Cerro de Pasco Resources Reports Q2 2023 Results
Cerro de Pasco Resources Reports Q2 2023 Results
MONTRÉAL, QUÉBEC, CANADA / August 29, 202 3/ Cerro de Pasco Resources Inc. (CSE: CDPR) (OTCPK:
GPPRF) (Frankfurt: N8HP) (“CDPR,” or the “Company”) is pleased to announce selected second quarter 2023
financial and operating results. All currency is in U.S. dollars, unless otherwise stated. The Company’s
Financial Statements and Management’s Discussion & Analysis (“MD&A” ) are available at
www.pascoresources.com and www.sedar.com.
Selected Q2 2023 financial and operating results
• Metal Production in Q 2 2023 was 10 million pounds of Zinc, 820 thousand pounds of Lead, and 66
thousand ounces of Silver. These production figures represent an 83% increase in Zn, 112% increase in
Pb and 238% in Ag respectively over Q2 2022 production.
• Revenue for Q2 2023 was $4.5 million. Revenue in Q2 2023 was impacted by $3. 9 million of negative
final settlements from Q1 2023 sales and further exacerbated by a 35% decrease in quarter over quarter
zinc prices.
• Q2 2023 C1 cash Cost (4) of $1.34, and AISC (5) $1.60 per pound of zinc produced remain in-line with the
Company’s projections; C1 Cash cost decreased by 41% and AISC decreased by 35% as compared to Q2
2022 due to the resumption of normal production rates and improved cost plans. AISC included
development and new infrastructure supporting the Santander Pipe connection.
• Q2 2023 average mill production was 2,0 50 tonnes per day. This was a 9 7% improvement over
throughput achieved in Q2 2022.
• Average mine development of 532 meters per month for Q2 2023. A 4% increase over Q1 2022. This
included a total of 208 meters completed for the Magistral-Pipe tunnel project.
• The Company met production guidance for 1H 2023.
• Positive mine operating cash flow (3) of over $3.8 million.
• Over 21% of the net loss for Q1 2023 comprises either non-cash or one-time items (6); net loss for Q2
2023 totaled $10.4M or ($0.03) per share.
• As of June 30, 2023, the Company had cash, cash equivalents, and restricted cash of $6.1 million.
Guy Goulet, CDPR’s C EO commented, “CDPR delivered a solid quarter despite inflationary pressures that
impacted the global mining industr y. Production has nearly doubled since Q2 2022 and average mill
production was just under nameplate capacity . Aggressive cost reduction plan s saved nearly 35% on unit
costs. Revenues for Q2 2023 were severely impacted due to a negative revision in final settlements of Q1
2023 sales further exacerbated by the significant drop in zinc prices . As a result, we have announced and
implemented a new curtailed operating plan to sustain the Santander operation while we continue
advancing the Pipe project.”
Guy Goulet, CDPR’s CEO further commented “The large imbalance in working capital is expected to be
temporary due to an increase in accounts payable , primarily caused by the decision to pursue the
development of the Santander Pipe in advance of support funding . According to the projections supported
by a third -party NI 43 -101 preliminary economic assessment, the Santander Pipe ’s Consolidated Plan will
produce a positive cashflow for a period of 10+ years. Once the previously announced financing packages
are closed, the Santander mine will be on track to quickly begin the period of positive cashflow and naturally
address the imbalance in working capital.”
