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Frontera Copper Reports on Financial Results and Operational Performance for the Second Quarter of 2008
TORONTO and PHOENIX, AZ--(Marketwire - August 07, 2008) - Frontera Copper Corporation (TSX: FCC) (TSX: FCC.NT) (TSX: FCC.NT.A) today reported financial results and operational performance for the quarter ended June 30, 2008.
Second Quarter Summary
- Net loss of $0.9 million ($0.01 per share basic and diluted)
- Copper cathode production of 9.8 million pounds
- Copper cathode sales of 9.9 million pounds
- Average cash cost of $2.36 per pound
- Closing cash balance of $19.4 million
- Reached two million consecutive man hours without a lost time accident in July
Financial Results
(millions of dollars, except per share)
2Q08 1Q08 4Q07 3Q07 2Q07
------ ------ ------ ------- -------
Revenues 29.9 31.9 37.5 50.1 50.8
Net earnings/(loss) (0.9) (1.2) 6.7 10.3 9.8
Net earnings/(loss) per share -
basic (0.01) (0.02) 0.11 0.16 0.15
Cash flows from operating
activities (8.9) (18.5) (3.1) 23.6 36.3
Closing cash balances 19.4 29.5 54.5 58.8 48.7
------ ------ ------ ------- -------
Alan Edwards, President and Chief Executive Officer, said, "As expected, the ore cutoff and leaching strategies implemented in the second quarter enabled us to maintain copper production while avoiding the purchase of high cost acid on the spot market, resulting in a 25% reduction in cash costs per pound compared to the first quarter of 2008. Looking ahead, we believe that our new mine plans should enable us to generate positive cash flows for the balance of 2008, despite expectations of continuing shortfalls in deliveries of acid from our primary supplier."
For the three months ended June 30, 2008, Frontera Copper reported a net loss of $0.9 million ($0.01 per share basic and diluted), compared to net income of $9.8 million ($0.15 per share basic and diluted) for the three months ended June 30, 2007. Revenues of $29.9 million in the second quarter of 2008 and $50.8 million in the second quarter of 2007 were reduced by $7.6 million and $3.1 million, respectively, due to the effect of the company's copper hedging program. This hedging program is scheduled to be completed during the first quarter of 2009.
Results from Operations
2Q08 1Q08 4Q07 3Q07 2Q07
------ ------ ------ ------ ------
"LME Grade A" quality copper
cathode (millions of lbs.):
Produced 9.8 9.9 12.3 15.1 15.9
Sold 9.9 9.9 12.6 15.7 15.7
Cash costs per pound sold ($):
(Excluding prepaid royalties) 2.36 3.14 1.39 1.13 1.10
(Including prepaid royalties) 2.36 3.14 1.46 1.21 1.18
Revenue ($ millions) 29.9 31.9 37.5 50.1 50.8
Average price per pound:
Realized ($) 3.02 3.21 2.97 3.20 3.23
COMEX ($) 3.80 3.53 3.26 3.48 3.46
For the three months ended June 30, 2008, the Piedras Verdes operations produced 9.8 million pounds and sold 9.9 million pounds of "LME Grade A" quality copper compared to production of 15.9 million pounds and sales of 15.7 million pounds of copper for the three months ended June 30, 2007. For the six months ended June 30, 2008, the Piedras Verdes operations produced 19.6 million pounds and sold 19.8 million pounds of copper compared to production of 26.3 million pounds and sales of 25.8 million pounds of copper for the six months ended June 30, 2007. Average cash costs during the second quarter of 2008 were $2.36 per pound compared to $3.14 during the first quarter of 2008 and $1.18 per pound during the second quarter of 2007. Cash costs during the first half of 2008 were $2.75 per pound compared to $1.28 per pound during the first half of 2007.
Capital expenditures for the three and six months ended June 30, 2008 were $1.2 million and $7.9 million, respectively. Capital expenditures for the three and six months ended June 30, 2008 include $0.6 million and $4.8 million for the Phase 3 leach pad expansion, and $0.6 and $3.1 million for the purchase of certain land and other projects at the Piedras Verdes operations, respectively.
Cash and cash equivalents decreased by $10.1 million during the three months ended June 30, 2008 primarily reflecting the payment of $9.0 million of Mexican tax installments in respect of the 2008 fiscal year. The Company expects to receive a $6 million refund in the second half of 2008 in respect of the 2007 tax year, and to receive a $9 million refund of its 2008 Mexican tax installments in the early part of 2009. The Company has been informed by Mexican tax authorities that it will not be required to pay any additional tax installments during 2008.
