Mr. Darren Pylot reports
CAPSTONE OUTLINES CAPITAL INVESTMENT PLANS TO ACHIEVE 20% PRODUCTION GROWTH BY 2021
Capstone Mining Corp. has provided 2020 production, cost and capital guidance. Capstone's 2019 actual production was above the midpoint range of 145 million to 160 million pounds of copper, and actual costs were below the bottom end of the guidance range of $1.80 to $2 per pound payable copper. The company will further expand on 2019 results when it releases its fourth quarter 2019 results on Feb. 11, 2020, after market close, followed by an investor webcast and conference call on Feb. 12, 2020, at 11:30 a.m. Eastern Time.
2020 production, cost and capital guidance
In 2020, Capstone expects to produce between 140 million and 155 million pounds of copper at C1 cash costs (1) of between $1.85 and $2 per pound payable copper produced.
"Capstone has redefined itself as we enter this new decade. Our business is supported by an expansion at our high-grade and high-margin Cozamin mine, while Pinto Valley is positioning to amplify best-in-class leverage to copper," said Darren Pylot, president and chief executive officer. "We are making small, high-return and quick-payback investments to ensure both operations are optimized to maximize cash flow in this improving copper market. We have made substantial and sustainable reductions to our cost base, achieving our goal of approximately $30-million per year. This, coupled with a strong balance sheet, gives us confidence we can invest in our organic growth opportunities without hesitation. I'm proud to say that Capstone is positioned for 20-per-cent production growth with a 10-per-cent decrease in costs by 2021 and beyond."
Mr. Pylot continued: "For 2020, Capstone is anticipating a similar year as 2019, with a slight decrease at Pinto Valley (approximately five million pounds lower) to account for the installation of new secondary crushers. The less-than-one-year payback is expected to deliver higher throughput, lower costs and improved recovery. At Cozamin, the one-way ramp project is proceeding on schedule, allowing for confidence in the expected increased annual production rates of 50 [million] to 55 million pounds of copper and 1.5 million ounces of silver for 2021 and beyond. The capital investments, included in our expansionary spend for 2020 at Pinto Valley and Cozamin, will increase throughput rates, enabling growth to a sustainable run rate of approximately 180 million pounds of copper per year by 2021, and for several years after supported by a steady-grade profile at both mines."
Pinto Valley Cozamin Santo Domingo Total
Production and cost (U.S.$)
Copper production (million pounds) 110-120 30-35 - 140-155
C1 cash cost (1) $2.10-$2.25 $0.95-$1.10 - $1.85-$2.00
(U.S.$ millions, rounded)
Sustaining $28 $24 - $52
Capitalized stripping $8 - - $8
Expansionary $19 $2 $9 (2) $30
Total capital expenditure $55 $26 $9 $90
Exploration (U.S.$ millions, rounded)
Brownfield - $6 - $6
Greenfield - - - $4
Total exploration - $6 - $10
(1) This is an alternative performance measure. C1 cash cost per pound of payable copper produced is
net of byproduct credits and selling costs.
(2) On a 100-per-cent basis, the figure is $12-million. Ownership is 70-per-cent Capstone and
30-per-cent Korea Resources Corp.
2020 capital investments and future growth
Cozamin: near-term production expansion
Development work on the one-way ramp system at Cozamin continues to be on budget and on schedule for completion by the end of 2020. The concurrent development of the raisebore to improve ventilation is two months ahead of schedule and is expected to be completed in early 2020. Phase 1 of the raisebore finished ahead of schedule when the reaming head broke through to surface in December, 2019, and immediately improved ventilation to the upper section of the one-way ramp. Once these two underground expansion projects are completed, Cozamin's annual production for 2021 and beyond is expected to increase to between 50 million and 55 million pounds of copper and 1.5 million ounces of silver.
Cozamin: doubling the mine life
The Cozamin 2019/2020 infill drilling program to move inferred mineral resources to the mineral reserve category, with the expectation of adding additional mineral resources to support doubling the mine life, is more than two months ahead of schedule, allowing the company flexibility to add more holes than originally planned, for a new mineral resource and mineral reserve estimate before the end of 2020. Positive drill results pointing to higher grades and wider intercepts than in the current reserve were released on Nov. 5, 2019, Dec. 2, 2019, and Jan. 16, 2020.
Pinto Valley: modernization
Pinto Valley's 2020 guidance of between 110 million and 120 million pounds of copper production accounts for scheduled downtime for secondary crusher and screen installations. In fourth quarter 2019, the board approved the $15-million capital project to improve mill reliability and overall performance at Pinto Valley. The expected result is for throughput to reliably achieve between 56,000 and 57,000 tonnes per day in 2021 and beyond. The one-year payback is calculated based on higher throughput, reduced maintenance and power costs, as well as increased copper recovery associated with improved copper mineral liberation prior to flotation.
Pinto Valley: future expansion study
Preliminary work on the Pinto Valley future expansion study (PV4) continues, with an update expected mid-2020. The study is focused on evaluating potential scenarios to take advantage of the nearly one billion tonnes of mineral resources not currently scheduled in the current mine plan pit shell (PV3).
Capital expenditures for the fully permitted Santo Domingo project will be kept to a minimum in 2020 to preserve the optionality of the project, as the company continues the strategic process in an improving copper market to rightsize or monetize Capstone's ownership. Work on the updated study is being finalized, and the results will be released soon.
Cost reduction program
Capstone has achieved its cost reduction target of approximately $30-million in annualized savings. More details will be provided when the company releases its fourth quarter results on Feb. 11, 2020.
2020 TD conference
Capstone management will be attending the TD Securities Mining Conference in Toronto, Ont. Raman Randhawa, chief financial officer, will be presenting on Jan. 23, 2020. An updated Capstone corporate presentation will be available on Jan. 22, 2020.
Fourth quarter 2019 results and conference call and webcast details
Capstone will release its fourth quarter 2019 results on Feb. 11, 2020, after market close, followed by an investor webcast and conference call on Feb. 12, 2020, at 11:30 a.m. ET, with details as follows.
Date: Feb. 12, 2020
Time: 11:30 a.m. Eastern Time (8:30 a.m. Pacific Time)
Dial-in: North America: 877-823-8676; international: 825-312-2240
The conference call replay will be available until Feb. 26, 2020.
Replay: North America: 800-585-8367; international: 416-621-4642
Following the replay, an audio file will be available on Capstone's website.
Capstone Mining Corp.
Capstone Mining is a Canadian base metal mining company, focused on copper. Its two producing mines are the Pinto Valley copper mine, located in Arizona, United States, and the Cozamin copper-silver mine in Zacatecas state, Mexico. 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 a portfolio of exploration properties. Capstone's strategy is to focus on the optimization of operations and assets in politically stable, mining-friendly regions, centred in the Americas.
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, the annual information form and news releases 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 disclosure of technical information related to mineral exploration activities and to mineral resources at Cozamin in this news release was reviewed and approved by Brad Mercer, PGeol, senior vice-president, operations and exploration.
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