Capstone Copper Reports First Quarter 2023 Results
NEWS RELEASE
TSX:CS ● capstonecopper.com
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 1
May 3, 2023
Capstone Copper Reports First Quarter 2023 Results
All amounts in US$ unless otherwise indicated
Vancouver, British Columbia – Capstone Copper Corp. (“Capstone” or the “Company”) (TSX:CS) today
reported financial results for the three months and quarter ended March 31, 2023 (“Q1 2023”). Q1 copper
production totaled 40.7 tonnes at C1 cash costs 1 of $2.96 per payable pound of copper produced. The
Company reaffirmed its 2023 consolidated production, C1 cash costs 1, and capital (including capitalized
stripping) guidance of 170- 190kt of copper, $2.50 to $2.70 per payable pound, and $620 million,
respectively. Link HERE for Capstone’s Q1 2023 webcast presentation.
John MacKenzie, CEO of Capstone, commented, "We are pleased to report that construction at our
transformational Mantoverde Development Project (“MVDP”) remains on- time and on- budget, with nearly 3
million tonnes of sulphide ore stockpiled to date ahead of our ramp- up commencing late this year.
Furthermore, despite a challenging Q1 2023 marked by heavy rainfall at our Pinto Valley mine in Arizona, we
are re -iterating our 2023 production, cost, and capital outlook. We anticipate production to increase
sequentially, with a commensurate decrease in costs in the back half of 2023. This year is pivotal for
Capstone, as we expect to complete MVDP construction in Q4, setting the stage for a doubling of
consolidated cash flow and positioning us well for future growth".
Q1 2023 OPERATIONAL AND FINANCIAL HIGHLIGHTS
• Net loss of $29.0 million, or $(0.03) per share for Q1 2023. Adjusted net income 1 of $8.5 million, or
$0.02 per share for Q1 2023. Q1 2023 results are lower compared to the same quarter last year due
to a lower realized copper price, inflationary pressure on costs, and an inventory build- up due to a
sales lag in the availability of ocean going vessels for cathode shipments which totaled 2.4 thousand
tonnes of copper. Given the strengthening Chilean peso, net income includes a realized foreign
exchange loss of $8.5 million.
• Adjusted EBITDA 1 of $65.3 million for Q1 2023 compared to $123.4 million for Q1 2022. The
decrease in Adjusted EBITDA1 is driven by a lower realized copper price, a sales lag and inflationary
pressure on costs, and realized foreign exchange loss of $8.5 million and realized derivative loss of
$8.4 million.
• Operating cash flow before changes in working capital of $41.7 million in Q1 2023 compared to
$70.4 million in Q1 2022.
• Consolidated copper production for Q1 2023 of 40.7 thousand tonnes at C1 cash costs 1 of $2.96.
Copper production was lower than expected in the first quarter due to unfavorable weather at Pinto
Valley and maintenance downtime at Mantos Blancos focused on increasing mill throughput which
translated into higher consolidated cash costs.
• The Company reiterates the 2023 guidance of 170- 190kt of copper production at $2.50- $2.70 per
pound, along with capital guidance (including capitalized stripping) of $620 million. We expect
production to be back -half weighted, with sequential quarter -over-quarter improvements in copper
production, notably at Pinto Valley.
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 2
• Mantoverde Development Project ("MVDP") remains on budget and on schedule. Construction is
progressing well on all key areas of the project. Total project spend inception -to-date was
approximately $654 million at the end of March 2023 of a total budget of $825 million.
• Total available liquidity1 of $529.1 million as at March 31, 2023, composed of $101.1 million of cash
and short -term investments, and $428.0 million of undrawn amounts on the corporate revolving
credit facility.
• On March 20, 2023, Capstone Copper announced a new Sustainable Development Strategy and the
adoption of greenhouse gases ("GHG") emissions reduction targets to support the Company's
commitment to responsible copper production.
• On March 31, 2023, the Company and its largest shareholder, Orion Resource Partners ("Orion")
completed a secondary bought offering of common shares whereby Orion sold an aggregate of
57,500,000 common shares at a price of C$5.70 per share. Subsequent to the completion of the
offering, Orion's shareholding decreased from approximately 32% to approximately 24%.
• Subsequent to quarter-end, the Company announced the results of an new Technical Report and life
of mine plan for its Cozamin mine. The updated life of mine plan includes average annual copper
production of 20 thousand tonnes of copper and 1.3 mil lion ounces of silver over eight years at
average C1 costs1 of $1.51 per payable pound of copper.
