All amounts in US$ unless otherwise
indicated
Capstone Copper Corp. (“Capstone” or the “Company”) (TSX:
CS) (ASX: CSC) today reported financial results for the three
months and year ended December 31, 2023 (“Q4 2023”). Copper
production in Q4 totaled 44,103 tonnes at C1 cash costs1 of $2.67
per payable pound of copper produced. Link HERE for Capstone’s Q4
2023 webcast presentation.
John MacKenzie, CEO of Capstone, commented, "Last year set us up
for transformational growth in 2024. We completed construction at
our flagship Mantoverde Development Project ("MVDP") in Chile,
advanced key studies to support our future growth, and our
operations delivered their strongest quarter to finish off the
year. In the first half of 2024, we will be focused on the ramp-up
of MVDP and maintaining consistently strong production across our
portfolio. In the second half of 2024, we will be focused on
generating record copper production and cash flow."
Q4 2023 OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Achieved production guidance2 for the year ended December 31,
2023, with consolidated copper production of 164,353 tonnes.
Consolidated copper production for Q4 2023 was 44,103 tonnes at C1
cash costs1 of $2.67/lb, which consisted of 15,933 tonnes at
Pinto Valley, 11,587 tonnes at Mantos Blancos, 10,019 tonnes at
Mantoverde, and 6,564 tonnes at Cozamin.
- Net loss of $19.5 million, or $(0.02) per share for Q4 2023
compared to net loss of $28.4 million, or $(0.03) per share for Q4
2022.
- Adjusted net income attributable to shareholders1 of $10.8
million, or $0.02 per share for Q4 2023. Q4 2023 adjusted net
income attributable to shareholders1 is lower than Q4 2022 adjusted
net income attributable to shareholders1 of $60.4 million due to
lower copper volumes sold.
- Adjusted EBITDA1 of $88.3 million for Q4 2023 compared to $81.3
million for Q4 2022. The increase in Adjusted EBITDA1 is driven by
a higher copper price of $3.69/lb compared to $3.45/lb (prior to
unrealized provisional pricing adjustments), partially offset by
lower copper sold (43.3 thousand tonnes in Q4 2023 versus 44.7
thousand tonnes in Q4 2022).
- Operating cash flow before changes in working capital of $80.4
million in Q4 2023 compared to $76.1 million in Q4 2022.
- At the Mantoverde Development Project ("MVDP"), construction of
all elements required to commence commissioning activities were
completed by year end 2023. MVDP will continue to systematically
commission the concentrator plant with first saleable concentrate
expected in Q2 2024. Project total capital remains unchanged at
$870 million. Focus is on a safe, efficient and phased project
commissioning and ramp-up.
- Expected 2024 consolidated copper production growth of 25%
driven by the ramp up of MVDP, resulting in 2024 guidance of
190,000 to 220,000 tonnes of copper at 17% lower C1 cash costs1 of
$2.30/lb to $2.50/lb. Total 2024 sustaining and expansionary
capital expenditure guidance is $275 million, plus an additional
$180 million for capitalized stripping.
- Total available liquidity1 of $352.8 million as at December 31,
2023, composed of $126.8 million of cash and short-term
investments, and $226.0 million of undrawn amounts on the corporate
revolving credit facility. Subsequent to year-end, the Company
completed a Share Offering that will increase available liquidity
through net proceeds to the Company of approximately $253 million
(C$342 million).
1 These are Non-GAAP performance measures. Refer to the section
titled “Non-GAAP and Other Performance Measures” section. 2
Production guidance as most recently disclosed in the Company's
MD&A for the three and nine months ended September 30,
2023.
OPERATIONAL OVERVIEW
Refer to Capstone's Q4 2023 MD&A and Financial Statements
for detailed operating results.
Q4 2023
Q4 2022
2023
2022
Copper production (000s tonnes)
Sulphide business
Pinto Valley
15.9
15.0
55.1
56.8
Cozamin
6.6
5.8
24.3
24.5
Mantos Blancos
9.7
10.0
38.0
29.0
Total sulphides
32.2
30.8
117.4
110.3
Cathode business
Mantos Blancos
1.9
4.2
11.5
12.2
Mantoverde3
10.0
10.5
35.4
36.3
Total cathodes
11.9
14.7
46.9
48.5
Consolidated
44.1
45.5
164.3
158.8
Copper sales
Copper sold (000s tonnes)
43.3
44.7
160.2
159.9
Realized copper price1 ($/pound)
3.74
3.74
3.84
3.76
C1 cash costs1 ($/pound)
