Condor Gold

Capstone Mining Reports 2016 Financial Results

VANCOUVER, Feb. 15, 2017 /CNW/ - Capstone Mining Corp. ("Capstone" or the "Company") (TSX: CS) today announced its financial results for the three months and year ended December 31, 2016. For the three months ended December 31, 2016, operating cash flow before changes in working capital1 was $75.0 million or $0.20 per share, with a net loss of $182.4 million and adjusted net income of $30.7 million or $0.08 per share after adjusting for certain non-cash and non-recurring charges. Copper production totalled 29,900 tonnes (28,800 tonnes of payable copper) at a C1 cash cost1 of $1.26 per payable pound produced with copper sales of 29,600 tonnes at a C1 cash cost1 of $1.24 per payable pound sold.

For the full year ended December 31, 2016, operating cash flow before changes in working capital1 was $156.9 million or $0.41 per share, with a net loss of $197.4 million and adjusted net income of $29.4 million or $0.08 per share after adjusting for certain non-cash and non-recurring charges. Copper production totalled 114,600 tonnes (110,700 tonnes of payable copper) at a C1 cash cost1 of $1.44 per payable pound produced with copper sales of 110,500 tonnes at a C1 cash cost1 of $1.53 per payable pound sold.

Capstone will hold a conference call and webcast on Thursday, February 16, 2017 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 year ended December 31, 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 December 31, 2016, and 2016 year-end webcast slides will also be available at http://capstonemining.com/investors/events-and-presentations/default.aspx.

Overview        
  Q4 2016 Q4 2015 2016 2015
Revenue ($ millions) 163.0 92.1 529.4 420.5
Copper produced (tonnes) 29,853 25,691 114,583 92,577
Payable copper produced (tonnes) 28,828 24,781 110,663 89,341
C1 cash cost per payable pound produced1 ($/lb) 1.26 1.81 1.44 1.99
All-in cost per payable pound produced1 ($/lb) 1.77 2.67 1.88 2.88
Fully-loaded all-in cost per payable pound produced1 ($/lb) 1.85 2.67 1.98 2.85
Copper sold (tonnes) 29,558 22,322 110,450 87,521
Realized copper price per pound sold ($/lb)* 2.48 2.05 2.27 2.35
Adjusted realized copper price per pound sold ($/lb) ** 2.35 2.26 2.28 2.43
C1 cash cost per payable pound sold1 ($/lb) 1.24 1.82 1.53 2.00
All-in cost per payable pound sold1 ($/lb) 1.74 2.78 1.97 2.92
Fully-loaded all-in cost per payable pound sold1 ($/lb) 1.82 2.78 2.07 2.89
Net loss ($ millions) (182.4) (19.5) (197.4) (251.5)
Net loss attributable to shareholders ($ millions) (125.4) (19.3) (140.0) (202.7)
Net loss attributable to shareholders per common share ($) (0.33) (0.05) (0.37) (0.53)
Adjusted net income (loss)1 ($ millions) 30.7 (8.0) 29.4 (31.9)
Adjusted net income (loss)1 attributable to shareholders ($ millions) 30.9 (7.8) 30.0 (30.4)
Adjusted net income (loss)1attributable to shareholders per common share ($) 0.08 (0.02) 0.08 (0.08)
Operating cash flow before changes in working capital1 ($ millions) 75.0 12.5 156.9 60.0
Operating cash flow before changes in working capital per common share1 ($) 0.20 0.03 0.41 0.16
Cash and cash equivalents ($ millions) 130.4 101.6 130.4 101.6
Net debt1 ($ millions) 198.6 247.9 198.6 247.9

* Q4 2016 includes a negative provisional pricing adjustment of $0.1 million (2015 – negative $4.2 million) related to prior shipments, equivalent to $0.00 per pound (2015 – $(0.09) per pound) of copper sold during the quarter. YTD includes a negative provisional pricing adjustment of $12.7 million (2015 – negative $25.8 million) related to prior shipments, equivalent to $(0.05) per pound (2015 – $(0.13) per pound) of copper sold during the year. ** Q4 2016 adjusted realized copper price includes the provisional pricing adjustments noted above and realized loss of $8.5 million (2015 gain – $10.1 million) equivalent to $(0.13) per pound (2015 gain - $0.21 per pound) related to copper derivative contracts exercised during the quarter. YTD includes a realized gain of $3.3 million (2015 – $15.9 million) equivalent to $0.01 per pound (2015 - $0.08 per pound) related to copper derivative contracts exercised during the year.

