(All amounts in C$ unless otherwise stated)
Sherwood Copper Corporation (TSX VENTURE: SWC)(TSX VENTURE:
SWC.DB) today announced its results for the three and six months
ended June 30, 2008 (the "Current Quarter" and the "Current
Period", respectively) including results of operations at its high
grade Minto copper-gold mine located in the Yukon.
Sherwood generated cash flow from mining operations(i) of $21.4
million and an adjusted net income(i) of $7.1 million in the
Current Quarter and $38.3 million of cash flow from mining
operations(i) and an adjusted net income(i) of $10.8 million for
the Current Period, based on the following concentrate sales:
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Concentrate - Copper - Gold - Silver -
Sales tonnes sold pounds ounces ounces
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First Quarter 2008 9,158 7,087,088 3,950 25,016
Second Quarter 2008 9,849 7,933,592 4,087 37,304
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Total - Current Period 19,007 15,020,680 8,037 62,320
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With completion of the Phase 2 mill expansion during the first
quarter of 2008, increasing mill throughput from 1,563 tonnes per
day to 2,400 tonnes per day, the Current Quarter production
increased to 12.8 million pounds of payable copper at an estimated
cash cost of $0.96(i) per pound of payable copper, bringing the
Current Period production total to 23.8 million pounds of payable
copper at an estimated cost of $0.99(i) per pound of payable
copper. The difference in the metal produced and the metal sold is
due to timing differences between when the material is produced at
the mine and when a sale can be recognized under Sherwood's revenue
recognition policy. Under that policy, in order for a sale to be
recognized, the metals have to be sold. Metals produced but not
sold are carried as inventory at the cost of production. This
timing difference is also affected by the availability of road
transport from the mine to the Port of Skagway due to the freeze up
and breakup of the Yukon River in fall and spring of each year.
"Our high grade Minto copper-gold mine continues to generate
strong financial results," said Stephen Quin, President & CEO.
"Recognizing that there is an approximate three month lag between
metal production and the related financial return, we generated
cash flow from mining operations(i) of $21.4 million in the second
quarter and $38.3 million in the first six months of 2008. Given
that copper production totalled 12.8 million pounds in the second
quarter and that there will be two concentrate shipments in the
third quarter (as compared to one in each of the first two
quarters) we are well positioned to deliver a strong set of third
quarter results," he said. "Going forward, we expect to achieve our
objective of 55 million pounds of copper production in 2008 and to
benefit from (1) lower unit operating costs as mill throughput is
sustained at or above design levels, (2) head grades increase into
the fourth quarter as fresh high grade ore is accessed following
the current pushback in the open pit, and (3) lower energy costs as
we connect to lower cost grid power. In 2009, we are targeting
production of 70 million pounds of copper as a result of a
sustained period of processing high head grades and we complete our
Phase 3 expansion to 3,200 tpd of mill throughput."
Highlights for the Current Quarter
The following highlights summarize results for Sherwood and its
high grade Minto copper-gold mine, owned through its wholly owned
subsidiary, Minto Explorations Ltd. ("MintoEx"):
- Produced 14,468 dry metric tonnes ("dmt") of copper
concentrate containing 12.8 million pounds of payable copper at an
estimated total cash cost(i) (inclusive of shipping, treatment and
refining charges, insurance and by-product credits) of $0.96 per
pound of payable copper.
- Shipped 9,849 dmt of concentrate from the Port of Skagway in
April with an estimated net revenue value of $3,282 per dmt at June
30, 2008.
- Held 15,397 dmt of concentrate in inventory at June 30, 2008
with a carrying value of $1,482 per dmt comprised of $1,075 cash
and $407 non-cash (substantially below current net realizable
values).
- Shipped 9,840 dmt of the above inventory in July 2008. The
balance of the June 30, 2008 inventory and a portion of the July
production (approximately 9,800 tonnes) is scheduled for shipment
in late August.
- All mining activity concentrated on removing 3.3 million dmt
of waste to facilitate access to the Phase 3 higher grade ore by
the latter part of the third quarter 2008.
- Processed 206,263 dmt of ore from stockpiles at an average
grade of 3.26% copper at an average cost(i) of $68 per tonne (which
includes all mine site production costs).
- Generated cash flow from mining operations(i) of $21.4 million
and income from mining operations(i) of $17.4 million on the sale
of 9,849 dmt of copper concentrate.
- Generated an adjusted net income(i) of $7.1 million.
- Repaid US$16.9 million of the project loan facility, leaving a
balance of US$40.9 million outstanding at June 30, 2008.
