All amounts in US$ unless otherwise
indicated
Capstone Copper Corp. (“Capstone” or the “Company”)
(TSX:CS) today announced production and financial results for the
quarter ended September 30, 2022 (“Q3 2022”). Quarterly
consolidated copper production totaled 45,700 tonnes at C1 cash
costs1 of $2.76 per payable pound of copper produced. Link HERE for
Capstone’s Q3 2022 management’s discussion and analysis
(“MD&A”) and financial statements and HERE for the webcast
presentation.
John MacKenzie, CEO of Capstone commented, “Our Q3 results
represent our second full quarter of combined operations as
Capstone Copper and I'm very pleased with the integration efforts
to date. Despite continued inflationary pressures felt across the
industry, we kept costs in-line quarter over quarter and are seeing
key input costs, particularly sulphuric acid, trend lower and which
we expect to realize in 2023. We remain well positioned with a
strong balance sheet and the right team to complete the
construction of our world-class Mantoverde Development Project by
the end of 2023, driving our next phase of near-term
transformational growth.”
Q3 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Net income of $37.5 million, or $0.05 per share. Adjusted net
loss1 of $19.3 million or $(0.02) per share for Q3 2022, down $48.0
million, or $0.11 per share compared to the same quarter last year
due to a declining copper price, an incremental $22.5 million in
realized provisional pricing losses and inflationary pressures on
costs.
- Adjusted EBITDA1 of $34.1 million which includes a realized
provisional pricing loss of $32.5 million relating to Q2, compared
to Adjusted EBITDA1 of $72.3 million in Q3 2021 which included a
realized provisional pricing loss of $10 million. The decrease is
driven by a declining realized copper price ($3.29/lb in Q3 2022
compared to $4.15/lb in Q3 2021) and inflationary pressures on
costs, particularly sulphuric acid and diesel fuel costs.
- Operating cash flow before changes in working capital of $13.9
million in Q3 2022 compared to $67.1 million in Q3 2021. The
decrease is related to the decline in realized copper prices,
increase in operating costs, and higher cash taxes in Mexico.
- Consolidated copper production of 45.7 thousand tonnes at C1
cash costs1 of $2.76/lb of copper produced for Q3 2022, which
consisted of 14.1 thousand tonnes at Pinto Valley, 6.4 thousand
tonnes at Cozamin, 13.6 thousand tonnes at Mantos Blancos, and 11.6
thousand tonnes at Mantoverde.
- Total available liquidity1 of $711 million as at September 30,
2022, comprised of $196 million of cash & short-term
investments, $405 million of undrawn amounts on our $500 million
corporate revolving credit facility as well as $110 million of
undrawn amounts on our $520 Mantoverde Development Project
facility.
- Proactive measures taken during the third quarter to protect
downside risk with additional 2023 copper hedges as we complete the
construction of Mantoverde next year. In total, 85 thousand tonnes
of copper production in 2023 is hedged at a weighted average copper
price of $3.45/lb. In addition, we commenced a quotational period
(“QP”) hedging program, which will mitigate the QP price risk and
assist in achieving realized copper prices closer to LME average in
future quarters.
- Mantos Blancos Concentrator Debottlenecking Project ("MB-CDP")
averaged above the designed throughput level over 20 out of 27
planned operating days in October, with copper recoveries in line
with expectations.
- Mantoverde Development Project remains on schedule and on
target. Major construction is progressing well on the primary
crusher, grinding and flotation area. Overall project completion
was 67% as of the end of September 2022.
- Mantoverde - Santo Domingo ("MV-SD") District Integration Plan
will outline the approach Capstone Copper is taking to maximize
value creation (including synergies) across the district. The
integration plan describing the optimized flowsheet will be
presented during the Chile analyst tour and Investor Day during the
week of November 14th.
1 These are alternative performance
measures. Refer to the section entitled “Alternative Performance
Measures” in the Cautionary Notes
OPERATIONAL OVERVIEW
Refer to Capstone’s Q3 2022 MD&A and Financial Statements
for detailed operating results.
Q3 2022
Q3 2021
2022 YTD
2021 YTD
Copper production (000s tonnes)
Sulphides business
Pinto Valley
14.1
13.7
41.8
43.6
Cozamin
6.4
6.4
18.7
17.8
Mantos Blancos
9.6
—
19.0
—
Total sulphides
30.1
20.1
79.5
61.5
Cathode business
Mantos Blancos
4.0
—
8.0
—
Mantoverde2
11.6
—
25.8
—
Total cathodes
15.6
—
33.8
—
Consolidated
45.7
20.1
113.3
61.5
Copper sales
Copper sold (000s tonnes)
44.2
17.9
115.2
59.8
Realized copper price1 ($/pound)
3.29
4.15
3.76
4.35
C1 cash costs1 ($/pound)
produced
Sulphides business
Pinto Valley
2.60
2.44
2.67
2.22
Cozamin
1.20
0.93
1.19
0.95
Mantos Blancos
2.17
—
2.34
—
Total sulphides
2.17
1.96
2.25
1.85
Cathode business
Mantos Blancos
3.87
—
3.80
—
Mantoverde
3.87
—
3.62
—
Total cathodes
3.87
—
3.66
—
Consolidated
2.76
1.96
2.68
1.85
2 Mantoverde production shown on a 100%
basis.