produced
Sulphides business
Pinto Valley
2.36
2.48
2.79
2.63
Cozamin
1.76
1.40
1.74
1.24
Mantos Blancos
2.58
1.82
2.74
2.16
Total sulphides
2.30
2.07
2.56
2.20
Cathode business
Mantos Blancos
3.32
2.69
3.11
3.41
Mantoverde
3.68
3.65
3.83
3.63
Total cathodes
3.62
3.37
3.66
3.58
Consolidated
2.67
2.50
2.88
2.63
3 Mantoverde production shown on a 100% basis.
Consolidated Production
Q4 2023 copper production of 44.1 thousand tonnes was 3% lower
than Q4 2022 primarily as a result of lower oxide production at
Mantos Blancos driven by lower dump throughput, grade and
recoveries.
Q4 2023 C1 cash costs1 of $2.67/lb were 7% higher than $2.50/lb
Q4 2022 mainly impacted by 3% lower production ($0.19/lb),
partially offset by lower operational costs (-$0.02/lb).
Pinto Valley Mine
Copper production of 15.9 thousand tonnes in Q4 2023 was 6%
higher than in Q4 2022. Lower mill throughput during the quarter
(Q4 2023 - 53,134 tonnes per day ("tpd") versus Q4 2022 - 55,222
tpd), resulting from unplanned 97 hours of downtime, was offset by
higher grades (Q4 2023 – 0.36% versus Q4 2022 - 0.32%) due to
mining in the higher grade Castle Dome area of the mine. Recoveries
were slightly lower compared to the same period last year (Q4 2023
- 86.5% versus Q4 2022 - 86.9%).
C1 cash costs1 of $2.36/lb in Q4 2023 were 5% lower than Q4 2022
of $2.48/lb primarily due to higher capitalized stripping
(-$0.34/lb), higher gold by-product credits (-$0.21/lb) and higher
production (-$0.16/lb), partially offset by increases in operating
costs driven by higher contractor spend, electricity cost, ball
mill liner cost and mechanical parts costs ($0.53/lb), stockpile
drawdown ($0.04/lb) and higher treatment costs on higher volume of
copper sold ($0.03/lb).
Mantos Blancos Mine
Q4 2023 production was 11.6 thousand tonnes, composed of 9.7
thousand tonnes from sulphide operations and 1.9 thousand tonnes of
cathode from oxide operations, 18% lower than the 14.2 thousand
tonnes produced in Q4 2022. The lower production was driven
primarily by lower dump throughput tied to power outage and issues
in leach pumping system, and lower grade and recoveries impacting
cathode production. The mill throughput of 13,814 tpd in Q4 2023
was impacted by mill downtime caused by a planned repair that
lasted three days and additional maintenance of the concentrator
plant that lasted five days (power outage and pinion shaft bearing
assessment). A plan to address the plant stability is underway that
includes improved maintenance and optimization of the concentrator
and the tailings system. Mantos Blancos 2024 sustaining capital
guidance includes approximately $35 million to achieve sustainable
nameplate operating rates. During the first half of 2024, the focus
will be on receiving and installing the engineering and
infrastructure upgrades in the tailings dewatering area of the
plant in the second quarter. The Company expects Mantos Blancos to
achieve its nameplate operating throughput rates late in the second
quarter.
Combined Q4 2023 C1 cash costs1 were $2.71/lb ($2.58/lb
sulphides and $3.32/lb cathodes) compared to combined C1 cash
costs1 of $2.09/lb in Q4 2022, 30% higher than the same period last
year mainly due to lower production ($0.48/lb), an increase in
contracted services and labour costs mainly driven by unfavourable
foreign exchange rate and inflation impact ($0.13/lb), spare parts
spend ($0.12/lb), plant maintenance and spare parts spend
($0.18/lb), partially offset by lower key consumable prices
(-$0.29/lb) (realized acid prices averaged $153/t in Q4 2023 versus
$273/t in Q4 2022 and diesel price averaged $0.82/l in Q4 2023
versus $0.97/l in Q4 2022).
Mantoverde Mine
Q4 2023 copper production of 10.0 thousand tonnes was 5% lower
compared to 10.5 thousand tonnes in Q4 2022. Heap recoveries were
lower (64.6% in Q4 2023 versus 77.0% in Q4 2022), which was
partially offset by higher dump throughput as a catch-up of
September's lower throughput due to a temporary sulphuric acid
supply shortage at a Chilean smelter.
