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TheStreet Open House

Capstone Reports 2012 Third Quarter Financial Results; Cash Flow From Operations Remains Strong

Stocks in this article: CS

VANCOUVER, November 7, 2012 /PRNewswire/ --

Cash Flow from Operating Activities of $25.8 million, Net Earnings of $12.8 million or $0.03 per share (All amounts in US$ unless otherwise specified)

Capstone Mining Corp. ("Capstone") (TSX: CS) today announced its financial results for the three and nine months ended September 30, 2012. Net earnings for the quarter were $12.8 million and cash flow from operating activities was $25.8 million. Capstone ended the quarter with cash on hand of $509.4 million and a $200 million credit facility. Copper production for the quarter at Capstone's two operating mines, Cozamin and Minto, totalled 22.6 million pounds in concentrates at a total cash cost (1)of $1.50 per payable pound.

Capstone will hold a conference call and webcast on Thursday, November 8, 2012 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 and nine months ended September 30, 2012, 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 September 30, 2012, will also be available at http://capstonemining.com/s/Presentation.asp.

Overview

                            Three months   Three months   Nine months    Nine months
                               ended          ended          ended          ended
                          Sept. 30, 2012 Sept. 30, 2011 Sept. 30, 2012 Sept. 30, 2011
    Gross sales revenue
     ($ millions)               99.7           97.9          250.0          287.0
 
    Copper in concentrates
     produced (million lbs)     22.6           20.6           63.1           58.5
 
    Payable copper
     produced (million lbs)     21.8           19.9           60.8           56.5
    Total cash cost
     per payable pound
     of copper produced (1) ($  1.50           1.39           1.44           1.42
 
    Copper sold (million lbs)   23.4           23.3           59.6           62.6
    Recognized copper
     price per pound ($)        3.84           3.66           3.72           4.03
 
    Net earnings ($ millions)   12.8           21.1           41.1           55.5
    Earnings per 
     common share ($)           0.03           0.06           0.11           0.21
 
    Adjusted net 
     earnings(1) ($ millions)   21.6           13.4           58.6           47.9
    Adjusted net 
     earnings(1) per
     common share ($)           0.06           0.04           0.15           0.18
 
    Cash flow from operating
     activities ($ millions)    25.8           38.9           72.2           75.4
    Cash flow from operating 
     activities per
     common share(1) ($)        0.07           0.10           0.19           0.28
 
    Cash and cash equivalents ($ millions)                   509.4          484.2

"Both mines continued to run well, generating solid cash flow from operating activities of $72.2 million over the first nine months of the year," said Darren Pylot, President and CEO of Capstone. "On the project development side, we have chosen to align our Santo Domingo project timeline to more closely coincide with the expected availability of low cost power in the area of our project in Chile, rather than fast track the timeline. This revised timeline will allow us an opportunity to optimize the project and we will take full advantage of the slowdown to perform optimization and trade-off studies to ensure the lowest capital and operating costs are achieved at the feasibility study stage."

"We remain fully committed to the project and will explore all opportunities to advance it as quickly as possible, but only on a timeline that maximizes returns. Our cash balance, credit facility, access to credit and the Korea Resources Corporation strategic partnership and financing agreement for the Santo Domingo project, combined with on-going cash flow from operations, give us considerable financial flexibility to opportunistically redeploy our capital in the short term, while at all times maintaining a balance sheet that allows us to advance Santo Domingo," continued Mr. Pylot.

Financial and Production Highlights for the Three Months Ended September 30, 2012

  • Recorded net earnings of $12.8 million or $0.03 per common share which included:
    • Earnings from mining operations of $21.2 million,
      • Recognized copper price of $3.84 per pound.
    • Cost of sales included a $5.7 million non-cash charge related to the write-down of ore stockpile inventory at the Minto Mine,
    • $5.5 million in current and deferred tax expenses.
  • Adjusted net earnings (1) of $21.6 million or $0.06 per common share after making adjustments for certain non-cash and non-recurring items.
  • Generated cash flow from operating activities of $25.8 million or $0.07 per common share.
  • Working capital increased to $567.8 million at September 30, 2012 (which included $509.4 million of cash and cash equivalents) from $533.1 million at December 31, 2011.
  • Produced a total of 21.8 million pounds of payable copper at an estimated total cash cost (1) of $1.50 per pound of payable copper produced.
  • Recorded gross sales revenue of $99.7 million on the sale of 23.4 million pounds of copper, 2.5 million pounds of zinc, 0.6 million pounds of lead, 6,880 ounces of gold and 351,366 ounces of silver.

