Capstone Copper Reports Fourth Quarter and Full-Year 2022 Financial Results

All amounts in US$ unless otherwise indicated

VANCOUVER, British Columbia–(BUSINESS WIRE)–#CapstoneCopper—Capstone Copper Corp. (�Capstone” or the “Company”) (TSX:CS) today reported financial results for the three months and year ended December 31, 2022 (“Q4 2022” and “2022”). The results are preliminary and subject to change based on final results. Q4 copper production totaled 45,500 tonnes at C1 cash costs¹ of $2.50 per payable pound of copper produced. As previously reported on February 1, 2023, Capstone achieved production and cost guidance for the period April 1, 2022 to December 31, 2022, with consolidated copper production of 136.3 thousand tonnes at C1 cash costs¹ of $2.68/lb. Link HERE for Capstone’s Q4 2022 webcast presentation.

John MacKenzie, CEO of Capstone, commented, “We achieved several major milestones in 2022 following the Capstone/Mantos merger in late Q1 including the successful integration of the two companies, the release of our MV-SD District Integration Plan, the ramp-up at Mantos Blancos, and tremendous progress at our transformational Mantoverde Development Project (“MVDP”), which remains on-time and on-budget. This year, 2023, is pivotal for Capstone as we expect to complete MVDP construction in Q4 setting the stage for a doubling of consolidated cash flow and positioning us well for further growth”.

Q4 2022 HIGHLIGHTS

• Net income of $136.1 million, or $0.20 per share, for 2022, and net loss of $28.4 million, or $(0.03) per share for Q4 2022.
• Adjusted net income¹ of $84.5 million, or $0.14 per share for 2022, and $52.9 million or $0.06 per share for Q4 2022. Q4 2022 is down $20.3 million, or $0.12 per share, compared to the same quarter last year due to a lower copper price and inflationary pressure on costs.
• Adjusted EBITDA¹ of $352.8 million for 2022 compared to $432.2 million for 2021. Adjusted EBITDA¹ of $80.5 million for Q4 2022, which includes a realized provisional pricing loss of $7.8 million relating to Q3 and Q2, compared to Adjusted EBITDA¹ of $113.3 million in Q4 2021. The decrease in Adjusted EBITDA¹ is driven by a lower realized copper price and inflationary pressure on costs, particularly sulphuric acid and diesel fuel costs.
• Operating cash flow before changes in working capital of $99.4 million in Q4 2022 compared to $104.9 million in Q4 2021.
• Achieved production and cost guidance for the period from April 1, 2022 to December 31, 2022, with consolidated copper production of 136.3 thousand tonnes at C1 cash costs¹ of $2.68/lb. Consolidated copper production for Q4 2022 of 45.5 thousand tonnes at C1 cash costs¹ of $2.50/lb of copper produced for Q4 2022, which consisted of 15 thousand tonnes at Pinto Valley, 5.8 thousand tonnes at Cozamin, 14.2 thousand tonnes at Mantos Blancos, and 10.5 thousand tonnes at Mantoverde.
• Total available liquidity¹ of $697 million as at December 31, 2022, composed of $172 million of cash and short-term investments, and $525 million of undrawn amounts on corporate revolving credit facility which was expanded during the fourth quarter to $600 million.
• Mantos Blancos Concentrator Debottlenecking Project (“MB-CDP”) completed ramp up to commercial production in December, 2022.
• MVDP remains on budget and on schedule. Construction is progressing well on all key areas of the project. Total project spend inception-to-date was approximately $579 million at the end of December 2022 on a total budget of $825 million.
• Mantoverde – Santo Domingo (“MV-SD”) District Integration Plan was presented during Q4 2022 outlining the approach Capstone is taking to maximize value creation (including synergies) across the district.

1 These are alternative performance measures. Refer to the section entitled “Alternative Performance Measures” in the Cautionary Notes

Unaudited tabular amounts are in millions of U.S. dollars except number of shares and per share amounts, unless otherwise noted.

