All amounts in US$ unless otherwise
indicated
Capstone Copper Corp. (“Capstone” or the “Company”)
(TSX:CS) today announced the Mantoverde-Santo Domingo (“MV-SD”)
District Integration Plan (the “Plan”) which showcases the path
towards creating a world-class mining district in the Atacama
region of Chile, targeting over 200,000 tonnes per year (“tpa”) of
low-cost copper production with the potential to also become one of
the largest and lowest cost battery grade cobalt producers in the
world. The Company has the opportunity to unlock a total of $80-100
million per year in operating cost savings, while also enabling
additional copper and cobalt production, infrastructure capital
savings, and the potential for significant tax synergies through
the reinvestment in Chile to support our district growth
(summarized in Figure 1).
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20221110006192/en/
MV-SD District Synergies (Graphic:
Business Wire)
The fully-permitted Santo Domingo project is located 35
kilometres northeast of the Mantoverde mine which is currently
undergoing construction of a 32,000 tonne per day (“tpd”) sulphide
concentrator with wet commissioning expected in late 2023.
Following the completion and successful ramp-up of the Mantoverde
Development Project (“MVDP”), the Company’s next phase of
transformational growth will be a construction decision and
integration of Santo Domingo. The combination of key infrastructure
already in place alongside an experienced mine build and operating
team significantly de-risks the future development of the
district.
Please click the following link to view a 3D virtual tour
presentation of the MV-SD District Integration Plan and respective
synergies, further outlined herein:
https://vrify.com/decks/12234-MV-SD-District-Integration-Plan
John MacKenzie, CEO of Capstone commented, “Over the past
decade, I’ve closely monitored the progress at the Santo Domingo
project given its proximity to, and obvious synergies with,
Mantoverde. We are extremely excited to now be developing a
world-class copper and cobalt district, with both commodities being
essential to the global economy’s decarbonization efforts. Our team
is committed to pursuing the highest standards in safety and
environmental management as well as meaningful engagement with all
stakeholders as we progress our growth plans. We are transforming
Capstone into a leading long-life and low-cost producer of critical
metals essential for the transition to net zero.”
Cashel Meagher, President and COO of Capstone added, “The
permitted and executable growth pathway that lies ahead of us is
the reason why I joined Capstone. This is a rare opportunity to
design and engineer significant synergies into the plan prior to
the construction of the Santo Domingo project. We look forward to
hosting our Chile site visit next week to showcase our
transformational growth in progress and our plans going
forward.”
Base Case Plan
Our Base Case plan includes the completion and successful
ramp-up of MVDP, a sanctioning decision followed by construction of
the Santo Domingo copper-iron project, which includes upgrades to
the existing water and power infrastructure, as well as a
development scenario for the Santo Domingo port located
approximately 65 kilometres by road from Mantoverde.
Future Growth Plan
Our Future Growth plans include Mantoverde Phase II, which
envisions an expansion of the sulphide concentrator to process part
of the 77% of resources not included in Phase I, processing Santo
Domingo oxides at the underutilized 60,000 tpa SX-EW cathode plant
at Mantoverde, as well as the development of the MV-SD cobalt
opportunity, described below.
MV-SD District Integration Synergies:
- Water and Power Infrastructure – A plan to expand the
existing Mantoverde desalination plant to 840 litres per second
(“l/s”), utilization of existing water pipelines, and upgraded
energy transmission capacity provides the infrastructure foundation
to support our district growth opportunities. We are currently
expanding the desalination capacity to 380 l/s to supply sufficient
water requirements for MVDP with expected completion by year-end
2022. The expansion to 840 l/s is expected to reduce net capex by
$25-30 million by utilizing existing pipeline infrastructure and
lower operating costs by $4-6 million per year while also reducing
our environmental footprint by not requiring the previously planned
desalination plant at the Santo Domingo port. Additionally, a $20
million upgrade to the existing power infrastructure is expected to
further lower operating costs by $1-2 million per year, while also
allowing us to fully control our own energy distribution needs at
our mine sites. The upgrade will provide approximately 50 Megawatts
of excess transmission capacity to the port beyond the requirements
from the current pipeline of projects and will enable optionality
for future growth.
