Copper Mountain Mining Corporation (TSX: CMMC) (ASX: C6C) announces third quarter 2022 financial and operating results. All currency is in Canadian dollars, unless otherwise stated. All results are reported on a 100% basis. The Company’s Financial Statements and Management’s Discussion & Analysis are available at www.CuMtn.com and www.sedar.com.
|(1)||The Company reports the non-GAAP financial measures of C1 cash cost, AISC, and AIC per pound of copper produced, adjusted net loss and cash flow from operating activities per share to manage and evaluate its operating performance. See “Cautionary Note Regarding Non-GAAP Performance Measures” in this press release.|
|(2)||Based on a C$1.30 to US$1.00 exchange rate and consensus metal prices for years 1, 2, 3 and long-term, respectively, of: US$3.73, US $3.86, US$3.94 and US$3.60 per pound copper; US$1,796, US$1,762, US$1,749 and US$1,650 per ounce of gold; and US$21.86, US$22.30, US$22.24 and US$21.35 per ounce of silver.|
Gil Clausen, Copper Mountain’s President and CEO commented, “Our third quarter clearly did not meet our expectations. Lower grade and lower mill throughput impacted our copper output. We experienced a grade reduction as most of the ore processed in the third quarter came from the lower-grade North Pit as opposed to the planned Phase 4 of the main pit. Our higher-grade main pit Phase 4 ore release lagged due to spotty ore continuity in the upper benches of that pushback. In the second half of September, we advanced mining to consistently large zones of continuous higher-grade ore in Phase 4. We expect that result to continue throughout the fourth quarter and solidify into higher-grade ore production through 2023. The North Pit ore impacted recoveries due to the higher oxide content in the upper benches of pioneering that pit. We also encountered a SAG mill steel grinding ball quality issue, forcing reduced milling rates for about a month. The balls were breaking apart in the mill, significantly affecting throughput during August and into September. Overall, a disappointing quarter and nine months of 2022.”
“However, we are now past an inflection point in the operation with main waste movement of Phase 4 completed. Ore grades are higher, recoveries are up, and the North Pit development has advanced beyond the higher oxide transitional zone. Our project team has also completed all our plant optimization projects. The mill has been operating at the designed 45,000 tpd throughput rate and achieving daily rates up to 53,000 tpd in October, with AIC reduced materially. In the fourth quarter, we expect AIC to improve significantly and be in the US$2.90 to US$3.10 per pound range from our operational turnaround and benefit from the higher grades from Phase 4, where we expect an average of 0.27% Cu in Q4.”
“Although we experienced challenges at the mine, we completed several primary corporate objectives: growing reserves and resources at the Copper Mountain Mine, including a 70% increase in measured and indicated mineral resources compared to the prior technical report dated November 30, 2020; publishing a new NI 43-101 life of mine/ mill expansion study to 65,000 tpd; announcing a definitive agreement for the sale of the Eva Copper project; and publishing the Company’s inaugural ESG report” added Mr. Clausen.
SUMMARY OF OPERATING RESULTS
|Copper Mountain Mine (100% Basis)||2022
Q1 – Q3
Q1 – Q3
|Total tonnes mined (000s)||14,248||14,483||41,305||45,529|
|Ore tonnes mined (000s)||3,660||3,053||9,072||10,335|
|Waste tonnes (000s)||10,588||11,430||32,233||35,194|
|Tonnes milled (000s)||3,378||3,417||9,604||10,282|
|Feed Grade (Cu%)||0.24||0.37||0.24||0.41|
|Operating time (%)||89.0||92.2||88.1||93.4|
|Tonnes milled (TPD)||36,721||37,141||35,181||37,664|
|Copper (000s lb)||13,159||22,406||39,634||73,447|
|Copper (000s lb)||12,319||24,416||38,698||73,613|
|C1 cash cost per pound of copper produced (US$)(1)||3.70||1.50||3.40||1.34|
|AISC per pound of copper produced (US$)(1)||4.50||1.77||4.20||1.68|
|AIC per pound of copper produced (US$)(1)||4.95||2.17||4.99||1.97|
|Average realized copper price (US$/lb)||$3.52||$4.27||$4.09||$4.15|
|(1)||The Company reports the non-GAAP financial measures of C1 cash costs, AISC and AIC per pound of copper produced to manage and evaluate its operating performance. For further information, see “Cautionary Note Regarding Non-GAAP Performance Measures” in this press release.|
The Copper Mountain Mine produced 13.2 million pounds of copper, 6,053 ounces of gold, and 64,331 ounces of silver in Q3 2022, compared to 22.4 million pounds of copper, 7,449 ounces of gold, and 134,987 ounces of silver in Q3 2021. Production was lower during the quarter due to lower mill feed grade, lower mill throughput and lower copper recoveries.