"Our strong operating performance in 2016 exceeded guidance, setting records at Pinto Valley, Minto and for Capstone as a whole," said Darren Pylot, President and CEO of Capstone. "All three of our mines generated positive net earnings, with throughput success at Pinto Valley and processing of high grade Minto North ore being key drivers in 2016."

"Despite a challenging copper price environment for most of the year, we generated operating cash flow of $156.9 million, allowing us to reduce our debt by $40 million," continued Mr. Pylot. "We anticipate taking full advantage of additional free cash flow to further reduce our debt over the coming quarters."

"Our year end results included a non-cash write-down of our Santo Domingo project based on lower forecast iron prices," continued Mr. Pylot. "The project does however, continue to have considerable optionality in a rising market."

Financial and Production Highlights for the Quarter Ended December 31, 2016

  • Net loss of $182.4 million included:
    • Income from mining operations of $55.8 million,
      • Realized copper price of $2.48 per pound
    • Production costs included a $2.0 million  non-cash charge related to the write-down of inventory (primarily supplies) at the Pinto Valley, Minto and Cozamin mines,
    • A non-cash impairment charge of $189.2 million related to mineral property, plant and equipment at Santo Domingo,
    • A commodity derivative loss of $29.9 million, comprising a realized loss of $8.5 million and unrealized losses of $21.4 million,
    • An income tax expense of $1.9 million.
  • Operating cash flow before changes in working capital1 was $75.0 million or $0.20 per share.
  • Working capital increased to $171.1 million at December 31, 2016 (which included $130.4 million of cash and cash equivalents) from $162.4 million at December 31, 2015.
  • Produced a total of 28,828 tonnes of payable copper at an estimated C1 cash cost1 of $1.26 per pound of payable copper produced and fully-loaded all-in cost1 of $1.85 per pound of payable pound copper produced.
  • Revenue of $163.0 million generated primarily from the sale of 29,557 tonnes of payable copper.

Financial and Production Highlights for the Year Ended December 31, 2016

  • Net loss of $197.4 million included:
    • Earnings from mining operations of $87.7 million,
      • Realized copper price of $2.27 per pound
    • Production costs included a $3.4 million non-cash charge related to the write-down of inventory at the Pinto Valley, Minto and Cozamin Mines,
    • A non-cash impairment charge of $189.2 million related to the Santo Domingo property,
    • A commodity derivative loss of $25.6 million, comprising a realized gain of $3.3 million combined with an unrealized loss of $28.9 million,
    • An income tax expense of $9.4 million.
  • Operating cash flow before changes in working capital1 of $156.9 million or $0.41 per common share.
  • Working capital increased $8.7 million to $171.1 million at December 31, 2016 (which included $130.4 million of cash and cash equivalents) from $162.4 million at December 31, 2015.
  • Production of 110,663 tonnes of payable copper at a C1 cash cost1 of $1.44 per pound of payable copper produced and fully-loaded all-in cost1 of $1.98 per pound of payable pound copper produced.
  • Revenue of $529.4 million generated primarily from the sale of 110,450 tonnes of copper.

Production and Additional Highlights
Pinto Valley Mine:

  • Produced 17,051 tonnes of copper during Q4 2016 at a C1 cash cost1 of $1.70 per pound of payable copper produced and all-in cost1 of $2.06 per pound of payable copper produced.
  • Produced 68,850 tonnes of copper during 2016 at a C1 cash cost1 of $1.61 per pound of payable copper produced and all-in cost1 of $1.95 per pound of payable copper produced.
  • Copper production at Pinto Valley exceeded expectations, with mill throughput and head grade above plan for the quarter and year. Throughput averaged 56,800 tonnes per day ("tpd") and 56,200 tpd for the fourth quarter and full year, respectively. The operation continued to demonstrate the mine's potential, achieving a new daily throughput record of over 64,000 tpd in December.