Consolidated Production
Q3 2022 copper production was 127% higher than Q3 2021 primarily
as a result of including production for the Mantos Blancos and
Mantoverde mines.
Q3 2022 C1 cash costs1 of $2.76/lb and 2022 YTD C1 cash costs1
of $2.68/lb are a mix of sulphide and cathode business units
compared to 2021 which was predominately sulphide production.
Cathode production is from copper oxide ore that requires sulphuric
acid leaching, solvent extraction and electrowinning (SX-EW) to
produce copper cathodes which are a finished copper product for the
market. Sulphuric acid prices of $255/tonne (average) in 2022
represent an historic high, and thus negatively impacted cash costs
YTD. Sulphide production requires a mill that utilizes a grinding
and flotation process to recover sulphide minerals in a copper
concentrate saleable as an intermediate product to smelters and
refiners. Capstone's low-cost sulphide production is growing
significantly with the Mantoverde Development Project to be
completed and in ramp-up late next year.
2022 YTD consolidated production of 113.3 thousand tonnes of
copper is higher than the 61.5 thousand tonnes in 2021 YTD,
primarily as a result of the addition of Mantos Blancos and
Mantoverde production.
Pinto Valley Mine
Copper production of 14.1 thousand tonnes in Q3 2022 was 3%
higher than Q3 2021. Higher grades (Q3 2022 – 0.34% versus Q3 2021
- 0.33%) and recoveries (Q3 2022 - 89.1% versus Q3 2021 - 88.0%)
were partially offset by lower throughput during the quarter (Q3
2022 - 48,143 tpd versus Q3 2021 - 49,100 tpd) as a result of
unplanned downtime in the tailings thickener and water pumping
infrastructure.
2022 YTD production was 4% lower than the same period last year
primarily attributed to slightly lower grades (2022 YTD – 0.33%
versus 2021 YTD – 0.34%), lower recoveries (2022 YTD - 86.3% versus
2021 YTD - 87.3%) as well as lower mill throughput (51,088 tpd in
2022 YTD versus 52,089 tpd in 2021 YTD).
Q3 2022 C1 cash costs1 of $2.60/lb in Q3 2022 were higher than
Q3 2021 of $2.44/lb primarily due to increases in operating costs
($0.29/lb) and treatment and refining costs ($0.12/lb), partially
offset by higher capitalized stripping costs (-$0.16/lb) and higher
copper production (-$0.07/lb).
2022 YTD C1 cash costs1 of $2.67/lb were $0.45/lb higher
compared to the same period last year of $2.22/lb primarily due to
increased operating costs from inflationary pressures on diesel,
power, grinding media; and higher spend on rental equipment, mining
equipment tools, contractors and dust suppression ($0.31/lb) and an
increase in treatment and refining costs ($0.11/lb), partially
offset by higher capitalized stripping costs.
Cozamin Mine
Copper production of 6.4 thousand tonnes was consistent with the
same period in the prior year. Q3 2022 throughput of 3,829 tpd,
grades of 1.86% and recoveries of 96.8% were also consistent with
Q3 2021.
2022 YTD production was 5% higher than the same period last year
and attributed to the higher mining rates as the mine uses the
availability of the Calicanto ramp increasingly compared to the
prior year and higher throughput as a result of upgrades to the
mill in Q1 2022 (3,803 in 2022 YTD versus 3,678 in 2021 YTD),
higher grades (2022 YTD – 1.86% versus 2021 YTD – 1.84%).
Q3 2022 C1 cash costs1 of $1.20/lb were 29% higher than the same
period last year mainly due to a decrease in by-product credits
($0.22/lb) as a result of lower zinc production as well as lower
silver production and prices.
2022 YTD C1 cash costs1 of $1.19/lb were 25% higher than the
same period last year primarily due to inflationary price increases
in steel (grinding media), explosives and insurance premiums,
planned higher spend on mechanical parts to increase equipment
availability and reliability ($0.20/lb), lower zinc by-product
credits due to planned lower zinc production, as well as lower
silver prices ($0.12/lb) and higher treatment and refining costs
($0.03/lb), partially offset by higher copper production
(-$0.04/lb).
The paste backfill and dry stack tailings project continues to
make good progress and will facilitate the mine's planned long-term
sustainability with project completion expected in Q4 and ramp-up
in the first half of 2023. To date, we have invested $41 million of
a total $55 million budget for the project.
Mantos Blancos Mine
Q3 2022 production was 13.6 thousand tonnes, 9.6 thousand tonnes
of copper in concentrate and 4.0 thousand tonnes of cathode. Q3
2022 throughout of 14,334 tpd was 6% lower than the previous
quarter due to several unplanned downtime events impacting
performance. Offsetting lower throughput was strong mill copper
recovery of 79.3% compared to 69.7% in the previous quarter and a
higher mill feed grade of 0.92% versus 0.90% in Q2. The Mantos
Blancos mill operated above the designed 20,000 tpd throughput
level over 20 out of 27 planned operating day, with copper
recoveries in line with expectations.