Mill feed grade in Q3 2022 was 0.24% Cu as compared to 0.37% Cu in Q3 2021. Mill feed was delivered from Phase 4 (approximately 40%), and the North Pit (approximately 60%) during the quarter. Phase 4 delivered higher grade tonnes as planned, but lower tonnages of higher grade were present at the top of the deposit, thus more North Pit ore was used for mill feed than planned, resulting in the lower overall grade in the quarter. Phase 4 grades averaged 0.28% Cu during the quarter compared to North Pit grades averaging 0.21% Cu. Ore feed grades are expected to improve for the remainder of the year, with the higher-grade Phase 4 ore being the primary ore supply for the remainder of 2022 as the Company begins to mine the bulk of the deposit. Phase 4 higher grade ore is also planned to be the main ore supply for 2023, driving increased production. Phase 4 has an average grade of 0.33% Cu.
The mill processed a total of 3.4 million tonnes of ore during the quarter as compared to 3.4 million tonnes in Q3 2021. The crushing circuit was optimized in the quarter and consistently achieved the designed rate to allow the mill to reach 45,000 tpd during the second half of the quarter, producing a large crushed-ore stockpile in front of the mill. Mill throughput improved following availability of crushed ore from the crushing circuit. However, a SAG ball quality issue was encountered in mid-August which restricted mill throughput until the SAG ball charge was fully replaced in mid-September. Following resolution of this issue, the mill demonstrated the ability to process the targeted 45,000 tpd, achieving daily tonnage rates up to 50,000 tpd in September.
Copper recovery was 74.4% in Q3 2022 as compared to 79.7% in Q3 2021. The milling of higher oxide material from the North Pit negatively impacted recovery. Higher oxide levels did project further than expected in the North Pit, but consistently reduced to normal levels in mill feed and blast hole samples, in the later part of the quarter. Copper recovery is expected to improve with lower oxides, the successful operation of the rougher flotation expansion, and optimization of the grinding circuit to achieve consistent fine grinds.
Mill availability averaged 89.0% for Q3 2022 as compared to 92.2% in Q3 2021. The largest scheduled annual mill shutdown was completed during the quarter, replacing SAG mill liners including the pulp lifters, upgrading site supply powerlines, and commissioning the rougher expansion project. The Ball Mill #3 feed modifications completed in Q2 2022 continue to perform well supporting stable mill production.
Supply chain issues continue to impact the mine and the mill with low availabilities of supply, long deliveries due to low supply chain inventories, and lower quality product challenges. These challenges continue to be managed by the site team.
C1 cash cost, AISC and AIC per pound of copper produced are non-GAAP financial measures. See “Cautionary Note Regarding Non-GAAP Performance Measures” in this press release.
C1 cash cost per pound of copper produced, net of precious metal credits, for Q3 2022 was US$3.70, as compared to US$1.50 in Q3 2021. The variance in C1 cash costs for Q3 2022, as compared to Q3 2021, was due to several items, including:
With production levels expected to increase for the remainder of the year, the Company anticipates C1 cash cost per pound of copper produced to improve materially in the fourth quarter of 2022.
AISC per pound of copper produced for Q3 2022 was US$4.50, compared to US$1.77 in Q3 2021. AISC carries forward from C1 cash costs with the addition of $13.9 million in sustaining capital, lease, and applicable administration expenditures in Q3 2022 compared to $7.7 million in Q3 2021. The increase in AISC is carried forward from higher C1 cash costs and higher sustaining capital of $10.3 million in Q3 2022 compared to sustaining capital of $4.7 million in Q3 2021.
