(All amounts in C$ unless otherwise stated)
Sherwood Copper Corporation (TSX VENTURE:SWC)(TSX VENTURE:SWC.DB) today
announced significantly improved operating results for the three months ending
June 30, 2008 from its high grade Minto copper-gold mine located in the Yukon,
as well as a significant reduction in its bank debt.
Second quarter 2008 production totalled 12.8 million pounds of payable copper at
an estimated total cash cost(i) of $0.96 per pound of payable copper (after
estimated by-product credits and offsite costs) versus 11.0 million pounds of
payable copper at total cash cost(i) of $1.04(4) per pound in the first quarter
of 2008. These improved operating results were achieved as a result of
processing ramping up to and then exceeding design capacity (with mill
throughput increased 35% over that in the first quarter), while unit operating
costs per tonne fell 21% over the same period, despite higher fuel prices.
Further, on June 30, 2008, Sherwood's subsidiary, Minto Explorations Ltd.
("MintoEx"), repaid an additional US$12 million of its project loan facility
("PLF"), on top of a US$5 million payment made on March 30, 2008, reducing the
amount outstanding under the PLF to US$40.9 million. In addition, MintoEx placed
US$7.5 million into its banks' debt service reserve account to partially cover
the next payment (due on September 30, 2008).
"Operations at our high grade Minto copper-gold mine delivered an excellent
quarter, with 12.8 million pounds of copper produced at total cash costs(i) of
under $1.00 per pound," said Stephen Quin, President & CEO. "Our operating group
made tremendous progress over the second quarter; completing the commissioning
of the Phase 2 mill expansion and increasing throughput to levels above design
on a sustained basis. This production, combined with strong metal prices, has
enabled us to aggressively reduce our project debt," he said. "Going forward, we
continue to push down to much higher grades in the latter part of 2008, which
should result in production targets being met in 2008 and in a significantly
stronger 2009 than previously planned."
During the second quarter 2008, Sherwood continued its project optimization
process, developing and implementing a rescheduled open pit mine plan that
should result in significantly increased production in 2009 versus what was
previously forecast as a result of bringing high grade production forward from
2010. Production forecasts for 2008 of approximately 55 million pounds of
payable copper and 24,000 oz of payable gold remain unchanged. "The rescheduled
open pit should result in more copper production sooner, which should increase
value to all of our stakeholders," said Mr. Quin.
Operating Highlights from Second Quarter 2008
During the three months ended June 30, 2008, Sherwood made significant progress
at its high grade Minto copper-gold mine, including the following:
- Production increased approximately 17% to 13.23 million pounds of contained
and 12.80 million pounds of payable copper at an estimated total cash cost(i) of
$0.96 per pound of payable copper, after by-product credits, treatment charges
and selling costs. In the first quarter production totalled 11.32 million pounds
of contained copper and 10.95 million pounds of payable copper at a total cash
cost(i) of $1.04(4) per pound.
- Cash costs per tonne milled fell 21% from $86/tonne in the first quarter to
$68/tonne in the second quarter. Going forward, unit costs should continue to
trend down as a result of increased production and mill throughput, and
conversion to grid electrical power before the end of 2008. The conversion to
grid power should result in an immediately reduction in operating costs.
- No ore was mined during the second quarter and all mill production was drawn
from material stockpiled over the prior 12 months, and all mining activity was
focused on stripping waste for the Phase 3 pit to expose high grade ore by the
end of the third quarter of 2008, which should result in high production in the
fourth quarter of 2008 and in 2009. Costs related to waste stripping completed
in the quarter were deferred. Costs related to the mining and stripping of ore
that was drawn from the stockpile and processed in the quarter had previously
been deferred but have now been expensed and are included in the total cash
costs for the second quarter.
- Processed 206,263 tonnes of ore at an average grade of 3.26% copper versus
152,368 tonnes processed at an average grade of 3.61% in the first quarter. Mill
throughput increased from an average of 1,674 tpd in Q1 to 2,266 tpd in Q2, a
35% increase in throughput. In June 2008, throughput averaged 2,521 tpd.
