Capstone Mining Corporation released the following statement on Wednesday, September 9 regarding its mining operations:
Capstone Mining Corp. today (September 9) announced that in light of the current copper price environment it has lowered 2015 operating mine site capital expenditures relative to previous guidance by approximately $20 million, will reduce mine site operating costs by $20 million over the second half of 2015 and has suspended work on the Santo Domingo project.
“As copper prices continue to deteriorate, we have looked at a range of actions to preserve our financial flexibility. We have taken the steps we outlined with our initial 2015 guidance to reduce our overall capital expenditures and have reduced operating costs in order to enhance our financial position and provide sufficient liquidity to execute our operating plan in the current market environment. This includes reducing and deferring capital expenditures at our operating mines, suspending all work on the Santo Domingo project, eliminating non-essential operating and general and administrative expenses and reducing exploration expenditures,” said Darren Pylot, President and CEO of Capstone.
Revised 2015 Operating and Capital Guidance
Operating Mine Guidance: Overall production guidance remains unchanged, however the distribution by mine has been revised to reflect the outperformance at Minto and the shortfall at Cozamin. Overall cost guidance has been reduced from $2.00-$2.10 per pound of payable copper produced to $1.95-$2.05 per pound, reflecting both expenditure reductions as well as efficiencies in operations at Pinto Valley and Minto.
Capital expenditures at the operating mines have been reduced by $17.9 million or 13% from the initial budget of $136.8 million. Pinto Valley sustaining and development capital has been reduced by $7 million. Capitalized stripping at Pinto Valley is estimated to be higher than originally planned because we advanced our 2015 mine plan to align with the expected PV3 mine plan. Approximately $10 million of capitalized stripping at Minto, originally planned for 2015, will be pushed into 2016 due to the delay in accessing the Minto North pit.
Development and Exploration: Total 2015 expenditures for Santo Domingo are expected to be $17 million on the basis of Capstone’s 70% ownership. Capitalized exploration expenditures at Cozamin have been reduced to $3.5 million from an initial budget of $5.6 million in 2015. An additional $5.4 million in exploration is expected to be expensed at the Providencia project in Chile, unchanged from the original budget. Maintenance costs for the Kutcho project are expected to be $0.1 million, down from the original guidance of $0.8 million.
Suspension of Santo Domingo Project
Capstone will discontinue all work on its Santo Domingo project, and will downsize the Santiago and Diego de Almagro offices in Chile. The previously communicated 2015 budget of $19.4 million will be reduced by $2.4 million (including severance costs) on the basis of Capstone’s 70% ownership. In 2016 and beyond, holding and community relations costs are expected to be in the range of $2 million annually on a 100% basis. Of the 31 employees at Santo Domingo, 23 positions are affected and a one-time restructuring charge of approximately $3.2 million on a 100% basis will be expensed in the third quarter.
“While we continue to believe that Santo Domingo is an excellent project, a number of factors, including uncertainty over the future direction of copper prices and our financing capacity for the project, make capital preservation a priority at this time,” continued Mr. Pylot. “In this environment, we believe the most prudent course of action is to put the project and completion of the updated Feasibility Study on hold, while maintaining the optionality for future development when conditions improve.”
Tagged with copper, mining, tED