Analyst and Investor Luncheon. January 10, 2018

Transcription

1 Analyst and Investor Luncheon January 10,

2 Cautionary Note On Forward Looking Information This presentation, and the documents incorporated by reference herein, may contain forward-looking information within the meaning of Canadian securities legislation and forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, forward-looking statements ). These forward-looking statements are made as of the date of this document and Capstone does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation. Forward-looking statements relate to future events or future performance and reflect our expectations or beliefs regarding future events. Forward-looking statements include, but are not limited to, statements with respect to the estimation of mineral resources and mineral reserves, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production and capital expenditures, the success of our mining operations, environmental risks, unanticipated reclamation expenses and title disputes. In certain cases, forward-looking statements can be identified by the use of words such as plans, expects, budget, scheduled, estimates, forecasts, intends, anticipates, believes or variations of such words and phrases, or statements that certain actions, events or results may, could, would, might or will be taken, occur or be achieved or the negative of these terms or comparable terminology. In this document certain forward-looking statements are identified by words including anticipation, guidance, plan and expected. By their very nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, amongst others, risks related to inherent hazards associated with mining operations, future prices of copper and other metals, compliance with financial covenants, surety bonding, our ability to raise capital, Capstone s ability to acquire properties for growth, counterparty risks associated with sales of our metals, use of financial derivative instruments and associated counterparty risks, foreign currency exchange rate fluctuations, changes in general economic conditions, accuracy of mineral resource and mineral reserve estimates, operating in foreign jurisdictions with risk of changes to governmental regulation, compliance with governmental regulations, compliance with environmental laws and regulations, reliance on approvals, licences and permits from governmental authorities, impact of climatic conditions on our Pinto Valley, Cozamin and Minto operations, aboriginal title claims and rights to consultation and accommodation, land reclamation and mine closure obligations, uncertainties and risks related to the potential development of the Santo Domingo Project, increased operating and capital costs, challenges to title to our mineral properties, maintaining ongoing social license to operate, dependence on key management personnel, potential conflicts of interest involving our directors and officers, corruption and bribery, limitations inherent in our insurance coverage, labour relations, increasing energy prices, competition in the mining industry, risks associated with joint venture partners, our ability to integrate new acquisitions into our operations, cybersecurity threats, legal proceedings and other risks of the mining industry as well as those factors detailed from time to time in the Company s interim and annual financial statements and management s discussion and analysis of those statements, all of which are filed and available for review under the Company s profile on SEDAR at Although the Company has attempted to identify important factors that could cause our actual results, performance or achievements to differ materially from those described in our forwardlooking statements, there may be other factors that cause our results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that our forwardlooking statements will prove to be accurate, as our actual results, performance or achievements could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on our forward-looking statements. Alternative Performance Measures C1 cash cost, cash cost, all-in cost, fully-loaded all-in cost, adjusted net income/loss, operating cash flow before changes in working capital and net debt are Alternative Performance Measures. Alternative performance measures are furnished to provide additional information. These non-gaap performance measures are included in this presentation because these statistics are key performance measures that management uses to monitor performance, to assess how the Company is performing, to plan and to assess the overall effectiveness and efficiency of mining operations. These performance measures may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance included in the Company s unaudited condensed interim consolidated financial statements prepared in accordance with IFRS. Currency All amounts are in US$ unless otherwise specified. 2

3 Introduction Darren Pylot - President, CEO & Director 3

4 Participants Darren Pylot President, CEO & Director Jim Slattery SVP & CFO Gregg Bush SVP & COO Brad Mercer SVP Exploration Jason Howe VP Corporate Development Cindy Burnett VP IR & Communications 4

5 Presentation Overview Topic Time Presenter Introduction Operations Update and Outlook Pinto Valley Minto Cozamin Exploration Strategy Growth Strategy Financial Position Debt Reduction Target Closing Comments 10 min 12:30-12:40 40 min 12:40 1:20 30 min 1:20 1:50 15 min 1:50 2:05 15 min 2:05 2:20 10 min 2:20 2:30 Darren Pylot President, CEO & Director Gregg Bush Sr. VP & COO Brad Mercer Sr. VP Exploration Jason Howe VP Corporate Development Jim Slattery Sr. VP & CFO Darren Pylot President, CEO & Director 5

