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Frontera Copper Reports on Financial Results and Operational Performance for the Third Quarter of 2008
Toronto and Phoenix, AZ -- November 12, 2008 -- Frontera Copper Corporation (FCC:TSX, FCC.NT:TSX, FCC.NT.A:TSX) today reported financial results and operational performance for the quarter ended September 30, 2008.
Third Quarter Summary
- Net earnings of $8.5 million ($0.13 per share basic and diluted)
- Copper cathode production of 11.5 million pounds
- Copper cathode sales of 11.4 million pounds
- Average cash cost of sales of $1.65 per pound
- Closing cash balance of $23.5 million
- Reached 2.3 million consecutive man hours without a lost time accident
- Subsequent event: Temporarily suspended mining activities to ensure the Company remains cash flow positive with copper recovered from ores previously placed on the leach pads
Financial Results
(millions of dollars, except per share)
3Q08 2Q08 1Q08 4Q07 3Q07
------ ------ ------ ------ -------
Revenues 31.5 29.9 31.9 37.5 50.1
Net earnings/(loss) 8.5 (0.9) (1.2) 6.7 10.3
Net earnings/(loss) per share - basic 0.13 (0.01) (0.02) 0.11 0.16
Cash flows from operating activities 5.6 (8.9) (18.5) (3.1) 23.6
Closing cash balances 23.5 19.4 29.5 54.5 58.8
------ ------ ------ ------ -------
Alan Edwards, President and Chief Executive Officer, said, "We are quite pleased with our operational performance during the third quarter. The results clearly demonstrate that the initiatives that were implemented in the past several months would have, under normal circumstances, put us on course to reach full production by the middle of next year. However, our response to the recent decline in copper prices by temporarily suspending mining activities will enable us to generate cash while we await an improvement in copper prices and an eventual return to full production."
For the three months ended September 30, 2008, Frontera Copper reported net earnings of $8.5 million ($0.13 per share basic and diluted), compared to $10.3 million ($0.16 per share basic and diluted) for the three months ended September 30, 2007. Revenues of $31.5 million in the third quarter of 2008 and $50.1 million in the third quarter of 2007 were reduced by $3.7 million and $4.8 million, respectively, due to the effect of the company's copper hedging program. This hedging program is scheduled to be completed during the first quarter of 2009.
Results from Operations
3Q08 2Q08 1Q08 4Q07 3Q07
------ ------ ------ ------ ------
"LME Grade A" quality copper cathode
(millions of lbs.):
Produced 11.5 9.8 9.9 12.3 15.1
Sold 11.4 9.9 9.9 12.6 15.7
Cash costs per pound sold ($) 1.65 2.36 3.14 1.46 1.21
Revenue ($ millions) 31.5 29.9 31.9 37.5 50.1
Average price per pound:
Realized ($) 2.76 3.02 3.21 2.97 3.20
COMEX ($) 3.45 3.80 3.53 3.26 3.48
------ ------ ------ ------ ------
For the three months ended September 30, 2008, the Piedras Verdes Operations produced 11.5 million pounds and sold 11.4 million pounds of "LME Grade A" quality copper compared to production of 15.1 million pounds and sales of 15.7 million pounds of copper for the three months ended September 30, 2007. For the nine months ended September 30, 2008, the Piedras Verdes Operations produced 31.1 million pounds and sold 31.2 million pounds of copper compared to production of 41.3 million pounds and sales of 41.5 million pounds of copper for the nine months ended September 30, 2007. Average cash costs of sales during the third quarter of 2008 were $1.65 per pound compared to $2.36 during the second quarter of 2008 and $1.21 per pound during the third quarter of 2007. Cash costs during the first nine months of 2008 were $2.35 per pound compared to $1.25 per pound during the first nine months of 2007.
Capital expenditures for the three and nine months ended September 30, 2008 were $1.2 million and $9.2 million, respectively. Capital expenditures for the three and nine months ended September 30, 2008 include $0.7 million and $5.5 million for the Phase 3 leach pad expansion, and $0.5 million and $3.7 million for the purchase of certain land and other projects at the Piedras Verdes Operations, respectively.
Cash and cash equivalents increased by $4.1 million during the three months ended September 30, 2008, primarily reflecting the receipt of a $6.4 million Mexican income tax refund in respect of the 2007 tax year. The Company expects to receive a $7.4 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 Suspension of Mining Activities announcement released earlier this week, the Company is responding to the recent downturn in copper prices by temporarily suspending mining activities at its Piedras Verdes Operations in Mexico. This action will result in the near-term reduction of approximately 100 employees at Piedras Verdes, not including people who are employed by the Company's mining and engineering contractors. Copper production will continue on a gradually declining basis while leaching operations will proceed on an uninterrupted basis to recover copper from ores previously placed on the leach pads.