2022 YTD production (including the nine days in March 2022 after
closing of the Transaction) was 27.0 thousand tonnes, 19.0 thousand
tonnes of copper in concentrate and 8.0 thousand tonnes of
cathode.
Combined Q3 2022 C1 cash costs1 were $2.68/lb - $2.17/lb
sulphides and $3.87/lb cathodes. The sulphide cash costs are
expected to decline with the ramp-up of the MB-CDP to full capacity
in Q4 2022 and copper cathode costs are currently being impacted by
the high cost of acid which averaged $261/tonne delivered in Q3
2022. Sulphuric acid prices are showing signs of significant
decline in 2023 with contract prices moving towards a range of
$120/tonne to $140/tonne.
Combined 2022 YTD C1 cash costs1 were $2.78/lb - $2.34/lb
sulphides and $3.80/lb cathodes.
Mantoverde Mine
Q3 2022 production was 11.6 thousand tonnes.
2022 YTD production (including the nine days in March 2022 after
closing of the Transaction) was 25.8 thousand tonnes of copper
cathode. The MVDP remains on schedule and on budget. Major
construction is progressing well on the primary crushing, grinding
and flotation areas. Overall project completion was 67% as of the
end of September 2022.
Q3 2022 C1 cash costs1 were $3.87/lb which were also impacted by
the high cost of acid, at an average of $266/tonne.
2022 YTD C1 cash costs1 were $3.62/lb, at the lower end of
guidance range.
Mantoverde Development Project
Construction of the MVDP located at the existing Mantoverde
(oxide) operation continues to progress well. The MVDP is expected
to enable the mine to process 235 million tonnes of copper sulphide
reserves over a 20-year expected mine life, in addition to existing
oxide reserves. The MVDP involves the addition of a sulphide
concentrator (12.3 million tonnes per year) and tailings storage
facility, and the expansion of the existing desalination plant.
Upon completion, the Company expects the MVDP to increase
production from approximately 49,000 tonnes of copper (cathodes
only) in our current guidance for the period from April to December
2022 (annualized) to ~120,000 tonnes of copper (copper concentrate
and cathodes) post project completion in 2024. In parallel, C1 cash
costs1 are expected to decrease from $3.60/lb to $3.80/lb in
current guidance for the period from April to December 2022 to
below $2.00/lb in 2024 after project completion and ramp up. The
decline in expected costs will be driven by the mine's transition
to becoming a primary producer of copper concentrate. The mine will
also benefit from the production of approximately 31,000 ounces of
gold per year that will generate by-product credits. Upon
completion of MVDP, approximately 75% of Mantoverde's production
will come from the lower-cost sulphide copper.
MVDP is progressing under a lump-sum turn-key engineering,
procurement and construction (EPC) contract with Ausenco Limited, a
multi-national EPC management company, with broad international
experience in the design and construction of copper concentrator
projects of this scale in the international market. The execution
plan includes a Capstone Copper owner’s team working with the
contractors during the execution phase.
As of September 30, 2022, the MVDP had achieved overall progress
of 67% and construction progress of 37%. The schedule remains
intact and the target for construction completion remains late
2023. Work completed in Q3 2022 included:
- Assembly and commissioning of the first electric rope shovel
with commissioning of a second shovel planned for mid-Q4 2022;
- Arrival of the SAG and ball mill shells in Chile and transport
to the mine site has commenced with all other components already on
site; and
- Began structural and mechanical assembly in the primary
crusher, grinding and flotation area.
As of September 30, 2022, the cost of the different components
of the project, including the lump-sum turnkey EPC continue on
track and on target. The total project capital remains at $825
million and spend-to date totals $490 million.
The EPC contract total budget is approximately $525 million of
which $294 million has been spent to date. The nature of the lump
sum turn-key contract with Ausenco has the majority of the capital
cost as lump sum of the total projected capital cost of $825
million. In addition, major mining equipment for approximately $140
million was price fixed prior to the elevated inflationary
pressures observed this year.
Mantoverde Phase II
Mantoverde is currently analyzing the next expansion of the
sulphide concentrator. Alternatives are being considered to expand
the plant capacity by either the addition of a new ball mill and
secondary equipment or a complete new processing line, to process
part of the 77% of resources not utilized by Phase I of the MVDP. A
conceptual study will be developed during the second half of 2022
to assess the best options for the next stage of MVDP which will be
incorporated into a feasibility study targeted for H2 2023.
Mantos Blancos Concentrator Debottlenecking Project
The MB-CDP is expected to increase throughput capacity at the
sulphide concentrator plant from 11,000 tonnes per day ("tpd') to
20,000 tpd (or from 4.2 million tonnes per year to 7.3 million
tonnes per year). This will more than replace declining oxide
production levels at Mantos Blancos.
