Capstone Mining Reports Operating Cash Flow Increases 134% to $47.1 Million

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VANCOUVER, May 7, 2014 /CNW/ - Capstone Mining Corp. ("Capstone") (TSX:CS.TO - News) today announced its financial results for the three months ended March 31, 2014, posting a loss of $4.4 million due to a non-cash ore stockpile write-down. Operating cash flow before changes in working capital(1) was $47.1 million compared to $20.1 million in the first quarter of 2013. Copper production for the quarter at Capstone's three operating mines, Pinto Valley, Cozamin and Minto, totalled 27,644 tonnes of copper in concentrates and cathode (26,635 tonnes of payable copper) at a C1 cash cost(1) of $1.89 per payable pound of copper produced.

Capstone will hold a conference call and webcast on Thursday, May 8, 2014 at 11:30 am Eastern Time (8:30 am Pacific Time) to discuss these results; call-in details are provided at the end of this release. This release should be read in conjunction with Capstone's unaudited condensed interim consolidated financial statements and management's discussion and analysis ("MD&A") for the three months ended March 31, 2014, which are available on Capstone's website at: http://capstonemining.com/s/financial-statements.asp and on SEDAR. An updated corporate presentation, including results to March 31, 2014, will also be available at http://capstonemining.com/s/presentations.asp.

NOTE: The transaction to acquire the Pinto Valley Mine closed on October 11, 2013 and therefore its results of operations are included in the Company's reported results from that date forward. As such, there are no comparable Q1 2013 figures for the Pinto Valley Mine.

Overview

  Q1 2014 Q1 2013
Revenue ($ millions) 160.8 57.7
     
Copper in concentrates produced (tonnes) 27,023 8,430
Copper cathode produced (tonnes) 621 -
     
Payable copper produced (tonnes) 26,635 8,111
C1 cash cost per payable pound of copper produced(1) ($) 1.89 1.72
     
Copper sold (tonnes) 26,601 6,894
Realized copper price per pound sold ($) 3.09 3.51
     
Net (loss) earnings ($ millions) (4.4) 6.9
Net (loss) earnings per common share ($) (0.01) 0.02
     
Adjusted EBITDA(1) ($ millions) 55.5 23.6
Adjusted EBITDA(1) per common share ($) 0.15 0.06
     
Operating cash flow before changes in working capital(1) ($ millions) 47.1 20.1
Operating cash flow before changes in working capital per common share(1) ($) 0.13 0.05
     
Net debt (cash)(1) ($ millions) 175.5 (485.4)


 

"With all three of our mines operating very well in the first quarter, we generated operating cash flow before changes in working capital of $47 million," said Darren Pylot, President and CEO of Capstone. "That strong cash flow allowed us to reduce our net debt to $175 million, while retaining a cash balance of $136 million."

"We marked a significant milestone in the first quarter with the Pinto Valley pre-feasibility study extending the mine life an additional eight years to 2026," continued Mr. Pylot. "With the mine life confirmed and the operation now stabilized at its targeted run rate, we can fully turn our attention to efficiencies at the mine and commence our planning for the potential long-term operation beyond 12 years."

Financial and Production Highlights for the Three Months Ended March 31, 2014

  • Net loss of $4.4 million or $0.01 per common share which included:
    • Earnings from mining operations of $17.1 million,
      • Realized copper price of $3.09 per pound.
    • Production costs included a $10.0 million non-cash charge related to the write-down of ore stockpile inventory at Minto,
    • $7.8 million tax expense.
  • Adjusted EBITDA(1) of $55.5 million or $0.15 per common share after making adjustments for certain non-cash and other items.
  • Operating cash flow before changes in working capital(1) of $47.1 million or $0.13 per common share.
  • Working capital increased to $140.3 million at March 31, 2014 (which included $135.7 million of cash and cash equivalents) from $137.4 million at December 31, 2013.
  • Production of 26,658 tonnes of payable copper at a C1 cash cost(1) of $1.89 per pound of payable copper produced.
  • Revenue of $160.8 million generated primarily from the sale of 26,601 tonnes of payable copper.

Operational Highlights for the Three Months Ended March 31, 2014

Pinto Valley Mine:

  • Produced 16,701 tonnes of copper in concentrates and 621 tonnes of copper cathode at a C1 cash cost(1) of $2.06 per pound of payable copper, a 20 cent per pound reduction relative to the fourth quarter of 2013. This trend is expected to continue as the operation completes its ramp-up, begins to take advantage of the conversion to its own operating system at the end of February and gathers momentum from productivity improvement initiatives begun following the transaction in Q4 2013.
  • Completed the Pinto Valley Phase 2 prefeasibility study ("PV2 PFS") in March 2014, extending the mine life at Pinto Valley to 2026, at an average annual production of 54,200 tonnes of copper in concentrate and 2,900 tonnes of copper cathode, at a C1 cash cost(1) of $2.00 per pound of payable copper.

Cozamin Mine:

  • Produced 5,101 tonnes of copper in concentrates at a C1 cash cost(1) of $1.23 per pound of payable copper, demonstrating an ability to control on-site cost inflation and maintain its second quartile cost position.

Minto Mine:

  • Produced 5,221 tonnes of copper in concentrates at a C1 cash cost(1) of $1.94 per pound of payable copper as compared to $2.50 per pound in Q1 2013 as a result of strong throughput, better grades and effective cost control.

Santo Domingo Project:

  • Work on the Feasibility study ("FS") and engineering continued, with the FS on target for completion mid-year 2014.

Greenfield Exploration:

  • Exploration work continued during Q1 2014 at both the Project Providencia in Region II, Chile and the Cumbral Project (Westminster Resources Ltd. Option) in Sonora, Mexico. Capstone is now in receipt of the airborne magnetic, VTEM and radiometric surveys and is executing a large ground follow-up program of mapping and geochemistry at Providencia while diamond drilling commenced at the Cumbral porphyry project.

Production Outlook

Capstone's 2014 guidance for 102,000 tonnes ±5% of copper in concentrates and 2,800 tonnes of cathode, at a C1 cash cost(1) of $1.90 to $2.00 per pound of payable copper, net of by-product credits and selling costs, remains unchanged.