Q4 2023 C1 cash costs1 were $3.68/lb, 1% higher than $3.65/lb in
Q4 2022 due to an increase in contracted services, explosive
consumption, spare parts spend and labour cost mainly driven by
higher mine movement ($0.74/lb) and lower production (0.12/lb),
partially offset by lower key consumable prices (-$0.83/lb).
Realized sulphuric acid prices averaged $174/t in Q4 2023 versus
$253/t in Q4 2022, whilst energy prices averaged $0.21/kWh in Q4
2023 versus $0.17/kWh in Q4 2022 and diesel price averaged $0.83/l
in Q4 2023 versus $0.94/l in Q4 2022.
Cozamin Mine
Q4 2023 copper production of 6.6 thousand tonnes was 14% higher
than the same period prior year mainly on higher mill throughput
(3,786 tpd in Q4 2023 versus 3,430 tpd in Q4 2022). Grades were
higher than the same period last year due to mining sequence (1.95%
in Q4 2023 versus 1.89% in Q4 2022). Recoveries were consistent
quarter over quarter.
Q4 2023 C1 cash costs1 were 26% higher than the same period last
year mainly due to inflationary price increases on the main
consumables, unfavourable foreign exchange rate, start of paste
plant operations, which resulted in an increase in labour,
contractor and cement costs, changes in mining method and
additional bolting requirements ($0.51/lb) and higher treatment
costs ($0.07/lb), partially offset by higher copper production
(-$0.17/lb) and higher by-product credits due to higher silver
prices (-$0.06/lb).
Mantoverde Development Project
Construction of all elements of the MVDP that were required to
commence commissioning were completed during the fourth quarter of
2023. Commissioning activities are underway, and the Company is
focused on a safe, efficient and phased project commissioning and
ramp-up. MVDP is expected to enable the mine to process 231 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 (nominal 32,000 ore tonnes per
day) and tailings storage facility, and the expansion of the
existing desalination plant and other minor infrastructure.
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 Ausenco
during the execution phase. The contract with Ausenco includes the
project commissioning and ramp-up.
Key milestones during the commissioning and ramp-up include:
- First ore to the primary crusher – completed in Q4 2023
- First ore to the grinding circuit – on track for Q1 2024
- First saleable concentrate – on track for Q2 2024
- Achievement of nameplate operating rates – expected during Q3
2024
As of December 31, 2023, cash capital spent at MVDP totaled $809
million versus the project capital estimate of $870 million.
A virtual tour of MVDP can be viewed at
https://vrify.com/decks/12698-mantoverde-development-project
MVDP Optimized FS and Phase II
The Company is currently analyzing the next expansion of the
sulphide concentrator. Capstone has identified that the
desalination plant capacity and major components of the comminution
and flotation circuits of the MVDP can sustain an average annual
throughput of approximately 45,000 tonnes per day (an increase of
over 40% above the base case nameplate throughput capacity).
Capstone continues to work with Ausenco's engineering team to
develop the MVDP Optimized Feasibility Study, including evaluating
the costs and timelines of debottlenecking the minor components of
the plant to meet the potential increased throughput target.
Completion of the optimized feasibility study is expected in the
first half of 2024.
Given the above, the Mantoverde Phase II opportunity will
evaluate the addition of an entire second processing line, possibly
a duplication of the first line, to process some of the additional
approximately 1.0 billion tonnes of resources not in reserves.
Santo Domingo Feasibility Study Update
The Company has continued updating the Feasibility Study ("FS")
with contributions from third parties. Ausenco is optimizing the
process configuration and updating the Technical Report to take
into consideration recently produced metallurgical testwork data,
updated mine plan with a lower strip ratio and a modernized milling
and flotation circuit with a lower overall footprint and operating
cost compared with the previous design. One of the key improvements
is the definition of an iron concentration circuit that can produce
two different qualities of product: a bulk 65% grade iron
concentrate and a premium 67% iron concentrate. The Technical
Report is expected to be delivered in the first half of 2024.
Mantoverde - Santo Domingo Cobalt Study
A district cobalt plant for Mantoverde - Santo Domingo may allow
for low-cost by-product cobalt production while producing a
by-product of sulphuric acid which can then be consumed internally
to further significantly lower operating costs in the cathode
process at Mantoverde.