The ramp-up continued during the quarter with increased focus on
achieving operational stability of the auxiliary systems such as
the electrical and tailing systems. Mill throughput continues to
improve and the plant has averaged above the design throughput
level over 20 out of 27 planned operating days in October, with
copper recoveries in line with expectations. Technical reviews of
the year-to-date performance of Ball Mill 8 indicate that it is
performing at higher than expected milling efficiencies, indicating
that concentrator throughput greater than the nominal 20,000 tpd
may be sustainable with minimal capital expenditure. The ramp-up to
20,000 tpd is targeted to be completed by year-end.
Mantos Blancos Phase II
Mantos Blancos is currently analyzing the potential to increase
the throughput of the Mantos Blancos sulphide concentrator plant
from 7.3 million tonnes per year to 10.0 million tonnes per year
using existing underutilized ball mills and process equipment. As
part of the Mantos Blancos Phase II Project, we are also evaluating
the potential to extend the life of copper cathode production. The
Advanced Basic Engineering Study is expected to be released in H1
2023, and the environmental DIA application was submitted in August
2022.
Santo Domingo
Since closing of the Transaction, the Santo Domingo team has
been integrated into the larger Capstone Copper team in Chile. The
integrated project team is focused on identifying and evaluating
the optimal integrated development plan for the Mantoverde - Santo
Domingo district. The Mantoverde operation is located approximately
~35km southwest of the Santo Domingo project. The Company expects
the integrated district plan to study alternatives and identify the
best path forward to develop the copper (sulphides and oxides),
gold, iron, and cobalt across both properties. An integrated
development approach is focused on maximizing potential synergies
associated with the proximity of Santo Domingo to the existing
Mantoverde operation, existing infrastructure (including a
desalination plant, roads, power, and pipelines), and integration
of other assets, such as the Santo Domingo port contract with
Puerto Abierto S.A. and the rail option currently being assessed
for products/supply transportation.
The potential synergies the Company expects to be maximized
through an optimal integrated district development plan include the
following:
- Infrastructure synergies (including desalination plant, power,
pipelines, port)
- Integrated mine and process approach
- Construction and supply chain synergies
- Cobalt and sulphuric acid enhancements
- Recovery of Mantoverde cobalt
- Use of excess solvent extraction and electrowinning ("SX-EW")
capacity
The revenue-enhancing opportunities include using excess
electrowinning capacity at Mantoverde to potentially process Santo
Domingo oxide material. An updated base case copper/iron Santo
Domingo feasibility study including district integration synergies
will be released in 2023.
Santo Domingo contains oxide mineralization, which is located
above the sulphide ore body and is part of the Santo Domingo and
Iris Norte pre-stripping material. During Q3 2022, the Company
continued with the exploratory oxide metallurgical program, which
is now expected to be completed in Q4 2022. Preliminary
metallurgical test results suggest the possibility to process the
leach solution from Santo Domingo's oxides at Mantoverde's existing
SX-EW plant. Subject to further positive results, the Company plans
to complete an oxide drill program in the near future and the
results, including an optimized flowsheet, are expected to be
incorporated into an updated Santo Domingo feasibility study to be
released in H1 2024.
Mantoverde - Santo Domingo Cobalt Feasibility Study
Update
A district cobalt plant for Mantoverde - Santo Domingo may also
unlock cobalt production from Mantoverde while producing a
by-product of sulphuric acid which can then be consumed internally
to further significantly lower operating costs in the leaching
process at Mantoverde.
The cobalt recovery process consists of a concentration step, an
oxidation step, and a cobalt recovery step. The concentration step
considers a conventional froth flotation circuit treating copper
flotation tails to produce a cobaltiferous pyrite concentrate. For
the base case, the pyrite concentrate, which contains between 0.5%
and 0.7% Co, is oxidized in a fluidized bed roaster to produce a
cobalt calcine and a concentrated sulphuric acid by-product. The
calcine is then subjected to various leaching, precipitation,
solvent extraction and crystallization steps to produce battery
grade cobalt sulphate heptahydrate. Capstone is also evaluating
alternatives that may include the direct sale of some or all the
cobalt as intermediate product, such as mixed hydroxide
precipitate, to a partner, JV or an independent third-party
refiner. At an expected 4.7 thousand tonnes of cobalt production
per year from Santo Domingo plus expected additional tonnage from
Mantoverde, this would be one of the largest and lowest cost cobalt
producers in the world. Additional benefits of this project include
the generation of carbon-free energy from waste heat emitted by the
roaster, and the production of by-product sulphuric acid which can
be used for heap or dump leaching to produce low-cost copper
cathodes at Mantoverde, Mantos Blancos or sold to other consumers
within the district. Also, the potential production of an iron
hematite concentrate is considered which would allow for potential
integration with SD iron production if the rail option confirms
benefit for product transportation.
Along the same timeline (Q4 2022) we intend to release an
updated cobalt resource for Santo Domingo, as well as an initial
cobalt resource for Mantoverde. The full updated cobalt feasibility
study will be released in H1 2024.
Exploratory testwork has started at Mantoverde to confirm
suitability of the Santo Domingo cobalt circuit flowsheet to
process an integrated cobaltiferous pyrite feed. Evaluations are
also underway to investigate the potential for early production of
cobalt from Mantoverde by treating an oxide leach raffinate bleed
and/or pyrite contained in the MVDP cleaner tailings.