CONSOLIDATED FINANCIAL RESULTS
($ millions, except per share data)	Q4 20223 (unaudited)			Q4 2021		20223 (unaudited)			2021		2020
Revenue	362.1			215.9		1,296.0			794.8		453.8
Net (loss) income	(28.4	)		41.4		136.1			252.9		12.4
Net (loss) income attributable to shareholders	(20.9	)		41.4		122.2			226.8		12.6
Net (loss) income attributable to shareholders per common share – basic ($)	(0.03	)		0.10		0.20			0.56		0.03
Net (loss) income attributable to shareholders per common share – diluted ($)	(0.03	)		0.10		0.19			0.55		0.03
Operating cash flow before changes in working capital1,2	99.4			104.9		224.4			556.3		131.2
Adjusted EBITDA1	80.5			113.3		352.8			432.2		139.2
Adjusted net income1	52.9			73.2		84.5			241.6		26.4
Adjusted net income attributable to shareholders1	40.8			73.2		85.6			242.1		26.4
Adjusted net income attributable to shareholders per common share – basic	0.06			0.18		0.14			0.60		0.07
Adjusted net income attributable to shareholders per common share – diluted	0.06			0.18		0.14			0.58		0.07
Realized copper price1 ($/pound)	3.74			4.61		3.76			4.42		2.99
Net (debt) / cash1	(483.1	)		264.4		(483.1	)		264.4		(124.9	)
Attributable net (debt) / cash 1	(339.9	)		264.4		(339.9	)		264.4		(125.6	)
Total assets	5,380.9			1,728.0		5,380.9			1,728.0		1,391.6
Total non-current financial liabilities	709.5			38.4		709.5			38.4		183.6
2 2021 includes $180.0 million silver and gold stream proceeds
3 2022 financial information is based on unaudited annual results.

CONSOLIDATED OPERATIONAL RESULTS
	Q4 2022		Q4 2021		2022		2021
Copper production (000s tonnes)
Sulphides business
Pinto Valley	15.0		16.8		56.8		60.5
Cozamin	5.8		6.6		24.5		24.4
Mantos Blancos	10.0		—		29.0		—
Total sulphides	30.8		23.4		110.3		84.9
Cathode business
Mantos Blancos	4.2		—		12.2		—
Mantoverde2	10.5		—		36.3		—
Total cathodes	14.7		—		48.5		—
Consolidated	45.5		23.4		158.8		84.9
Copper sales
Copper sold (000s tonnes)	44.7		21.2		159.9		81.1
Realized copper price1 ($/pound)	3.74		4.61		3.76		4.42
C1 cash costs1 ($/pound) produced
Sulphides business
Pinto Valley	2.48		2.00		2.63		2.16
Cozamin	1.40		0.99		1.24		0.96
Mantos Blancos	1.82		—		2.16		—
Total sulphides	2.07		1.72		2.20		1.81
Cathode business
Mantos Blancos	2.69		—		3.41		—
Mantoverde	3.65		—		3.63		—
Total cathodes	3.37		—		3.58		—
Consolidated	2.50		1.72		2.63		1.81
2 Mantoverde production shown on a 100% basis.

Consolidated Production

Q4 2022 copper production of 45.5 thousand tonnes was higher than Q4 2021 primarily as a result of including production for the Mantos Blancos and Mantoverde mines.

2022 consolidated production of 158.8 thousand tonnes of copper is higher than the 84.9 thousand tonnes in 2021, primarily as a result of the addition of Mantos Blancos and Mantoverde production. Consolidated production for the nine month period from April 1, 2022 to December 31, 2022 of 136.3 thousand tonnes was within the guidance range.

Q4 2022 C1 cash costs¹ of $2.50/lb and 2022 C1 cash costs¹ of $2.63/lb are a mix of sulphide and cathode business units compared to 2021 which was predominately sulphide production. Consolidated C1 cash costs¹ are within the guidance range of $ 2.55 to $2.70 per pound payable copper.

Cathode production is from copper oxide ore that requires sulphuric acid leaching, solvent extraction and electrowinning (SX-EW) to produce copper cathodes which are a finished copper product for the market. Average sulphuric acid prices of $271 per tonne for the Company’s cathode business unit in 2022 represented an historic high, and thus negatively impacted cash costs. Sulphide production requires a mill that utilizes a grinding and flotation process to recover sulphide minerals in a copper concentrate saleable as an intermediate product to smelters and refiners. Capstone’s low-cost sulphide production is growing significantly with the Mantoverde Development Project to be completed late in 2023.

Pinto Valley Mine

Copper production of 15.0 thousand tonnes in Q4 2022 was 11% lower than Q4 2021. Lower grades (Q4 2022 – 0.32% versus Q4 2021 – 0.37%) were offset partially by higher recoveries (Q4 2022 – 86.9% versus Q4 2021 – 81.8%). In addition, lower throughput during the quarter (Q4 2022 – 55,222 tpd versus Q4 2021 – 58,481 tpd) was a result of down time for a mill reline and lower ore supply from the pit due to low truck availability.