Copper production for the fourth quarter of 2008 is estimated to range from 9 million to 11 million pounds, based on the temporary cessation of mining activities scheduled to be completed during the next several days. Copper production for the first quarter of 2009 is estimated at approximately 6 million to 8 million pounds, assuming the suspension of mining activities continues for the duration of the quarter. Since all copper will be recovered from existing leach pad inventories while mining activities are suspended during the first quarter of 2009, actual cash costs per pound of copper produced are expected to range from $0.85 to $1.10 per pound. Non- cash expenses related to previously-incurred and inventoried mining costs of approximately $0.60 per pound will bring total reported cash costs to an estimated $1.45 to $1.70 per pound.
CONFERENCE CALL
Frontera Copper Corporation will hold a conference call at 11:00 a.m. ET tomorrow, November 13 to report on third 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, Engineering and Rod Prokop, Vice President, Investor Relations.
Those wishing to participate should dial 612-332-0725 or toll free 800-288- 8968. A replay of the call will also be available through Thursday, November 27, by dialing 320-365-3844 or toll free 800-475-6701 and entering access code 968643.
The Company's September 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
AS AT
(Expressed in United States Dollars; tabular September December
dollar amounts in thousands) 30, 31,
2008 2007
$ $
========= =========
ASSETS
CURRENT
Cash and cash equivalents 23,536 54,479
Accounts receivable 173 705
Income taxes recoverable 8,029 -
Commodity taxes recoverable 3,854 4,181
Inventory 27,962 24,918
Prepaid expenses and deposits 1,944 6,440
Future tax asset 843 2,883
Deferred loss on derivative instruments 1,133 -
--------- ---------
67,474 93,606
RESTRICTED CASH 1,825 1,825
LONG TERM INVENTORY 43,529 20,912
LONG TERM DEPOSITS 354 1,854
MINERAL PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT 137,316 136,036
--------- ---------
TOTAL ASSETS 250,498 254,233
========= =========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 19,991 17,547
Deferred revenue - 326
Income taxes payable - 14,501
Derivative instruments 3,547 8,143
Current portion of notes payable 5,853 6,915
--------- ---------
29,391 47,432
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 2,006 3,197
NOTES PAYABLE 71,302 73,446
ASSET RETIREMENT OBLIGATION 5,554 4,907
DERIVATIVE INSTRUMENTS - 3,440
FUTURE INCOME TAXES 16,365 7,849
--------- ---------
124,618 140,271
--------- ---------
SHAREHOLDERS' EQUITY
CAPITAL STOCK 103,276 102,807
CONTRIBUTED SURPLUS 988 1,174
ACCUMULATED OTHER COMPREHENSIVE LOSS (2,092) (7,388)
RETAINED EARNINGS 23,708 17,369
--------- ---------
125,880 113,962
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 250,498 254,233
========= =========
FRONTERA COPPER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30
(Expressed in United States Dollars;
tabular dollar amounts in thousands, Three Months Nine Months
except per share) Ended Ended
---------------- ----------------
2008 2007 2008 2007
$ $ $ $
======= ======= ======= =======
REVENUE
Copper cathode sales 31,471 50,143 93,312 129,911
COST OF SALES AND EXPENSES
Cost of sales 18,770 18,943 73,327 51,942
Depreciation, depletion and
amortization 1,955 3,452 5,952 8,255
Exploration 77 113 252 359
Administration 181 1,407 1,773 4,635
------- ------- ------- -------
20,983 23,915 81,304 65,191
------- ------- ------- -------
OTHER (INCOME) AND EXPENSES
Interest income (246) (683) (826) (1,408)
Long-term interest and accretion 2,931 3,025 8,876 9,420
Foreign exchange (gain) loss (2,942) 4,869 (4,863) 11,146
Unrealized (gain) loss on
derivatives contracts (634) 172 (680) 1,728
Loss on repurchase of notes
payable - 944 - 944
------- ------- ------- -------
(891) 8,327 2,507 21,830
------- ------- ------- -------
Income before income taxes 11,379 17,901 9,501 42,890
Income taxes (2,912) (7,554) (3,162) (17,779)
------- ------- ------- -------
NET INCOME FOR THE PERIOD 8,467 10,347 6,339 25,111
======= ======= ======= =======
INCOME PER SHARE