PV4 Study
During the quarter, work progressed on the pre-feasibility study
("PFS") for PV4 which aims to maximize the conversion of
approximately one billion tonnes of mineral resources to mineral
reserves, significantly extending Pinto Valley’s mine life and
increasing the mine’s copper production profile. The PV4 study is
focused on an expansion of existing mill throughput and tailings
impoundment facility, improvements to the metal recovery processes,
and an extension of the life of mine. It is expected to be released
in H1 2023 and considers the following process enhancements:
- A new tailings dam, TSF5, that would improve tailings water
recovery while accommodating a longer mine life.
- Pyrite leach enhancement, with strong positive environmental,
social and governance ("ESG") implications as it would divert
acid-generating minerals including pyrite and chalcopyrite from
tailings to the dump leach operation. Additional copper recovery
and lower costs via the generation of acid would be key economic
drivers for this project.
- Ball mill circuit upgrades, including ball mill shell
replacements, motor upgrades, cyclone feed pump and cluster
upgrades, and process control upgrades.
- Flotation circuit upgrades, including froth cameras on primary
rougher banks, variable-speed drives on key slurry pumps, and
potentially additional flotation capacity.
- Moly plant upgrades, including additional flotation capacity
and process control in the molybdenum plant.
Corporate Exploration Update
Cozamin: The focus during Q3 2022 was on testing the Mala
Noche Main Vein West Target with one surface rig and one
underground rig from the west exploration crosscut station. Since
the 2021-2022 exploration program started, approximately 51,020
meters of drilling have been completed from 65 holes and an
additional 1,200 meters of drilling from 2 holes are planned for
the remainder of this year. A proposed lower elevation mine
cross-cut will allow for expedited infill drilling in 2023 to
inform an updated mineral resource estimate in the second quarter
of 2023. Surface drill testing of other targets along strike from
the San Roberto mine area commenced in Q3 2022 with one rig with
1,370m drilled in 2 holes.
Copper Cities, Arizona: On January 20, 2022, Capstone
Mining announced that it had entered into an 18-month access
agreement with BHP Copper Inc. ("BHP") to conduct drill and
metallurgical test-work at BHP's Copper Cities project ("Copper
Cities"), located approximately 10 km east of the Pinto Valley
mine. In 2022, Capstone Copper plans to spend $6.7 million in a
two-phase drill program aimed at twinning historical drill holes,
and to select a portion of these for metallurgical testing.
Drilling with two surface rigs is complete with metallurgical
testing underway.
Planalto, Brazil: Step-out drilling at the Planalto Iron
Ore-Copper-Gold prospect in Brazil, under an earn-in agreement with
Lara Exploration Ltd. ("Lara"), commenced in Q4 2021 and continued
in Q3 2022. Lara is conducting the work and will report results
when appropriate.
REITERATING NINE-MONTH GUIDANCE (APRIL-DECEMBER 2022)
The company reiterates the consolidated production, C1 cash
costs1 and capital guidance of 136-150kt of copper, $2.55-$2.70 per
pound and $580 million respectively for the nine month period from
April 1, 2022 to December 31, 2022. We expect improved concentrator
throughput levels in Q4 2022 compared to Q2 and Q3 2022 at both
Mantos Blancos and Pinto Valley with cash costs trending towards
the upper end of the guidance range due to continued inflationary
pressures.
FINANCIAL OVERVIEW
Please refer to Capstone’s Q3 2022 MD&A and Financial
Statements for detailed financial results.
($ millions, except per share data)
Q3 2022
Q3 2021
2022 YTD
2021 YTD
Revenue
308.7
165.4
933.4
578.9
Net income
37.5
35.0
164.5
211.5
Net income attributable to
shareholders
34.1
35.0
143.1
185.4
Net income attributable to shareholders
per common share - basic ($)
0.05
0.09
0.24
0.46
Net income attributable to shareholders
per common share - diluted ($)
0.05
0.08
0.23
0.45
Adjusted net (loss) income1
(19.3
)
35.3
31.1
168.4
Adjusted net (loss) income attributable to
shareholders per common share - basic
(0.02
)
0.09
0.07
0.42
Adjusted net (loss) income attributable to
shareholders per common share - diluted
(0.02
)
0.09
0.07
0.41
Adjusted EBITDA1
34.1
72.3
272.3
318.9
Cash flow from operating
activities2
11.2
70.0
63.0
458.9
Cash flow from operating activities per
common share1 - basic ($)
0.02
0.17
0.10
1.13
Operating cash flow before changes in
working capital1,2
13.9
67.1
124.8
451.6
Operating cash flow before changes in
working capital per common share1 – basic ($)
0.02
0.16
0.21
1.11
2 2021 YTD includes $180.0 million silver
and gold stream proceeds
($ millions)
September 30, 2022
June 30, 2022
December 31, 2021
Total assets
5,260.8
5,296.8
1,728.0
Long term debt (excluding financing fees
and purchase price allocation fair value adjustments)1
505.0
441.6
—
Total non-current financial
liabilities
572.3
497.1
38.4
Total non-current liabilities
1,732.6
1,638.7
481.3
Cash and cash equivalents and short-term
investments
196.3
350.1
264.4
Net (debt)/cash1
(331.5
)
(91.5
)
264.4
Attributable net (debt)/cash1
(230.6
)
(34.1
)
264.4
CONFERENCE CALL AND WEBCAST DETAILS
Capstone will host a conference call and webcast on Monday,
October 31, 2022 at 08:00 am PT/11:00 am ET. Link to the audio
webcast: https://app.webinar.net/K9m7M6aJ1X0
Dial-in numbers for the audio-only portion of the conference
call are below. Due to an increase in call volume, please dial-in
at least five minutes prior to the call to ensure placement into
the conference line on time.