Sustaining capital costs for Q3 2022 were higher than Q3 2021 mainly due to $6.8 million of expenditures for the mine’s continued environmental water management systems currently underway. The mine’s continued environmental water management projects are substantially advanced and are expected to be fully completed in Q4 2022.
AIC per pound of copper produced for Q3 2022 was US$4.95, as compared to US$2.17 in Q3 2021. AIC carries forward from AISC with the addition of $7.6 million in deferred stripping as compared to $11.3 million deferred stripping in Q3 2021. Deferred stripping costs in Q3 2022 were from regular development activities, as the Company continued to advance the development of the higher-grade Phase 4 pushback of the Main Pit.
SUMMARY OF FINANCIAL RESULTS
|Results and Highlights (100%)||Three months
|(In thousands of CDN$, except for per share amounts)||2022
|Gross profit (loss)||(11,123)||66,641||(1,734)||248,707|
|Gross profit (loss) before depreciation(1)||(6,217)||73,927||15,282||269,978|
|Net income (loss)||(39,430)||25,824||(47,540)||116,604|
|Earnings (loss) per share – basic||(0.15)||0.08||(0.19)||0.39|
|Adjusted earnings (loss)(1)||(22,920)||41,389||(27,383)||106,969|
|Adjusted earnings (loss) per share – basic(1)||(0.11)||0.20||(0.13)||0.51|
|Cash flow from operating activities||(7,518)||90,869||34,799||265,036|
|Cash flow from operating activities per share – basic(1)||0.16||1.27|
|Cash, cash equivalents and restricted cash – end of period||49,651||199,436|
|(1)||The Company reports the non-GAAP financial measures of gross profit before depreciation, adjusted earnings, adjusted earnings per share, EBITDA and adjusted EBITDA to manage and evaluate its operating performance. For further information, see “Cautionary Note Regarding Non-GAAP Performance Measures” in this press release.|
In Q3 2022, revenue was $58.3 million, net of pricing adjustments and treatment charges, compared to $137.2 million in Q3 2021. Revenue in Q3 2022 is based on the sale of 12.3 million pounds of copper, 4,902 ounces of gold, and 59,790 ounces of silver. This compares to 24.4 million pounds of copper, 8,308 ounces of gold, and 142,128 ounces of silver sold in Q3 2021. The decrease in revenue was due to lower quantities of all metal sold and at a lower average price. Lower quantities of metal sold was a result of lower metal production in Q3 2022 compared to Q3 2021.
Cost of sales in Q3 2022 was $69.4 million as compared to $70.5 million for Q3 2021. The elevated cost of sales despite lower revenues can largely be attributed to cost increases associated with fuel, mill grinding media/steel, explosives, and mobile equipment repairs, as well as increased maintenance contractor support required to assist with managing both COVID-19 related absences and above-normal workforce absences.
The Company generated a gross loss of $11.1 million in Q3 2022 as compared to a gross profit of $66.6 million for Q3 2021. The Company reported a net loss of $39.4 million for Q3 2022 as compared to a net income of $25.8 million for Q3 2021. The variance in net income for Q3 2022, as compared to Q3 2021, was due to several items, including:
The Company recorded an adjusted net loss (1) of $22.9 million in Q3 2022, or $(0.11) per share (1), compared to adjusted net income (1) of $41.4 million in Q3 2021, or $0.20 per share (1).
PROJECT DEVELOPMENT UPDATE
Copper Mountain Mine, Canada
During the quarter, the Company continued to advance the expansion to the rougher flotation circuit, its final plant improvement and optimization project planned at the mine in 2022. Subsequent to the quarter-end, in early October, the rougher flotation circuit was successfully commissioned, which is expected to now support higher recoveries, especially on slower kinetic ore types.
The prior plant improvement and optimization projects completed earlier this year at the mine include the installation of an additional large column flotation cell to increase cleaner circuit capacity, which was completed and fully commissioned during the second quarter. The large new flotation cell provides additional cleaner circuit capacity to handle higher mill feed grades at higher tonnage rates. The new filter press was also installed and commissioned during the year. This second filter press will allow for maintaining design mill tonnage rates during extended periods of higher grades, eliminating the requirement to reduce mill tonnage as was experienced in 2021. The new filter will also fully support the planned increased production levels in 2023 at any grade. All projects were completed without lost time injuries.
