Mr. Gil Clausen reports
COPPER MOUNTAIN MINING ANNOUNCES STRONG Q3 2020 FINANCIAL RESULTS, REDUCES ALL-IN COST GUIDANCE
Copper Mountain Mining Corp. has released strong third quarter 2020 financial and operating results. All results are reported on a 100-per-cent basis. The company's financial statements and management discussion and analysis (MD&A) are available at its website and SEDAR.
Q3 2020 highlights:
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Production for Q3 2020 was 23.8 million pounds of copper equivalent (comprising 18.9 million pounds of copper, 6,630 ounces of gold and 81,418 ounces of silver).
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C1 cash cost for Q3 2020 was $1.27 (U.S.) per pound copper produced, all-in sustaining cost (AISC) was $1.43 (U.S.)/lb copper and all-in cost (AIC) was $1.68 (U.S.)/lb copper.
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Revenue for Q3 2020 was $95.0-million, from the sale of 17.8 million pounds of copper, 6,232 ounces of gold and 67,901 ounces of silver, net of pricing adjustments.
- Gross profit for Q3 2020 was $42.0-million and net income was $33.2-million.
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Earnings per share were 13 cents per share, or eight cents on an adjusted basis.
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Cash flow from operations (before working capital changes) for Q3 2020 was $47.0-million as compared with negative $2.1-million for Q3 2019.
- Cash and cash equivalents at the end of Q3 2020 was $53.6-million, an increase of $24.6-million during the quarter when compared with the end of the second quarter.
- AIC guidance for 2020 was reduced to a range of $1.85 (U.S.) to $2 (U.S.) per pound of copper from a range of $2.20 (U.S.) to $2.35 (U.S.) per pound, while production guidance was maintained at 70 million to 75 million pounds of copper with the expectation to achieve the higher end of the production range.
"We posted another strong quarter and continued to exceed our revised operating plan with solid operating and financial results," commented Gil Clausen, Copper Mountain's president and chief executive officer. "We expect production to continue to increase in the fourth quarter with higher grades and recoveries at low cost. As a result, we are reducing our 2020 all-in cost guidance to a range of $1.85 (U.S.) to $2 (U.S.) per pound of copper. We are also maintaining our 2020 production guidance but expect to end the year at the top end of the range.
"Our plan is to continue to build upon our healthy cash position in anticipation of restarting construction of the third ball mill in early 2021, which is the last stage to complete our 45,000-tonne-per-day mill expansion project. We have commenced activities to prepare for construction and forecast commissioning by the end of Q3 2021. The installation of the third ball mill is expected to increase production by 15 to 18 per cent as a result of higher throughput and improved metal recoveries while maintaining the mill head grade. This is the first step of our multitier growth plan. This growth pipeline includes a further mill expansion to 65,000 tonnes per day at the Copper Mountain mine. We expect to publish a technical report in Q4 on this expansion plan. In addition, the Eva copper project is being advanced and we are currently developing project financing options and evaluating potential project partners. Our seasoned team continues to steadily derisk and advance our organic growth plans."
SUMMARY OF OPERATING RESULTS
Mine production information
Copper Mountain mine (100% basis) Q3 2020 Q3 2019 YTD 2020 YTD 2019
Mine
Total tonnes mined (000) 13,681 13,965 39,547 47,558
Ore tonnes mined (000) 3,133 2,761 10,388 8,582
Waste tonnes (000) 10,548 11,204 29,159 38,976
Stripping ratio 3.37 4.06 2.81 4.54
Mill
Tonnes milled (000) 3,725 3,596 10,928 10,910
Feed grade (Cu %) 0.29 0.26 0.29 0.28
Recovery (%) 80.4 78.2 78.2 79.3
Operating time (%) 90.8 91.9 91.8 93.3
Tonnes milled (TPD) 40,489 39,087 39,884 39,963
Production
Copper (000 lb) 18,934 16,302 54,498 53,362
Gold (oz) 6,630 6,498 20,268 20,547
Silver (oz) 81,418 57,225 247,560 185,212
Sales
Copper (000 lb) 17,824 17,021 54,565 54,300
Gold (oz) 6,232 6,400 18,885 20,470
Silver (oz) 67,901 57,426 226,767 177,694
C1 cash cost per pound of copper produced (US$) 1.27 2.12 1.58 1.87
AISC per pound of copper produced (US$) 1.43 2.28 1.74 1.99
AIC per pound of copper produced (US$) 1.68 2.67 1.93 2.48
Average realized copper price (US$/lb) 2.97 2.65 2.66 2.74
During the third quarter of 2020, the company continued to operate under the revised operating plan announced in March of 2020. In Q3 2020, the Copper Mountain mine produced 18.9 million pounds of copper, 6,630 ounces of gold and 81,418 ounces of silver, as compared with 16.3 million pounds of copper, 6,498 ounces of gold and 57,225 ounces of silver for Q3 2019.