Toronto: (+1) 416-764-8650 Vancouver: (+1) 778-383-7413 North
America toll free: 888-664-6383 Confirmation #64795591
A replay of the conference call will be available until November
7, 2022. Dial-in numbers for Toronto: (+1) 416-764-8677 and North
American toll free: 888-390-0541. The replay code is 795591#.
Following the replay, an audio file will be available on Capstone’s
website at:
https://capstonemining.com/investors/events-and-presentations/default.aspx.
This release is not suitable on a standalone basis for readers
unfamiliar with Capstone and should be read in conjunction with the
Company’s MD&A and Financial Statements for the three and nine
months ended September 30, 2022, which are available on Capstone’s
website and on SEDAR, all of which have been reviewed and approved
by Capstone's Board of Directors.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 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 our expectations or beliefs regarding
future events and the impacts of the ongoing and evolving COVID-19
pandemic and the evolving geopolitical environment. Forward-looking
statements include, but are not limited to, statements with respect
to the execution of our future growth projects, our financial
liquidity and development of our projects, the estimation of
Mineral Resources and Mineral Reserves, the success of the
underground paste backfill and tailings filtration projects at
Cozamin, the timing and cost of the construction of the paste
backfill and dry stack tailings plant at Cozamin, the success and
timing of the Mantos Blancos Concentrator Debottlenecking
Project, the timing and cost of the Mantoverde Development
Project, the timing and results of the PV4 study, timing and
success of the Jetti Technology, the successful execution of a port
services agreement with Puerto Abierto S.A., the expected reduction
in capital requirements for the Santo Domingo project, the timing
and success of the Cobalt Study for Santo Domingo, the timing and
results of the integrated plan for Mantoverde - Santo Domingo, the
realization of Mineral Reserve estimates, the timing and amount of
estimated future production, the costs of production and capital
expenditures and reclamation, the budgets for exploration at
Cozamin, Santo Domingo, Pinto Valley, Mantos Blancos, Mantoverde
and other exploration projects, the timing and success of the
Copper Cities project, the success of our mining operations, the
continuing success of mineral exploration, the estimations for
potential quantities and grade of inferred resources and
exploration targets, our ability to fund future exploration
activities, our ability to finance the Santo Domingo project and
other current or future projects and expansions, environmental
risks, unanticipated reclamation expenses and title disputes, the
success of the synergies and catalysts related to the Transaction,
and the anticipated future production, costs of production,
including the cost of sulphuric acid and oil and other fuel,
capital expenditures and reclamation of the Company's operations
and development projects and the risks included in our continuous
disclosure filings on SEDAR at www.sedar.com. The potential effects
of the COVID-19 pandemic on our business and operations are unknown
at this time, including Capstone Copper’s ability to manage
challenges and restrictions arising from COVID-19 in the
communities in which Capstone Copper operates and our ability to
continue to safely operate.. The impact of COVID-19 to Capstone
Copper is dependent on a number of factors outside of our control
and knowledge, including the effectiveness of the measures taken by
public health and governmental authorities to combat the spread of
the disease, global economic uncertainties and outlook due to the
disease, supply chain delays resulting in lack of availability of
supplies, goods and equipment, and evolving restrictions relating
to mining activities and to travel in certain jurisdictions in
which we operate.