The cobalt recovery process comprises a pyrite flotation step to
recover cobaltiferous pyrite from MVDP tails and redirect it to the
dynamic heap leach pads, which will be upgraded to a bio-leach
configuration through the addition of an aeration system. The
pyrite oxidizes in the leach pads and the solubilized cobalt is
recovered via an ion exchange plant treating a bleed stream from
the copper solvent extraction plant. The approach has been
successfully demonstrated at the bench scale, and onsite piloting
commenced in January 2024. Engineering has commenced for a small
plant treating only Mantoverde pyrite concentrates to produce up to
1,500 tonnes per annum ("tpa") of contained cobalt. In line with
this, Santo Domingo has initiated a Feasibility Study to assess, as
part of the copper/iron circuit overall layout optimization being
conducted by Ausenco, the optimum process configuration for the
pyrite flotation and pumping transportation facilities needed to
transport pyrite concentrate to Mantoverde's leach facilities.
At a combined MV-SD target of 4.5 to 6.0 thousand tpa of mined
cobalt production, this would be one of the largest and lowest cost
cobalt producers in the world, outside of Indonesia and the
DRC.
PV District Growth Study
The company continues to review and evaluate the consolidation
potential of the Pinto Valley district. Opportunities under
evaluation include a potential mill expansion and increased
leaching capacity supported by optimized water, heap and dump
leach, and tailings infrastructure. District consolidation could
unlock significant ESG opportunities and may transform our approach
to create value for all stakeholders in the Globe-Miami District.
Constructive discussions with key district stakeholders advanced
during the quarter.
Chilean Tax Reform
In August 2023, Chile passed the Mining Royalty into law to be
effective on January 1, 2024, replacing the prior Specific Tax on
Mining Activity. As a change in tax law is accounted for in the
period of enactment, rather than from its effective date, the
Company recorded an initial deferred income tax charge and a
corresponding increase to deferred income tax liabilities during Q3
2023.
The Mining Royalty contains two components, an 1% ad-valorem
component on net copper revenues and a mine operating margin
"(MOM") component based on rates ranging from 8% to 26%.
The Mining Royalty includes a maximum limit to the total tax
burden, consisting of (1) corporate income tax, (2) Mining Royalty
(both ad-valorem and MOM components) and (3) imputed withholding
taxes. The Mining Royalty establishes that when the sum of the
three components exceeds 46.5% of MOM, then the Mining Royalty is
to be adjusted in such a way that it does not exceed the limit.
The Mining Royalty is not expected to have an impact on the
Santo Domingo mine, which has 15 years of tax stability post
commencement of commercial production as a result of Decree Law No.
600 ("DL 600") during which time it will remain subject to the
prior Specific Tax on Mining. Furthermore, given the Company's
growth projects in Chile, we do not expect to incur cash
withholding taxes for several years, although, the deduction is
available when calculating the cap under the new Mining
Royalty.
Management and Board of Director Additions
Effective January 15, 2024, Oscar Flores joined Capstone as
General Manager, Mantoverde. Previous General Manager, Pablo
Asiain, will be retiring effective March 31, 2024. During this
transition period, Mr. Flores and Mr. Asiain will work closely
together to transfer knowledge and responsibilities to ensure
operational continuity during the MVDP commissioning and ramp-up.
Mr. Flores is a Mining Engineer with over 25 years of progressive
experience, including past general management positions with
Kinross, AMSA, Anglo American, and Codelco in Chile, along with New
Gold in Mexico, Australia, and Canada.
Effective January 8, 2024, Gordon Bell joined Capstone's Board
of Directors as a new Independent Director. He was most recently
Vice Chairman for the Mining and Metals Group of RBC Capital
Markets before his retirement from RBC Capital Markets in 2022.
Previously Mr. Bell was the Global Head for RBC's Mining &
Metals group, leading the expansion and growth of the firm's Mining
and Metals practice domestically as well as in London, Australia
and Asia. Mr. Bell has global expertise in corporate strategy, debt
and equity financing, shareholder engagement, and mergers and
acquisitions. He received a Bachelor of Science in Mining
Engineering from Queens University in Kingston, Ontario and an MBA
from Washington University in St. Louis, Missouri.