The mine processed a total of 3.7 million tonnes of ore during the quarter as compared with 3.6 million tonnes in Q3 2019. Average feed grade increased to 0.29 per cent Cu and copper recovery improved to 80.4 per cent in Q3 2020, as compared with average feed grade of 0.26 per cent Cu and copper recovery of 78.2 per cent in Q3 2019, which are the primary reasons for higher production in Q3 2020. Copper grade is expected to continue to improve in Q4 2020, as the company has completed mining in the pit No. 1 area and has restarted mining in the higher-grade pit No. 3 area. Mining costs are expected to remain at lower levels as the waste haul remains short as pit No. 1 is being backfilled with waste rock from pit No. 3. Mill availability averaged 90.8 per cent for Q3 2020 as compared with 91.9 per cent in Q3 2019. The slight decrease in mill availability was a result of scheduled preventative maintenance shutdowns in Q3 2020. With expected higher grades and higher recoveries driving increased production in the fourth quarter of 2020, Copper Mountain expects to achieve the higher end of its guidance range for the year.
C1 cash cost per pound of copper produced for Q3 2020 decreased 40 per cent to $1.27 (U.S.), as compared with $2.12 (U.S.) in Q3 2019. The decrease in cost per pound in Q3 2020 was the result of higher production, reduced mining costs and higher byproduct credits for the gold and silver produced in Q3 2020 as compared with Q3 2019.
All-in sustaining cost per pound of copper produced (AISC) in Q3 2020 decreased 37 per cent to $1.43 (U.S.), as compared with $2.28 (U.S.) in Q3 2019. The low AISC carries forward from the low C1 cost per pound with addition of $3.9-million in sustaining capital, lease and applicable administration expenditures in Q3 2020 as compared with $3.4-million in Q3 2019.
Total all-in cost per pound of copper produced (AIC), net of credits, for Q3 2020 decreased 37 per cent to $1.68 (U.S.), as compared with $2.67 (U.S.) in Q3 2019. The low AIC carries forward from the low AISC with the addition of $6.4-million in deferred stripping and nil of low-grade stockpile mining costs incurred in Q3 2020 as compared with $8.3-million of deferred stripping and $300,000 of low-grade stockpile costs in Q3 2019.
The significant decrease in C1, AISC and AIC recognized in Q3 2020 as compared with past quarters was a result of the company's strong copper production, cost savings initiatives and operating efficiencies at the Copper Mountain mine, supplemented by an increase in precious metals prices and production for Q3 2020.
SUMMARY OF FINANCIAL RESULTS
(in thousands, except for per-share amounts)
Results and highlights (100%) Three months ended Sept. 30 Nine months ended Sept. 30
2020 2019 2020 2019
Financial
Revenue $94,992 $62,703 $235,645 $214,717
Gross profit (loss) 42,019 (1,428) 57,329 23,484
Gross profit before depreciation 47,091 4,866 74,472 41,282
Net income (loss) 33,249 (10,595) 21,724 9,761
Income (loss) per share -- basic 0.13 (0.05) 0.08 0.03
Adjusted earnings (loss) 15,078 (5,602) 15,067 (482)
Adjusted earnings per share -- basic (loss) 0.08 (0.03) 0.08 (0.00)
EBITDA (loss) 51,226 (3,204) 60,631 38,917
Adjusted EBITDA 33,055 1,789 53,974 28,674
Cash flow from operations 38,595 368 70,620 46,893
Cash and cash equivalents -- end of period 53,573 36,008
In Q3 2020, revenue was $95-million, net of pricing adjustments and treatment charges, compared with $62.7-million in Q3 2019. Q3 2020 revenue is based on the sale of 17.8 million pounds of copper, 6,232 ounces of gold and 67,901 ounces of silver. This compares with 17.0 million pounds of copper, 6,400 ounces of gold and 57,426 ounces of silver sold in Q3 2019. Revenue increased significantly as a result of increased sales and higher metal prices, including a positive mark to market and final adjustment on concentrate sales of $11.3-million. This compares with a negative mark-to-market and final adjustment of $2.4-million for Q3 2019, a differential of approximately $13.7-million. Q3 2020 revenue before the mark-to-market adjustment was $83.7-million as compared with $63.6-million for Q3 2019.
Cost of sales in Q3 2020 was $53.0-million as compared with $64.1-million for Q3 2019. A substantial part of the decrease in cost of sales is a result of the company's cost savings initiatives resulting from the revised operating plan, which included utilizing less equipment. Q3 2020 cost of sales did not include any mining costs being allocated to the low-grade stockpile and the company allocated $6.4-million to deferred stripping. This is compared with Q3 2019 cost of sales, which was net of $8.3-million of deferred stripping and low-grade stockpile costs.
The company reported net income of $33.2-million for the three-month period ended Sept. 30, 2020, as compared with a net loss of $10.6-million for the same period of 2019. The variance in the higher net income for 2020, as compared with 2019, was a result of several items including:
- Revenue in Q3 2020 included a positive mark-to-market and final adjustment from provisional pricing on concentrate sales, as mentioned above.