As more fully discussed in the Company's Update on Operations released on July 21, new operating plans have been developed that project production in the second half of 2008 will be above the first half of 2008 levels, with full production ultimately achieved in the third quarter of 2009. A key component of these mine plans involves accelerated movement into the eastern areas of the mine, where higher grade ores, with improved leaching characteristics in terms of acid consumption and percolation characteristics, are located. Copper cathode production totaled approximately 3.7 million pounds in July, 11% higher than the average production rate during the first half of 2008.
The Piedras Verdes operation is continuing to receive acid from its primary supplier at contracted prices, despite the ongoing labor strike at the supplier's major mining operation; however, it is receiving less than optimum levels of acid for its current operating situation. Previously announced ore cutoff and leaching strategies have enabled the operation to minimize acid consumption and avoid purchasing high cost sulfuric acid in the spot market during second quarter of 2008. As a result, the Company is currently generating positive cash flows and expects that based on its current operating plans and at current copper prices it should be generating positive cash flows for the remainder of 2008.
CONFERENCE CALL
Frontera Copper Corporation will hold a conference call at 11:00 a.m. EDT today to report on second quarter 2008 results. The conference call will be hosted by Alan Edwards, President and Chief Executive Officer. He will be joined by Dave Peat, Vice President and Chief Financial Officer; Tim Swendseid, Vice President of Engineering and Rod Prokop, Vice President, Investor Relations.
Those wishing to participate should dial 213-785-2437 or toll free 866-558-6338. A replay of the call will also be available through Thursday, August 21, by dialing 719-457-0820 or toll free 888-203-1112 and entering passcode 6741151.
The Company's June 30, 2008 Financial Statements and Management's Discussion and Analysis have been filed on SEDAR and are available on the Company's website.
ABOUT FRONTERA COPPER CORPORATION
Frontera Copper is a Canadian mining, development and exploration company whose principal activity is the production of copper cathode from the Piedras Verdes run-of-mine heap-leach copper operation in Sonora, Mexico. Based on the January 1, 2008 ore reserves and the estimated recoverable copper contained on the leach pads at December 31, 2007, approximately 1 billion pounds of copper is projected to be produced over the remaining life of the operation.
For further information, please see Frontera Copper's website at www.fronteracopper.com or contact:
Rodney Prokop
Vice President, Investor Relations
(602) 424-5483
ir@fronteracopper.com
Alan Edwards
President and Chief Executive Officer
(602) 424-5488
Information in this news release that is not current or historical factual information may constitute forward-looking information or statements within the meaning of applicable securities laws. Implicit in this information, particularly in respect of statements as to future operating results and economic performance of the Company, and resources and reserves at the Piedras Verdes operations, are assumptions regarding projected revenue and expense, copper prices and mining costs. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including risks relating to general economic conditions and mining operations, and could differ materially from what is currently expected. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Frontera Copper Corporation
Consolidated Balance Sheet
US$ (in thousands) (unaudited)
June 30, December 31,
2008 2007
------------ ------------
Assets
Current
Cash and cash equivalents 19,417 54,479
Accounts receivable 836 705
Income taxes recoverable 14,562 -
Commodity taxes recoverable 3,418 4,181
Inventory 21,378 24,918
Prepaid expenses and deposits 2,078 6,440
Future tax asset 5,609 2,883
Deferred loss on derivative instruments 1,629 -
------------ ------------
68,927 93,606
Restricted cash 1,825 1,825
Long term inventory 40,799 20,912
Long term deposits 373 1,854
Mineral properties and property, plant and
equipment 138,465 136,036
------------ ------------
250,389 254,233
============ ============
Liabilities
Current
Accounts payable and accrued liabilities 22,874 17,547
Deferred revenue - 326
Income taxes payable - 14,501
Derivative instruments 20,706 8,143
Current portion of notes payable 7,016 6,915
------------ ------------
50,596 47,432
Accounts payable and accrued liabilities 2,197 3,197
Notes payable 72,467 73,446
Asset retirement obligation 5,451 4,907
Derivative instruments - 3,440
Future income taxes 14,163 7,849
------------ ------------
144,874 140,271
------------ ------------
Shareholders' Equity
Capital stock 103,276 102,807
Contributed surplus 988 1,174
Accumulated other comprehensive loss (13,990) (7,388)
Retained earnings 15,241 17,369
------------ ------------
105,515 113,962