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 3
OPERATIONAL OVERVIEW
Refer to Capstone's Q1 2023 MD&A and Financial Statements for detailed operating results.
Q1 2023 Q1 2022
Copper production (000s tonnes)
Sulphide business
Pinto Valley 12.9 14.4
Cozamin 5.2 5.9
Mantos Blancos 10.8 0.7
Total sulphides 28.9 21.0
Cathode business
Mantos Blancos 3.3 0.30
Mantoverde2 8.5 1.20
Total cathodes 11.8 1.5
Consolidated 40.7 22.5
Copper sales
Copper sold (000s tonnes) 37.5 25.5
Realized copper price1 ($/pound) 4.17 4.78
C1 cash costs1 ($/pound) produced
Sulphides business
Pinto Valley 3.09 2.60
Cozamin 1.72 1.12
Mantos Blancos 2.46 2.89
Total sulphides 2.61 2.31
Cathode business
Mantos Blancos 3.36 4.38
Mantoverde 4.02 3.63
Total cathodes 3.83 3.78
Consolidated 2.96 2.31
2 Mantoverde production shown on a 100% basis.
3 Q1 2022 production represents only nine days production for Mantos Blancos and Mantoverde
Consolidated Production
Q1 2023 copper production of 40.7 thousand tonnes of copper is higher than the 22.5 thousand tonnes in
Q1 2022, primarily as a result of the addition of full quarter Mantos Blancos and Mantoverde production.
Q1 2023 C1 cash costs1 of $2.96/lb are a mix of sulphide and cathode business units compared to Q1 2022
which was predominately sulphide production. Cash costs are higher than guidance for the quarter due to
lower production and inflationary pressure on costs which included some carryover of higher cost sulphuric
acid inventory.
Q1 2023 consolidated sulphide C1 cash costs 1 of $2.61/lb were 13% higher than in Q1 2022 primarily due
to inflationary price increases on main consumables.
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 4
Cathode production is from copper oxide ore that requires sulphuric acid leaching, solvent extraction and
electrowinning (SX-EW) to produce copper cathodes which are a finished copper product for the market.
Sulphide production requires a mill that utilizes a grinding and flotation process to recover sulphide minerals
in a copper concentrate saleable as an intermediate product to smelters and refiners. Capstone's low- cost
sulphide production is growing significantly with the MVDP to be completed late in 2023.
Pinto Valley Mine
Q1 2023 production was 10% lower than Q1 2022 mainly due to lower mill throughput (52,207 tpd in Q1
2023 versus 58,412 tpd in Q1 2022) driven by heavy rainfall, including flooding, which resulted in plugged
chutes and screens; in addition, there was unplanned maintenance on the secondary crusher. The mill feed
grade was 6% lower (0.30% in Q1 2023 versus 0.32% in Q1 2022) due to mining sequence, which was
partially offset by higher recoveries as a result of lower mill throughput.
Q1 2023 C1 cash costs 1 of $3.09/lb were $0.49/lb higher compared to the same period last year of $2.60/lb
primarily due to lower production ($0.30/lb), increased mining costs due to inflationary pressures on diesel
prices, explosives, grinding media and higher spend on rental equipment, mining equipment tools and
contractors ($0.24/lb), higher 2022 bonus payout ($0.05/lb) and lower capitalized stripping ($0.05/lb),
partially offset by higher by-product credits on higher molybdenum production. The cash costs are expected
to trend down as result of higher production but will be at the high end of the cost guidance range for Pinto
Valley.
Mantos Blancos Mine
Q1 2023 production was 14.1 thousand tonnes, comprised of 10.8 thousand tonnes from the sulphide
operations and 3.3 thousand tonnes of cathode from the oxide operations. Sulphide concentrate production
increased by 9% quarter- over-quarter, driven by higher throughput (16,023 tpd vs. 15,246 tpd in Q4 2022)
and higher recoveries (80.2% vs. 75.1% in Q4 2022). Copper grades remained strong at 0.94% (compared
to 0.94% in Q4 2022). During Q1 2023, the focus was on preventative maintenance in order to increase
reliability and improve online time. The quarter included 18 days operating at 20,000 tpd, and an average
throughput rate of 19,000 tpd in February.