- Acquired the final 7% of Western Keltic Mines Inc. in May 2008
through the amalgamation of Western Keltic Mines Inc. and a
wholly-owned subsidiary of the Company, giving the Company a 100%
interest in the high grade Kutcho Copper Project in north western
British Columbia. The amalgamated company's name was changed to
Kutcho Copper Corp. ("Kutcho Copper").
- Completed a 43-101 compliant preliminary economic assessment
("PEA") on the high grade Kutcho Copper Project. The PEA evaluated
the potential for the development of a smaller, less capital
intensive open pit mining operation on a portion of the Main
deposit that can be developed relatively quickly. Two parallel
tracks are being pursued to enhance this base case option by
evaluating: (a) a number of opportunities identified within the
study that could significantly enhance the economics of the project
as defined, and (b) the potential of increasing the production and
mine life by incorporating some of the more than 50% of the project
mineral resources not considered in this study.
- Announced a 50% increase in the copper and a 40% increase in
the precious metals contained in mineral resource estimates for the
Minto mine. New mineral resource estimates were completed for the
Area 118 and the Ridgetop deposits, while those for the Main Minto
and Area 2 deposits were updated to incorporate the results of 101
new holes drilled across these four deposits in 2007. These
resource estimates exclude the results of drilling in 2008.
- Closed the transaction with Firestone Ventures Inc.
("Firestone") whereby MintoEx received an equity interest in a new
public company (Northern Tiger Resources Inc.) created by Firestone
in exchange for contributing four sets of mineral claims in the
Minto region, access to MintoEx's extensive Yukon exploration
database and participation in a regional exploration alliance.
Highlights Subsequent to Current Quarter
- Announced initial results from the 2008 drill program, which
was undertaken in order to increase confidence in the mineral
resources that comprise the bulk of the "Main" deposit at the
Kutcho Project, to infill gaps in the previous resource model, test
potential along open high grade trends within the Main deposit and
to provide ample sample material for an extensive metallurgical
program, all in support of advancing the Kutcho Project toward
completion of a feasibility study.
- Announced results for 34 drill holes completed at the Minto
Mine. Highlights of these recent results include: (a) confirmation
of a high grade zone within the Area 118 deposit, including the
highest reported intercept from Area 118 to date (4.7% copper and
3.4g/t gold over 8.5 metres (m)), and (b) the discovery of further
high grade mineralization in wide-spaced drilling on the south and
east margins of the Area 2 and (c) a significant intercept in the
Copper Keel area.
- Completed a National Instrument 43-101 Technical Report that
details two significant developments at the high grade Minto
copper-gold mine:
-- Rescheduling of the open pit currently being mined, higher
grade copper production has been brought forward from 2010 to
2009.
-- Details the updated mineral resource estimates announced in
June 2008, increasing the mineral resources by approximately
50%.
Financial Results
In Current Quarter and the Current Period, the Company recorded
net revenue of $32.3 million on the sale of 9,489 dmt of copper
concentrate (at $3,282 per dmt) and $61.0 million on the sale of
19,007 dmt (at $3,209 per dmt), respectively. These sales generated
cash flow from mining operations(i) in the Current Quarter of $21.4
million and income from mining operations of $17.4 million. In the
Current Period, $38.3 million of cash flow from mining
operations(i) and $30.4 million of income from mining operations(i)
were generated.
A total of 14,468 dmt of copper concentrate were produced in the
Current Quarter for a total of 27,711 tonnes produced during the
Current Period. There was no production in the comparable periods
as the Company only achieved commercial production on October 1,
2007. In the Current Quarter, 9,849 dmt were shipped, bringing the
total for the Current Period to 19,007 dmt. At the end of the
Current Period, 15,397 dmt of copper concentrate with an average
attributable cost of $1,482 per dmt (cash $1,075 and non-cash $407)
were held in inventory. The attributable cost reported is
substantially below current net realizable values for this
concentrate held in inventory. The difference between the average
attributable cost of the concentrate and the current net realizable
value is substantial but is not reflected in the interim
consolidated financial statements and will not be so reflected
until these concentrates are shipped.
