Capstone Copper Reports Third 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
November 3, 2023
Capstone Copper Reports Third 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 nine months and quarter ended September 30, 2023 (“Q3 2023”). Copper
production in Q3 totaled 40.3 thousand tonnes at C1 cash costs 1 of $2.88 per payable pound of copper
produced. Link HERE for Capstone’s Q3 2023 webcast presentation.
John MacKenzie, CEO of Capstone, commented, "I am encouraged by the progress we made during the third
quarter in executing on our plan to improve operational reliability and expand margins across our portfolio. As
construction at our flagship Mantoverde Development Project ("MVDP") approaches completion by year-end,
we look forward to a transformational year in 2024. Our excitement follows many years of dedicated effort by
our mine build team in Chile. MVDP will drive a significant reduction in our consolidated unit costs and provide
a pathway to record operating cash flow generation for Capstone Copper."
Q3 2023 OPERATIONAL AND FINANCIAL HIGHLIGHTS
• Net loss of $42.3 million, or $(0.05) per share for Q3 2023 compared to net income of $37.5 million,
or $0.05 per share for Q3 2022.
• Adjusted net loss attributable to shareholders1 of $15.8 million, or $(0.02) per share for Q3 2023. Q3
2023 adjusted net loss attributable to shareholders 1 is lower than Q3 2022 adjusted net loss
attributable to shareholders1 of $22.7 million due to higher copper prices.
• Adjusted EBITDA1 of $62.8 million for Q3 2023 compared to $35.2 million for Q3 2022. The increase
in Adjusted EBITDA 1 is driven by a higher copper price of $3.75/lb compared to $3.18/lb (prior to
unrealized provisional pricing adjustments), partially offset by lower copper sold (38.7 thousand tonnes
in Q3 2023 versus 44.2 thousand tonnes in Q3 2022).
• Operating cash flow before changes in working capital of $59.3 million in Q3 2023 compared to
$14.4 million in Q3 2022.
• Consolidated copper production for Q3 2023 of 40.3 thousand tonnes at C1 cash costs1 of $2.88/lb.
Copper production in the third quarter was impacted by an unplanned eight days of cumulative
downtime at Pinto Valley related to the secondary crusher jack shaft replacement and counter shaft
repairs, plus planned maintenance downtime at Mantos Blancos. Lower production levels and
maintenance expenses were the key drivers related to higher consolidated cash costs in the quarter.
• The Company reaffirms its H2 copper production guidance of 83kt to 93kt. C1 cash costs1 are trending
towards the upper end of the H2 guidance range of $2.55/lb to $2.75/lb due to additional unplanned
maintenance expenditures noted in Q3.
• Mantoverde Development Project overall progress at 93% and remains on schedule. Construction is
progressing well on all key areas of the project. Total project spend since inception was $763 million
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 2
at the end of September 2023, compared to $706 million at June 2023. The project is on track for
construction completion by year end 2023. As the project nears completion, the updated total project
cost is estimated at $870 million which is a 5% increase and includes approximately $20 million in
project improvements.
• Total available liquidity1 of $424.5 million as at September 30, 2023, composed of $129.5 million of
cash and short-term investments, and $295.0 million of undrawn amounts on the corporate revolving
credit facility.
OPERATIONAL OVERVIEW
Refer to Capstone's Q3 2023 MD&A and Financial Statements for detailed operating results.
Q3 2023 Q3 2022 2023 YTD 2022 YTD
Copper production (000s tonnes)
Sulphide business
Pinto Valley 13.7 14.1 39.2 41.8
Cozamin 5.9 6.4 17.8 18.7
Mantos Blancos 9.1 9.6 28.3 19.0
Total sulphides 28.7 30.1 85.3 79.5
Cathode business
Mantos Blancos 3.0 4.0 9.6 8.0
Mantoverde2 8.6 11.6 25.4 25.8
Total cathodes 11.6 15.6 35.0 33.8
Consolidated 40.3 45.7 120.3 113.3
Copper sales
Copper sold (000s tonnes) 38.7 44.2 116.9 115.2
Realized copper price1 ($/pound) 3.77 3.30 3.87 3.76
C1 cash costs1 ($/pound) produced
Sulphides business
Pinto Valley 2.83 2.60 2.96 2.67
Cozamin 1.85 1.20 1.73 1.19
Mantos Blancos 2.85 2.17 2.80 2.34
Total sulphides 2.63 2.17 2.65 2.25
Cathode business
Mantos Blancos 2.75 3.87 3.07 3.80
Mantoverde 3.74 3.87 3.89 3.62
Total cathodes 3.48 3.87 3.67 3.66
Consolidated 2.88 2.76 2.96 2.68
2 Mantoverde production shown on a 100% basis.
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 3
Consolidated Production
Q3 2023 copper production of 40.3 thousand tonnes was 12% lower than Q3 2022 primarily as a result of
expected lower oxide production at Mantoverde on lower ore grade related to the mining sequence as we are
transitioning to sulphide ore for MVDP . Moreover, Pinto Valley had lower mill throughput due to unplanned
maintenance downtime related to secondary crusher jack shaft replacement and counter shaft repairs
resulting in approximately eight days of downtime.