- Revenue in Q3 2020 was higher as a result of higher metal prices experienced in the quarter as compared with Q3 2019.
- The inclusion of a non-cash unrealized foreign exchange gain of $6.9-million in Q3 2020 as compared with a non-cash unrealized foreign exchange loss of $4.0-million in Q3 2019, a differential of approximately $10.9-million, which was primarily related to the company's debt that is denominated in U.S. dollars.
On adjusted basis, the company recorded a net income of $15.1-million in Q3 2020, compared with a net loss of $5.6-million in Q3 2019.
Project development update
Copper Mountain mill expansion
In July, 2020, the company completed the first stage of the ball mill expansion project, which included installation of the direct flotation reactors (DFRs). The ball mill expansion is designed to increase throughput to 45,000 tonnes per day from 40,000 tonnes per day and improve copper recovery as a result of being able to achieve a finer grind of ore. The DFRs have increased the efficiency and the capacity of the current cleaner circuit, and as planned increased copper concentrate grade from about 24 to 28 per cent, resulting in lower concentrate transportation, smelting and refining costs during Q3 2020. The installation of the DFRs was completed on schedule and on budget.
As noted in Q1 2020, as a result of COVID-19, the company deferred all major capital spend and therefore halted work on the second stage of the ball mill expansion project, which deferred the actual installation of a third ball mill that the company had already purchased and had delivered to site. Work was reduced to completing commitments on long lead items, which would allow the project to restart in an efficient and expeditious manner. The company has recommenced activities for the installation of the third ball mill for a construction start in early 2021. Copper Mountain is planning for commissioning of the ball mill expansion project by the end of Q3 2021.
2020 outlook
The company is reducing its 2020 AIC guidance to a range of $1.85 (U.S.) to $2 (U.S.) per pound of copper from a range of $2.20 (U.S.) to $2.35 (U.S.) per pound of copper. The company reaffirms its 2020 production guidance of 70 million to 75 million pounds of copper and expects to be at the higher end of the range. Copper production is expected to be stronger in the fourth quarter of 2020 as a result of higher grades and improved recoveries.
Q3 2020 financial and operating results conference call and webcast
Copper Mountain will host a conference call on Monday, Nov. 2, 2020, at 7:30 a.m. Pacific Time for senior management to discuss the third quarter 2020 results.
Dial-in information:
Toronto and international: 647-427-7450
North America (toll-free): 1-888-231-8191
Replay call information:
Toronto and international: 416-849-0833, pass code: 3359433
North America (toll-free): 1-855-859-2056, pass code: 3359433
The conference call replay will be available until 8:59 p.m. Pacific Time on Nov. 9, 2020. An archive of the audio webcast will also be available on the company's website.
About Copper Mountain Mining Corp.
Copper Mountain's flagship asset is the 75-per-cent-owned Copper Mountain mine located in Southern British Columbia near the town of Princeton. The Copper Mountain mine currently produces approximately 90 million pounds of copper equivalent. Copper Mountain also has the development-stage Eva copper project in Queensland, Australia, and an extensive 2,443-square-kilometre highly prospective land package in the Mount Isa area.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except earnings per share)
Three months Nine months
ended Sept. 30 ended Sept. 30
2020 2019 2020 2019
Revenue $94,992 $62,703 $235,645 $214,717
(Cost) of sales (52,973) (64,131) (178,316) (191,233)
Gross profit (loss) 42,019 (1,428) 57,329 23,484
Other income and expenses
General and administration (loss) (1,836) (3,517) (5,196) (8,908)
Share-based compensation (loss) (863) (497) (2,066) (1,684)
Operating income (loss) 39,320 (5,442) 50,067 12,892
Finance and other income 517 135 622 389
Finance (expense) (3,741) (3,454) (11,173) (11,695)
Unrealized (loss) on interest rate swap (2) (15) (1,020) (505)
Foreign exchange (loss) gain 6,938 (4,041) (5,457) 8,733
Loss on sale of fixed asset (102) - (102) -
Income (loss) before tax 42,930 (12,817) 32,937 9,814
Current tax recovery (expense) 385 (190) (128) (1,166)
Deferred income tax (expense) recovery (10,066) 2,412 (11,085) 1,113
Net income (loss) 33,249 (10,595) 21,724 9,761
Other comprehensive income (loss)
Foreign currency translation
adjustment (loss) 897 (1,432) 1,982 (4,139)
Total comprehensive income (loss) 34,146 (12,027) 23,706 5,622
Net income (loss) attributable to
shareholders of the company 24,420 (8,755) 15,459 4,848
Net income (loss) attributable to
non-controlling interest 8,829 (1,840) 6,265 4,913
33,249 (10,595) 21,724 9,761
Earnings (loss) per share
Basic (loss) 0.13 (0.05) 0.08 0.03
Diluted (loss) 0.13 (0.05) 0.08 0.03
We seek Safe Harbor.
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