In certain cases, forward-looking statements can be identified
by the use of words such as “anticipates”, “approximately”,
“believes”, “budget”, “estimates”, expects”, “forecasts”,
“guidance”, intends”, “plans”, “scheduled”, “target”, or variations
of such words and phrases, or statements that certain actions,
events or results “be achieved”, “could”, “may”, “might”, “occur”,
“should”, “will be taken” or “would” or the negative of these terms
or comparable terminology. In this document certain forward-looking
statements are identified by words including “anticipated”,
“expected”, “guidance” and “plan”. By their very nature,
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Such factors include, amongst
others, risks related to inherent hazards associated with mining
operations and closure of mining projects, future prices of copper
and other metals, compliance with financial covenants, surety
bonding, our ability to raise capital, Capstone Copper’s ability to
acquire properties for growth, counterparty risks associated with
sales of our metals, use of financial derivative instruments and
associated counterparty risks, foreign currency exchange rate
fluctuations, market access restrictions or tariffs, changes in
general economic conditions, availability and quality of water,
accuracy of Mineral Resource and Mineral Reserve estimates,
operating in foreign jurisdictions with risk of changes to
governmental regulation, compliance with governmental regulations,
compliance with environmental laws and regulations, reliance on
approvals, licences and permits from governmental authorities and
potential legal challenges to permit applications, contractual
risks including but not limited to, our ability to meet the
completion test requirements under the Cozamin Silver Stream
Agreement with Wheaton Precious Metals Corp. ("Wheaton"), our
ability to meet certain closing conditions under the Santo Domingo
Gold Stream Agreement with Wheaton, acting as Indemnitor for Minto
Metals Corp.’s surety bond obligations post divestiture, impact of
climate change and changes to climatic conditions at our operations
and projects, changes in regulatory requirements and policy related
to climate change and greenhouse gas ("GHG") emissions, land
reclamation and mine closure obligations, aboriginal title claims
and rights to consultation and accommodation, risks relating to
widespread epidemics or pandemic outbreak including the COVID-19
pandemic; the impact of COVID-19 on our workforce, risks related to
construction activities at our operations and development projects,
suppliers and other essential resources and what effect those
impacts, if they occur, would have on our business, including our
ability to access goods and supplies, the ability to transport our
products and impacts on employee productivity, the risks in
connection with the operations, cash flow and results of Capstone
Copper relating to the unknown duration and impact of the COVID-19
pandemic, impacts of inflation, geopolitical events and the effects
of global supply chain disruptions, uncertainties and risks related
to the potential development of the Santo Domingo project, risks
related to the Mantos Blancos Concentrator Debottlenecking Project
and the Mantoverde Development Project, increased operating and
capital costs, increased cost of reclamation, challenges to title
to our mineral properties, increased taxes in jurisdictions the
Company operates or is subject to tax, changes in tax regimes we
are subject to and any changes in law or interpretation of law may
be difficult to react to in an efficient manner, maintaining
ongoing social licence to operate, seismicity and its effects on
our operations and communities in which we operate, dependence on
key management personnel, potential conflicts of interest involving
our directors and officers, corruption and bribery, limitations
inherent in our insurance coverage, labour relations, increasing
input costs such as those related to sulphuric acid, electricity,
fuel and supplies, increasing inflation rates, competition in the
mining industry including but not limited to competition for
skilled labour, risks associated with joint venture partners and
non-controlling shareholders or associates, our ability to
integrate new acquisitions and new technology into our operations,
cybersecurity threats, legal proceedings, the volatility of the
price of the Common Shares, the uncertainty of maintaining a liquid
trading market for the Common Shares, risks related to dilution to
existing shareholders if stock options or other convertible
securities are exercised, the history of Capstone Copper with
respect to not paying dividends and anticipation of not paying
dividends in the foreseeable future and sales of Common Shares by
existing shareholders can reduce trading prices, 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
MD&A of those statements and Annual Information Form, all of
which are filed and available for review under the Company’s
profile on SEDAR at www.sedar.com. Although the Company has
attempted to identify important factors that could cause our actual
results, performance or achievements to differ materially from
those described in our forward-looking statements, there may be
other factors that cause our results, performance or achievements
not to be as anticipated, estimated or intended. There can be no
assurance that our forward-looking statements will prove to be
accurate, as our actual results, performance or achievements could
differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on our
forward-looking statements.
COMPLIANCE WITH NI 43-101
Unless otherwise indicated, Capstone Copper has prepared the
technical information in this document (“Technical Information”)
based on information contained in the technical reports, Annual
Information Form and news releases (collectively the “Disclosure
Documents”) available under Capstone Copper’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.
Disclosure Documents include the National Instrument 43-101
compliant technical reports titled "NI 43-101 Technical Report on
the Cozamin Mine, Zacatecas, Mexico" effective October 31, 2020,
“NI 43-101 Technical Report on the Pinto Valley Mine, Arizona, USA”
effective March 31, 2021, “Santo Domingo Project, Region III,
Chile, NI 43-101 Technical Report” effective February 19, 2020, and
"Mantos Blancos Mine NI 43-101 Technical Report Antofagasta /
Región de Antofagasta, Chile" and "Mantoverde Mine and Mantoverde
Development Project NI 43-101 Technical Report Chañaral / Región de
Atacama, Chile", both effective November 29, 2021.
The disclosure of Scientific and Technical Information in this
document was reviewed and approved by Clay Craig, P.Eng., Director,
Mining & Strategic Planning (technical information related to
Mineral Reserves at Pinto Valley and Cozamin), and Cashel Meagher,
P.Geo., President and Chief Operating Officer (technical
information related to project updates at Santo Domingo and Mineral
Reserves and Resources at Mantos Blancos and Mantoverde) all
Qualified Persons under NI 43-101.
Alternative Performance Measures
Alternative performance measures are furnished to provide
additional information. These non-GAAP performance measures are
included in this MD&A because these statistics are key
performance measures that management uses to monitor performance,
to assess how the Company is performing, and to plan and assess the
overall effectiveness and efficiency of mining operations. These
performance measures do not have a standard meaning within IFRS
and, therefore, amounts presented may not be comparable to similar
data presented by other mining companies. These performance
measures should not be considered in isolation as a substitute for
measures of performance in accordance with IFRS.
