Capstone Reports Financial Results for the Third Quarter VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Nov 6, 2008 -- Capstone Mining Corp. ("Capstone") (Toronto:CS.TO - News) announces its
financial results for the third quarter of 2008 including
production and sales for the Cozamin mine located in Zacatecas
State, Mexico. All dollar amounts are stated in U.S. dollars
unless otherwise indicated.
Overview and Highlights - Earnings before income taxes for the quarter ended September 30, 2008 were $18.4 million or $0.22 per share compared to earnings before income taxes of $12.2 million or $0.15 per share in the three months ended August 31, 2007. - Earnings for the quarter ended September 30, 2008 were $16.1 million or $0.20 per share compared to earnings of US$9.7 million or $0.12 per share in the three months ended August 31, 2007. - Cash flows from operations for the quarter ended September 30, 2008 were $9.0 million or $0.11 per share compared to $8.1 million or $0.10 per share for the three months ended August 31, 2007. - Copper production during the quarter was 6.7 million lbs compared with 4.9 million lbs for the three months ended August 31, 2007. - At September 30, 2008, Capstone had cash of $43.1 million, working capital of $57.4 million and no bank debt. - The Company purchased 2,323,900 common shares which were cancelled. - Current forward sales of 24.5 million lbs of copper with a weighted average price of $3.15 valued at approximately $30 million today. - Copper cash costs for the quarter were $1.29/lb of copper (net of by-product credits and including smelter, refining, transportation and all site costs). Increased costs were a result of lower by-product credits due to less zinc/lead sales, a write down of zinc inventory to fair market value, and higher treatment charges due to lower than expected concentrate grade in the third quarter. - Total costs (the aggregate of cash costs, royalty, depletion and amortization and accretion) for the quarter were $1.68/lb. - Capstone and Sherwood Copper Corporation ("Sherwood") signed a combination agreement to create a well funded, low-cost, growth-oriented copper company.
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Q3 - 2008 Q2 - 2008 Q1 - 2008
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Revenue $ 17.6M $ 35.3M $ 29.5M
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Copper $ 13.4M(i) $ 27.9M $ 24.6M
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Zinc $ 1.4M $ 2.6M $ 0.6M
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Lead $ 0.8M $ 1.8M $ 1.7M
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Silver $ 2.0M $ 2.9M $ 2.6M
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Operating profit $ 2.9M(i) $ 19M $ 15.9M
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Earnings (before taxes) $ 18.4M $ 16.7M $ 3.3M
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EPS (before taxes) $ 0.22 $ 0.20 $ 0.04
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Earnings (after taxes) $ 16.1M $ 12.2M $ 0.5M
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EPS $ 0.20 $ 0.15 $ 0.01
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(i) Includes negative price adjustment of $7.1 million due to
mark-to-market adjustments.Cozamin Mine Q3 - 2008 Production and Sales Highlights - Capstone produced the following metals during the quarter: -- 6.7 million pounds of copper -- 2.6 million pounds of zinc -- 1.6 million pounds of lead -- 331,000 ounces of silver - Concentrate sales for the quarter contained: -- 6.0 million pounds of copper -- 1.9 million pounds of zinc -- 0.9 million pounds of lead -- 259,000 ounces of silver Concentrate inventory at September 30, 2008 was 6,001 DMT (containing 1.2 million pounds of copper, 2.5 million pounds of zinc and 0.8 million pounds of lead). September 30, 2008 Production Results and Forecast for 2008 and 2009
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Previous Current
2008 (F) 2008 (F) 2009 (F)
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Total tons milled 850,000 830,000 1,000,000
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Copper (payable lbs) 30,000,000 28,000,000 40,000,000
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Silver (payable ounces) 1,300,000 1,300,000 1,500,000
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Zinc (payable lbs) 9,000,000 10,000,000 10,000,000
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Lead (payable lbs) 5,100,000 6,000,000 5,000,000
--------------------------------------------------------------------------The following table is a summary of the actual operating statistics for the three months ended September 30, 2008 and the three months ended August 31, 2007.