Combined Q1 2023 C1 cash costs 1 were $2.68/lb ($2.46/lb sulphides and $3.36/lb cathodes). The cathode
costs were significantly impacted by high sulphuric acid prices that averaged $212/tonne in Q1 2023
including inland transport costs and 11,300 tonnes of high- acid cost inventory ($240/tonne) as of the end of
2022. Recently, sulphuric acid prices have significantly decreased with contract prices of approximately
$130/tonne for 2023. In addition, for the rest of 2023 we expect a reduction in combined C1 cash costs as
the production mix will have a higher ratio of concentrates to cathodes with the ramp up in sulphide
production during the year. Cash costs in Q4 2022 were lower as a result of a stockpile adjustment that was
recorded.
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 5
Mantoverde Mine
Q1 2023 production was 8.5 thousand tonnes. Heap operations grade was 0.31% and recoveries were
69.0%. Dump operations grade was 0.17% and recoveries were 39.9%. The heap operations will have a
lower grade during 2023 in range of 0.31% to 0.33% as result of mine sequence as we transition towards
the sulphide ore for MVDP. As a result of 30% lower grade, the cash costs for 2023 will be higher than 2022
and then subsequently decline in 2024 with the commencement of sulphide production.
Q1 2023 C1 cash costs1 were $4.02/lb and were significantly impacted by high energy costs, averaging 25.6
c/kWh due to high coal prices included in the pricing formula of the energy contract, and high sulphuric acid
prices, averaging $177/tonne for the quarter including inland transport costs and 17,600 tonnes of high- cost
acid inventory as of the end of 2022. The impact of of higher cost sulphuric acid in opening inventory was
approximately $1.3 million. For the rest of 2023, energy costs are expected to gradually decrease and in
2024 the coal price element will be eliminated from the pricing formula. In addition, sulphuric acid prices
have significantly decreased with contract prices in the $140/tonne range for 2023.
Cozamin Mine
Q1 2023 production was l ower than Q1 2022 due to lower throughput as a result of change in mining
method (cut-and-fill) (3,410 tpd in Q1 2023 versus 3,704 tpd in Q1 2022) and lower grades (1.77% in Q1
2023 versus 1.84% in Q1 2022). Recoveries were consistent quarter over quarter.
Q1 2023 C1 cash costs 1 were 54% higher than the same period last year primarily due to the change in
mining method which resulted in an increase in employee headcount, higher power rates, planned higher
spend on contractors and mechanical parts to increase equipment availability and reliability ($0.20/lb). In
addition, cash costs were impacted by lower production ($0.17/lb) and lower zinc by -product credits due to
planned lower zinc production, as well as lower silver prices ($0.15/lb).
Mantoverde Development Project
Construction of the MVDP located at the existing Mantoverde (oxide) operation continues to progress well.
The MVDP is expected to enable the mine to process 235 million tonnes of copper sulphide reserves over a
20-year expected mine life, in addition to existing oxide reserves. The MVDP involves the addition of a
sulphide concentrator (12.3 million tonnes per year) and tailings storage facility, and the expansion of the
existing desalination plant.
Upon completion, the Company expects the MVDP to increase production from approximately 36,000 to
40,000 tonnes of copper (cathodes only) in our current guidance for 2023 to approximately 110,000 to
120,000 tonnes of copper (copper concentrate and cathodes) post project completion. In parallel, C1 cash
costs1 are expected to decrease from a range of $3.50/lb to $3.70/lb in the current guidance for 2023 to
below $2.00/lb after project completion and ramp up. The decline in expected costs will be driven by the
mine's transition to becoming a primary producer of copper concentrate. Upon completion of the MVDP,
approximately 75% of Mantoverde's production will come from the lower- cost sulphide copper. The mine will
also benefit from the production of approximately 31, 000 ounces of gold per year that will generate by -
product credits.
MVDP is progressing under a lump- sum turn- key engineering, procurement, and construction (EPC)
contract with Ausenco Limited, a multi -national EPC management company, with broad internati onal
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 6
experience in the design and construction of copper concentrator projects of this scale in the international
market. The execution plan includes a Capstone Copper owner’s team working with the contractors during
the execution phase.