2024 Outlook
Guidance for 2024 on production, C1 cash costs1, and capital
expenditures that was previously disclosed on January 24, 2024
remains unchanged. Capstone expects to produce between 190 to 220
thousand tonnes of consolidated copper in 2024, at C1 cash costs1
of $2.30 to $2.50 per payable pound of copper produced. Capstone
first half (H1), second half (H2) 2024, and full year 2024
production and cost guidance are as follows:
H1 2024
H2 2024
Full Year 2024
Guidance
Copper Production
(‘000s tonnes)
C1 Cash
Costs1 (US$ per payable lb Cu Produced)
Copper Production
(‘000s tonnes)
C1 Cash
Costs1 (US$ per payable lb Cu Produced)
Copper Production
(‘000s tonnes)
C1 Cash
Costs1 (US$ per payable lb Cu Produced)
Sulphides Business
Pinto Valley
28 – 30
$2.60 – $2.80
30 – 34
$2.40 – $2.60
58 – 64
$2.50 – $2.70
Cozamin
11 – 12
$1.90 – $2.10
11 – 12
$1.85 – $2.05
22 – 24
$1.85 – $2.05
Mantoverde2
–3
–3
25 – 35
$1.45 – $1.75
25 – 35
$1.45 – $1.75
Mantos Blancos
20 – 24
$2.55 – $2.75
23 – 25
$1.90 – $2.10
43 – 49
$2.10 – $2.30
Total Sulphides
59 – 66
$2.45 – $2.65
89 – 106
$2.00 – $2.20
148 – 172
$2.10 – $2.30
Cathode Business
Mantoverde2
18 – 20
$3.35 – $3.55
18 – 20
$3.10 – $3.30
36 – 40
$3.20 – $3.40
Mantos Blancos
3 – 4
$2.85 – $3.05
3 – 4
$2.10 – $2.30
6 – 8
$2.45 – $2.65
Total Cathodes
21 – 24
$3.25 – $3.45
21 – 24
$2.90 – $3.10
42 – 48
$3.10 – $3.30
Consolidated Copper Production
80 – 90
$2.65 – $2.85
110 – 130
$2.10 – $2.30
190 – 220
$2.30 – $2.50
2 Mantoverde production shown on a 100% basis 3 Production and
C1 cash costs1 guidance not provided during the ramp-up of
Mantoverde Development Project in H1 2024.
Key C1 Cash costs input assumptions:
CLP/USD: 875:1
MXN/USD: 18:1
Silver: $23/oz
Molybdenum: $18/lb
Gold: $1,850/oz
In 2024, the Company plans to a spend a total of $275 million in
sustaining and expansionary capital expenditures at its operating
mines and the Santo Domingo Project, as follows:
Pinto Valley
Cozamin
Mantoverde*
Mantos Blancos
Santo Domingo
Total
Capital Expenditure ($
millions)
Sustaining Capital1
70
25
40
60
0
195
Expansionary Capital1
0
0
65
0
15
80
Total Capital Expenditures
70
25
105
60
15
275
* Mantoverde capital expenditures shown on a 100% basis.
In addition, the Company plans to spend a total of $180 million
in capitalized stripping at its three open pit mines.
Pinto Valley
Mantoverde*
Mantos Blancos
Total
Capital Expenditure ($
millions)
40
75
65
180
Finally, the Company plans to spend $15 million in brownfield
and greenfield exploration activities in 2024.
FINANCIAL OVERVIEW
Please refer to Capstone's Q4 2023 MD&A and Financial
Statements for detailed financial results.
($ millions, except per share data)
Q4 2023
Q4 2022
2023
2022
Revenue
353.7
362.1
1,345.5
1,296.0
Net (loss) income
(19.5)
(28.4)
(124.7)
136.1
Net (loss) income attributable to
shareholders
(12.3)
(20.9)
(101.7)
122.2
Net (loss) income attributable to
shareholders per common share - basic ($)
(0.02)
(0.03)
(0.15)
0.20
Net (loss) income attributable to
shareholders per common share - diluted ($)
(0.02)
(0.03)
(0.15)
0.19
Adjusted net income1
10.8
60.4
0.3
70.6
Adjusted net income attributable to
shareholders per common share - basic and diluted
0.02
0.09
—
0.11
Operating cash flow before changes in
working capital
80.4
76.1
204.8
184.8
Adjusted EBITDA1
88.3
81.3
260.3
356.7
Realized copper price1
($/pound)
3.74
3.74
3.84
3.76
($ millions)
December 31, 2023
December 31, 2022
Total assets
5,873.9
5,380.9
Total non-current financial
liabilities
1,205.3
709.5
Net debt1
(927.2)
(483.1)
Attributable net (debt)/cash1
(776.6)
(339.9)
CONFERENCE CALL AND WEBCAST DETAILS
Capstone will host a conference call and webcast on Thursday,
February 22, 2024 4:00 pm Eastern Time / 1:00 pm Pacific Time
(Friday, February 23, 2024, 8:00 am Australian Eastern Daylight
Time). Link to the audio webcast:
https://app.webinar.net/GjLvY9eYlKp
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: 416-764-8650 Vancouver: 778-383-7413 Australia:
18-0007-6068 North America toll free: 888-664-6383
A replay of the conference call will be available until February
29, 2024. Dial-in numbers for Toronto: (+1) 416-764-8677 and North
American toll free: 888-390-0541. The replay code is 862300#.