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3 months
ended
August 31,
Q3 - 2008 2007
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Total tons mined 198,441 162,415
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Tons of ore milled 202,142 161,162
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Copper grade (%) 1.67 1.60
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Zinc grade (%) 1.56 1.25
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Silver grade (g/t) 65 71
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Lead grade (%) 0.52 0.55
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Copper recovery (%) 89.3 86.7
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Zinc recovery (%) 45.4 43.4
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Silver recovery (%) 76.9 71.5
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Lead recovery (%) 69.3 50.4
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Copper production (million DMT lbs) 6.7 4.9
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Zinc production (million DMT lbs) 2.6 2.1
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Silver production ('000 ounces) 331 263
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Lead production (million DMT lbs) 1.6 1.0
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Note: Silver reports to all concentrates.Third Quarter 2008 Highlights Copper - Copper in concentrate produced during the quarter was 6.7 million pounds of copper, three months ended June 30, 2008 was also 6.7 million. - Copper concentrate sales for the quarter were 13,409 dry metric tons ("DMT"), containing 6.0 million pounds of copper, three months ended June 30, 2008 was 6.8 million. - The average price for sales of copper in the period used for provisional invoices was $3.32/lb. Subsequently adjusted to September 30, 2008 price of $2.91. - Copper concentrate inventory at September 30, 2008 was 2,386 DMT, equal to the 2,387 DMT of concentrate on hand at June 30, 2008. - Silver in the copper concentrate produced during the period totaled 249,000 ounces. Zinc - Zinc in concentrate produced during the quarter was 2.6 million pounds of zinc, three months ended June 30, 2008 was 2.9 million. - Zinc sales for the period were 2,516 DMT, containing 1.9 million pounds of zinc, three months ended June 30, 2008 was 2.9 million. - The average price for sales of zinc in the period was $0.78/lb. - Zinc concentrate inventory at September 30, 2008 was 3,035 DMT, a decrease in inventory from the 4,283 DMT of concentrate on hand at June 30, 2008. - Silver in the zinc concentrate produced during the period totaled 9,000 ounces. Lead - Lead in concentrate produced during the quarter was 1.6 million pounds of lead, three months ended June 30, 2008 was 1.5 million. - Lead concentrate sales for the period were 703 DMT, containing 0.9 million pounds of lead, three months ended June 30, 2008 was 2.0 million. - The average price for sales of lead in the period was $0.85/lb. - Lead concentrate inventory at September 30, 2008 was 580 DMT, an increase in inventory from the 118 DMT of concentrate on hand at June 30, 2008. - Silver in the lead concentrate produced during the period totaled 73,000 ounces. Expansion The Company continued with its expansion plans at the Cozamin mine in the quarter, targeting production of 3,000 tpd in the fourth quarter. Mill expansion including installation of column cells for cleaner flotation in both the copper and lead circuits was completed and brought on line in September. A second generator was purchased to provide back up for the existing generator which provides the incremental power needed for the expansion until the new power line is completed. Engineered cost estimates have been received for the power line and negotiations are continuing with landowners regarding both possible routings. The underground ramp to level 9 was completed during September. The ramp is approximately two months behind the Company's internal schedule due to the delayed delivery of both a jumbo drill and additional scoop purchased as mining equipment for expediting ramp development. Ore production was reduced in September in the mine to allow the large quantity of waste accumulated from the ramp development to be removed from the mine. Ramp development to the 10 level was completed at the end of October and will allow the mine to commence operating at the 3,000tpd in late November. Ramp development will continue to the 12 level where an underground crusher and new loading pocket will be installed in the first half of 2009. Exploration At the Cozamin project during the third quarter, the Company drilled 6,917m of HQ core in 23 holes from surface and 2,327m of NQ core in 6 holes from underground. This brings the total metres drilled since late 2007 to 42,944m in 142 holes. The surface drilling program has been completed for 2008 and one drill remains underground where additional holes will augment resources in the mine. The Company has spent $4.3 million on this program to date. The data from all the surface and underground holes up to September 15, 2008 will be incorporated into an updated resource estimate at Cozamin. This work will be undertaken by an independent geologist and the resource report will be used to provide guidance for a revised mine plan and updated reserve estimate that are planned for the first quarter of 2009. Labour There were 3 minor lost time accidents during the third quarter. The number of personnel at the end of the quarter was 680 compared to 643 at the end of June, of which approximately 100 were contractors related to the expansion project and 30 were contractors related to the exploration drilling. Q3 - Actual Sales and Costs
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Q3 - 2008 Q2 - 2008 Q1 - 2008
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Copper (million lbs) 6.0 6.8 6.9
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Zinc (million lbs) 1.9 2.9 0.7
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Lead (million lbs) 0.9 2.0 1.3
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Silver ('000 ounces) 259 343 306
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Copper production costs, net of by
product credits, per lb of copper $ 0.86 $ 0.53 $ 0.58
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Off property costs for transport,
smelting and refining per lb of
copper $ 0.43 $ 0.37 $ 0.40
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Total cash costs of production per
lb of copper $ 1.29 $ 0.90 $ 0.98