6 Solid Base with Growth on the Horizon Operations in Stable Jurisdictions 3 Operations +85k tonnes of copper over next 5 years Leverage Returning and Strong Balance Sheet Unhedged % Cu exposure returns January 2018 Balance Sheet Net Debt Q $185m Net Debt / EBITDA 1.18x Net debt target $100m Building a balance sheet to grow 6

7 Short term Long term 220kt under $2.20/lb All-in by 2022 Internal Growth Opportunities External Growth Opportunities Pinto Valley Regional opportunities Cozamin Mine life extension and zinc upside Minto Cash flow contribution through 2021 Santo Domingo Define the value maximizing path forward Portfolio of Greenfield Exploration Targets Acquisition Criteria Copper first Mining friendly jurisdictions Ability to extract more value than paid for Long life potential Goal of four operations and one project build 7

8 Operations Update and Outlook Gregg Bush - Sr. VP & COO 8

9 2018 Operating & Capital Guidance Production and Operating Costs Pinto Valley Cozamin Minto Total Copper Production (tonnes) 56,000 15,000 19,000 90,000 C1 Cash Cost 1, 2 ($ per payable lb of Cu produced) All-In Sustaining Cost 3 ($ per payable lb of Cu produced) $ $2.00 $ $1.10 $ $2.45 $ $1.95 $ $2.60 $ $1.85 $ $2.65 $ $2.60 Capital Expenditures (US$ millions) Pinto Valley Cozamin Minto Total Sustaining $44 $19 $6 $69 Brownfield Exploration Capitalized Stripping Total $68 $26 $6 $100 Greenfield Exploration Expenditures 5 (US$ millions) Total Mexico $1 Chile 2 Total $3 1. This is an alternative performance measure, please see Alternative Performance Measure definition at the beginning of this presentation. 2. Net of by-product credits and selling costs. 3. All-In sustaining cost per pound of payable copper produced is C1 cash cost plus NSR and production royalties, non-cash deferred revenue, all sustaining capital expenditures (including cash portion of production-phase capitalized stripping), accretion of reclamation obligations, amortization of reclamation assets, corporate G&A and cash portion of pre-production capitalized stripping. 4. Capitalized stripping is included as an operating cost in the PV3 PFS, however, under IFRS accounting guidelines stripping costs are capitalized when the strip ratio is higher than the life-of-mine strip ratio. 5. Greenfield exploration will be expensed. 9

10 Short-term Pinto Valley Mine Strategy Maximizing the Value Optimization Sustaining mill throughput Addressing Key Risks Increase Annual Copper Production Develop a Recession-Proof Asset Evaluating Regional Opportunities Long-term 10

11 PV Throughput 60,000 55,000 +8% 50, % 45,000 40,000 35,000 30,000 At Purchase PV2 Target PV3 Target Steady throughput gains since acquisition 11

12 2018 Sustaining Capex Capital Item 2018 Budget (US$M) Mining fleet component replacement $17 Replace current rougher flotation cells 7 SX/EW repurposing initiatives 4 Crushing improvements 3 Pit dewatering 2 Replace UG power lines with overhead lines 2 Advancement of PV3 permitting 2 Other 7 Total Capex $44 Focus is planned maintenance, process enhancements and aging infrastructure 12

13 Million Tonnes PV3 Mine Plan 1 PV3 mine plan more than doubles mine life, increases throughput and lowers operating costs without significant capital investment No significant changes moving from PV2 to PV3 Planning further 10% throughput expansion 2020/2021 with timeline aligned to permitting 60 M 0.60% 50 M 0.50% 40 M 0.40% 30 M 0.30% Cu Grade 20 M 0.20% 10 M 0.10% 0 M PV2 Ore PV3 Ore PV2 Waste PV3 Waste Cu Grade to Mill SBP Cu Grade - PV3 Plan 0.00% 1. See Technical Report dated February 23,