Q3 2023 C1 cash costs 1 of $2.88/lb were 4% higher than $2.76/lb Q3 2022 mainly impacted by 12% lower
production, partially offset by higher capitalized stripping at Mantoverde and higher gold by-product credits at
Pinto Valley.
2023 YTD copper production of 120.3 thousand tonnes of copper is higher than the 113.3 thousand tonnes in
2022 YTD, primarily as a result of full quarter of production in Q1 2023 versus nine day production in Q1 2022
at Mantos Blancos and Mantoverde.
2023 YTD C1 cash costs1 of $2.96/lb were 10% higher than $2.68/lb 2022 YTD mainly on higher operational
costs, partially offset by higher capitalized stripping and by-product credits.
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.
Pinto Valley Mine
Copper production of 13.6 thousand tonnes in Q3 2023 was 3% lower than in Q3 2022 mainly on lower mill
throughput during the quarter (Q3 2023 - 47,426 tonnes per day ("tpd") versus Q3 2022 - 48,143 tpd), resulting
from unplanned eight-day downtime related to the secondary crusher jack shaft replacement and counter shaft
repairs. Grade was consistent quarter over quarter (Q3 2023 – 0.34% versus Q3 2022 - 0.34%). Recoveries
were lower compared to the same period last year (Q3 2023 - 87.4% versus Q3 2022 - 89.1%).
2023 YTD production was 6% lower than 2022 YTD mainly due to lower mill throughput (47,972 tpd in 2023
YTD versus 51,088 tpd in 2022 YTD) driven by heavy rainfall, including flooding, which resulted in plugged
chutes and screens in Q1, conveyor belt replacement/structural support rebuild, and unplanned maintenance
on the secondary crusher and associated conveyors which caused the equivalent of twenty days of downtime
during Q2 and Q3. Recoveries were higher than 2022 YTD (87.4% 2023 YTD versus 86.3% 2022 YTD). The
mill feed grade was consistent with the same period last year (0.32% in 2023 YTD versus 0.33% in 2022 YTD).
Q3 2023 C1 cash costs 1 of $2.83/lb in Q3 2023 were 9% higher than Q3 2022 of $2.60/lb primarily due to
increases in operating costs driven by higher contractor spend and mechanical parts costs ($0.32/lb) and
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 4
lower production ($0.11/lb), partially offset by higher gold by-product credits and lower treatment and refining
costs (-$0.21/lb).
2023 YTD C1 cash costs 1 of $2.96/lb were 11% higher compared to the same period last year of $2.67/lb
primarily due to increased mining costs due to inflationary pressures on explosives, and higher spend on rental
equipment, mining equipment tools and maintenance contractors ($0.23/lb), lower production ($0.18/lb), and
lower capitalized stripping ($0.05/lb), partially offset by higher gold and molybdenum by -product credits and
lower treatment costs ( -$0.15/lb). The cash costs are expected to trend down in Q4 as result of higher
production.
Mantos Blancos Mine
Q3 2023 production was 12.2 thousand tonnes, comprised of 9.1 thousand tonnes from sulphide operations
and 3.0 thousand tonnes of cathode from oxide operations, 11% lower than the 13.6 thousand tonnes
produced in . The lower production was dr iven primarily by lower dump throughput, grade and recoveries
impacting cathode production. The mill throughput of 14,176 tpd in Q3 2023 was impacted by mill downtime
caused by planned repair and maintenance of the concentrator plant that lasted six days ( liners and major
components change). Recoveries were lower in Q3 2023 compared to the same period last year (76.3% in
Q3 2023 versus 79.3% in Q3 2022), mainly driven by ore characteristics in the upper areas of the mine. A plan
to address the plant stability during the second half of 2023 is underway that includes improved maintenance
and optimization of the concentrator and the tailings system.
2023 YTD production of 37.9 thousand tonnes, composed of 28.3 thousand tonnes from sulphide operations
and 9.6 thousand tonnes of cathode from oxide operations, was higher than the same period last year due to
full operational Q1 2023 compared to a nine-day stub period in Q1 2022.
Combined Q3 2023 C1 cash costs 1 were $2.82/lb ($2.85/lb sulphides and $2.75/lb cathodes) compared to
combined C1 cash costs 1 of $2.68/lb in Q3 2022, 5% higher than the same period last year mainly due to
lower production ($0.11/lb), an increase in contracted services and labour cost mainly driven by unfavourable
foreign exchange rate and inflation impact ($0.34/lb), plant maintenance and spare parts spend ($0.03/lb),
partially offset by lower key consumable prices ( -$0.34/lb) (realized acid prices averaged $141/t in Q3 2023
versus $273/t in Q3 2022 and diesel price averaged $0.76/l in Q3 2023 versus $0.97/l in Q3 2022).