- Shipped 9,849 dry metric tonnes ("dmt") of concentrate from the Port of
Skagway in April 2008, with similar amounts scheduled to be shipped in each of
July and August 2008. Revenue and costs related to the April shipment will be
recognized in the second quarter of 2008, while those for the July and August
shipments in the third quarter of 2008. As a result of Sherwood's revenue
recognition policy, Sherwood's net income or loss may vary significantly from
quarter to quarter based on revenue recognition timing.
- Held 15,936 dmt of copper concentrate grading approximately 40.3% copper in
inventory at June 30, 2008.
- Significant progress was made in the construction of the powerline and related
facilities, which should connect the Minto Mine to the Yukon power grid before
year-end 2008 and should result in a significant reduction in operating costs
once connected.
Minto Mine Operating Statistics
--------------------------------------------------------------------------
Q1/08 YTD Total
(3) Q2/08 (5)
--------------------------------------------------------------------------
Production
(contained in concentrates)
--------------------------------------------------------------------------
- Copper (000's lbs) 11,322,942 13,232,620 24,555,562
--------------------------------------------------------------------------
- Gold (oz)(1) N/A N/A N/A
--------------------------------------------------------------------------
- Silver (oz) 63,440 68,300 131,740
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Mining
--------------------------------------------------------------------------
- Waste (tonnes) 1,372,953 3,301,619 4,674,572
--------------------------------------------------------------------------
- Ore (tonnes) 321,431 0 321,431
--------------------------------------------------------------------------
- Total material mined (tonnes) 1,694,384 3,301,619 4,996,003
--------------------------------------------------------------------------
- Copper grade (%) 3.57 N/A 3.57
--------------------------------------------------------------------------
- Gold grade (g/t)(1) 1.46 N/A 1.46
--------------------------------------------------------------------------
- Silver grade (g/t) 14.6 N/A 14.6
--------------------------------------------------------------------------
Milling
--------------------------------------------------------------------------
- Tonnes processed 152,368 206,263 358,631
--------------------------------------------------------------------------
- Copper grade (%) 3.61 3.26 3.34
--------------------------------------------------------------------------
- Gold grade (g/t)(2) 1.73 N/A N/A
--------------------------------------------------------------------------
- Silver grade (g/t) 14.8 12.6 13.5
--------------------------------------------------------------------------
Recoveries
--------------------------------------------------------------------------
- Copper (%) 94.5 93.3 93.3
--------------------------------------------------------------------------
- Gold (%)(1) 79.7 N/A N/A
--------------------------------------------------------------------------
- Silver (%) 88.5 86.1 86.7
--------------------------------------------------------------------------
Concentrate
--------------------------------------------------------------------------
- Dry tonnes produced 13,243 14,468 27,711
--------------------------------------------------------------------------
- Copper grade (%) 38.8 41.5 40.3
--------------------------------------------------------------------------
- Gold grade (g/t)(1) N/A N/A N/A
--------------------------------------------------------------------------
- Silver grade (g/t) 148.0 148.5 149.0
--------------------------------------------------------------------------
Operating Costs (C$)
--------------------------------------------------------------------------
- Cash cost per tonne milled $85.65 $67.86 $75.42
--------------------------------------------------------------------------
- Total operating cost/payable lb Cu $1.19 $1.09 $1.14
--------------------------------------------------------------------------
- Estimated by-product
credits/payable lb Cu(4) ($0.56) ($0.48) ($0.52)
--------------------------------------------------------------------------
- Treatment, refining, freight,
port, insurance $0.41 $0.34 $0.37
--------------------------------------------------------------------------
- Total cash cost/payable lb Cu $1.04 $0.96 $0.99
--------------------------------------------------------------------------
1 Gold is not assayed on site, resulting in a significant lag in receiving
this data.
2 Gold grades for ore mined are estimated from the reserve block model,
whereas copper and silver grades are based on blast hole assays.
3 Q1/08 numbers have been adjusted based on concentrate settlement
information available after April 17, 2008.
4 Q2/08 by-product credit numbers (gold and silver) are based on estimates
and will be adjusted after final settlement.
5 YTD totals may not match the totals from individual quarters due to
rounding and post-quarter adjustments.
