Capstone reports 2020 operations beat with strong Q4

Copper-focused miner Capstone Mining (TSX: CS) has announced a production and costs beat for 2020, driven by strong fourth-quarter output at both the Pinto Valley open pit mine in Arizona and at the Cozamin underground mine in Mexico.

With a total of 44.4 million lb. of copper generated in the fourth quarter (34.1 million lb. from Pinto Valley and 10.3 million lb. from Cozamin), Capstone’s production for the year comes in at 156.9 million copper lb., surpassing 2020 guidance for 140 to 155 million lb. of the base metal. Consolidated cash costs of US$1.68 per lb. copper in the last quarter (US$2 per lb. at Pinto Valley and US$63¢ a lb. a Cozamin) bring 2020 full-year cash costs to US$1.84 per copper lb., below the US$1.85 to US$2 per lb. guidance.

Looking at financial performance, in 2020, Capstone generated US$147.2 million from operating activities after changes in working capital, and reported a US$16.6-million increase in cash and equivalents, closing out the year with US$56.6 million in cash and equivalents.

On Feb. 19, Capstone closed a US$150-million streaming agreement with Wheaton Precious Metals (TSX: WPM) which covers 50% of the silver output from Cozamin. Once 10 million oz. have been delivered, the stream would drop to 33% of silver production for the life of the mine. With the closing of this deal, Capstone had a net cash position of US$25 million, based on a debt balance of US$124.9 million at year-end.

“Last quarter we saw outperformance at both operations delivering operating cash flow of US$67 million, which marks the beginning of very strong financial metrics across the business, moving forward in this current US$4-copper price environment,” Darren Pylot, president and CEO of Capstone, said in a release. “Now that the silver stream is closed, we are in a net cash position and are on track to be debt free in 2021, allowing cash flow to be deployed to high-impact, high-return projects like paste backfill at Cozamin and Eriez HydroFloat coarse particle flotation at Pinto Valley.”

This year, Capstone expects 175 to 190 million lb. of copper at cash costs of US$1.75 to US$1.9 from the two mines.

At Pinto Valley, first phase of the PV3 optimization project, completed last year, allowed the mill to achieve throughputs of 57,168 tonnes per day in the fourth quarter, a 10% improvement over 2019 run rates, with average throughputs of 60,717 tonnes per day in December. The second phase is expected to be complete in the second half of this year – a technical report is also expected in the second half of 2021 on the two optimization projects.

Capstone also reported that, in December, a pilot plant test of the Eriez HydroFloat coarse particle technology achieved 6% to 8% increases in copper recoveries, exceeding the company’s expectations for a 6% improvement in recoveries. An estimated US$70 million in expansionary capital would be required to install these units at Pinto Valley.

Additional feasibility-level work is planned to evaluate the mining of resources outside the mine plan, with results anticipated in 2022.

Cozamin is ramping up mill processing, with throughputs of 3,780 tonnes a day expected by the end of the first quarter. Based on an updated life of mine plan for this asset, released in January, the underground mine is expected to generate an average of 51.2 million lb. of copper and 1.6 million oz. of silver a year between 2021 and 2030.

Capstone also holds a 70% interest in the permitted Santo Domingo pre-development copper-iron-gold project in Chile; 30% is held by a Korean state-owned enterprise.