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Message: Guidance and Operations Update
| December 1, 2008 | ||
| Quadra Mining Provides 2009 Guidance and Operations Update | ||
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 1, 2008) - (All figures in US$ unless otherwise noted) Quadra Mining Ltd. (TSX:QUA) ("Quadra" or "the Company") is pleased to announce production guidance for both the Robinson Mine ("Robinson") in Ely, Nevada and our second operation, the Carlota Mine ("Carlota") in Globe/Miami, Arizona. Quadra remains positive on the medium and long term outlook for copper. However, in recognition of the current metal price environment, management has completed a review of its operations and has developed contingent plans intended to allow the Company to maintain appropriate cash balances at lower copper prices, and at the same time maximize the Company's ability to deliver metal into future higher metal price environments. The following 2009 production forecasts are based on the current estimates at Robinson and Carlota: --------------------------------------------------------------------------
Robinson Carlota Total 2009
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Copper production 130 million lbs. 50 million lbs. 180 million lbs.
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Gold production 125,000 ounces N/A 125,000 ounces
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The Company cautions that there is currently very broad volatility in all aspects of its business and, accordingly, actual results may vary substantially from all guidance and forward-looking information in this press release. See the discussion of assumptions and risks underlying this forward looking information at the end of this release. Robinson Production Profile and Mine Plan Metal production in 2009 will come from existing ore reserves in the Veteran pit, which should provide mill feed for approximately 15 months. The Company intends to proceed with the previously announced additional stage of mining, or "pushback" in the Veteran pit, which is expected to provide the required ore for blending with Ruth pit ore in 2011 and 2012. Blending of hypogene and supergene ores, together with developed reagent metallurgical strategies, is believed to significantly improve recovery and concentrate grade. The planned schedule should also allow time to progress the dewatering of the Ruth pit, with its additional permit and pumping requirements. Recent hydrological work has established that the likely dewatering rate is expected to be approximately double the previously anticipated requirements. An updated Technical Report on Robinson containing the technical details on this pit development sequence is expected to be filed on SEDAR in January 2009. The table below lays out the current expectations of the Company with respect to production and costs for 2008 and 2009 at Robinson under the current mine plan. Cost assumptions are based on the current environment for input costs and, while they take into account the cost reductions that have occurred to date, there is no projection of future cost reductions in these numbers. --------------------------------------------------------------------------
2008 2009
Robinson Mine: Forecast Forecast
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Copper production 160 million lbs. 130 million lbs.
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Gold production 130,000 ounces 125,000 ounces
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Onsite Costs ($ millions)(2)(3) $ 245 $ 220
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Offsite Costs ($ millions)(3) $ 65 $ 60
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Total onsite and offsite costs ($ millions) $ 310 $ 280
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Cash cost per pound of copper produced(1)(3) $ 1.22 $ 1.40
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Capital expenditures and bonding ($ millions) $ 70 $ 40
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(1) Cash cost per pound of copper produced in 2009 assumes gold by-product
revenue at $800/oz.
(2) Onsite costs in 2009 assume a diesel price of $2.80/gallon and include
the costs for pre-stripping the Veteran pit expansion.
(3) Non-GAAP financial measures (see section below).