Cozamin Mine:

  • Produced 4,001 tonnes of copper during Q4 2016 at a C1 cash cost1 of $1.40 per pound of payable copper produced and all-in cost1 of $2.06 per pound of payable copper produced.
  • Produced 14,307 tonnes of copper during 2016 at a C1 cash cost1 of $1.48 per pound of payable copper produced and all-in cost1 of $1.88 per pound of payable copper produced.
  • During 2016, Cozamin experienced a mine development shortfall resulting in lower production, however, during the second half of the year Cozamin conducted a management reorganization and a number of additional processes were implemented to improve the development rates. Development rates continued to improve through the second half of the year (7,725 meters H2 2016 vs. 5,880 meters H1 2016).
  • During Q4 2016, Cozamin achieved the revised target production due to a better than planned average head grade of 1.63% copper offset by lower than planned mill throughput.

Minto Mine:

  • Produced 8,801 tonnes of copper during Q4 2016 at a C1 cash cost1 of $0.33 per pound of payable copper produced, which included $0.11 per pound of cost allocated from stockpile that was spent in prior periods, bringing the actual cash expended during Q4 2016 to $0.22 per pound of payable copper produced and all-in cost1 of $0.43 per payable pound of copper produced.
  • Produced 31,426 tonnes of copper during 2016 at a C1 cash cost1 of $1.03 per pound of payable copper produced, which included $0.03 per pound of cost allocated from stockpile that was spent in prior periods, bringing the actual cash expended during 2016 to $1.00 per pound of payable copper produced and all-in cost1 of $1.12 per payable pound of copper produced.
  • Copper production for the quarter met expectations while full year throughput, grade and recoveries all exceeded plan. In the fourth quarter the mill processed stockpiles, supplemented by underground mining.
  • Produced 39,506 ounces of gold contained in copper concentrate, and 11,675 ounces of gold contained in gold concentrate, for a total of 51,181 ounces produced during 2016. Under the terms of the Precious Metal Stream Agreement with Silver Wheaton, Capstone receives market rates for 50% of gold produced in excess of 30,000 ounces in a twelve-month period. We exceeded this threshold during Q4 and as a result Capstone is entitled to sell 8,320 ounces of gold at market rates. 5,100 of these ounces were sold in Q4 2016 and the remaining 3,220 ounces are expected to be sold in H1 2017.

Additional highlights:

  • On January 13, 2017 a second repayment of $20.0 million was made on the RCF, reducing the outstanding balance to $308.9 million. At the same time, Capstone chose to permanently reduce the credit available under the RCF from $420 million to $400 million. This payment was in addition to a $20.0 million payment and permanent credit reduction made in Q4 2016. The combination of this lower commitment and the strong debt coverage ratio at December 31, 2016 resulted in the Company achieving the second lowest tier on the RCF pricing grid with interest rates of LIBOR plus 2.75% and stand-by fees of 0.6188%. This will result in annualized savings of almost $1.5 million per year in interest and stand-by fees.
  • As a result of the decline in long term iron ore prices during 2016, Capstone recorded an impairment on the Santo Domingo development Copper/Iron project of $189.2 million during Q4 2016.

Operating Outlook

Capstone's 2017 production guidance is for 94,000 tonnes (±5%) of copper at a C1 Cash Cost1 of $1.60 to $1.70, All-In Cost1 of $2.15 to $2.25 and Fully-Loaded All-In Cost1 of $2.20 to $2.30, per pound of payable copper produced net of by-product and selling costs.

Capital Outlook

Capstone's 2017 capital expenditures are expected to be $67 million, with $35 million for sustaining capital at Pinto Valley and Cozamin, $2 million related to PV3 permitting activities and $30 million for capitalized stripping at Pinto Valley. An additional $10 million is budgeted for both brownfield and greenfield exploration, however as exploration activities are discretionary they will be aligned with prevailing market conditions, financing capacity and corporate priorities.

Conference Call and Webcast Details

Date:                              Thursday, February 16, 2017
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=1323771&s=1&k=AFC597F521C716D97270B033FC966280
Replay:                           North America: 1-888-390-0541, International: +416-764-8677
Replay Passcode:       063291#

The conference call replay will be available until Thursday, February 23, 2017. 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.

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