The Mantoverde Development Project is progressing well and remains on track for commissioning and
feeding first ore to the mill in late 2023. Areas of focus in Q1 2023 were:
• Third electric rope shovel assembly and commissioning completed;
• Stockpiled nearly 3 million tonnes of sulphide ore grading ~0.6% copper;
• Structural and mechanical assembly completed in the primary crusher, while services facilities are
progressing according to plan; and
• Installed critical equipment such as the SAG and ball mill, flotation cells, conveyor belts and other
components in the final position and electromechanical assembly is progressing according to the
planned schedule.
As of March 31, 2023, the cost of the different components of the project, including the lump-sum turnkey
EPC, continue on track and on target. The total project capital remains at $825 million and inception- to-date
project spend, excluding finance costs, totals $654 million.
The majority of the total project capital cost of $825 milli on is fully encompassed by the turn- key contract
with Ausenco. The EPC contract total budget is approximately $525 million of which $413 million has been
spent as of March 31, 2023. In addition, major mining equipment for approximately $140 million was pri ce
fixed prior to the elevated inflationary pressures observed this year.
A virtual tour of the project can be viewed at https://vrify.com/decks/12698-mantoverde-development-project
Mantoverde - Santo Domingo District Integration Plan
The Company is focused on creating a world- class mining district in the Atacama region of Chile, targeting
over 200,000 tonnes per year of low- cost copper production with the potential to also become one of the
largest and lowest cost battery grade cobalt producers in the world. Capstone Copper has the opportunity to
unlock a total of $80- 100 million per year in operating cost synergies, while also enabling additional copper
and cobalt production, infrastructure capital savings, and the potential for significant tax synergies.
The district integration synergies include the following:
• Water and Power Infrastructure – a plan to expand the existing Mantoverde desalination plant to 840
litres per second, utilization of existing water pipelines, and upgraded ene rgy transmission capacity
to Santo Domingo.
• Port Infrastructure – opportunity to reduce Mantoverde’s concentrate trucking costs by $10 million
per year by using the planned Santo Domingo port, located 65 kilometres from Mantoverde. This will
also lower GHG emissions associated with transporting concentrate to customers.
• Integrated Operations – potential to lower district operating costs by $20- 30 million by streamlining
the organizational chart across both operations, increasing purchasing power given district scale,
and standardizing equipment to promote productivity gains.
• Santo Domingo Oxides – potential addition of 8,000- 10,000 tonnes per annum ("tpa") of copper
production over the first 10 years of production, by leaching copper oxides at Santo Domingo and
processing the concentrated solutions at Mantoverde’s underutilized SX-EW facility.
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 7
• Cobalt Opp ortunity – ability to reduce operating costs by approximately $45 million per year by
building the cobalt and sulphuric acid production facility at Mantoverde that will process cobaltiferous
pyrite produced by both Mantoverde and Santo Domingo. The benefits would be realized through the
by-product production of sulphuric acid as well as the elimination of related sulphuric acid port and
trucking costs.
Santo Domingo
Santo Domingo has started the flowsheet optimization process previously announced by awarding Ausenco
a Prefeasibility Study ("PFS") subsequently followed by a Feasibility Study ("FS") scope which explores
betterments identified through the development of several technical assessments conducted by subject
matter experts. Taki ng into consideration the previous feasibility study, Ausenco will put together a new
Technical Report to update the market with the Santo Domingo current business case. The press release
associated with the Technical Report is expected in December 2023. A lso, project debottlenecking activities
have continued to maintain Capstone Copper's "shovel ready" position by advancing permitting and
formalizing agreements with third parties.
Mantoverde Optimization and Phase II
The Company is currently analyzing the next expansion of the sulphide concentrator. Capstone has
identified that the desalination plant capacity and major components of the comminution and flotation circuits
of the Mantoverde Development Project are capable of sustaining average annual throughput of between
40,000 and 45,000 tonnes per day with no major capital equipment upgrades. Capstone continues to work
with Ausenco's engineering team to develop the Optimized Mantoverde Development Project (MVDP
Optimized), including eval uating the costs and timelines of debottlenecking the minor components of the
plant to meet the potential throughput target. The conceptual engineering study is expected to be completed
in Q2 and the Feasibility Study is on track for completion late in H2 2023.
Given the above, the Mantoverde Phase II study will evaluate the addition of an entire second processing
line, possibly a duplication of the first line, to process some of the additional 77% of resources not utilized by
the optimized MVDP. Current activities are focused on understanding the optimum concentrator capacity
and mine plan, along with the implications to the timing and permitting for the project.
