Capstone Reports Q3 Results: Operating Profit of $7.8 Million, $0.09 Per Share
VANCOUVER, B.C. - Capstone Mining Corp. ("Capstone") announces its financial results for the 3rd quarter ending May 31 2007, including production and sales for the Cozamin Mine located in Zacatecas, Mexico.
THIRD QUARTER HIGHLIGHTS
Operating profit of $7.8 million, or $0.09 per share.
Mine operating cash flow of $8.9 million, or $0.11 per share.
Net income of $5.8 million, or $0.07 per share including an unrealized foreign exchange loss of $2 million related to deferred revenue from the Silverstone transaction.
Completed the Silverstone silver transaction whereby Capstone received US$44 million (US$20 million received in cash and US$24 million received in Silverstone shares and special warrants) in exchange for selling the next 10 years of silver production from the Cozamin mine.
As of May 31, 2007 the market value of the investment in the securities of Silverstone was $65 million, or $0.79 per share.
Working capital increased to $47.8 million or $0.58 per share with no debt.
Total concentrate sales were $16.7 million including 2.9 million pounds of payable copper.
Copper cash costs were $0.61 per pound of copper (net of by-product credits and including smelter, refining, transportation and all site costs).
Completed construction of the mill expansion to increase capacity from 350,000 tonnes per year to 750,000 tonnes per year, an increase of 115%. Start-up commenced in mid June.
Capstone today reported net income of $5.8 million, or $0.07 per share. This includes an unrealized foreign exchange loss of $2 million related to the value of US$44 million received from the sale of silver to Silverstone on April 4th as it relates to the Canadian dollar conversion at May 31, 2007. Capstone will be reporting the year end financial results in US$ and will no longer have to report fluctuations in foreign exchange between Canadian and US dollars. Net earnings increased by 51% from the previous quarter primarily due to increased metal production and higher metal prices.
Concentrate sales for the third quarter were $16.7 million, a 58% increase over Q2 - 2007, due to higher realized copper prices and increased production and concentrate shipments from the Cozamin mine. Operating cash flow in the quarter increased to $7.8 million from $4.8 million in the previous quarter. Working capital at May 31, 2007 was $47.8 million, an increase of $21.3 million from February 28, 2007, primarily due to the sale of the silver to Silverstone Resources Corp, as well as increased cash flow.
During the third quarter the average price for sales of copper, zinc and lead were US$3.62/lb, US$1.70/lb and US$0.94/lb respectively.
The Company sold all of its silver production from the Cozamin mine in Mexico over a 10 year period to Silverstone in consideration for an upfront payment of US$44 million of which US$20 million was received in cash and US$24 million in 19,155,310 special warrants of Silverstone which are convertible into common shares of Silverstone at no additional cost.
Silverstone will pay for each ounce of refined silver from the mine the lesser of US$4.00 per ounce of silver and the prevailing market price per ounce of silver.
Darren Pylot, President and CEO of Capstone Mining commented: "With the doubling of capacity at the mine, the sale of the silver to Silverstone resulting in a working capital position in excess of $47 million, Capstone is well positioned to take advantage of the current strong market conditions and look to expand in the base metal sector."
Total mill throughput for the quarter was 112,277 tonnes of ore, a rate of 1,200 tonnes per day. This increased tonnage was 15% higher than the previous quarter. Cash costs were $0.61 per pound of copper including by-product credits and all smelter, refining, transportation and site costs. Total costs were $1.08 per pound of copper which included the aggregate of cash costs, depletion and royalty. Total cash costs per pound of copper increased by 22% from the previous quarter largely due to a decrease in the average price received for zinc sales within the quarter.
Total concentrate sales were $16.7 million. 2.9 million pounds of payable copper, 1.5 million pounds of payable zinc, 700,000 pounds of payable lead and 143,000 ounces of payable silver. This was an increase of 45% from the previous quarter.
Total production for the third quarter totaled 3.5 million pounds of copper, 1.6 million pounds of zinc, 600,000 pounds of lead and 174,000 ounces of silver. This production is a 25% increase over the second quarter of 2007. Higher mill tonnage as the expansion was incrementally completed, and increased mine grades accounted for the improvement.
Inventory on site and at the port at the end of the third quarter totaled 3,842 dry metric tons ("DMT") of copper (Q2 -- 2,559 DMT), 1,820 DMT of zinc (Q2 -- 2,140 DMT) and 120 DMT of lead (Q2 -- 213).
During the quarter, Capstone completed the expansion of the mill capacity to 750,000 tonnes per year, a 115% increase from the previous operating throughput of 350,000 tonnes per year. All construction and commissioning has been completed and the start-up began in mid-June. The expansion was completed on schedule and under budget with final estimated costs of US$13.0 million compared to the original estimate of US$15 million. To date US$7.2 million has been spent and the remaining US$4.8 million are related to land purchase, mine equipment and development costs which will be incurred over the next 12 months. The expansion will increase the 2008 production at Cozamin to 26 million pounds of copper, 11 million pounds of zinc, 4 million pounds of lead and 1.2 million ounces of silver at planned mine grades.
The Company has completed 58 underground definition drill holes that total 18,200m of NQ core. An additional 2,300m of drilling distributed between 8 holes are planned for this program. A surface exploration drilling program totaling 4,800m of PQ and HQ core in 5 holes has been completed. These data indicate that Capstone will be able to increase all resource categories at Cozamin in concert with the current construction program that is planned to more than double daily production from the mine and plant. The definition drilling program is planned to be completed by the end of July and an updated resource estimate is to be completed by the fourth quarter on 2007.
Capstone will hold a conference call to report third quarter 2007 results on Thursday, June 28th at 8:00 a.m. PT. The conference call will be chaired by Mr. Darren Pylot, President and CEO.
The conference call may be accessed by dialing 1.866.651.2245 in North America and 1.416.849.7332 internationally. Please ask for the Capstone Mining Corp. conference call.
The conference call will be archived for later playback until July 5th, 2007 and can be accessed by dialing 1.866.501.5559 and the pass code is 21238256#.
The information in this news release should be read in conjunction with the Interim Consolidated Financial Statements and Management Discussion and Analysis for the quarter ended May 31, 2007, which will be available on the Companies web site www.capstonemining.com and at www.sedar.com.
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 81.9 million shares outstanding and is well financed with no bank debt. More information is available online at: www.capstonemining.com.
For further information about the Company, please contact:
Chris Tomanik, Telephone: (604) 684-8894 / Facsimile: (604) 688-2180
To review the complete report, see attached PDF:
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