2022 production was 6% lower than the same period last year primarily attributed to lower grades (2022 – 0.33% versus 2021 – 0.35%) and lower mill throughput (51,088 tpd in 2022 versus in 53,700 tpd 2021), partially offset by higher recoveries (2022 – 86.5% versus 2021 – 85.7%).

Q4 2022 C1 cash costs¹ of $2.48/lb in Q4 2022 were higher than Q4 2021 of $2.00/lb primarily due to lower production ($0.26/lb), increases in operating costs due to inflation ($0.23/lb) and treatment and refining costs ($0.05/lb), partially offset by higher capitalized stripping costs (-$0.12/lb).

2022 C1 cash costs¹ of $2.63/lb were $0.47/lb higher compared to the same period last year of $2.16/lb primarily due to increased operating costs due to inflationary pressures on diesel, power, explosives, grinding media; and higher spend on rental equipment, mining equipment tools, contractors and dust suppression ($0.29/lb), lower production ($0.14/lb) and an increase in treatment and refining costs ($0.10/lb), partially offset by higher capitalized stripping costs (-$0.07/lb).

PV4 Study

During Q4 2022, work progressed on the feasibility study (“FS”) for PV4 which aims to maximize the conversion of approximately one billion tonnes of mineral resources to mineral reserves, significantly extending Pinto Valley’s mine life and increasing the mine’s copper production profile. The PV4 study is focused on an expansion of existing mill throughput and tailings impoundment facility, improvements to the metal recovery processes, and an extension of the life of mine. It is expected to be released in H1 2023 and considers the following process enhancements:

• A new tailings dam, TSF5, that would improve tailings water recovery while accommodating a longer mine life.
• Pyrite leach enhancement, with strong positive environmental, social and governance (“ESG”) implications as it would divert acid-generating minerals including pyrite and chalcopyrite from tailings to the dump leach operation. Additional copper recovery and lower costs via the generation of acid would be key economic drivers for this project.
• Ball mill circuit upgrades, including ball mill shell replacements, motor upgrades, cyclone feed pump and cluster upgrades, and process control upgrades.
• Flotation circuit upgrades, including froth cameras on primary rougher banks, variable-speed drives on key slurry pumps, and potentially additional flotation capacity.
• Plant upgrades, including additional flotation capacity and process control in the molybdenum plant.

Cozamin Mine

Q4 2022 copper production of 5.8 thousand tonnes was lower than the same period prior year mainly on lower mill throughput (3,430 tpd in Q4 2022 versus 3,863 tpd in Q4 2021) as a result of lower ore mined due to the implementation of a new mining method (cut-and-fill) and ground support improvement project in late Q4 2022. Q4 2022 recoveries and grades were consistent with Q4 2021.

2022 production was slightly higher than 2021 full year due to higher throughput as a result of upgrades to the mill in Q1 2022 (3,803 in 2022 versus 3,724 in 2021), slightly higher grades (2022 – 1.87% versus 2021 – 1.86%) and recoveries.

Q4 2022 C1 cash costs¹ were 41% higher than the same period last year mainly due to a decrease in by-product credits ($0.17/lb) as a result of lower zinc production as well as lower silver production and prices, inflationary price increases on the main consumables ($0.13/lb) and lower copper production ($0.13/lb).

2022 C1 cash costs¹ were 29% higher than the same period last year primarily due to inflationary price increases in steel (grinding media), explosives and insurance premiums, planned higher spend on mechanical parts to increase equipment availability and reliability ($0.13/lb), lower zinc by-product credits due to planned lower zinc production, as well as lower silver prices ($0.13/lb)

The paste backfill and dry stack tailings project remains on target and will facilitate the mine’s planned long-term sustainability with project completion expected in Q1 2023 and ramp-up in the first half of 2023. Inception-to-date, we have invested $52 million of a total $55 million budget for the project.

Mantos Blancos Mine

Sulphide and cathode copper production in Q4 2022 was 14.2 thousand tonnes. Q4 2022 throughput of 15,246 tpd was 6% higher than the previous quarter due to MB-CDP ramping up during the quarter and a higher mill feed grade of 0.94% versus 0.92% in Q3. 2022 copper production was 41.2 thousand tonnes.

Combined Q4 2022 C1 cash costs¹ were $2.09/lb ($1.82/lb sulphides and $2.69/lb cathodes).

Combined 2022 C1 cash costs¹ were $2.54/lb ($2.16/lb sulphides and $3.41/lb cathodes). The cathode costs were significantly impacted by high sulphuric acid prices of average $271/tonne in 2022.

Mantoverde Mine

Q4 2022 copper production was 10.5 thousand tonnes.

