Capstone Outlines Capital Investment Plans to Achieve 20% Pr All amounts in US$ unless otherwise specified)
Capstone Mining Corp. (“Capstone” or the “Company”) (TSX:CS) provides 2020 production, cost and capital guidance. Capstone’s 2019 actual production was above the mid-point range of 145 to 160 million pounds of copper and actual costs were below the bottom end of the guidance range of $1.80 to $2.00 per pound payable copper. The Company will further expand on 2019 results when it releases its 2019 fourth quarter results on Tuesday, February 11, 2020 after market close, followed by an investor webcast and conference call on Wednesday, February 12, 2020 at 11:30 am Eastern Time.
2020 PRODUCTION, COST AND CAPITAL GUIDANCE
In 2020, Capstone expects to produce between 140 and 155 million pounds of copper at C1 cash costs1 of between $1.85 and $2.00 per pound payable copper produced.
“Capstone has redefined itself as we enter this new decade. Our business is supported by an expansion at our high grade and high margin Cozamin mine, while Pinto Valley is positioning to amplify best in class leverage to copper,” said Darren Pylot, President and CEO. “We are making small, high return and quick payback investments to ensure both operations are optimized to maximize cash flow in this improving copper market. We have made substantial and sustainable reductions to our cost base, achieving our goal of ~$30 million per year. This coupled with a strong balance sheet gives us confidence we can invest in our organic growth opportunities without hesitation. I’m proud to say that Capstone is positioned for 20% production growth with a 10% decrease in costs by 2021 and beyond.”
Mr. Pylot continued, “For 2020, Capstone is anticipating a similar year as 2019, with a slight decrease at Pinto Valley (~5 million pounds lower) to account for the installation of new secondary crushers. The less than one-year payback is expected to deliver higher throughput, lower costs and improved recovery. At Cozamin, the one-way ramp project is proceeding on schedule, allowing for confidence in the expected increased annual production rates of 50 to 55 million pounds of copper and 1.5 million ounces of silver for 2021 and beyond. The capital investments included in our expansionary spend for 2020 at Pinto Valley and Cozamin will increase throughput rates enabling growth to a sustainable run rate of approximately 180 million pounds of copper per year by 2021, and for several years after supported by a steady grade profile at both mines.”
| 2020 Guidance | Pinto Valley | Cozamin | Santo Domingo | Total |
| Production and Cost (US$) |
| Copper production (million pounds) | 110 – 120 | 30 – 35 | - | 140 – 155 |
| C1 Cash Cost1 | $2.10 - $2.25 | $0.95 - $1.10 | - | $1.85 - $2.00 |
| Capital Expenditure (US$ millions, rounded) |
| Sustaining | $28 | $24 | - | $52 |
| Capitalized Stripping | $8 | - | - | $8 |
| Expansionary | $19 | $2 | $92 | $30 |
| Total Capital Expenditure | $55 | $26 | $9 | $90 |
| Exploration (US$ millions, rounded) |
| Brownfield | - | $6 | - | $6 |
| Greenfield | - | - | - | $4 |
| Total Exploration | - | $6 | - | $10 |
Guidance Notes:
1. This is an alternative performance measure; please see "Alternative Performance Measures" at the end of this release. C1 cash cost per pound of payable copper produced net of by-product credits and selling costs.
2. On a 100% basis the figure is $12 million; ownership is 70% Capstone and 30% Korea Resources Corporation.
2020 CAPITAL INVESTMENTS AND FUTURE GROWTH
Cozamin: Near-Term Production Expansion
Development work on the one-way ramp system at Cozamin continues to be on budget and on schedule for completion by the end of 2020. The concurrent development of the raisebore to improve ventilation is two months ahead of schedule and is expected to be completed in early 2020. Phase 1 of the raisebore finished ahead of schedule when the reaming head broke through to surface in December 2019, and immediately improved ventilation to the upper section of the one-way ramp. Once these two underground expansion projects are completed, Cozamin’s annual production for 2021 and beyond is expected to increase to between 50 and 55 million pounds of copper and 1.5 million ounces of silver.
Cozamin: Doubling the Mine Life
The Cozamin 2019/2020 infill drilling program to move Inferred Mineral Resources to the Mineral Reserve category, with the expectation of adding additional Mineral Resources to support doubling the mine life, is more than two months ahead of schedule, allowing us flexibility to add more holes than originally planned, for a new mineral resource and mineral reserve estimate before the end of 2020. Positive drill results pointing to higher grades and wider intercepts than in the current reserve were released on November 5, 2019, December 2, 2019 and January 16, 2020.
Pinto Valley: Modernization
Pinto Valley’s 2020 guidance of between 110 to 120 million pounds of copper production accounts for scheduled downtime for secondary crusher and screen installations. In Q4 2019, the Board approved the $15 million capital project to improve mill reliability and overall performance at Pinto Valley. The expected result is for throughput to reliably achieve between 56,000 to 57,000 tonnes per day in 2021 and beyond. The one-year payback is calculated based on higher throughput, reduced maintenance and power costs, as well as increased copper recovery associated with improved copper mineral liberation prior to flotation.
Pinto Valley: Future Expansion Study
Preliminary work on the Pinto Valley future expansion study (PV4) continues, with an update expected mid-2020. The study is focused on evaluating potential scenarios to take advantage of the nearly one billion tonnes of mineral resources not currently scheduled in the current mine plan pit shell (PV3).
Santo Domingo
Capital expenditures for the fully permitted Santo Domingo project will be kept to a minimum in 2020 to preserve the optionality of the project, as we continue the strategic process in an improving copper market to right size or monetize Capstone’s ownership. Work on the updated study is being finalized and the results will be released soon.
Cost Reduction Program
Capstone has achieved its cost reduction target of ~$30 million in annualized savings. More details will be provided when the Company releases its fourth quarter results on February 11, 2020.