Following the replay, an audio file will be available on Capstone’s
website at
https://capstonecopper.com/investors/events-and-presentations/.
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. Our Sustainable Development Strategy goals and
strategies are based on a number of assumptions, including, but not
limited to, the biodiversity and climate-change consequences;
availability and effectiveness of technologies needed to achieve
our sustainability goals and priorities; availability of land or
other opportunities for conservation, rehabilitation or capacity
building on commercially reasonable terms and our ability to obtain
any required external approvals or consensus for such
opportunities; the availability of clean energy sources and
zero-emissions alternatives for transportation on reasonable terms;
availability of resources to achieve the goals in a timely manner,
our ability to successfully implement new technology; and the
performance of new technologies in accordance with our
expectations.
Forward-looking statements include, but are not limited to,
statements with respect to 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
Mantoverde Development Project ("MVDP"), the timing and results of
the Optimized Mantoverde Development Project ("MVDP Optimized FS")
and Mantoverde Phase II study, the timing and results of PV
District Growth Study (as defined below), the timing and results of
Mantos Blancos Phase II Feasibility Study, the timing and success
of the Mantoverde - Santo Domingo Cobalt Feasibility Study, the
timing and results of the Santo Domingo FS Update and success of
incorporating synergies previously identified in the Mantoverde -
Santo Domingo District Integration Plan, the realization of Mineral
Reserve estimates, the timing and amount of estimated future
production, the costs of production and capital expenditures and
reclamation, the timing and costs of the Minto obligations and
other obligations related to the closure of the Minto Mine, 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, environmental risks, unanticipated reclamation expenses
and title disputes, the success of the synergies and catalysts
related to prior transactions, in particular but not limited to,
the potential synergies with Mantoverde and Santo Domingo, the
anticipated future production, costs of production, including the
cost of sulphuric acid and oil and other fuel, capital expenditures
and reclamation of Company’s operations and development projects,
our estimates of available liquidity, and the risks included in our
continuous disclosure filings on SEDAR+ at www.sedarplus.ca. The
impact of global events such as pandemics, geopolitical conflict,
or other events, to Capstone 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 diseases, global economic uncertainties and
outlook due to widespread diseases or geopolitical events or
conflicts, 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 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, inflation,
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, 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, introduction or increase in carbon or
other "green" taxes, aboriginal title claims and rights to
consultation and accommodation, risks relating to widespread
epidemics or pandemic outbreaks; the impact of communicable disease
outbreaks 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 epidemics or pandemics,
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 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.sedarplus.ca. 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.sedarplus.ca. 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 January 1, 2023, “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.
Non-GAAP and Other Performance Measures
The Company uses certain performance measures in its analysis.
These Non-GAAP performance measures are included in this document
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 performance measures are presented in Highlights
and discussed further in other sections of the document. 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 non-GAAP 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 non-GAAP 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), Cost overrun
facility from MMC, Cash and cash equivalents, Short-term
investments, and excluding shareholder loans.
Attributable Net debt / Net cash
Attributable net debt / net cash is a non-GAAP performance
measure used by the Company to assess its financial position and is
calculated as net debt / net cash excluding amounts attributable to
non-controlling interests.
Available Liquidity
Available liquidity is a non-GAAP 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 the 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 as they are not available for general purposes.
Adjusted net income attributable to shareholders
Adjusted net income attributable to shareholders is a non-GAAP
measure of Net (loss) 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 a non-GAAP measure of net (loss) income before net
finance expense, tax expense, and depletion and amortization.
Adjusted EBITDA
Adjusted EBITDA is non-GAAP measure of EBITDA before the pre-tax
effect of the adjustments made to 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 income attributable to
shareholders 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 of this
non-GAAP measure 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 of this non-GAAP measure 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 pricing and volume adjustments. 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/20240222925260/en/
Jerrold Annett, SVP, Strategy and Capital Markets 647-273-7351
jannett@capstonecopper.com Daniel Sampieri, Director, Investor
Relations & Strategic Analysis 437-788-1767
dsampieri@capstonecopper.com
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