------------ ------------
250,389 254,233
============ ============
Frontera Copper Corporation
Consolidated Statements of Operations
US$ (in thousands except per
share amounts) (unaudited) (unaudited)
2nd Quarter Year-to-Date
--------- --------- --------- ---------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue 29,897 50,818 61,841 79,768
Cost of sales and expenses
Cost of sales 23,311 18,567 54,557 32,999
Depreciation, depletion
and amortization 1,806 2,880 3,997 4,803
Exploration 149 143 175 246
Administration 83 1,884 1,592 3,228
--------- --------- --------- ---------
25,349 23,474 60,321 41,276
--------- --------- --------- ---------
Other (income) and expenses
Interest income (164) (471) (580) (725)
Long-term interest and
accretion 2,995 3,567 5,945 6,395
Foreign exchange (gain) loss 1,080 5,631 (1,921) 6,277
Unrealized (gain) loss on
derivatives contracts 627 1,548 (46) 1,556
--------- --------- --------- ---------
4,538 10,275 3,398 13,503
--------- --------- --------- ---------
Income (loss) before income
taxes 10 17,069 (1,878) 24,989
Income taxes (951) (7,235) (250) (10,225)
--------- --------- --------- ---------
Net income (loss) for the
period (941) 9,834 (2,128) 14,764
========= ========= ========= =========
Income (loss) per share - Basic (0.01) 0.15 (0.03) 0.23
- Diluted (0.01) 0.15 (0.03) 0.23
Weighted average common shares
outstanding - Basic 64,518 63,929 64,515 63,740
- Diluted 64,899 64,731 64,934 64,493
Frontera Copper Corporation
Consolidated Statements of Retained Earnings (Deficit)
US$ (in thousands)
(unaudited) (unaudited)
2nd Quarter Year-to-Date
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Retained earnings (deficit),
beginning of period 16,182 (9,544) 17,369 (14,474)
Net income (loss) for the period (941) 9,834 (2,128) 14,764
-------- -------- -------- --------
Retained earnings, end of period 15,241 290 15,241 290
======== ======== ======== ========
Consolidated Statements of Comprehensive Income (Loss)
US$ (in thousands)
(unaudited) (unaudited)
2nd Quarter Year-to-Date
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net income (loss) for the period (941) 9,834 (2,128) 14,764
Reclassification of loss on cash
flow hedges to revenues 7,617 3,074 13,449 3,074
Change in loss on derivatives
designated as cash flow hedges (1,868) (12,729) (22,619) (25,557)
-------- -------- -------- --------
Unrealized gain (loss) on
derivatives designated as cash
flow hedges 5,749 (9,655) (9,170) (22,483)
Income tax on derivatives
designated as cash flow hedges (1,610) 3,017 2,568 6,295
Tax valuation allowance - (3,017) - (6,295)
-------- -------- -------- --------
Other comprehensive income (loss)
for the period 4,139 (9,655) (6,602) (22,483)
-------- -------- -------- --------
Comprehensive income (loss) for the
period 3,198 179 (8,730) (7,719)
======== ======== ======== ========
Frontera Copper Corporation
Consolidated Statements of Cash Flows
US$ (in thousands) (unaudited) (unaudited)
2nd Quarter Year-to-Date
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Cash flows from operating
activities
Net income (loss) for the period (941) 9,834 (2,128) 14,764
Items not involving cash:
Future income taxes 6,735 4,616 5,866 7,606
Unrealized foreign exchange 914 5,755 (2,159) 6,201
Depreciation, depletion and
amortization 2,778 4,140 5,666 6,938
Accretion 924 863 1,752 1,649
Unrealized (gain) loss on
derivative contracts 627 1,548 (46) 1,556
Long term inventory (5,980) (258) (9,035) (439)
Long term deposits 1,488 - 1,481 -
Write-off of deferred finance
costs - 522 - 522
-------- -------- -------- --------
6,545 27,020 1,397 38,797
Changes in non-cash working capital
balances (15,444) 9,457 (28,810) (3,605)
-------- -------- -------- --------
Cash flows from operating
activities (8,899) 36,477 (27,413) 35,192
-------- -------- -------- --------
Cash flows from investing
activities
Property, plant and equipment (1,157) (13,703) (7,917) (23,005)
Decrease in restricted cash - - - 1,233
-------- -------- -------- --------
Cash flows used in investing
activities (1,157) (13,703) (7,917) (21,772)
-------- -------- -------- --------
Cash flows from financing
activities
Exercise of options - 504 283 601
-------- -------- -------- --------
Cash flows from financing
activities - 504 283 601
-------- -------- -------- --------
Effect of exchange rate changes on
cash (2) 1,002 (15) 1,159
-------- -------- -------- --------
Increase (decrease) in cash and
cash equivalents during the period (10,058) 24,280 (35,062) 15,180
Cash and cash equivalents,
beginning of period 29,475 24,447 54,479 33,547
-------- -------- -------- --------
Cash and cash equivalents, end of
period 19,417 48,727 19,417 48,727
======== ======== ======== ========
Cash and cash equivalents consist
of:
Cash 5,481 2,311 5,481 2,311
Cash equivalents 13,936 46,416 13,936 46,416
-------- -------- -------- --------
19,417 48,727 19,417 48,727
======== ======== ======== ========
Supplemental information:
Interest paid 3,170 3,233 4,402 4,456
Income taxes paid 9,101 - 23,447 -
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