--------------------------------------------------------------------------Business combination with Sherwood Copper Corporation On October 9, 2008, the Company and Sherwood Copper Corporation ("Sherwood") entered into a combination agreement pursuant to which the companies will combine, by way of plan of arrangement, to create a well funded, low-cost, growth-oriented, copper company with two producing mines in mining friendly jurisdictions in North America. The Company agreed to acquire all of the outstanding common shares and options to purchase common shares of Sherwood. The Sherwood shareholders will receive 1.566 common shares of the Company for each Sherwood common share. Each Sherwood convertible debenture, warrant and stock option, which gives the holder the right to acquire common shares of Sherwood, will be exchanged for convertible debenture, warrant or stock option which gives the holder the right to acquire common shares of the Company on the same basis as the shareholders of Sherwood, will all other terms of such convertible debentures, warrants and options (such as term and expiry) remaining unchanged. As a result of the proposed transaction, the combined company will be held approximately 51% by Sherwood shareholders and approximately 49% by the Company's shareholders. Accordingly, this business combination is expected to be accounted for as a reverse takeover under Canadian GAAP with Sherwood being identified as the acquirer and the Company as the acquiree. The transaction is subject to the approval of Sherwood's shareholders. The special meeting of Sherwood's shareholders will be held on November 14, 2008. Financial Results The information in this news release and the selected financial information contained in the following pages should be read in conjunction with the Interim Consolidated Financial Statements and Management Discussion and Analysis for the three months ended September 30, 2008, which will be available at Capstone's website at www.capstonemining.com and at www.sedar.com. The Company's net earnings for the quarter ended September 30, 2008 were $16.1 million or $0.20 per share compared to $9.7 million or $0.12 per share for August 31, 2007. The Company's operating profit for the three months ended September 30, 2008 was $2.9 million or $0.04 per share compared to operating profit of $10.0 million or $0.12 per share for the three months ended August 31, 2007. The Company reported revenues for the three month period of $17.6 million (August 31, 2007 - $18.3 million). Revenues consisted of copper concentrate sales of $13.3 million (net of $7.1 million negative price adjustment), zinc concentrate sales of $1.4 million, lead concentrate sales of $0.8 million and silver concentrate sales of $2.0 million. Cost of sales for the three month period was $8.2 million (August 31, 2007 - $4.3 million), treatment and transportation charges were $3.9 million (August 31, 2007 - $3.8 million), royalty charges were $0.8 million (August 31, 2007 - $0.6 million) and depletion was $1.4 million (August 31, 2007 - $0.6 million). For the three month period ended September 30, 2008, the Company recorded an unrealized gain related to mark-to-market on the outstanding derivative contracts in the amount of $16.8 million (August 31, 2007 - $Nil). Glencore International AG and Trafigura Beheer B.V. purchases the concentrates produced by the Cozamin mine pursuant to the terms of a written contract until the end of 2008. Beginning January 1, 2009 the company has entered into new agreements with Trafigura Beheer B.V. for copper, MRI Trading AG for zinc and Louis Dreyfus for lead through till the end of 2011.
Capstone Mining Corp.
Selected Financial Information
Interim Consolidated Balance Sheets
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September 30, Dec 31,
2008 2007
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Cash $ 43,091,053 $ 25,114,753
Concentrate receivables 7,182,141 9,799,634
Inventory 5,913,858 5,428,842
Investment in Silverstone Resources Corp. 40,685,314 39,022,891
Property, plant and equipment 52,775,643 45,655,190
Other assets 16,193,678 19,958,886
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Total assets 165,841,687 144,980,196
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Deferred revenue 37,504,796 41,398,281
Other liabilities 21,029,511 17,833,194
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Total liabilities 58,534,307 59,231,475
Shareholder's equity 107,307,380 85,748,721
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Total liabilities and shareholders' equity 165,841,687 144,980,196
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Interim Consolidated Statements of Operations
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Three months Three months
ended ended
September 30, August 31,
2008 2007
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Total revenues $ 17,552,582 $ 18,318,372
Total cost of sales (14,603,590) (8,299,496)
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Operating profit 2,948,992 10,018,876
G&A and other expenses (392,746) 2,183,986
Other items 15,814,594 2,584
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Earnings before income taxes 18,370,840 12,205,446
Current income tax (971,553)
Future income tax (1,253,935) (2,479,593)
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Earnings for the year 16,145,352 9,725,853
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EPS - Basic 0.20 0.12
EPS - Diluted 0.19 0.11
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-------------------------------------------------------------------------CONFERENCE CALL Capstone will host a conference call on Friday, November 7 at 8:30 AM Pacific Time (11:30 AM Eastern Time) to discuss these results. The conference call may be accessed by dialing 1.866.365.1119 in North America or 1.416.849.7329 Internationally, please ask for the Capstone Mining Corp. conference call. The conference call will be archived for later playback until Friday, November 14, 2008 and can be accessed by dialing 1.866.501.5559 and the pass code is 21287742#. ABOUT CAPSTONE Capstone is a Canadian based mining company currently operating the 100% owned Cozamin copper-silver-lead-zinc mine located in Zacatecas State, Mexico. Capstone has approximately 80.3 million shares outstanding and is well financed with no bank debt. More information is available online at: www.capstonemining.com. Contact: Contacts:
Capstone Mining Corp.
Chris Tomanik
(604) 684-8894
Email: ctomanik@capstonemining.com
Capstone Mining Corp.
Mark Patchett
(604) 684-8894
(604) 688-2180 (FAX)
Email: mpatchett@capstonemining.com
Website: http://www.capstonemining.com
Source: Capstone Mining Corp.
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