14 Pinto Valley Mine Plan Minto North Underground Minto East 2 Underground Area 118 UG (completed) 14

15 PV3 Permitting Timelines Consolidated Plan of Operations/Environmental Impact Statement (EIS) Extends pit and tailings facilities onto National Forest land Q2/2016 Plan of operations submitted Draft EIS expected Earliest potential approval of Final EIS Aquifer Protection Permit Amendments (ADEQ) Q TSF4 Elevation Rise to 4,250 ft submitted; permit anticipated Q Q Main Dump Expansion submission; permit anticipated Q Q West Dump, Gold Gulch repurposing submission; permitted anticipated 2019 Jurisdictional Determination on Waters of the US (US Army Corps of Engineers) Determines if future activities will impact waters subject to 404 permitting 15

16 Key Takeaways Long life asset in favorable jurisdiction Considerable resources support expansion and another pushback beyond PV3 Focused on developing a recession proof asset 16

17 Minto Mine Strategy Option on rising copper market Generates robust cash flow at current prices over remaining life Economic certainty to $2.00 lb copper price with Wheaton Precious Metals 17

18 Minto Target Case Mineral Reserves Minto North Underground Minto East Underground M-Zone UG (completed) Area 2 UG (in progress) Area 118 UG (completed) Minto East 2 Underground Area 2 Stage 3 Pit Copper Keel Underground Ridgetop Pit 18

19 Key Takeaways Cash flow contribution through 2021 Operating insurance down to US$2.00/lb Cu 19

20 Short-term Cozamin Mine Strategy Maximizing the Value Expand Reserves in the MNFWZ Incorporate San Rafael Zinc production Explore Additional Mining Concessions Reduce Operating Costs Maximize Capacity of the UG Infrastructure Increase Resources and Reserves Long-term 20

21 1800 MASL Cozamin Mine Exploration Potential Zaragoza Shaft San Roberto Shaft 2016/2017 Zinc Drilling San Rafael Shaft Cu-Zn Exp. Potential San Rafael Zinc Zone Zinc Potential Open MNV Endeavour Boundary MNFWZ 2017/18 Targeting Indicated 2017/18 Targeting Inferred LOOKING NORTH 21

22 Key Takeaways Significant exploration success has potential to substantially add to mine life Infrastructure optimization Low operating costs 22

23 Exploration Strategy and Outlook Brad Mercer Sr. VP, Exploration 23

24 Exploration Strategy Brownfield Building on significant recent success at Cozamin Greenfield Focus on locations with team in place and permitting understood Mexico & Chile in particular The remainder of North and South America opportunistically 24

25 1800 MASL Cozamin Mine Exploration Potential Zaragoza Shaft San Roberto Shaft 2016/2017 Zinc Drilling San Rafael Shaft Cu-Zn Exp. Potential San Rafael Zinc Zone Zinc Potential Open MNV Endeavour Boundary MNFWZ 2017/18 Targeting Indicated 2017/18 Targeting Inferred LOOKING NORTH 25

26 Cozamin 2018 MNFWZ Drilling Strategy Indicated Resource 2018 Indicated Resource 2019 LOOKING NORTHEAST CS/EDR Boundary 3% NSR on Cozamin claims - 1% NSR on Endeavor Claims 26

27 Footwall Zone 2017 Results Update U455 Assays Pending TW 3.83m U436 Cu 4.04% TW 3.68m U444 Cu 2.96% TW 7.08m U450 Cu 4.14% TW 2.81m U449 Cu 2.62% TW 13.28m U456 Assays Pending TW 2.82m U457 Assays Pending TW 4.1m S296 Assays Pending TW 1.40m S294 Cu 4.36% TW 0.93m U441 Cu 6.15% TW 2.75m U458 In progress U459 In Progress S284 Cu 2.42% TW 4.40m S287 Cu 0.14% TW 0.48m S291 Cu 2.26% TW 6.48m S301 Assays Pending TW 4.40m S292 Cu 2.00% TW 3.17m S304 In Progress S300 Assays Pending TW 7.42m S289 Cu 3.03% TW 4.59m S299 Assays Pending TW 3.25m S295 Cu 2.40% TW 1.49m S293 Cu 2.41% TW 3.27m S285 Cu 4.12% TW 6.89m S297 Cu 2.26% TW 7.99m S298 Cu 4.63% TW 6.19m S302 In Progress S303 In Progress Excellent grades plus intercepts generally thicker than historical 27