A large resource expansion drilling program was completed at the Copper Mountain Mine earlier this year. Data from this successful drilling program were used to update the mineral resource and mineral reserve models, resulting in a 57% increase in the copper mineral reserve and an updated life-of-mine plan, as reported in the Company’s press release dated September 28, 2022.
Copper-gold mineralization at the Copper Mountain Mine occurs over a 5 x 2 km area and remains open both laterally and at depth, providing further reserve expansion potential. Multiple historical drill holes end in copper-gold mineralization and geophysical data suggest that the mineralizing system extends well below the current known resource.
To evaluate this upside potential, a geoscience-based target definition program began in June 2022. This program aims to define new drill targets outboard of, and below, the current resource, particularly high grade “root zones”, like the deeper parts of the Red Chris porphyry in British Columbia (also an alkalic porphyry and of similar age), and deposits in the Cadia-Ridgeway alkalic porphyry district in Australia. The 2022 program includes relogging and resampling of historical drill core for multi-element geochemical analysis and petrographic study and the creation of a new 3D geological model of the deposit. Reinterpretation of historical geophysical data, including IP chargeability/resistivity data, magnetotelurics, and airborne magnetic/radiometric data is also ongoing, with additional geophysical surveys planned for early 2023. These geophysical data, together with geochemical and alteration/mineralization style data from drill holes will be used to rank and prioritize drill targets for testing in 2023.
This section of the press release provides management’s production and cost estimates for 2022. See “Cautionary Note Regarding Forward-Looking Statements” in this press release. AIC per pound of copper produced is a non-GAAP financial measure. See “Cautionary Note Regarding Non-GAAP Financial Measures” in this press release.
As a result of production results to date in 2022, the Company now expects annual copper production to be in the range of 55 million to 60 million pounds compared to prior guidance of 65 million to 75 million pounds of copper. This revised estimate also reflects a week of unplanned downtime due to repair maintenance of the primary crusher in October. Such maintenance included regular planned annual maintenance, as well as additional required unplanned work to change worn bushings in the lower part of the crusher and machine eccentric. It is expected that production in the fourth quarter will increase as the Company is now mining higher grade ore from Phase 4 of the Main Pit. When mining in the Phase 4 area, the Company has been experiencing grades of approximately 0.28% Cu, and has achieved the design capacity of 45,000 tpd, milling up to 53,000 tpd in October, as well as higher copper recoveries. The higher-grade Phase 4 ore is expected to be the main source of ore in the fourth quarter of 2022 and in 2023, with grades expected to average 0.27% and 0.33% Cu, respectively. Production in the fourth quarter is forecast to be the strongest quarter in 2022 and is expected to be 15 to 20 million pounds of copper.
The Company expects AIC to improve in the fourth quarter of 2022 to between US$2.90 and US$3.10 per pound because of increased production, minimal sustaining capital costs and minimal to no deferred stripping. In addition, several non-recurring expenses are now complete. Further, the Company has completed all plant improvement projects and therefore expects development capital to also be minimal in the fourth quarter of 2022. AIC for the full year 2022 is thus expected to be between US$4.25 and US$4.50 per pound which compares to prior guidance of between US$2.75 and US$3.25 per pound.
At this time, 2023 production guidance remains unchanged. The Company will announce its 2023 production and cost guidance in early 2023, as per usual practice.
About Copper Mountain Mining Corporation
Copper Mountain is a Canadian mining company focused on the development and production of base and precious metals. The Company, through its subsidiaries, owns 75% of the Copper Mountain Mine located in southern British Columbia. The Copper Mountain Mine produces approximately 100 million pounds of copper equivalent per year and is expected to increase to approximately 140 million pounds of copper equivalent per year, with a large resource that remains open laterally and at depth. Copper Mountain has entered into a definitive agreement to sell its Eva Copper Project and its 210,000 hectare exploration land package in Queensland, Australia, with closing anticipated to occur in the first quarter of 2023.
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