VANCOUVER, Oct. 25, 2016 - Capstone Mining Corp. ("Capstone" or the "Company") (TSX: CS) today announced its financial results for the three and nine months ended September 30, 2016. Operating cash flow before changes in working capital1 for the quarter was $41.5 million or $0.11 per share, with net income of $11.2 million. Copper production for the quarter totalled 32,027 tonnes (30,939 tonnes of payable copper) at a C1 cash cost1 of $1.32 per payable pound produced with copper sales for the quarter of 30,359 tonnes at a C1 cash cost1 of $1.49 per payable pound sold.
Capstone will hold a conference call and webcast on Wednesday, October 26, 2016 at 11:30 a.m. Eastern time (8:30 a.m. Pacific time) to discuss these results; call-in details and information on associated slides are provided at the end of this release. This release should be read in conjunction with Capstone's consolidated financial statements and management's discussion and analysis ("MD&A") for the quarter ended September 30, 2016, which are available on Capstone's website at http://capstonemining.com/investors/financial-reporting/default.aspx and on SEDAR. An updated corporate presentation, including results to September 30, 2016, in addition to the Q3 2016 webcast slides, will also be available at http://capstonemining.com/investors/events-and-presentations/default.aspx.
| Overview | ||||||
| Q3 2016 | Q3 2015 | 2016 YTD | 2015 YTD | |||
| Revenue ($ millions) | 139.9 | 113.0 | 366.4 | 328.4 | ||
| Copper produced (tonnes) | 32,027 | 22,109 | 84,730 | 66,886 | ||
| Payable copper produced (tonnes) | 30,939 | 21,340 | 81,836 | 64,560 | ||
| C1 cash cost per payable pound produced1 ($/lb) | 1.32 | 1.98 | 1.50 | 2.05 | ||
| All-in cost per payable pound produced1 ($/lb) | 1.65 | 2.91 | 1.91 | 2.97 | ||
| Fully-loaded all-in cost per payable pound produced1 ($/lb) | 1.75 | 2.75 | 2.02 | 2.92 | ||
| Copper sold (tonnes) | 30,359 | 24,645 | 80,893 | 65,200 | ||
| Realized copper price per pound sold ($/lb)* | 2.18 | 2.24 | 2.19 | 2.45 | ||
| Adjusted realized copper price per pound sold ($/lb) ** | 2.21 | 2.35 | 2.26 | 2.49 | ||
| C1 cash cost per payable pound sold1 ($/lb) | 1.49 | 2.16 | 1.63 | 2.05 | ||
| All-in cost per payable pound sold1 ($/lb) | 1.82 | 2.95 | 2.05 | 2.94 | ||
| Fully-loaded all-in cost per payable pound sold1 ($/lb) | 1.93 | 2.80 | 2.16 | 2.90 | ||
| Net income (loss) ($ millions) | 11.2 | (216.0) | (15.0) | (232.1) | ||
| Net income (loss) per common share ($) | 0.03 | (0.44) | (0.04) | (0.48) | ||
| Adjusted net income (loss)1 ($ millions) | 7.8 | (16.3) | (1.2) | (23.9) | ||
| Adjusted net income (loss)1 per common share ($) | 0.02 | (0.04) | (0.00) | (0.06) | ||
| EBITDA1 ($ millions) | 50.5 | (185.4) | 91.8 | (146.5) | ||
| Operating cash flow before changes in working capital1 ($ millions) | 41.5 | 9.2 | 81.9 | 47.6 | ||
| Operating cash flow before changes in working capital per common share1 ($) | 0.11 | 0.02 | 0.21 | 0.12 | ||
| Cash and cash equivalents ($ millions) | 120.4 | 108.5 | 120.4 | 108.5 | ||
| Net debt1 ($ millions) | 224.2 | 216.1 | 224.2 | 216.1 |
| * Q3 2016 includes a negative provisional pricing adjustment of $1.4 million (2015 – negative $8.0 million) related to prior shipments, equivalent to $(0.02) per pound (2015 – $(0.15) per pound) of copper sold during the quarter. 2016 YTD includes a negative provisional pricing adjustment of $12.9 million (2015 – negative $21.6 million) related to prior shipments, equivalent to $(0.07) per pound (2015 – ($0.15) per pound) of copper sold during the nine month period. The Q3 2016 and 2016 YTD negative provisional pricing adjustments were predominantly related to assay adjustments. The Q3 2016 figure of ($1.4 million) is broken down as ($0.3 million) related to price adjustments and ($1.1 million) related to assay adjustments. This translates into adjustments of ($0.00) and ($0.02) respectively on a per pound sold basis. The YTD Q3 2016 figure of ($12.9 million) is broken down as ($0.9 million) related to price adjustments and ($12.0 million) related to assay adjustments. This translates into adjustments of ($0.01) and ($0.06) respectively on a per pound sold basis.