Note that the first quarter 2008 production statistics, previously reported on
April 17, 2008, have been adjusted as a result of quarter-end reconciliations
completed subsequent to that announcement, while second quarter precious metal
by-product credits are estimates that will be adjusted after final settlement
with the smelters.
Concentrate Shipments
In April, Sherwood loaded approximately 9,849 dmt of concentrate grading
approximately 38.8% copper on the vessel MV Sanka Eternal and, in mid-July, an
additional approximately 9,800 dmt of concentrate grading approximately 40%
copper will be shipped on the vessel MV Blundance for sale to Asian smelters.
Another shipment, of approximately 9,800 dmt of concentrates is scheduled for
loading in August 2008. Of these quantities delivered, approximately 42% of the
April shipment and 58% of the July shipment will be delivered into Sherwood's
copper forward sales contracts, while the balance has been or will be sold at
spot between the loading date and final settlement date. In addition, these
concentrates contain significant gold and silver credits.
Production Outlook
Given that the mill has demonstrated sustained capacity in excess of the
2,400tpd design, Sherwood aims to average mill throughput in excess of 2,400
tonnes per day for the balance of 2008 in order to achieve its production
forecast of approximately 55 million pounds of payable copper and 24,000 oz of
payable gold in 2008.
As noted in the May 30, 2008 press release, as part of its optimization plan,
Sherwood has rescheduled mine production from the main pit at Minto in order to
accelerate the mining of high grade ore that was previously scheduled for
production in 2010 and moved it into late 2008 and all of 2009. This
rescheduling involves developing the pit northward from the current pit walls,
as opposed to the prior plan of developing the southern portion of the pit
first. This rescheduled mine plan will expose the largest amount of high grade
copper-gold ore (greater than 4% copper and 2g/t gold) in the main Minto pit
12-18 months earlier than previously planned, resulting in increased copper
production in 2009 while reducing the forecast production for 2010 below that
set out in the February 17, 2008 press release. Given current very high copper
and gold prices, this change in pit scheduling should result in several million
pounds of copper production being brought forward from 2010 into 2009, without
reducing Sherwood's forecast production of approximately 55 million pounds of
copper in 2008. Additional details will be provided in respect of the
rescheduled production outlook for 2009 and 2010 in the near future.
As a result of this rescheduling, all production is being drawn from stockpiles
mined in prior periods, with the highest grade stockpile material (greater than
4% copper) being processed first followed by medium (2%-4%) and then lower grade
(1-2%) before processing of high grade resumes as soon as fresh ore is exposed
in late third quarter 2008. This means that the lowest production is expected to
occur in the second and third quarters of 2008. Due to Sherwood's revenue
recognition policy, which requires title and risk be transferred to the
purchaser of the concentrates, there is an approximate three to four month lag
between production and financial results.
Capital Programs
In addition to the $1.2 million in additional exploration expenditures announced
on July 17, 2008, MintoEx has approved capital allocations for $3.1 million
which expenditures include a number of productivity and throughput expansion
related activities. The crusher is being modified and upgraded so that it should
not have the freezing issues that proved problematic in the extreme cold weather
experienced in the first quarter of 2008, and so that is easier to maintain,
reducing downtime and therefore increasing availability. In addition, a new
concentrate thickener is being added to handle increased production. Several
other improvements are being made, including improvements to the camp to enhance
living conditions for the employees. In parallel, construction of the powerline
and related facilities required to connect to the Yukon grid is well advanced,
should be completed before year-end and should result in a significant reduction
in costs once connected.
About Sherwood Copper
Sherwood Copper's objective is the 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 (now Kutcho Copper Corp.), owner
of the high-grade Kutcho copper-zinc-gold-silver deposit in northwestern British
Columbia. Sherwood intends 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 has 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.
Additional Information
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 resources, the realization of mineral reserve estimates,
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 resources; possible variations in ore reserves, grade
or recovery rates; accidents, labour disputes and other risks of the mining
industry; 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, 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 in the Company's management discussion and
analysis for the three month period ended March 31, 2008 as filed on Sedar for
further details.
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