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Cost per Total
Dry Cost per tonne, cost
metric tonne, non-cash per
Copper Concentrate tonne cash(i) (i) tonne(i)
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Opening inventory 6,692 $1,775 $427 $2,202
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Produced - First Quarter 2008 13,243 $ 985 $388 $1,373
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Inventory adjustment (580) - - -
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Sold - First Quarter 2008 (9,158) $1,288 $413 $1,701
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Inventory March 31, 2008 10,196 $1,288 $413 $1,701
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Produced - Second Quarter 2008 15,049 $ 930 $403 $1,333
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Sold - Second Quarter 2008 (9,489) $1,075 $407 $1,482
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Inventory - June 30, 2008 15,397 $1,075 $407 $1,482
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Production costs (cash and non-cash) per dmt of copper
concentrate continue trending down at $1,333 in the Current Period
compared with $1,373 and $2,202 in the first quarter of 2008 and
the fourth quarter of 2007, respectively, as costs and production
levels ramped up to full capacity in the Current Period. The
expectation is that, over the balance of 2008, the cost per dmt of
concentrate produced will be further reduced as unit costs decrease
and production levels increase.
Current Quarter
The Company reported an overall net loss of $0.2 million in the
Current Quarter compared with a net loss of $21.3 million for the
three months ended June 30, 2007 (the "Comparative Quarter"). The
main reason for this improvement was the generation of income from
mining operations(i) of $15.7 million in the Current Quarter
compared to a loss from mining operations(i) of $2.3 million in the
Comparative Quarter. The quarters are not readily comparable as the
Company was in the development stage in the Comparative Quarter.
Another significant difference was a lower loss on derivative
instruments (i.e. forward metal sales) in the Current Quarter of
$7.0 million realized and $6.1 million unrealized compared with
only an unrealized loss of $22.8 million in the Comparative Period.
These changes were partially offset by higher interest expense
($1.1 million), a lower foreign exchange gain ($3.7 million) and
higher tax expenses ($2.4 million).
Current Period
The Company reported a net loss of $66.3 million in the Current
Period compared with a net loss of $22.9 million for the six months
ended June 30, 2007 (the "Comparative Period"). The main reasons
for the higher net loss were due to the realized ($7.7 million) and
unrealized ($76.6 million) loss of derivative instruments (i.e.
forward metal sales) compared with an unrealized loss of $22.8
million in the Comparative Period, higher interest expense ($3.3
million), a foreign exchange loss compared with a gain ($7.6
million) and higher tax expenses ($2.6 million).
A realized loss on derivative instruments is related to the
settlement of forward metal sales contracts closed out. Sherwood
only settles forward metal sales contracts in periods that actual
metal sales are settled. An unrealized loss on derivative
instruments is an estimate of the mark-to-market cost of closing
out all the longer term forward metal sales contracts where metal
is to be delivered against these in future periods, assuming the
forward copper prices as of June 30, 2008. However, since these
deliveries have not yet taken place and metal prices could be
different by the time such deliveries are made, such losses are
unrealized and could be quite different by the time the deliveries
occur. For example, the mark-to-market loss on derivative
instruments in the Current Period of $76.6 million would be less
than half of the amount reported, based on current metal
prices.
Sherwood's net income or loss may vary significantly from
quarter to quarter based on revenue recognition timing. In
addition, the mark-to-market of forward metal sales, expenses for
stock based compensation and foreign exchange adjustments, all of
which are non-cash adjustments, can swing significantly from period
to period and therefore affect reported net income without any
impact on cash or the financial strength of the Company. For
example, the mark-to-market loss on derivative instruments in the
Current Period of $76.6 million would be less than half of the
amount reported based on current metal prices.
Additional details on the financial and production results are
available in the Company's unaudited consolidated interim financial
statements and management discussion and analysis for the three and
six month periods ended June 30, 2008 filed on SEDAR at
www.sedar.com.
Concentrate Shipments
15,397 dmt of copper concentrate were held in inventory at June
30, 2008, of which 9,840 dmt were shipped in early July of 2008.
This tonnage, and an additional 9,800 dmt scheduled for shipment in
late August, will be recognized as revenue in the third quarter of
2008. Sherwood settled 2,786 tonnes of forward copper sales in July
2008, matching these sales to the final price settlement of the
April 2008 concentrate shipment. These forward copper sales had an
average strike price of $6,276 per tonne of copper. In addition,
these concentrates contain significant gold and silver credits. The
Company expects to settle forward sales against approximately 50%
of 2008 forecast production, providing Sherwood with significant
exposure to current high spot prices for copper, gold and silver in
2008.
