VANCOUVER, British Columbia, Capstone Copper Corp. (“Capstone” or the “Company”) (TSX:CS) today announced production and financial results for the quarter ended March 31, 2022 (Q1 2022) and production and cost guidance for the remainder of 2022. Quarterly consolidated copper production totaled 22,500 tonnes at C1 cash costs1 of $2.31 per payable pound of copper produced. Link HERE for Capstone’s Q1 2022 management’s discussion and analysis (“MD&A”) and financial statements and HERE for the webcast presentation.
“It is with great pleasure that I report the inaugural first quarter’s results of the new Capstone Copper, and I would particularly like to take this opportunity to thank everybody in our organization for their tremendous support as we integrate our business. Despite inflationary pressures facing the entire mining industry, Capstone delivered strong financial results, highlighted by adjusted EBITDA of $123 million that included only a nine-day contribution from our Mantoverde and Mantos Blancos mines since the combination took effect on March 23, 2022,” said John MacKenzie, CEO. “This is a transformational year for Capstone as we ramp-up our new Mantos Blancos mill, construct the Mantoverde sulphides project and deliver a District Integration Plan for Santo Domingo with Mantoverde. These are critical steps toward achieving over 40% copper production growth by 2024 and a further 45% when Santo Domingo goes into production. In the context of the current macro-environment we have critically evaluated our business to provide guidance for the remaining 9-months of 2022, and expect to produce 136,000 to 150,000 tonnes of copper at C1 cash costs of $2.55 to $2.70 per pound.”
Q1 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS
The Transaction to combine with Mantos to create Capstone Copper Corp. was completed on March 23, 2022. The Transaction establishes Capstone Copper as a premier copper producer with a diversified portfolio of high-quality, long-life operating assets focused in the Americas with an extensive pipeline of near-term fully-permitted organic growth opportunities.
Net income of $35.1 million, or $0.08 per share. Adjusted net income1 of $61.1 million or $0.14 per share for Q1 2022, with the main reconciling item for Q1 2022 being $19.9 million of transaction and integration costs related to the Transaction. Operating results include nine days of earnings from operations of the Mantos Blancos and Mantoverde mines.
Adjusted EBITDA1 of $123.4 million compared to $118.7 million in Q1 2021.
Operating cash flow before changes in working capital1 of $70.4 million in Q1 2022 compared to $245.0 million in Q1 2021, which includes a $150 million precious metal stream deposit. The variance is related to increased operating cash flow of $21.5 million on copper sales and prices offset by transaction costs of $19.9 million and $22.9 million higher annual tax payment in Mexico related to 2021 income.
The Company is in a net cash position of $64.9 million and total available liquidity1 is $638.1 million. The balance sheet was further expanded with the acquisition of cash and debt on the Transaction. The net cash position of $64.9 million as at March 31, 2022 consists of cash and short term investments of $413.1 million netted against long term debt of $348.2 million.
Consolidated copper production of 22,500 tonnes at C1 cash costs1 of $2.31/lb of copper produced for Q1 2022 which consisted of 14,400 tonnes at Pinto Valley, 5,900 tonnes at Cozamin and the balance for the Chilean mines for the nine-day stub period. Mantos Blancos and Mantoverde contributed an additional $0.14 per pound to the consolidated C1 cash costs1; excluding the stub period reporting, Capstone Copper's consolidated C1 cash costs1 were $2.17 per pound.
Mantos Blancos Concentrator Debottlenecking Project ("MB-CDP") ramp-up to 20,000 tonnes per day (“tpd”) is progressing well. Throughput averaged over 18,000 tpd during the last week of April. The focus is on ramping up to name plate capacity, optimization, and achieving targeted recoveries in Q3 2022.
Mantoverde Development Project ("MVDP") construction is progressing well with earthworks mostly completed and major construction commenced in late March 2022. Numerous marine cargo shipments of major plant equipment are now en-route to site. The total project capital budget is now estimated to be $825 million compared to previously $787 million. The increase relates to diesel prices impacting pre-stripping costs by $23 million plus additional contingency of $15 million. The majority of the capital costs are fixed due to the nature of the lump sum turn-key contract with Ausenco of $525 million and the purchase of major mining equipment was price fixed prior to the current inflationary environment for approximately $140 million.
The Mantoverde-Santo Domingo District Integration Plan will outline the approach Capstone Copper is taking to maximize value creation (including synergies) across the district. The integration plan will outline the optimized flowsheet to create a world-class district which is targeted for early Q4 2022 ahead of the Chile analyst tour and Investor Day during the week of November 14th. The Company expects the integration plan to contribute to the feasibility studies for Santo Domingo (H1 2023), Mantoverde Phase II (H2 2023) and Mantoverde & Santo Domingo cobalt and oxides (H2 2023).
Financial Flexibility enhanced with amendment of Revolving Credit Facility ("RCF") to $500 million plus $100 million accordion. Subsequent to quarter end, the RCF was amended and will become available after all the security is in place and other customary conditions are met, which is expected to occur before July 2022.
Mantos and Capstone Mining Transaction
On November 30, 2021, Capstone Mining announced it had entered into a definitive agreement (the "Agreement") with Mantos to combine, pursuant to a plan of arrangement.
The Transaction was completed on March 23, 2022 and the combined company was renamed Capstone Copper Corp. Capstone Copper is headquartered in Vancouver, B.C. and listed on the TSX. Pursuant to the Agreement, each Capstone Mining shareholder received one newly issued Capstone Copper share per Capstone Mining share (the "Exchange Ratio") and the existing Mantos shareholders maintained their Capstone Copper shares. At completion of the Transaction, former Capstone Mining and Mantos shareholders collectively owned approximately 60.75% and 39.25% of Capstone Copper, respectively, on a fully-diluted basis. Refer to the business combination note in the condensed interim consolidated financial statements.
Following completion of the Transaction, Capstone Copper operates four mines, including two mines run by Mantos Copper in Chile since 2015: The Mantos Blancos (100% owned) open pit copper mine is located forty-five kilometers northeast of Antofagasta in the Antofagasta Region and produces copper concentrate and copper cathodes. The Mantoverde (70% owned) open pit mine is located fifty kilometers southeast of Chanaral, in the region of Atacama and produces copper cathodes. Mantoverde is the site of the MVDP sulphide expansion, currently in construction.
The new Capstone Copper has a broad portfolio of (largely permitted) brownfield projects located at our sites that facilitate disciplined capital allocation and a phased approach to growth.
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