28 Cozamin 2018 Convergence of New Opportunities 28

29 Cozamin 2018 Convergence of New Opportunities 29

30 Cozamin 2018 Exploration Focus - $7 million Surface Drilling Resource/ Reserve Brownfield Location Metres Focus MNFWZ 40,000 San Rafael East Splay 2,000 Step-out: Wide-spaced drilling to extend MNFWZ on Capstone and Endeavour blocks (open 3-ways) to quantify largest possible Inferred Resource for longrange planning Infill: Targeting some Indicated Resources for conversion to reserves in 2017 and 2018 Deposit extension and test down-dip for copper transition Brownfield Parroquia 3,000 Testing system for more copper at depth Brownfield New Targets Collaterally test hanging wall veins to the MNFWZ for free up to 5 veins in some holes Increasing the pace on MNFWZ and advancing nearby brownfields targets 30

31 2018 Greenfield Exploration Program - $3 million Mexico Regional Exploration Priorities 1. Potential for ore within trucking distance to Cozamin 2. Standalone opportunities, with operating synergies 3. Other standalone opportunities Chile 1. Exiting Project Providencia - 4 technical discoveries, including two deposits demonstrate technical ability 2. Now targeting new projects where we can add value doing good science 3. Focusing on potential and favorable entry/exit terms Measured approach to greenfield exploration 31

32 Key Takeaways Significant exploration opportunity at Cozamin Resource updates in 2018 and 2019 at Cozamin Project generation underway in Mexico near Cozamin Project generation underway in Chile near Santo Domingo Strong and disciplined exploration team and process 32

33 Growth and Strategy Jason Howe VP, Corporate Development 33

34 Short term Long term 220kt under $2.20/lb All-in by 2022 Internal Growth Opportunities External Growth Opportunities Pinto Valley Regional opportunities Cozamin Mine life extension and zinc upside Minto Cash flow contribution through 2021 Santo Domingo Define the value maximizing path forward Portfolio of Greenfield Targets Acquisition Criteria Copper first Mining friendly jurisdictions Ability to extract more value than paid for Long life potential Goal of four operations and one project build 34

35 Pinto Valley: Infrastructure Advantage Pinto Valley Copper Cities (BHP) Old Dominion (BHP) Miami (BHP) Carlota (KGHM) Miami (FCX) Evaluating regional resource opportunities Source: Bing maps and boundaries are approximated 35

36 Santo Domingo 2018 Focus Areas Copper Development Project in Region III, Chile with approved EIS Power Updating costs for current conditions Port Infrastructure Opportunities may eliminate Capstone construction Iron Ore Reviewing opportunities to share or utilize third party infrastructure Updating OPEX & CAPEX Examining key changes and their impact on value 36

37 Financial Position Jim Slattery Sr. VP, CFO 37

38 Expected Free Cash Flow to Further Repay Debt At September 30, 2017 ($M) Cash and cash equivalents $114.2 LESS: Long Term Debt 1 $298.9 Net Debt $184.7 Total Net Debt / EBITDA 1.18:1 Revolving credit facility maturing 2021 $54M debt repaid in 2017 Proceeds from Kutcho sale (C$29m) to further reduce net debt Net debt target of $100 million Unhedged January 1, % copper price exposure effective January 1, Does not include a $14 million debt repayment on October 18,

39 2018 Free Cash Flow Potential at $3.00 Copper $200 Sustaining Development/Capitalized Stripping Exploration $150 $100 $50 $ Capital Guidance 2018 EBITDA Potential 1 2 Significant free cash flow generation potential at spot prices 1. Does not include $3M budgeted as an expense for greenfield exploration. 2 Source: Bloomberg, based on identifiable analyst consensus estimates 39

40 Closing Comments Darren Pylot - President, CEO & Director 40

41 Growth Potential Plant optimization/expansion Regional expansion opportunities Mine life extension to mid- 2021, potentially beyond Adjusted stream provides insurance Significant brownfield drilling success in 2017 Accessing additional land and accelerating exploration Define the value maximizing path forward Appropriate size and return for Capstone Organic growth opportunities in our portfolio 41

42 Questions 42

43 For additional information, please visit capstonemining.com or contact us at: Phone: Toll Free: January 10 th,