** Q3 2016 Adjusted realized copper price includes a realized gain of $2.0 million related to maturing forward contracts and nil related to exercised put contracts (Q3 2015 – $5.7 million related to exercised put contracts). 2016 YTD Adjusted realized copper price includes a realized gain of $2.2 million related to maturing forward contracts and $9.6 million related to exercised put contracts (2015 – $5.7 million related to exercised put contracts). |
"Operating performance in the third quarter continued to be very strong, setting throughput records at both Pinto Valley and Minto," said Darren Pylot, President and CEO of Capstone. "In addition, we received the benefit from a full quarter of processing high grade Minto North ore."
"Our operating cash flow this quarter of $41.5 million has de-levered our balance sheet, even in this low copper price environment, reducing our net debt by $20 million from the second quarter to $224 million," continued Mr. Pylot. "Subsequent to quarter end, we paid down our drawn debt by $20 million. We anticipate taking full advantage of additional free cash flow to further reduce our debt balance over the coming quarters."
Financial Highlights for the Three Months Ended September 30, 2016
- Net income of $11.2 million or $0.03 per common share which included:
- Earnings from mining operations of $27.1 million,
- Production costs included a $6.5 million non-cash recovery related to the reversal of inventory write-downs, primarily at Minto,
- A gain on commodity derivatives of $1.0 million,
- $3.2 million in current and deferred tax expense.
- Working capital increased to $186.1 million at September 30, 2016 from $160.6 million at June 30, 2016, primarily due to strong cash flows generated from operating activities ($41.1 million).
Financial Highlights for the Nine Months Ended September 30, 2016
- Net loss of $15.0 million or $0.04 per common share which included:
- Earnings from mining operations of $2.8 million,
- Production costs included a $1.4 million non-cash charge related to the write-down of inventories, primarily at Minto,
- Share-based compensation expense of $6.5 million, driven primarily by an increase in Capstone's share price,
- A gain on commodity derivatives of $4.2 million, comprising $2.8 million on copper forward contracts entered into during Q1 2016 and $1.5 million on $2.60 copper puts entered into during Q2 2015, which expired in February 2016,
- $7.5 million in current and deferred tax expense.
- Working capital increased to $186.1 million at September 30, 2016 from $162.4 million at December 31, 2015 primarily due to $74.4 million of cash flows generated from operating activities and $15.2 million in proceeds from the exercise of commodity derivatives.
Production and Additional Highlights for the Three and Nine Months Ended September 30, 2016
Pinto Valley Mine:
- Produced 16,658 tonnes of copper in concentrates and cathode during Q3 2016 at a C1 cash cost1 of $1.69 per pound of payable copper produced.
- Produced 51,799 tonnes of copper in concentrates and cathode during 2016 YTD at a C1 cash cost1 of $1.59 per pound of payable copper produced.
- During Q3 2016, copper production continued to be strong as a result of mill throughput above plan, setting a fourth consecutive quarterly record of 57,295 tonnes per day ("tpd"), as well as achieving a monthly throughput record of 58,075 tpd in August and a daily throughput record of 63,900 tpd in September. Higher mill throughput and better than planned copper grade contributed to lower costs on a per pound basis.
Cozamin Mine:
- Produced 3,359 tonnes of copper in concentrates during Q3 2016 at a C1 cash cost1 of $1.50 per pound of payable copper produced.
- Produced 10,306 tonnes of copper in concentrates during 2016 YTD at a C1 cash cost1 of $1.51 per pound of payable copper produced.
