in the first half of the year, the company could take advantage of underutilized mill capacity for additional zinc production in the second half of 2018 and beyond.
Minto
Open-pit mining in 2018 will comprise the area 2 extension and the Ridgetop North pit. Underground mining will take place in the area 2 lower lens, Minto East underground and Copper Keel. Copper grade is expected to be relatively consistent at plus 1.5 per cent throughout the year with throughput maintained at above 3,900 tonnes per day. Costs, however, will fluctuate significantly as stripping and development will be expensed as incurred with the most significant impact expected in the second and third quarters. The current mine plan continues through mid-2021, with production gradually falling starting in 2019, reaching approximately 75 per cent of the 2018 production level by 2021.
Copper production and costs 2019 and 2020
Consolidated production for 2019 and 2020 is expected to average 86,000 tonnes of copper annually at a consolidated C1 cash cost of approximately $1.95 per pound of copper.
2018 CAPITAL EXPENDITURE GUIDANCE -- OPERATING MINES
(in millions of U.S. dollars)
Pinto Valley Cozamin Minto Total
Sustaining $44 $19 $6 $69
Capitalized stripping* 24 - - 24
Total capital $68 $19 $6 $93
* Capitalized stripping is included as an operating cost in the PV3
PFS, however, under IFRS (international financial reporting
standards) accounting guidelines stripping costs are capitalized when
the strip ratio is higher than the life-of-mine strip ratio.
Pinto Valley
The largest category of sustaining capital in 2018 is $18-million for mining fleet component replacements, which include scheduled haul truck maintenance driven by operating hours on the existing fleet in accordance with the preventative maintenance plan. Other key sustaining costs include replacing the current rougher flotation cells ($7-million), and SX/EW (solvent extraction and electrowinning) repurposing initiatives ($4-million), crushing improvements ($3-million), pit dewatering ($2-million), the advancement of PV3 permitting ($2-million), and replacement of underground power lines with overhead lines ($2-million).
Cozamin
The majority of 2018 sustaining capital expenditures is for mine development, with additional sustaining capital for ventilation and production equipment capitalized maintenance.
Minto
As a result of mine life extension beyond 2017, capital will be required for increased underground ventilation, dewatering and electrical infrastructure. Additional delineation drilling will take place along with minor replacement of equipment that has reached the end of its useful life.
Capital expenditures 2019 and 2020
In 2019 and 2020, total sustaining capital expenditures at the company's operating mines are expected to average $55-million annually (excluding capitalized stripping). Capitalized stripping at Pinto Valley for 2019 and 2020 is expected to average $12-million annually.
2018 EXPLORATION PROGRAM
(in millions of U.S. dollars)
Brownfield Greenfield* Total
Cozamin $7 $- $7
Mexico - $1 1
Chile - 2 2
Total budgeted exploration expenditures $7 $3 $10
* Greenfield exploration will be expensed.
Brownfield exploration
The 2018 brownfield exploration program will include 45,000 metres of stepout and infill drilling aimed at extending the mine life at Cozamin. The majority of drilling will focus on the Mala Noche footwall zone to follow up on the significant 2017 drilling success, including testing on newly acquired property contiguous to Cozamin.
Greenfield exploration
Capstone has exited project Providencia in Chile, however, will allocate funds for additional greenfield exploration opportunities in both Mexico and Chile. Four technical discoveries were made at Providencia, including two deposits, however, data suggest they are not of a size meaningful to Capstone.
Financial results timing
Capstone will report fourth quarter 2017 financial results on Wednesday, Feb. 14, 2018, after market close, followed by a conference call and webcast for investors and analysts on Thursday, Feb. 15, 2018, at 11:30 a.m. Eastern Time (8:30 a.m. Pacific Time).
Conference call and webcast details:
Date: Thursday, Feb. 15, 2018
Time: 11:30 a.m. Eastern Time (8:30 a.m. Pacific Time)
Dial-in numbers:
North America: 1-888-390-0546
International: 416-764-8688
Replay:
North America: 1-888-390-0541
International: 416-764-8677
Replay pass code: 894303 followed by the number sign
The conference call replay will be available until Thursday, Feb. 22, 2018. The conference call audio and transcript will be available on Capstone's website within 48 hours of the call.
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 the large-scale 70-per-cent-owned copper-iron Santo Domingo development project in Region III, Chile, in partnership with Korea Resources Corp., as well as exploration properties in Chile.
National Instrument 43-101 compliance
Unless otherwise indicated, Capstone has prepared the technical information in this news release based on information contained in the technical reports, news releases and MD&As (management's discussion and analysis) available under Capstone Mining's company profile on SEDAR. Each disclosure document was prepared by, or under the supervision of, a qualified person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators. 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 was prepared by, or under the supervision of, a qualified person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators. The disclosure of the technical information contained in this news release has been reviewed and approved by Gregg Bush, PEng, Capstone senior vice-president and chief operating officer, a qualified person under NI 43-101.
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