Financial and Production Highlights for the Nine Months Ended September 30, 2012

  • Recorded net earnings of $41.1 million or $0.11 per common share which included:
    • Earnings from mining operations of $64.1 million,
      • Recognized copper price of $3.72 per pound.
    • Cost of sales included a $5.7 million non-cash charge related to the write-down of ore stockpile inventory at the Minto Mine,
    • $22.0 million in current and deferred tax expenses.
  • Adjusted net earnings (1) of $58.6 million or $0.15 per common share after making adjustments for certain non-cash and non-recurring items.
  • Generated cash flow from operating activities of $72.2 million or $0.19 per common share.
  • Produced a total of 60.8 million pounds of payable copper at an estimated total cash cost (1) of $1.44 per pound of payable copper produced.
  • Recorded gross sales revenue of $250.0 million on the sale of 59.6 million pounds of copper, 9.3 million pounds of zinc, 2.2 million pounds of lead, 12,864 ounces of gold and 1,176,401 ounces of silver.

Operational Highlights for the Three Months Ended September 30, 2012

Cozamin Mine, Mexico:

  • Achieved copper production of 11.0 million pounds.
  • Recorded cash costs (1) of $1.12 per pound of payable copper produced.
  • Continued the 32,000 metre 2012 exploration program.  Work in the quarter focused on the Mala Noche Footwall Zone, drilling 8,565 metres during the quarter, bringing the year-to-date total to 27,546 metres.
  • Continued development of the MNFWZ reserves.

Minto Mine, Yukon:

  • Achieved copper production of 11.6 million pounds.
  • Recorded cash costs (1) of $1.86 per pound of payable copper produced.
  • Recorded a $5.7 million non-cash charge related to the write-down of its ore stockpile inventory.
  • Completed new mineral resource estimates for the Fireweed and Inferno North deposits, resulting in a resource estimate of 101 million pounds of copper in the indicated category and 86 million pounds in the inferred category, at a 1.2% copper cut-off grade.
  • Commenced underground development with the initial excavation of the portal.
  • Subsequent to quarter end, the amendment to Minto's Water Use License was approved, allowing placement of tailings into the mined out Main Pit. Tailings have been deposited in the Main Pit since the beginning of November, resulting in an estimated cost savings of C$5.00 per tonne of ore milled.

Santo Domingo Project, Chile:

  • A Project Director with over 25 years of project, construction and engineering management experience, including extensive Owner and EPCM project management experience, has been hired to be based in Santiago to lead the Owner's team.
  • The bid process for power supply was completed with only one compliant proposal ultimately received.  The proponent's power project related to that proposal has subsequently met with substantial delays as a result of a recent court decision in Chile and the proposal was withdrawn. As a result, the bid process was closed without advancing a power purchase agreement. Discussions continue with a number of power suppliers to determine the best course of action.
  • The Bankable Feasibility Study was originally targeted for completion in the first quarter of 2013.  However, given the current state of the electricity market in Chile, reasonable rates for electric power are not expected to be available until 2017-2018, so Capstone has chosen to slow the project timeline to more closely align with power availability. The revised date for completion of the study will be the first quarter of 2014 and will incorporate a number of optimizations and trade-off studies. At the same time, indications are that the build time for the project will be 24 months. As a result, the targeted start up for the project is now mid-2017 at the earliest, but will be continually evaluated to align with any developments in the Chilean power supply.
  • The environmental impact study is expected to be completed as planned, however starting the formal assessment may be delayed to allow incorporation of project improvements.

Kutcho Project, British Columbia:

  • The Kutcho Project is in the pre-application stage of the environmental assessment process and work continued with the provincial and federal agencies to towards finalizing the draft Application Information Requirements.
  • Continued the First Nations consultation program, including negotiations around agreements leading to Impact Benefit Agreements.
  • Advanced basic engineering which has been allocated into three control work packages: the access road, surface infrastructure and mine development.

Production Outlook

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