2022 production was 36.3 thousand tonnes. Heap operation grade was 0.45% and recoveries 77.2%. Dump operations grade was 0.16% and recoveries 39.8%.

Q4 2022 C1 cash costs¹ were $3.65/lb, which were impacted by high sulphuric acid prices, averaging $271/tonne for 2022. More recently, sulphuric acid prices have significantly decreased with contract prices in the $130/tonne to $150/tonne range for 2023.

2022 C1 cash costs¹ were $3.63/lb, at the lower end of guidance range.

Mantoverde Development Project

Construction of the MVDP located at the existing Mantoverde (oxide) operation continues to progress well. The MVDP is expected to enable the mine to process 235 million tonnes of copper sulphide reserves over a 20-year expected mine life, in addition to existing oxide reserves. The MVDP involves the addition of a sulphide concentrator (12.3 million tonnes per year) and tailings storage facility, and the expansion of the existing desalination plant.

Upon completion, the Company expects the MVDP to increase production from approximately 36,000 to 40,000 tonnes of copper (cathodes only) in our current guidance for 2023 to ~110,000 to 120,000 tonnes of copper (copper concentrate and cathodes) post project completion. In parallel, C1 cash costs¹ are expected to decrease from $3.50/lb to $3.70/lb in the current guidance for 2023 to below $2.00/lb after project completion and ramp up. The decline in expected costs will be driven by the mine’s transition to becoming a primary producer of copper concentrate. Upon completion of the MVDP, approximately 75% of Mantoverde’s production will come from the lower-cost sulphide copper. The mine will also benefit from the production of approximately 31,000 ounces of gold per year that will generate by-product credits.

MVDP is progressing under a lump-sum turn-key engineering, procurement, and construction (EPC) contract with Ausenco Limited, a multi-national EPC management company, with broad international experience in the design and construction of copper concentrator projects of this scale in the international market. The execution plan includes a Capstone Copper owner’s team working with the contractors during the execution phase.

The Mantoverde Development Project is progressing well and remains on track for commissioning and feeding first ore to the mill in late 2023. Areas of focus in Q4 2022 were:

• Assembly and commissioning of the second electric rope shovel with commissioning of a third shovel planned for mid-Q1 2023;
• Critical equipment such as the SAG and ball mill shells, flotation cells, conveyor belts, components, and others, are already arrived at site; and
• Structural and mechanical assembly in the primary crusher, grinding, flotation, and tailings thickener area are in progress as planned.

As of December 31, 2022, the cost of the different components of the project, including the lump-sum turnkey EPC, continue on track and on target. The total project capital remains at $825 million and inception-to-date project spend, excluding finance costs, totals $579 million.

The majority of the total project capital cost of $825 million is fully encompassed by the turn-key contract with Ausenco. The EPC contract total budget is approximately $525 million of which $359 million has been spent as of December 31, 2022. In addition, major mining equipment for approximately $140 million was price fixed prior to the elevated inflationary pressures observed this year.

A virtual tour of the project can be viewed at https://admin.vrify.com/decks/12698

Mantoverde Phase II

Mantoverde is currently analyzing the next expansion of the sulphide concentrator. Capstone has identified that the major components of the comminution and flotation circuits of the Mantoverde Development Project are capable of throughput capacities higher than the 32,000 tonnes per day design, and an engineering study is being initiated to identify the upstream and downstream debottlenecking costs associated with the potential increase in nameplate capacity. Given the above, the Mantoverde Phase II study will now evaluate the addition of an entire second processing line, possibly a duplication of the first line, to process some of the additional 77% of resources not utilized by the optimized MVDP. A conceptual study is being prepared in Q1 2023 and pending positive results will be incorporated into a feasibility study targeted for H2 2023.

Mantos Blancos Concentrator Debottlenecking Project

The MB-CDP was completed in 2022 which increased throughput capacity at the sulphide concentrator plant from 11,000 tonnes per day (“tpd’) to 20,000 tpd (or from 4.2 million tonnes per year to 7.3 million tonnes per year). MB-CDP completed ramp up to commercial production in December.

Mantos Blancos Phase II

Mantos Blancos is currently evaluating the potential to increase throughput of the Mantos Blancos sulphide concentrator plant from 7.3 million tonnes per year to 10.0 million tonnes per year using existing underutilized ball mills and process equipment. As part of the Mantos Blancos Phase II Project, we are also evaluating the potential to extend the life of copper cathode production. The Mantos Blancos Phase II feasibility study is expected to be released in H2 2023, and the environmental DIA application was submitted in August 2022.