Summary of Operating Results at Santander
Q2 23 Q2 22 Var 1H 23 1H 22
Production
Zn Price ($/t) 2,539 3,925 -35% 18,964 14,879
Ore Mined t 185,050 94,207 96% 363,285 189,125
Ore Milled t 185,210 94,207 97% 361,694 189,125
Zn Head Grade %/t 3.14 3.30 -5% 3.20 3.82
Pb Head Grade %/t 0.31 0.30 3% 0.29 0.22
Ag Head Grade oz/t 0.71 0.50 42% 0.67 0.50
Zn Recovery % 93.64 94.80 -1% 94.32 95.10
Pb Recovery % 68.61 71.10 -4% 68.21 72.78
Ag recovery % 50.38 47.30 7% 48.27 48.35
Zn Concentrate t 11,508 6,129 88% 23,060 14,172
Pb Concentrate t 773 372 108% 1,339 666
Ag ounces Oz 69,862 22,405 212% 117,660 41,959
Zn Payable Production Mlbs 10.0 5.5 83% 20,035 32,709
Pb Payable Production Mlbs 0.82 0.39 112% 1,471 1,656
Ag Payable Production Oz 66,369 19,639 238% 111,777 108,634
Sales
Zn Payable sold Mlbs 8.5 4.1 109% 8.6 6.7
Pb Payable sold Mlbs 0.5 0.3 110% 0.5 0.3
Ag Payable sold Oz 20,616 7,468 176% 17,514 9,197
C1 Cash Cost 1 $/lb 1.34 2.28 -41% 1.50 1.95
AISC 1 $/lb 1.60 2.46 -35% 1.78 2.09
Development meters 1,593 1,213 4% 3,435 1,987
Finance
Revenues, net (000)s $ 4,515 6,891 -34% 16,820 21,472
Cost of Goods Sold (000)s $ -11,893 -8,249 -44% -26,499 -17,979
Gross Profit (000)s $ -7,378 -1,436 -413% -9,679 3,493
Sales and Admin Expenses (000s) $ -760 -689 -10% -1,411 -1,273
Adjusted EBIT (000)s $ -8,138 -2,047 -297% -11,090 2,220
Other income (expense) -599 -61 -882% -1,462 -79
EBITDA 1 (000)s $ -8,737 -2,108 314% -12,551 2,141
Depreciation (000)s $ 1,603 265 504% 3,011 527
EBIT 1 (000)s $ -7,134 -1,843 287% -9,541 2,668
AISC Total Costs Q2 23 Q2 22 Var 1H 23 1H 22
Mine Operating Expenses (000)s $ 10,644 10,963 -3% 24,007 21,216
Smelting and refining (000)s $ 4,385 1,990 120% 8,749 4,449
Distribution (000)s $ 312 180 74% 614 396
Royalties (000)s $ 22 25 -14% 71 53
Less: By-product revenues (000)s $ (1,984) (717) 177% (3,339) (1,395)
C1 total costs (000)s $ 13,378 12,441 8% 30,102 24,719
Sustaining CAPEX (000)s $ 2,628 1,011 160% 5,506 1,813
Lease Payments (000)s $
AISC total costs (000)s $ 16,006 13,451 19% 35,608 26,532
Pounds of zinc payable produced Mlbs 10.0 5.5 83% 20.0 12.7
C1 Cash Cost per pound $US 1.34 2.28 -41% 1.50 1.95
All-in Sustaining Cost per pound $US 1.60 2.46 -35% 1.78 2.09
Q2 2023 business development highlights
• On April 11, 2023, the Company announced that it has filed on SEDAR an independent Preliminary
Economic Assessment (“PEA”) for its brownfield Pipe Project (“the Project” or “the Santander Pipe”).
• On June 19th, 2023, the Company announced the discovery of La Cuñada Zone at the Santander Pipe,
an additional potential resource that benefits the Pipe project. The La Cunada zone starts at the surface
of the historic open pit (4580 masl), continues to the bottom of the pit (4380 masl), and ends at the
historic underground operation (level 4220 - where the Upper-Zone starts).
o The La Cuñada Zone in the Santander Pipe involves vertical mineralization of approximately 200
meters and has the potential to add 2 -3M tonnes with grades between 3 -4% Zn, 0.3-0.4% Pb,
0.6-0.7 oz/tn Ag and 0.10-0.12% Cu. The La Cuñada Zone, for practical purposes, is divided into
two zones: (1) Superficial Zone "La Isla", consisting of a remnant volume from old open pit
mining, and (2) "La Cuñada-underground", which corresponds to historic underground mining.
o The 2023 Puajanca drilling was completed in early June. Puajanca, which is within proximity to
the existing operation combined with the addition of La Cuñada potential zone are exciting
complements to the Santander Pipe package. The campaign comprised 8 bo reholes totaling
2,208 meters of drilling. Highlights include:
o The drill holes SAN-0295 and SAN-0297 intersected 39.6 meters grading 2.92% Zinc 0.81% Lead,
0.02% Copper and 1.60 opt Silver.
o Overall, the Puajanca drilling campaign intercepted 61.8 meters of mineralization with average
grades of 2.96% Zinc 0.98% Lead, 0.03% Copper and 1.8 opt Silver.