- During Q3 2016, work continued to advance development, with daily development rates improving steadily as a result of improvements implemented throughout the year. Production was consistent with the Cozamin guidance that was revised at the end of Q2 2016.
Minto Mine:
- Produced 12,010 tonnes of copper in concentrates during Q3 2016 at a C1 cash cost1 of $0.76 per pound of payable copper produced.
- Produced 22,625 tonnes of copper in concentrates during 2016 YTD at a C1 cash cost1 of $1.30 per pound of payable copper produced.
- Q3 2016 production continued above plan, reaching levels projected in the increased Q2 2016 Minto guidance. Copper grade averaged 3.16% for the quarter, reflecting a full quarter of processing Minto North high grade ore. The mill recorded a quarterly throughput record, and recoveries were strong due to the lower than expected oxidized content in the Minto North ore.
- Open pit mining of the Minto North pit was completed at the end of September 2016, with the mill now processing high grade stockpile combined with underground ore. Underground mining continued through Q3 2016 and is planned to extend into July 2017, as additional areas of high-grade underground ore continue to be mined. We are currently reviewing the economics of another stage of mining in the Area 2 pit that could potentially extend operations through 2017. We continue to expect the operation will be temporarily closed in 2017 once underground mining is completed and all the ore from the remaining stockpiles is processed.
Additional highlights:
- Total Net Debt/EBITDA was 1.7:1 at September 30, 2016. With the Total Net Debt/EBITDA ratio falling below 2.0:1, under the revolving credit facility ("RCF") we realized a 25 basis point reduction in interest rates effective mid-October 2016 to LIBOR plus 3.00% from LIBOR plus 3.25%.
- On October 25, 2016 a repayment of $20.0 million was made on the RCF, reducing the outstanding balance to $328.9 million. At the same time, Capstone chose to reduce the credit available under the RCF from $440 million to $420 million, which further reduces the interest rate to LIBOR plus 2.75%.
Operating Outlook
Capstone's consolidated 2016 guidance remains unchanged. The 2016 guidance is to produce 108,000 tonnes (±5%) of copper from its Pinto Valley, Cozamin and Minto mines at a C1 cash cost1 of $1.45 to $1.55, an All-in cost1 of $1.90 to $2.00 and Fully-loaded all-in cost1 of $2.05 to $2.15 per pound of payable copper produced.
Capstone expects to finish the year at the high end of the consolidated production guidance. Consolidated C1 cash cost, All-in cost, and Fully-loaded all-in cost guidance remains unchanged, as lower costs at Pinto Valley and higher volume at Minto are expected to offset higher operating costs at Cozamin.
Conference Call and Webcast Details
Date: Wednesday, October 26, 2016
Time: 11:30 am Eastern Time (8:30 am Pacific Time)
Dial in: North America: 1-888-390-0546, International: +416-764-8688
Webcast: http://event.on24.com/r.htm?e=1239352&s=1&k=8BAA23C969A4C534E3BE63477AC38ADA
Replay: North America: 1-888-390-0541, International: +416-764-8677
Replay Passcode: 651862#
The conference call replay will be available until Wednesday, November 2, 2016. The conference call audio and transcript will be available on Capstone's website within 48 hours of the call at http://capstonemining.com/investors/events-and-presentations/default.aspx.
About Capstone Mining Corp.
Capstone Mining Corp. is a Canadian base metals mining company, focused on copper. We are committed to the responsible development of our assets and the environments in which we operate. Our three producing mines are the Pinto Valley copper mine located in Arizona, US, the Cozamin copper-silver mine in Zacatecas State, Mexico and the Minto copper mine in Yukon, Canada. In addition, Capstone has two development projects; the large scale 70% owned copper-iron Santo Domingo project in Region III, Chile, in partnership with Korea Resources Corporation, and the 100% owned Kutcho copper-zinc project in British Columbia, Canada, as well as exploration properties in Chile and US. Capstone's strategy is to focus on the optimization of operations and assets in politically stable, mining-friendly regions, centred in the Americas. Our headquarters are in Vancouver, Canada and we are listed on the Toronto Stock Exchange (TSX). Further information is available at www.capstonemining.com.