Santo Domingo

Since closing the Transaction, the Santo Domingo team has been integrated into the larger Capstone Copper team in Chile. The integrated project team was initially focused on identifying and evaluating the optimal integrated development plan for the Mantoverde – Santo Domingo district. The Mantoverde operation is located approximately ~35km southwest of the Santo Domingo project. In consideration of the Integration Plan submitted by the Company on November 10th, activities to better understand the full potential of the synergies and to maximize the outcome for the company through a optimized flowsheet are ongoing and a 2023 work plan has been developed to take advantage of the synergies associated with the proximity of Santo Domingo to the existing Mantoverde operation, existing infrastructure (including a desalination plant, roads, power, and pipelines), and integration of other assets, such as the Santo Domingo port. The outcomes of all of this are expected to be incorporated into an updated Santo Domingo feasibility study in H2 2023.

Mantoverde – Santo Domingo Cobalt Feasibility Study Update

A district cobalt plant for Mantoverde – Santo Domingo may also unlock cobalt production from Mantoverde while producing a by-product of sulphuric acid which can then be consumed internally to further significantly lower operating costs in the leaching process at Mantoverde.

The cobalt recovery process consists of a concentration step, an oxidation step, and a cobalt recovery step. The concentration step considers a conventional froth flotation circuit treating copper flotation tails to produce a cobaltiferous pyrite concentrate. For the base case, the pyrite concentrate, which contains between 0.5% and 0.7% Co, is oxidized in a fluidized bed roaster to produce a cobalt calcine and a concentrated sulphuric acid by-product. The calcine is then subjected to various leaching, precipitation, solvent extraction and crystallization steps to produce battery grade cobalt sulphate heptahydrate. Capstone is also evaluating alternatives that may include the direct sale of some or all the cobalt as intermediate product, such as mixed hydroxide precipitate, to a partner, joint venture or an independent third-party refiner. At a combined MV-SD target of 6.0 to 6.5 thousand tonnes of cobalt production per year, this would be one of the largest and lowest cost cobalt producers in the world. Additional benefits of this project include the generation of carbon-free energy from waste heat emitted by the roaster, and the production of by-product sulphuric acid which can be used for heap or dump leaching to produce low-cost copper cathodes at Mantoverde, Mantos Blancos, or sold to other consumers within the district. Exploratory test-work has started at Mantoverde to confirm suitability of the Santo Domingo cobalt circuit flowsheet to process an integrated cobaltiferous pyrite feed.

Capstone is also examining the early production of cobalt from Mantoverde by oxidizing a pyrite concentrate from MVDP directly in the copper heap leach facilities. The pyrite concentrate would be recovered from MVDP waste streams and added to the oxide heap leach feed agglomerate drums. The pyrite would oxidize in the heap, producing by-product sulfuric acid in situ and solubilizing a significant fraction of the cobalt. A bleed stream containing cobalt in solution will then be directed to a recovery plant consisting of various steps of impurity removal, continuous ion exchange, and hydroxide precipitation to produce a cobalt hydroxide precipitate. It is believed that this approach would require significantly less capital expenditure and could potentially accelerate the production of cobalt from the district. Test work will commence in Q1 2023 and a conceptual study will be available near the end of H2 2023.

PV4 Study

During Q4 2022, work progressed on the feasibility study (“FS”) for PV4 which aims to maximize the conversion of approximately one billion tonnes of mineral resources to mineral reserves, significantly extending Pinto Valley’s mine life and increasing the mine’s copper production profile. The PV4 study is focused on an expansion of existing mill throughput and tailings impoundment facility, improvements to the metal recovery processes, and an extension of the life of mine. It is expected to be released in H1 2023 and considers the following process enhancements:

• A new tailings dam, TSF5, that would improve tailings water recovery while accommodating a longer mine life.
• Pyrite leach enhancement, with strong positive environmental, social and governance (“ESG”) implications as it would divert acid-generating minerals including pyrite and chalcopyrite from tailings to the dump leach operation. Additional copper recovery and lower costs via the generation of acid would be key economic drivers for this project.
• Ball mill circuit upgrades, including ball mill shell replacements, motor upgrades, cyclone feed pump and cluster upgrades, and process control upgrades.
• Flotation circuit upgrades, including froth cameras on primary rougher banks, variable-speed drives on key slurry pumps, and potentially additional flotation capacity.
• Plant upgrades, including additional flotation capacity and process control in the molybdenum plant.

Contacts

Jerrold Annett, SVP, Strategy and Capital Markets

647-273-7351

jannett@capstonecopper.com

Kettina Cordero, Director Investor Relations & Communications

604-262-9794

kcordero@capstonecopper.com

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