• On June 28, 2023, the Company announced that it has signed a term sheet with Ocean Partners UK
Limited (“OPUK”), a metals trading firm and Arena Investors, LP (“ARENA”), a global asset manager, to
provide an aggregate of $12.0M to $15.5M, consisting of a $8.0M loan facility from ARENA and a $4.0M
to $7.5M revolving concentrate pre-payment facility from OPUK (together the “Financing”). In addition,
the Company has secured a $5.0M term sheet with a private Peruvian fund in exchange for a 10%
ownership position in CDPR’s Santander subsidiary (the “Equity Interest”). The purpose of the Financing
and Equity Interest will be to strengthen the Company’s balance sheet during the physical development
stage of the Santander Pipe Project at its Santander Mine in Peru.
Private Placement Financings Completed in Q2 2023
• On June 5, 2023, the Company concluded a private placement by issuing 10,400,000 units at a price of
CA$0.10 per unit for proceeds of CA$1,004,000. Each unit consists of one common share and one
warrant for a total of 10,400,000 common shares and 10,400,0 00 warrants. Each warrant will entitle
the holder to acquire one additional common share of the Company at an exercise price of CA$0.25
with an expiry date of two years.
• On June 23, 2023, the Company concluded a private placement by issuing 1,027,500 units at a price of
CA$0.10 per unit for proceeds of CA$102,750. Each unit consists of one common share and one warrant
for a total of 1,027,500 common shares and 1,027,500 warrants. Each warrant will entitle the holder to
acquire one additional common share of the Company at an exercise price of CA$0.25 with an expiry
date of two years.
Quiulacocha Easement Update
In order to fulfill the requirements to obtain the authorization to start exploration activities from the
General Mining Bureau of Mining of the Ministry of Energy and Mines (DGM, for its acronym in Spanish), on
August 25th, 2022, CDPR requested the DGM to impose an easement for 2 years over a part of the plot
called Parcel "K", owned by Activos Mineros S.A.C. ("AMSAC").
The following phases of the process have been completed:
• Mining expert opinion obtained.
• Conciliation stage lead by the Centre of Conflict Resolution of the Catholic University of Peru (PUCP)
completed.
• Valuation of the easement request by an agronomic expert appointed by the Ministry of Housing,
Construction and Sanitation (MVCS, for its acronym in Spanish) conducted.
• CDPR has formally confirmed to the DGM its request for the granting of the easement.
The following milestones are expected to be obtained in September 2023:
• The DGM forwards the complete file to the Ministry of Agricultural Development and Irrigation
(MIDAGRI, for its acronym in Spanish) for the issuance of a favorable technical opinion.
• Once MIDAGRI's opinion is received, the DGM prepares the draft Supreme Resolution that sets the
amount of compensation to be paid for the easement, along with the minutes of the easement
establishment. This Supreme Resolution requires the signature of the Minister of Energy and Mines,
the Ministry of Agriculture, and the President of the Republic.
Technical Information
Mr. Jorge Lozano, MMSAQP and Chief Operating Officer for CDPR, has reviewed and approved the scientific
and technical information contained in this news release. Mr. Lozano is a Qualified Person for the purposes
of reporting in compliance with NI 43-101.
About Cerro de Pasco Resources
Cerro de Pasco Resources Inc. (CDPR) is a mining and resource management company, with the goal to
become the next mid-tier producer of base metals in Peru. CDPR is currently engaged in mining, developing
and exploring our wholly owned 6,000 hectare Santander Mine in the highly prospective Antamina -
Yauricocha Skarn Corridor, located 215 km from Lima. CDPR is also focused on the development of its
principal 100% owned assest, El Metallurgista mining concession comprising mineral tailings and stockpiles
extracted from the Cerro de Pasco open-pit mine in central Peru. The company’s approach at El Metalurgista
entails the reprocessing and environmental remediation of mining waste and the creation of numerous
opportunities in a circular economy. CDPR founded on clear the objectives, to engender long-term economic
sustainability and benefit for the local population, from an economic, social and health point of view.
Contact Information
Cerro de Pasco Resources Inc.