Production Outlook
As announced August 5, 2008 and detailed in a Technical Report
filed on SEDAR, Sherwood is targeting production of approximately
55 million pounds of payable copper and more than 24,000 oz of
payable gold in 2008 and 70 million pounds of payable copper and
more than 31,000 oz of payable gold in 2009. As outlined in the
Technical Report, this production profile is a result of
rescheduled mine production from the main pit at the Minto Mine
that accelerates the mining of high grade ore previously scheduled
for production in 2010. This rescheduled production profile
excludes consideration of the significant increase in mineral
resource detailed in the Technical Report, or consideration of the
extensive and successful 2008 drill program. Sherwood has engaged
SRK Consulting (Canada) Inc. ("SRK") to prepare an updated
pre-feasibility study on the Minto Mine incorporating the results
of the new resource estimates, the 2008 drilling and other
activities with the objective of demonstrating sustained production
at a rate of 60-70 million pounds of copper per year in that study,
likely entailing a Phase 4 mill expansion.
About Sherwood Copper
Sherwood Copper's current focus is profitable production of base
and precious metals from high grade, open pit mines in Canada.
Sherwood's first operating mine, the high grade Minto copper-gold
mine in Yukon, Canada, was built on budget and ahead of schedule.
The Minto Mine is one of the highest-grade open pit copper-gold
mines in the world, and is forecast to be a low cost producer.
Aggressive exploration on the Minto property has yielded
significant success, providing Sherwood the opportunity to 'grow
from within' by expanding the resource and reserve base,
potentially leading to further production increases. To further
accelerate its production growth, Sherwood intends to pursue merger
& acquisition opportunities that fit its business model and, in
May 2008, Sherwood acquired 100% ownership in Western Keltic Mines,
owner of the high-grade Kutcho copper-zinc-gold-silver deposit in
northwestern British Columbia. Sherwood expects to lever off its
successful development of the Minto Mine and advance the Kutcho
project to a production decision.
Quality Assurance
The technical information in this news release has been prepared
in accordance with Canadian regulatory requirements set out in
National Instrument 43-101 and reviewed by Stephen P. Quin, P.
Geo., President & CEO for Sherwood Copper Corporation. The
operational activities carried out at the Minto Mine have been
carried out under the supervision of Randall Thompson, General
Manager of the Minto Mine, and Kevin Weston, Chief Operating
Officer for Sherwood Copper, who have reviewed and approved the
information contained herein. The exploration activities at the
Minto Mine and Kutcho Project have been carried out under the
supervision of Brad Mercer, P. Geo., Sherwood's VP Exploration.
Additional information on Sherwood and its Minto Project can be
obtained on Sherwood's website at
http://www.sherwoodcopper.com.
On behalf of the board of directors
SHERWOOD COPPER CORPORATION
Stephen P. Quin, President & CEO
This document may contain "forward-looking statements" within
the meaning of Canadian securities legislation and the United
States Private Securities Litigation Reform Act of 1995. These
forward-looking statements are made as of the date of this document
and the Company does not intend, and does not assume any
obligation, to update these forward-looking statements.
Forward-looking statements relate to future events or future
performance and reflect management's expectations or beliefs
regarding future events and include, but are not limited to,
statements with respect to the estimation of mineral reserves and
mineral resources, conversion of inferred mineral resources to the
measured and indicated categories, the realization of mineral
reserve estimates in mining, the timing and amount of estimated
future production, costs of production, capital expenditures,
success of mining operations, environmental risks, unanticipated
reclamation expenses, title disputes or claims and limitations on
insurance coverage. In certain cases, forward-looking statements
can be identified by the use of words such as "plans", "expects" or
"does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "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.
By their very nature, forward-looking statements involve known and
unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Such factors include, among others, risks related to
actual results of current exploration activities; changes in
project parameters as plans continue to be refined; future prices
of metals; future currency exchange rates; conversion of mineral
resources to higher confidence levels or to mineral reserves;
possible variations in mineral reserves, grade or recovery rates;
accidents, labour disputes and other risks of the mining industry;
changes in the legal or regulatory regime affecting the Company's
operations; delays in obtaining governmental approvals or financing
or in the completion of development or construction activities; 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, including those for the Current
Period, all of which are filed and available for review on SEDAR at
www.sedar.com. Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such
statements.
Accordingly, readers should not place undue reliance on
forward-looking statements.
(i) These are non-GAAP performance measures and readers should
refer to notes on non-GAAP performance measures on page 17 of the
Company's management discussion and analysis for the three and six
month periods ended June 30, 2008 as filed on Sedar for further
details.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this press
release.
Contacts: Sherwood Copper Corporation Stephen P. Quin Investor
Contact (604) 687-7545 Sherwood Copper Corporation Neil MacRae
Investor Contact (604) 687-7545 (604) 689-5041 (FAX) Website:
www.sherwoodcopper.com
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