Combined 2023 YTD C1 cash costs1 of $2.87/lb ($2.80/lb sulphides and $3.07/lb cathodes) were 3% higher
compared to $2.78/lb in 2022 YTD. For the last quarter of 2023, we expect a reduction in combined C1 cash
costs1 as the production mix is expected to have a higher ratio of concentrates to cathodes and lower acid
prices (average 2023 YTD $171/t and estimated remaining $164/t).
Mantoverde Mine
Q3 2023 copper production of 8.6 thousand tonnes was 26% lower compared to 11.6 thousand tonnes in Q3
2022. Heap operations grade was lower as a result of mine sequence (0.32% in Q3 2023 versus 0.45% in Q3
2022), and recoveries were lower (66.5% in Q3 2023 versus 86.7% in Q3 2022). due to lower solubility ratio
of the processed mineral and lower grades, all of which was partially offset by higher heap throughput (2.7
million tonnes in Q3 2023 versus 2.5 million tonnes in Q3 2022). Throughput from dump operations was lower
compared with the same period last year due to a temporary sulphuric acid supply shortfall in September, and
grades were consistent with the same period last year.
2023 YTD production of 25.4 thousand tonnes was lower than the s ame period last year, despite of full
operational Q1 2023 compared to nine- day stub period in Q1 2022 due to lower heap grades as a result of
mine sequence (0.31% YTD 2023 versus 0.48% YTD 2022) and lower recoveries due to lower solubility ratio
of the processed mineral and lower grades. Production for the remainder of the y ear should be positiv ely
impacted by higher expected grades.
Q3 2023 C1 cash costs1 were $3.74/lb, (3)% lower than $3.87/lb in Q3 2022 due to lower sulphuric acid prices
($156/t in Q3 2023 versus $285/t in Q3 2022) and lower mine costs mainly driven by lower dies el prices
($0.76/l in Q3 2023 versus $1.03/l in Q3 2022), partially offset by lower production.
2023 YTD C1 cash costs1 were $3.89/lb, 7% higher than $3.62/lb in 2022 YTD. For the last quarter of 2023,
we expect a reduction in C1 cash costs1 due to lower energy prices (average YTD $0.22/kWh and estimated
remaining $0.16/kWh) and higher production.
Cozamin Mine
Q3 2023 copper production of 5.9 thousand tonnes was lower than the same period prior year mainly on
lower mill throughput (3,567 tpd in Q3 2023 versus 3,829 tpd in Q3 2022). Rec overies and grades were
consistent quarter over quarter.
2023 YTD production was 5% lower than 2022 YTD due to lower throughput as a result of change in
mining method (cut-a nd-fill) (3,590 tpd in 2023 YTD versus 3,803 tpd in 2022 YTD). Recoveries and
grades were consistent with the same period last year.
Q3 2023 C1 cash costs 1 were 54% higher than the same period last year mainly due to inflationary price
increases on the main consumables, unfavourable foreign exchange rate, start of paste plant operations,
which resulted in an increase in labour, contractor and cement costs, changes in mining method and additional
bolting requirements as part of strengthening ground support ($0.61/lb) and lower copper production
($0.08/lb), partially offset by stockpile buildup (-$0.07/lb).
2023 YTD C1 cash cos ts1 were 45% higher than the same period last year primarily due to the change in
mining method which resulted in an increase in c ontractor utilization and higher spend on bolting, and
unfavourable foreign exchange rate ($0.42/lb). In addition, cash costs wer e impacted by lower production
($0.06/lb) and lower zinc by-product credits due to planned lower zinc production ($0.03/lb).
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 5
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 6
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 231 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 (32,000 tonnes per day) and tailings storage facility, and the expansion of the existing
desalination plant.
The 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 international
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 MVDP is progressing well at approximately 93% complete as at September 30, 2023 and remains on
track for construction completion by year -end followed by an expected six -month ramp- up to nameplate
production levels in 2024.