Guy Goulet, CEO
Tel.: 579 476-7000
Email: [email protected]
Forward-Looking Statements and Disclaimer
Certain information contained herein may constitute “forward -looking information” or “forward -looking
statements” under Canadian securities legislation. Generally, forward-looking information can be identified
by words such as "pro forma", "plans", "expect s", "may", "should", "could", "will", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates", "believes", or variations including negative variations
thereof of such words and phrases that refer to certain actions, events or results that may, occur or be taken
or achieved. Such forward -looking statements, including but not limited to statements relating to the
expected development and operations of the Company and H 2-SPHERE, involve risks, uncertainties and
other factors which may cause the actual results to be materially different from those expressed or implied
by such forward -looking statements or forward -looking information. Such factors include, among others,
risks related to the exploration, development and mining operations; impacts of macroeconomic
developments as well as the impact of the COVID -19 pandemic; and any material adverse effect on the
business, properties and assets of the Company or H 2-SPHERE. There can be no assurance that such
statements will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue reliance on forward -looking
statements and forward-looking information. The Company will not update any forward-looking statements
or forward-looking information included herein, except as required by applicable securities laws.
Cautionary Note Regarding Non-IFRS Financial Performance Measures
This MD&A refers to the following non -IFRS financial performance measures: Earnings before interest,
taxes, depreciation and amortization (“EBITDA”), Earnings before interest and taxes (“EBIT”), Adjusted
EBITDA, Adjusted EBIT, Adjusted Earnings per Share, Net Debt, C1 Cash Cost and All -In Sustaining Cost
(“AISC”).
These measures are not recognized under IFRS as they do not have any standardized meaning prescribed
by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. CDPR
uses these measures internally to evaluate the und erlying operating performance of the Company for the
reporting periods presented. The use of these measures enables the Company to assess performance trends
and to evaluate the results of the underlying business. CDPR understands that certain investors, and others
who follow the Company’s performance, also assess performance in this way.
The Company believes that these metrics measure our performance and are useful indicators of our
expected performance in future periods. This data is intended to provide additional information and should
not be considered in isolation or as a substitute for measures of performance prepared in accordance with
IFRS.
1) EBITDA and EBIT
EBITDA provides insight into overall business performance. This measure assists readers in understanding
the ongoing cash generating potential of the business including liquidity to fund working capital, service
debt, and fund capital expenditures and inve stment opportunities. EBITDA is profit attributable to
shareholders before net finance expense, income taxes and depreciation, depletion, and amortization. EBIT
is EBITDA after depreciation, depletion, and amortization. Other companies may calculate EBIT and EBITDA
differently.
2) Adjusted EBITDA, Adjusted EBIT and Adjusted Earnings per Share
Adjusted EBITDA consists of EBITDA less the impact of impairments or reversals of impairment and other
non-cash and non -recurring expenses and recoveries. Adjusted EBIT consists of EBIT less the impact of
impairments or reversals of impairment and other no n-cash and non -recurring expenses and recoveries.
These expenses and recoveries are removed from the calculation of EBITDA and EBIT as the Company does
not believe they are reflective of the Company's ability to generate liquidity and its core operating results.
Adjusted Earnings per Share consists of net income or loss in the period less the impact of impairments or
reversals of impairment, settlement mark -to-market, fair value (gain) loss on financial instruments, (gain)
loss on foreign exchange, restructuring expenses and other income or expenses.
3) Mine Operating Cash Flow
Mine operating Cash Flow is net income from operations adding back the net effects of changes in
impairment, tax provisions, tax accruals, depreciation and amortization, non-cash changes in working capital
and changes due to non-cash purchase price allocation adjustments.
4) C1 Cash Cost
This measures the estimated cash cost to produce a pound of payable zinc. This measure includes mine
operating production expenses such as mining, processing, administration, indirect charges (including
surface maintenance and camp), and smelting, refining and freight, distribution, royalties, and by -product
metal revenues divided by pounds of payable zinc produced. C1 Cash Cost per pound of payable zinc
produced does not include depreciation, depletion, and amortization, reclamation expenses, capital
sustaining and exploration expenses.
5) AISC
This measures the estimated cash costs to produce a pound of payable zinc plus the estimated capital
sustaining costs to maintain the mine and mill. This measure includes the C1 Cash Cost per pound and capital
sustaining costs divided by pounds of payable zinc produced. All-In Sustaining Cost per pound of zinc payable
produced does not include depreciation, depletion, and amortization, reclamation, and exploration
expenses.
6) Non-cash or one-time items
Non-cash or one -time items include depreciation, stock-based compensation, loss or gain on derivatives,
change of fair value on contingent payments and other financial assets, losses on the dissolution of
subsidiaries, provisions for contingent taxes, gain on the extinguishment of debt and presumed interest on
convertible and promissory notes.