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Good morning, ladies and gentlemen, and welcome to the Capstone Mining Corp. Third Quarter Results Conference Call. [Operator Instructions] Also note that this call is being recorded on Wednesday, October 31, 2018. And I would like to turn the conference over to Cindy Burnett, Investor Relations. Please go ahead.
Thank you. I'd like to welcome everyone on the call today. The news release announcing Capstone's 2018 third quarter financial results is available on our website, along with an updated corporate presentation with summary information on the company and our financial and operating results. Also on the website are webcast slides to accompany our commentary today.With me today are: Darren Pylot, Capstone's President and CEO; Jim Slattery, Senior Vice President and Chief Financial Officer; Gregg Bush, Senior Vice President and Chief Operating Officer; and Raman Randhawa, Capstone's Vice President of Finance, Financial Planning and Analysis.And I would like to advise you that this call is being recorded for replay through our conference call provider and is being broadcast live through an Internet webcast system. Following our brief remarks, there'll be an opportunity for questions.Comments made on the call today will contain forward-looking information. This information, by its nature, is subject to risks and uncertainties, and actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please see Capstone's relevant filings on SEDAR.Finally, I'll just note that all amounts we will discuss today will be in U.S. dollars, unless otherwise specified.Now I'll turn the call over to Darren Pylot.
Thank you, Cindy. Good morning, everybody, and welcome to our third quarter financial results conference call. On the line, as Cindy mentioned, Raman will first review the financial performance of the company, followed by Gregg, who will review the operations, and then back to me to summarize and then we'll take questions from the floor. So to get started, Raman, over to you.
Good morning, everyone. For our third quarter results, we reported increasing production of 18,600 tonnes of copper at C1 cost of $1.85 per pound for the quarter on a consolidated basis from continuing ops. Quarter-over-quarter, we've reduced our all-in sustaining cost from continuing ops by over 5%, and Pinto Valley has seen their all-in sustaining cost reduced by 23% since their first quarter. In the quarter, we saw realized copper price fall 14% to $2.72 per pound, which included the impact of a negative $3.4 million provisional pricing adjustment on prior period shipments. We generated $25.9 million in operating cash flow before working capital for the quarter or $81.3 million year-to-date. Contribution to operating cash flow for the year was roughly split 60% from Pinto Valley and 40% from Cozamin. This demonstrates Cozamin's significant value to the company alongside Pinto Valley's high leverage to the copper price. We have resumed reporting adjusted EBITDA as a performance metric this quarter to highlight our earnings trend. Q3 adjusted EBITDA from continuing operations was $29.8 million, $94.4 million year-to-date, which was a 65% increase compared to 2017 year-to-date. In addition, in this quarter, we have reduced our outstanding balance on our credit facility by $40 million, resulting in interest savings going forward. As part of our improved cash management and to lower our interest expense, we are targeting a lower cash balance for working capital purposes going forward. We are comfortable with our consolidated production and cost guidance ranges for the year, higher grades are expected in the fourth quarter at Pinto Valley and the zinc byproduct credit is now fully ramped up at Cozamin. Now I'll turn the call over to Gregg for further operational details.
Thanks, Raman. Good morning. Starting with Pinto Valley, our operations at Pinto Valley stabilized in, during the early part of the quarter and it started to -- we started to see some steady improvement in performance. Also, its own -- our asset reliability program, we're starting to see some significant moves there. During the quarter, we reduced the backlog of maintenance in the crushing and the grinding circuits. A significant amount of downtime was taken early in the quarter due to -- to catch up on maintenance in the mill in the crushing circuits. Since then, we have seen 3 consecutive months of steadily increasing throughput. Our mean time between interruptions in the milling circuit has more than doubled over the past quarter, while the percentage of milling downtime planned versus unplanned has also doubled over the last quarter. And on another note, as you'll recall, we -- our employees ratified a new employment agreement at the end of the last quarter. Since that time, we've been able to fill some critical vacancies that we've been carrying for quite some time in the crafts roles. And that we're also starting to see a benefit from a contract that allows a much more proactive collaboration with our employees in training and advancement. And a follow-on to that, over the course of the quarter, we saw a 30% reduction in full-time equivalent contractors at Pinto Valley used in maintenance activities. At Cozamin. Cozamin during the quarter, we completed our development into the San Rafael zone, and now producing zinc ore from that zone to the tune of about 20% of our total fee, which has allowed us to increase our daily throughput to around 3,000 tonnes per day. We're also continuing to work on our updated technical report for Cozamin that should come out before year end. Over the course of the year, we continue to have success in exploration. So we do expect to be increasing our reserves and also increasing our resource in this upcoming update. So also, with the confidence we have in the mine life extension, we're looking at a number of scenarios that will allow us to increase the mining production from the footwall zone going forward. So we're expecting that towards the end of the year. And our exploration activities have continued to meet with success. And we're still open, both up-strike, our up-dip and along strike in that deposit. With that, I'll turn the call back over to Darren.