Mantoverde - Santo Domingo Cobalt Feasibility Study Update
A district cobalt plant for Mantoverde - Santo Domingo may also unlock cobalt production from Mantoverde
while producing a by-product of sulphuric acid which can then be consumed internally to further significantly
lower operating costs in the leaching process at Mantoverde.
The cobalt recovery process consists of a concentration step, an oxidation step, and a cobalt recovery step.
The concentration step considers a conventional froth flotation circuit treating copper flotation tails to
produce a cobalti ferous pyrite concentrate which is expected to contain between 0.5% and 0.7% Co. Two
cobalt processes are under evaluation, Roasting and Heap Leaching -Ion Exchange. In both cases, the
technology is proven and is expected to deliver low cost cobalt producti on and GHG savings. The roasting
case requires higher capital and would need a longer timeline for permitting and construction, while the heap
leaching-ion exchange process is expected to have lower cobalt production but with a quicker timeline to
production, and lower risk due to the use of heap leach infrastructure already in place at Mantoverde.
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 8
For the roasting case, the pyrite concentrate, which contains between 0.5% and 0.7% Co, is oxidized in a
fluidized bed roaster to produce a cobalt calcine and a concentrated sulphuric acid by -product. The calcine
is then subjected to various leaching, precipitation, solvent extraction and crystallization steps to produce
battery grade cobalt sulphate heptahydrate. Capstone is also evaluating alternatives that m ay include the
direct sale of some or all the cobalt as intermediate product, such as mixed hydroxide precipitate, to a
partner, joint venture or an independent third- party refiner. At a combined MV -SD target of 6.0 to 6.5
thousand tonnes of cobalt produc tion per year, this would be one of the largest and lowest cost cobalt
producers in the world. Additional benefits of this project include the generation of carbon- free energy from
waste heat emitted by the roaster, and the production of by -product sulphuric acid which can be used for
heap or dump leaching to produce low- cost copper cathodes at Mantoverde, Mantos Blancos, or sold to
other consumers within the district. Exploratory test -work has started at Mantoverde to confirm suitability of
the Santo Domingo cobalt circuit flowsheet to process an integrated cobaltiferous pyrite feed.
For the heap leaching- ion exchange case, the pyrite concentrate from Mantoverde and Santo Domingo
would be recovered and added to the oxide heap leach feed agglomerate drums. The pyrite would oxidize in
the heap, producing by -product sulfuric acid in situ and solubilizing a significant fraction of the cobalt. A
bleed stream containing cobalt in solution will then be directed to a recovery plant consisting of various steps
of i mpurity removal, continuous ion exchange, and hydroxide precipitation to produce a cobalt hydroxide
precipitate. It is believed that this approach would require significantly less capital expenditure and could
potentially accelerate the production of cobal t from the district. Test work has commenced as planned,
including cobaltiferous pyrite roasting and leaching tests for Santo Domingo, column leaching and selective
flotation tests using Mantoverde ore, and ion exchange separation tests using Mantoverde raffinates.
Mantos Blancos Phase II
Mantos Blancos is currently evaluating the potential to increase throughput of the Mantos Blancos sulphide
concentrator plant from 7.3 million tonnes per year to 10.0 million tonnes per year using exis ting
underutilized ball mills and process equipment. As part of the Mantos Blancos Phase II Project, we are also
evaluating the potential to extend the life of copper cathode production. The Mantos Blancos Phase II
Feasibility Study is expected to be released in H2 2023, and the environmental DIA application was
submitted in August 2022.
PV4 Study
The PV4 PFS aims to maximize the conversion of approximately one billion tonnes of mineral resources to
mineral reserves, significantly extending Pinto Valley’s mine life, and increasing the mine’s copper
production profile. Given our review of district consolidation potential, the release of the PV4 study will be
deferred while we investigate the incorporation of district opportunities including a potential mill expansion
and increased leaching capacity supported by optimized water, heap and dump leach, and tailings
infrastructure. This could unlock significant ESG opportunities and may transform our approach to surface
value for all stakeholders in the Globe-Miami District.
Cozamin Updated Technical Report
The Company is pleased to announce the results of a new Technical Report for its Cozamin Mine in
Zacatecas, Mexico. As at January 1, 2023, Probable Mineral Reserves stood at 10.2 million tonnes grading
1.65% copper, 43 g/t silver, 0.54% zinc and 0.29% lead. Measured and Indicated Mineral Resources were