- Port Infrastructure – Opportunity to reduce Mantoverde’s
concentrate trucking costs by $10 million per year by using the
planned Santo Domingo port (the “Port”), located 65 kilometres from
Mantoverde versus Puerto Angamos, 475 kilometers away. The planned
Santo Domingo port is expected to have sufficient scale to handle
capesize vessels suitable for large cargo, including Santo Domingo
copper concentrate, iron ore, district cobalt production, and the
potential for sulphuric acid handling. Additionally, the Port could
handle Mantoverde’s copper cathode production which could lower
transportation costs by approximately $2 million per year.
Designing the Port presents an opportunity to engineer a
world-class asset that meets the highest environmental standards,
in-line with our overall environmental, social, and governance
(“ESG”) strategy. The port framework agreement with Puerto Abierto
S.A., a wholly owned subsidiary of Puerto Ventanas S.A., remains
in-place and the rail and iron ore pipeline trade-off studies are
ongoing.
- Integrated Operations – Potential to lower MV-SD
district operating costs by $20-30 million by streamlining the
organizational chart across both operations, increasing purchasing
power given district scale, and standardizing equipment to promote
productivity gains. Decades of technical and operating experience
in Chile provide a unique opportunity to significantly de-risk the
execution of Santo Domingo with a proven project delivery team from
Mantos Blancos and Mantoverde.
- Santo Domingo Oxides – Potential addition of
8,000-10,000 tpa of copper production over the first 10 years of
production, by leaching copper oxides at Santo Domingo and
processing the concentrated solutions at Mantoverde’s underutilized
SX-EW facility. The potential increase in production is expected to
come from Santo Domingo’s oxide mineralization, much of which is in
the pre-strip, providing an operating cost advantage.
- Cobalt Opportunity – Ability to reduce operating costs
by approximately $45 million per year by building the cobalt and
sulphuric acid production facility at Mantoverde that will process
cobaltiferous pyrite produced by both Mantoverde and Santo Domingo.
The benefits would be realized through the neutralization of a weak
acid by-product stream from the cobalt operation at the Mantoverde
heap and dump leach operation, as well as through the elimination
of port and trucking costs related to sulphuric acid use at
Mantoverde. The plan would target an increase in district cobalt
production by approximately 1,500 to 2,000 tpa from Mantoverde to a
total of 6,000 to 6,500 tpa, which would make MV-SD one of the
world’s largest and lowest-cost sustainable cobalt producers
outside of the Democratic Republic of Congo and China.
- Withholding Tax – Potential to realize tax synergies
between $150-200 million by re-investing cash flows to support our
overall growth plan in Chile.
ABOUT CAPSTONE COPPER CORP.
Capstone Copper Corp. is an Americas-focused copper mining
company headquartered in Vancouver, Canada. We own and operate the
Pinto Valley copper mine located in Arizona, USA, the Cozamin
copper-silver mine located in Zacatecas, Mexico, the Mantos Blancos
copper-silver mine located in the Antofagasta region, Chile, and
70% of the Mantoverde copper-gold mine, located in the Atacama
region, Chile. In addition, we own the fully permitted Santo
Domingo copper-gold project, located approximately 30 kilometres
northeast of Mantoverde in the Atacama region, Chile, as well as a
portfolio of exploration properties in the Americas.
Capstone Copper’s strategy is to unlock transformational copper
production growth while executing on cost and operational
improvements through innovation, optimization and safe and
responsible production throughout our portfolio of assets. We focus
on profitability and disciplined capital allocation to surface
stakeholder value. We are committed to creating a positive impact
in the lives of our people and local communities, while delivering
compelling returns to investors by sustainably producing copper to
meet the world’s growing needs.
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 combined
business following the Company’s recent arrangement, 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 and to safely return our business to normal operations. 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”. The forward-looking statements
in this document are necessarily based on a number of estimates and
assumptions that, while considered reasonable by the Company as at
the date of such statements, are inherently subject to the
business, economic and competitive uncertainties and contingencies.
The Company has based these forward-looking statements on the
Company’s current expectations and projections about future events.
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 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, 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.