- Basic 0.13 0.16 0.10 0.39
- Diluted 0.13 0.16 0.10 0.39
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
- Basic 64,518 64,179 64,516 63,888
- Diluted 64,577 64,924 64,858 64,587
FRONTERA COPPER CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
FOR THE PERIODS ENDED SEPTEMBER 30
Three Months Ended Nine Months Ended
(Expressed in United States ------------------ ------------------
Dollars; tabular dollar amounts in 2008 2007 2008 2007
thousands) $ $ $ $
======== ======== ======== ========
RETAINED EARNINGS (DEFICIT)
Beginning of period 15,241 290 17,369 (14,474)
Net income for the period 8,467 10,347 6,339 25,111
-------- -------- -------- --------
RETAINED EARNINGS, END OF PERIOD 23,708 10,637 23,708 10,637
======== ======== ======== ========
FRONTERA COPPER CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE PERIODS ENDED SEPTEMBER 30
Three Months Ended Nine Months Ended
(Expressed in United States ------------------ ------------------
Dollars; tabular dollar amounts in 2008 2007 2008 2007
thousands) $ $ $ $
======== ======== ======== ========
NET INCOME FOR THE PERIOD 8,467 10,347 6,339 25,111
-------- -------- -------- --------
Reclassification of loss on cash
flow hedges to revenues 3,651 4,834 17,100 8,794
Change in loss on derivatives
designated as cash flow hedges 12,874 (16,078) (9,745) (42,521)
-------- -------- -------- --------
Unrealized gain (loss) on
derivatives designated as cash
flow hedges 16,525 (11,244) 7,355 (33,727)
Income tax on derivatives
designated as cash flow hedges (4,627) 3,149 (2,059) 9,444
Tax valuation allowance - (3,149) - (9,444)
-------- -------- -------- --------
Other comprehensive income (loss)
for the period 11,898 (11,244) 5,296 (33,727)
-------- -------- -------- --------
COMPREHENSIVE INCOME (LOSS) FOR THE
PERIOD 20,365 (897) 11,635 (8,616)
======== ======== ======== ========
FRONTERA COPPER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30
Three Months Ended Nine Months Ended
(Expressed in United States ------------------ ------------------
Dollars; tabular dollar amounts 2008 2007 2008 2007
in thousands) $ $ $ $
======== ======== ======== ========
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income for the period 8,467 10,347 6,339 25,111
Items not involving cash:
Future income taxes 2,578 - 8,444 7,606
Unrealized foreign exchange (3,193) 5,278 (5,352) 11,479
Depreciation, depletion and
amortization 2,295 3,975 7,961 10,913
Accretion 881 832 2,633 2,481
Unrealized (gain) loss on
derivative contracts (634) 172 (680) 1,728
Long term inventory (6,718) (3,561) (15,753) (4,000)
Long term deposits 19 - 1,500 -
Write-off of deferred finance
costs - - - 522
Loss on note repurchase - 944 - 944
-------- -------- -------- --------
3,695 17,987 5,092 56,784
Changes in non-cash working capital
balances 1,922 5,665 (26,888) 2,060
-------- -------- -------- --------
Cash flows from operating
activities 5,617 23,652 (21,796) 58,844
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment (1,250) (5,416) (9,167) (28,421)
Decrease in restricted cash - - - 1,233
-------- -------- -------- --------
Cash flows used in investing
activities (1,250) (5,416) (9,167) (27,188)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of options - 165 283 766
Repurchase of notes - (8,385) - (8,385)
-------- -------- -------- --------
Cash flows provided by (used in)
financing activities - (8,220) 283 (7,619)
-------- -------- -------- --------
Effect of exchange rate changes
on cash (248) 101 (263) 1,260
-------- -------- -------- --------
Increase (decrease) in cash and
cash equivalents during the period 4,119 10,117 (30,943) 25,297
CASH AND CASH EQUIVALENTS
Beginning of period 19,417 48,727 54,479 33,547
-------- -------- -------- --------
End of period 23,536 58,844 23,536 58,844
======== ======== ======== ========
CASH AND CASH EQUIVALENTS CONSIST
OF:
Cash 4,213 6,789 4,213 6,789
Cash equivalents 19,323 52,055 19,323 52,055
-------- -------- -------- --------
23,536 58,844 23,536 58,844
======== ======== ======== ========
SUPPLEMENTAL INFORMATION:
Interest paid 1,129 1,449 5,531 5,905
Income taxes paid (5,932) - 17,515 -
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