Some of these alternative performance measures are presented in
Highlights and discussed further in other sections of the MD&A.
These measures provide meaningful supplemental information
regarding operating results because they exclude certain
significant items that are not considered indicative of future
financial trends either by nature or amount. As a result, these
items are excluded for management assessment of operational
performance and preparation of annual budgets. These significant
items may include, but are not limited to, restructuring and asset
impairment charges, individually significant gains and losses from
sales of assets, share based compensation, unrealized gains or
losses, and certain items outside the control of management. These
items may not be non-recurring. However, excluding these items from
GAAP or Non-GAAP results allows for a consistent understanding of
the Company's consolidated financial performance when performing a
multi-period assessment including assessing the likelihood of
future results. Accordingly, these Non-GAAP financial measures may
provide insight to investors and other external users of the
Company's consolidated financial information.
C1 Cash Costs Per Payable Pound of Copper Produced
C1 cash costs per payable pound of copper produced is a measure
reflective of operating costs per unit. C1 cash costs is calculated
as cash production costs of metal produced net of by-product
credits and is a key performance measure that management uses to
monitor performance. Management uses this measure to assess how
well the Company’s producing mines are performing and to assess
overall efficiency and effectiveness of the mining operations and
assumes that realized by-product prices are consistent with those
prevailing during the reporting period.
All-in Sustaining Costs Per Payable Pound of Copper
Produced
All-in sustaining costs per payable pound of copper produced is
an extension of the C1 cash costs measure discussed above and is
also a key performance measure that management uses to monitor
performance. Management uses this measure to analyze margins
achieved on existing assets while sustaining and maintaining
production at current levels. Consolidated All-in sustaining costs
includes sustaining capital and corporate general and
administrative costs.
Net debt / Net cash
Net debt / Net cash is a performance measure used by the Company
to assess its financial position and is composed of Long-term debt
(excluding deferred financing costs and purchase price accounting
("PPA") fair value adjustments), Due to related parties, Cash and
cash equivalents and Short-term investments.
Available Liquidity
Available liquidity is a performance measure used by the Company
to assess its financial position and is composed of RCF credit
capacity, the $520 million Mantoverde DP facility capacity, Cash
and cash equivalents and Short-term investments. For clarity,
Available liquidity does not include undrawn amounts on Mantoverde
$60 million cost overrun facility from MMC nor the $260 million
undrawn portion of the Gold stream from Wheaton related to the
Santo Domingo project.
Operating Cash Flow before Changes in Working Capital per
Common Share
Operating Cash Flow before changes in working capital per common
share is a performance measure used by the Company to assess its
ability to generate cash from its operations, while also taking
into consideration changes in the number of outstanding shares of
the Company.
Adjusted Net (Loss) Income
Adjusted net (loss) income is net income as reported, adjusted
for certain types of transactions that in our judgment are not
indicative of our normal operating activities or do not necessarily
occur on a regular basis.
Adjusted net (loss) income attributable to
shareholders
Adjusted net (loss) income attributable to shareholders is Net
income attributable to shareholders as reported, adjusted for
certain types of transactions that in our judgment are not
indicative of our normal operating activities or do not necessarily
occur on a regular basis.
EBITDA
EBITDA is net income before net finance expense, tax expense,
and depletion and amortization.
Adjusted EBITDA
Adjusted EBITDA is EBITDA before the pre-tax effect of the
adjustments made to adjusted net (loss) income (above) as well as
certain other adjustments required under the RCF agreement in the
determination of EBITDA for covenant calculation purposes.
The adjustments made to Adjusted net (loss) income and Adjusted
EBITDA allow management and readers to analyze our results more
clearly and understand the cash generating potential of the
Company.
Sustaining Capital
Sustaining capital is expenditures to maintain existing
operations and sustain production levels. A reconciliation to GAAP
segment MPPE additions is included within the mine site sections of
this document.
Expansionary Capital
Expansionary capital is expenditures to increase current or
future production capacity, cash flow or earnings potential. A
reconciliation to GAAP segment MPPE additions is included within
the mine site sections of this document.
Realized copper price (per pound)
Realized price per pound is a non-GAAP ratio that is calculated
using the non-GAAP measures of revenue on new shipments, revenue on
prior shipments and provisional pricing changes. Realized prices
exclude the effects of the stream cash effects as well as TC/RCs.
Management believes that measuring these prices enables investors
to better understand performance based on the realized copper sales
in the current and prior period.
Adjusted realized copper price (per pound)
Adjusted realized price per pound is a non-GAAP ratio that is
calculated using the non-GAAP measures of revenue on new shipments,
revenue on prior shipments, provisional pricing changes, and
realized gains/losses on copper commodity contracts. Realized
prices exclude the effects of the stream cash effects as well as
TC/RCs. Management believes that measuring these prices enables
investors to better understand performance based on the realized
copper sales in the current and prior period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221031005258/en/
Jerrold Annett, SVP, Strategy and Capital Markets 647-273-7351
jannett@capstonecopper.com
Kettina Cordero, Director Investor Relations &
Communications 604-262-9794 kcordero@capstonecopper.com
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