Key areas of work completed during Q3 2023 were:
• Stockpiled approximately 5.0 million tonnes of sulphide ore
• Commenced commissioning of the primary crusher
• Grinding area: lubrication and cooling system installed. Laying completion of medium -voltage
conductors to the Ball/SAG mill. Rotation of SAG/Ball Mills performed
• Flotation area: All cells installed and water test started
• Filtering area: Filter installed, air blower and tank mounted
• Tailings Thickener: Rake glide test done, underflow control valves and metallurgical sampler assembly
completed
• Sand Plant: Thickener rake assembly in progress
• Tailings Storage Facilities: Mass excavation completed; Starting Wall and Cut -off Trench nearing
completion
As of September 30, 2023, the MVDP to date costs total $763 million. Our total capital cost for the MVDP is
estimated to be 5% higher at approximately $870 million. The increase from the prior estimate of $825 million
relates to the following main areas (1) Inflation ($20 million) - impacting the fourth electric shovel, the diesel
price on pre-stripping, and the cost per unit on tailings infrastructure construction, (2) Project improvements
($20 million) - additional rotainers for added flexi bility in concentrate transport and storage, water reservoir
and additional camp and warehouse space, and (3) Ramp up / commissioning costs ($5 million).
A virtual tour of the project can be viewed at https://vrify.com/decks/12698-mantoverde-development-project
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 7
Mantos Blancos
Mantos Blancos is currently focused on reliably achieving the installed capacity of 20,000 tonnes per day. We
are executing on a plan to address plant stability that includes improved maintenance and optimization of the
concentrator and tailings system. During the third quarter we addressed several bottlenecks in the crushing
and grinding area of the operation. Moving forward, certain components in the tailings dewatering area, such
as new handling and pumping infrastructure, are expected to be delivered an d installed in early 2024, after
which we expect Mantos Blancos to consistently deliver nameplate throughput rates.
The capital enhancements will enable future expansion opportunities as there will be installed capacity in
certain parts of the process in excess of 20,000 tonnes per day. Once nameplate capacity is reached, we will
recommence evaluating the potential to increase throughput of the Mantos Blancos sulphide concentrator
plant to at least 27,000 tonnes per day using existing process infrastructure and new technologies, while also
evaluating options to extend the life of copper cathode production.
Chilean Tax Reform
In August 2023, Chile passed the proposed Mining Royalty into law to be effective on January 1, 2024,
replacing the current Specific Tax on Mining Activity.
The Mining Royalty contains two components, an ad- valorem component and a mine operating margin
component. The ad- valorem component is applicable to companies with annual sales of copper that are
higher than the equivalent of 50,000 metric tonnes of fine copper ("MTFC"). If the company's "Adjusted Mining
Operational Taxable Income", or "RIOMA" as it is referred to in Chile, is negative, the ad-valorem component
to be paid will be calculated by subtracting the negative amount of the RIOMA from the ad-valorem component.
The ad-valorem component of the Mining Royalty will be deductible when determining First Category income
taxes, however, not for purposes of determining RIOMA. The ad-valorem component is capped at 1% of gross
copper revenues and will be reported in the royalties line on the income statement.
The mine operating margin ("MOM") component will vary depending on the sales volume of the company,
along with whether more than 50% of its annual production is copper. Mining companies which derive more
than 50% of their income from copper sales and exceed 50,000 MTFC will pay a tax rate that fluctuates
between 8% and 26% based on the following table:
1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes 8
MOM
Maximum effective
rate
Less than 20% 8%
greater than 20% but
less than 45%
the rate increases
linearly to 12%
greater than 45% but
less than 60%
the rate increases
linearly to 26%
Greater than 60% 26%
The MOM component will not be applicable in cases where the RIOMA is negative and is calculated based on
total mine operating margin, which includes silver and gold by -products. The Mining Royalty allows
depreciation as a fully deductible operational expense in the calculation of RIOMA, however, unlike the First
Category deduction, it is on a non-accelerated basis.
The Mining Royalty includes a maximum limit to the total tax burden, consisting of (1) the corporate income
tax paid in the respective year, (2) the Mining Royalty (both ad- valorem and MOM components) and (3)
withholding taxes to which owners would be subject to upon distribution of dividends. The calculation of
withholding taxes assumes a 100% distribution, and is calculated considering a tax burden of 35% of net
taxable income, i.e. an additional 8% to the First Category rate of 27%. The Mining Royalty establishes that
when the sum of three component exceeds 46.5% of RIOMA, then the Mining Royalty would be adjusted in
such a way that it does not exceed the limit.
As a change in tax law is accounted for in the period of enactment, rather than from its effective date, the
Company recorded a deferred income tax charge of $31.5 million and a corresponding increased to deferred
income tax liabilities. The impact to Capstone operating mines is less than expected due to pre- existing tax
losses and accelerated deprecation rates. The Mining Royalty is not expected to have an impact on Santo
Domingo which has 15 years of tax stability post commencement of commercial production as a result of
Decree Law No. 600 ("DL 600") during which time it will remain subject to the current Specific Tax on Mining.
Furthermore, given the Company's growth projects in Chile, we do not expect to incur cash withholding taxes
for several years but the deduction is available when calculating the cap under the new mining royalty.
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 outside of China and the DRC. Capstone
Copper has the opportunity to unlock operating cost synergies, while also enabling additional copper and
cobalt production, infrastructure capital savings, and the potential for significant tax synergies.