In 2010, the Company expects copper production to be 120-130 million pounds and gold production to be 80-100 thousand ounces. Annual capital expenditures in 2009 and 2010 are expected to be $40 million, primarily related to equipment and construction activities. Carlota Production Profile and Mine plan Cathode copper production is expected to be approximately 50 million pounds in 2009 due to the expected lower early stage head grades as per the mine plan. In accordance with Carlota's previously disclosed Technical Report, increasing head grades are expected to result in an estimated annual production rate of 70-75 million pounds in 2010. Total cash operating costs are expected to be approximately $75 million in 2009, increasing to approximately $85 million in 2010, resulting in unit cash operating costs of about $1.50 per pound in 2009 and $1.20 per pound in 2010. These operating cost forecasts exclude royalty payments and assume an acid price of $200/ton and a diesel price of $2.80/gallon. It should be noted that the operation is ramping up and that these costs are estimates that may change with real world data. The Company expects to incur $25 million of capital expenditures at Carlota during 2009 for the construction of the Pinto Creek Diversion which is required to divert a stream system around the pit, environmental bonding and the acquisition of an additional haul truck. Capital expenditures are forecasted to be $20 million in 2010, primarily for the expansion of the leach pad. Contingent Operating Plans Based on the current production, cost and cashflow forecasts for both operations, management estimates that a copper price in the range of $2.00/lb. is required from mid-2009 through 2010 to provide the cash needed to complete the Veteran expansion and the Ruth pit, while maintaining target cash balances. During the first quarter of 2009 and as required by the current plan, the Company intends to continue stripping the Veteran pit extension with the existing mining fleet. Total pre-stripping requirements for the Veteran extension are 60-70 million tons which will require additional mining equipment. Before committing to the acquisition of this additional equipment, Quadra intends to review market conditions for copper and gold, as well as any positive impact of input costs which are under downward pressure. Depending on the outlook for metal prices and costs, Quadra may limit its activities to mining out the existing Veteran pit and dewatering of Ruth. This alternate plan would not impact the forecast production for 2009 and is expected to significantly lower the cash cost per pound of copper produced at Robinson to approximately $0.95/lb., and capital expenditures to approximately $15 million. Under these circumstances, the mill feed in the existing Veteran pit should be sufficient to maintain operations at Robinson until the end of the first quarter of 2010 and, after suspension costs, the Company should still have a strong cash position of at least $100 million at current metal prices. Development Projects Other corporate activities, including the completion of a scoping study at Sierra Gorda and permitting activities at Malmbjerg, will continue but at a significantly reduced level. Total 2009 expenditures on development projects are expected to be $5 million. Discussions with potential partners to assist in the funding of development projects will continue. Quadra's President & CEO, Paul Blythe, says, "Quadra has highly experienced and committed management and operating teams with a track record of prudent corporate management and operational excellence at a very complex mine. We have carefully reviewed and revised our 2009 mine plans and expenditures in order to ensure adequate liquidity while maintaining production from both our operations through the current metal price environment. Our job as we see it is to be in full production or in a position to return rapidly to full production as prices recover and to maintain our strong balance sheet." Paul Blythe concludes, "We believe that the mid to long term fundamental drivers of the copper market remain in place but short term volatility has required management to put in place contingency plans that will allow us to maintain our sound financial position, maximize profitability, manage capital budgets and operate in the best interest of the Company and the shareholders." Non-GAAP Financial Measures The cash cost per pound of copper produced, and onsite costs and offsite costs are non-GAAP financial measures that do not have a standardized meaning under Canadian Generally Accepted Accounting Principles ("GAAP"), and as a result may not be comparable to similar measures presented by other companies. Management uses these statistics to monitor operating costs and profitability. Onsite costs include mining costs, equipment operating lease costs, mill costs, mine site general and administration costs, environmental costs and royalties. Offsite costs include the costs of transportation, smelting and refining of concentrate. The cash cost per pound of copper produced is the total of onsite and offsite costs less by-product revenues, divided by pounds of copper produced. About Quadra Mining Ltd. (TSX:QUA) Quadra is a mining company that owns and operates the Robinson copper mine ("Robinson Mine") near Ely, Nevada. In addition, Quadra holds a 100% interest in the Carlota copper mine ("Carlota"), a heap leach-SX/EW copper operation in Arizona. The Company also has a 100% interest in the Sierra Gorda project ("Sierra Gorda"), a late stage exploration property in northern Chile, and a 99% interest in the Malmbjerg molybdenum project ("Malmbjerg") in Greenland. The strategic plan of the Company includes growth by optimising operations, developing projects, and pursuing merger and acquisition opportunities. |
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