CAUTIONARY NOTE TO UNITED STATES INVESTORS REGARDING
PRESENTATION OF MINERAL RESERVE AND MINERAL RESOURCE
ESTIMATES
As a British Columbia corporation and a “reporting issuer” under
Canadian securities laws, we are required to provide disclosure
regarding our mineral properties in accordance with Canadian
National Instrument 43-101 – Standards of Disclosure for Mineral
Projects (“NI 43-101”). NI 43-101 is a rule developed by the
Canadian Securities Administrators that establishes standards for
all public disclosure an issuer makes of scientific and technical
information concerning mineral projects. In accordance with NI
43-101, we use the terms mineral reserves and resources as they are
defined in accordance with the CIM Definition Standards on mineral
reserves and resources (the “CIM Definition Standards”) adopted by
the Canadian Institute of Mining, Metallurgy and Petroleum. In
particular, the terms “mineral reserve”, “proven mineral reserve”,
“probable mineral reserve”, “mineral resource”, “measured mineral
resource”, “indicated mineral resource” and “inferred mineral
resource” used in this annual information form and the documents
incorporated by reference herein and therein, are Canadian mining
terms defined in accordance with CIM Definition Standards. These
definitions differ from the definitions in the disclosure
requirements promulgated by the SEC. Accordingly, information
contained in this annual information form and the documents
incorporated by reference herein may not be comparable to similar
information made public by U.S. companies reporting pursuant to SEC
disclosure requirements.
United States investors are also cautioned that while the SEC
will now recognize “measured mineral resources”, “indicated mineral
resources” and “inferred mineral resources”, investors should not
assume that any part or all of the mineralization in these
categories will ever be converted into a higher category of mineral
resources or into mineral reserves. Mineralization described using
these terms has a greater amount of uncertainty as to their
existence and feasibility than mineralization that has been
characterized as reserves. Accordingly, investors are cautioned not
to assume that any “measured mineral resources”, “indicated mineral
resources”, or “inferred mineral resources” that we report are or
will be economically or legally mineable. Further, “inferred
resources” have a greater amount of uncertainty as to their
existence and as to whether they can be mined legally or
economically. Therefore, United States investors are also cautioned
not to assume that all or any part of the inferred resources exist.
In accordance with Canadian rules, estimates of “inferred mineral
resources” cannot form the basis of feasibility or other economic
studies, except in limited circumstances where permitted under NI
43-101.
COMPLIANCE WITH NI 43-101
Unless otherwise indicated, Capstone has prepared the technical
information in this document (“Technical Information”) based on
information contained in the technical reports, news releases and
other public filings (collectively the “Disclosure Documents”)
available under Capstone Copper Corp.’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. For readers to fully
understand the information in this document, readers are encouraged
to review the full text of the Disclosure Documents, including the
qualifications, assumptions and exclusions that relate to the
Technical Information set out in this document, 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 “Santo Domingo Project, Region
III, Chile, NI 43-101 Technical Report” effective February 19, 2020
and “Mantoverde and Mantoverde Development Project, NI 43-101
Technical Report, Chañaral / Región de Atacama, Chile” effective
November 29, 2021.
The disclosure of Scientific and Technical Information in this
document was reviewed and approved by Cashel Meagher, P.Geo.,
President and Chief Operating Officer and Peter Amelunxen, PE, VP
Technical Services (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
This document refers to certain non-GAAP financial performance
measures, including “C1 cash cost”, “cash cost”, “EBITDA”,
“adjusted EBITDA”, “operating cash flow before changes in working
capital”, “adjusted net (loss) income”, “net debt”, “net cash”,
“all-in sustaining costs”, “all-in costs”, “available liquidity”,
“expansionary capital” and “sustaining capital” are Alternative
Performance Measures. Alternative performance measures are
furnished to provide additional information. These non-GAAP
performance measures are included in this presentation because
these statistics are key performance measures that management uses
internally to monitor performance, to assess how the Company is
performing, to plan and to 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. For full information, please refer to the
Company’s latest Management Discussion and Analysis published on
its Financial Reporting webpage or on SEDAR (the “MD&A”)
C1 Cash Cost per pound: 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.
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.
Operating cash flow before change in working capital:
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.
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.
All-in sustaining costs: 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221110006192/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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