Thanks, Gregg and Raman. So just to summarize, I think from management's point of view, we had a very good, steady quarter and kind of as expected, both on operations and production. As Gregg mentioned, although we didn't see the throughput number at PV increase dramatically, we did remove a lot of the maintenance backlog that existed prior to Q3, as well as that, we're able to actually maintain that throughput while doing a whole bunch of maintenance that would not normally get done. So that really sets us up now to start to increase throughput and obviously, increase production at Pinto Valley. So we feel really good with the backlog being done. And as the mine plan calls for a higher grade, we expect higher grade and throughput throughout the rest of this year. Also at Cozamin, we're, as Gregg mentioned, very happy with the development, that we're fully developed at San Rafael and we can take full advantage of the zinc byproduct credit going forward, which obviously should help to lower costs and as well as fill -- more fully fill the mill. We also announced earlier in the year that we had doubled our measured and indicated resources at Cozamin. And so a lot of work has been completed throughout this quarter to advance that reserve update. And as Gregg mentioned, along with that reserve update is a materials handling study that will look at scenarios to debottleneck the mine, and again, fill that 20% under capacity in the mill that we could fill with more copper. So look forward to that report getting issued in Q4. So again, good value enhancer at Cozamin. And at Minto, we did take the appropriate steps to move Minto towards care and maintenance by year-end. With the Pembridge deal not closing, we felt it was in the best interest to preserve value of these copper prices by going on care and maintenance. We do have several parties that took note of that press release that, that deal didn't close, that are interested in Minto, so we do have a process launched with 5 or 6 parties engaged and CAs have been signed. So there is work going on, and management is confident that when equity markets are there or copper price improves, that we will be able to and fully plan on selling the asset at the appropriate time. So looking forward into Q4, a couple of key catalysts. As I mentioned, look for that reserve update, materials handling study from Cozamin. And as well, we are on track to come out with an updated report that will include updated and current economics at Santo Domingo, and we think that will give us the tools to be able to move forward with an appropriate plan to maximize value that fits the needs of Capstone going forward at Santo Domingo. We continue to really like the project. We're excited to get the economics updated. And continue to move forward with maximizing value back into the share price and to the shareholders for Capstone in that project. So that really -- the 2 technical reports that get issued on both, on Cozamin and Pinto Valley -- and Santo Domingo, really will provide the clarity on the current value at both of those assets going forward. So that concludes the prepared remarks. We're ready to take questions now.
[Operator Instructions] And your first question will be from Orest Wowkodaw at Scotiabank.
Just curious on the mining approach next year at Pinto Valley and whether the focus is going to be to push throughput or whether to kind of constrain throughput and just try to focus on recoveries and sort of steady availability. And then I'm also curious what you think the grade will be next year at Pinto.
Well, we'll be coming out with our guidance, I believe, in January. The -- as far as a strategy, we are kind of dialing back a bit our expectations on throughput next year. I mean, in the long term, I don't think we have a different view. But we've kind of come to recognize there's some work to do there, to get things stabilized and to get the, I guess, the asset management culture fully embedded there. So I think we'll be looking at a little bit lower throughput projections next year than what we had come out with this year, so.
I think, Orest, a good way to put that is, it's going to be higher than what we've done this year, but lower than the throughput we -- the highest throughput we've done in the past. So somewhere in that mid-50s range.
Okay, okay. And Darren, did I hear you say earlier that you expect grades to improve in Q4? And, I mean, I ask that because the grade was pretty high in Q3 at 0.34%.
Yes, no, we didn't guide by quarter, but we did say at the start of the year, Orest, that the grade would continually increase throughout the year at Pinto Valley. And so yes, Q4 is, according to mine plan, is the highest grade quarter of the year. So expect a little better throughput than this quarter and a little better grade.
Next question will be from Stefan Ioannou at Cormark.
Great to hear that Pinto Valley is sort of turning the corner here and getting back on track. Just switching gears over to Minto. I just wonder, I'm just curious, is the mining completely done there now, or are you still sort of cleaning up on the mining and stockpile processing?
Yes, I think we've actually processed the last bit of ore that was scheduled to go through the mill this week. And so that would be it now. We're just -- between now and the end of the year, we'll just be preparing for proper care and maintenance going forward. The mining -- the mine's essentially complete -- mining and milling are essentially complete as of now.
[Operator Instructions] And at this time it appears we have no further questions. So I would like to turn the call back over to Mr. Pylot.
Great. Well, thanks everybody for taking part in a very short and brief call. And at this time -- Jim was on the line. I'd like to thank Jim for his -- this will be his last call, as he's retiring. So I'd like to thank Jim at the same time, and also welcome Raman on as CFO of Capstone. So thank you, everybody. Have a great day. And as always, please don't hesitate to contact us for any further questions.
Thank you, Mr. Pylot. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.