SOURCE: Frontera Copper Corporation

August 07, 2008 08:30 ET

Frontera Copper Reports on Financial Results and Operational Performance for the Second Quarter of 2008

TORONTO and PHOENIX, AZ--(Marketwire - August 7, 2008) - Frontera Copper Corporation (TSX: FCC) (TSX: FCC.NT) (TSX: FCC.NT.A) today reported financial results and operational performance for the quarter ended June 30, 2008.

Second Quarter Summary

--  Net loss of $0.9 million ($0.01 per share basic and diluted)
--  Copper cathode production of 9.8 million pounds
--  Copper cathode sales of 9.9 million pounds
--  Average cash cost of $2.36 per pound
--  Closing cash balance of $19.4 million
--  Reached two million consecutive man hours without a lost time accident
    in July
    

Financial Results
(millions of dollars, except per share)

                                     2Q08    1Q08    4Q07    3Q07    2Q07
                                    ------  ------  ------  ------- -------
Revenues                              29.9    31.9    37.5     50.1    50.8
Net earnings/(loss)                   (0.9)   (1.2)    6.7     10.3     9.8
Net earnings/(loss) per share -
 basic                               (0.01)  (0.02)   0.11     0.16    0.15
Cash flows from operating
 activities                           (8.9)  (18.5)   (3.1)    23.6    36.3
Closing cash balances                 19.4    29.5    54.5     58.8    48.7
                                    ------  ------  ------  ------- -------

Alan Edwards, President and Chief Executive Officer, said, "As expected, the ore cutoff and leaching strategies implemented in the second quarter enabled us to maintain copper production while avoiding the purchase of high cost acid on the spot market, resulting in a 25% reduction in cash costs per pound compared to the first quarter of 2008. Looking ahead, we believe that our new mine plans should enable us to generate positive cash flows for the balance of 2008, despite expectations of continuing shortfalls in deliveries of acid from our primary supplier."

For the three months ended June 30, 2008, Frontera Copper reported a net loss of $0.9 million ($0.01 per share basic and diluted), compared to net income of $9.8 million ($0.15 per share basic and diluted) for the three months ended June 30, 2007. Revenues of $29.9 million in the second quarter of 2008 and $50.8 million in the second quarter of 2007 were reduced by $7.6 million and $3.1 million, respectively, due to the effect of the company's copper hedging program. This hedging program is scheduled to be completed during the first quarter of 2009.

Results from Operations

                                       2Q08   1Q08   4Q07   3Q07   2Q07
                                      ------ ------ ------ ------ ------
"LME Grade A" quality copper
 cathode (millions of lbs.):
   Produced                              9.8    9.9   12.3   15.1   15.9
   Sold                                  9.9    9.9   12.6   15.7   15.7

Cash costs per pound sold ($):
   (Excluding prepaid royalties)        2.36   3.14   1.39   1.13   1.10
   (Including prepaid royalties)        2.36   3.14   1.46   1.21   1.18

Revenue ($ millions)                    29.9   31.9   37.5   50.1   50.8

Average price per pound:
   Realized ($)                         3.02   3.21   2.97   3.20   3.23
   COMEX ($)                            3.80   3.53   3.26   3.48   3.46

For the three months ended June 30, 2008, the Piedras Verdes operations produced 9.8 million pounds and sold 9.9 million pounds of "LME Grade A" quality copper compared to production of 15.9 million pounds and sales of 15.7 million pounds of copper for the three months ended June 30, 2007. For the six months ended June 30, 2008, the Piedras Verdes operations produced 19.6 million pounds and sold 19.8 million pounds of copper compared to production of 26.3 million pounds and sales of 25.8 million pounds of copper for the six months ended June 30, 2007. Average cash costs during the second quarter of 2008 were $2.36 per pound compared to $3.14 during the first quarter of 2008 and $1.18 per pound during the second quarter of 2007. Cash costs during the first half of 2008 were $2.75 per pound compared to $1.28 per pound during the first half of 2007.

Capital expenditures for the three and six months ended June 30, 2008 were $1.2 million and $7.9 million, respectively. Capital expenditures for the three and six months ended June 30, 2008 include $0.6 million and $4.8 million for the Phase 3 leach pad expansion, and $0.6 and $3.1 million for the purchase of certain land and other projects at the Piedras Verdes operations, respectively.

Cash and cash equivalents decreased by $10.1 million during the three months ended June 30, 2008 primarily reflecting the payment of $9.0 million of Mexican tax installments in respect of the 2008 fiscal year. The Company expects to receive a $6 million refund in the second half of 2008 in respect of the 2007 tax year, and to receive a $9 million refund of its 2008 Mexican tax installments in the early part of 2009. The Company has been informed by Mexican tax authorities that it will not be required to pay any additional tax installments during 2008.

As more fully discussed in the Company's Update on Operations released on July 21, new operating plans have been developed that project production in the second half of 2008 will be above the first half of 2008 levels, with full production ultimately achieved in the third quarter of 2009. A key component of these mine plans involves accelerated movement into the eastern areas of the mine, where higher grade ores, with improved leaching characteristics in terms of acid consumption and percolation characteristics, are located. Copper cathode production totaled approximately 3.7 million pounds in July, 11% higher than the average production rate during the first half of 2008.

The Piedras Verdes operation is continuing to receive acid from its primary supplier at contracted prices, despite the ongoing labor strike at the supplier's major mining operation; however, it is receiving less than optimum levels of acid for its current operating situation. Previously announced ore cutoff and leaching strategies have enabled the operation to minimize acid consumption and avoid purchasing high cost sulfuric acid in the spot market during second quarter of 2008. As a result, the Company is currently generating positive cash flows and expects that based on its current operating plans and at current copper prices it should be generating positive cash flows for the remainder of 2008.

CONFERENCE CALL

Frontera Copper Corporation will hold a conference call at 11:00 a.m. EDT today to report on second quarter 2008 results. The conference call will be hosted by Alan Edwards, President and Chief Executive Officer. He will be joined by Dave Peat, Vice President and Chief Financial Officer; Tim Swendseid, Vice President of Engineering and Rod Prokop, Vice President, Investor Relations.

Those wishing to participate should dial 213-785-2437 or toll free 866-558-6338. A replay of the call will also be available through Thursday, August 21, by dialing 719-457-0820 or toll free 888-203-1112 and entering passcode 6741151.

The Company's June 30, 2008 Financial Statements and Management's Discussion and Analysis have been filed on SEDAR and are available on the Company's website.

ABOUT FRONTERA COPPER CORPORATION

Frontera Copper is a Canadian mining, development and exploration company whose principal activity is the production of copper cathode from the Piedras Verdes run-of-mine heap-leach copper operation in Sonora, Mexico. Based on the January 1, 2008 ore reserves and the estimated recoverable copper contained on the leach pads at December 31, 2007, approximately 1 billion pounds of copper is projected to be produced over the remaining life of the operation.

Information in this news release that is not current or historical factual information may constitute forward-looking information or statements within the meaning of applicable securities laws. Implicit in this information, particularly in respect of statements as to future operating results and economic performance of the Company, and resources and reserves at the Piedras Verdes operations, are assumptions regarding projected revenue and expense, copper prices and mining costs. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including risks relating to general economic conditions and mining operations, and could differ materially from what is currently expected. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Frontera Copper Corporation
Consolidated Balance Sheet
US$ (in thousands)                                     (unaudited)
                                                  June 30,    December 31,
                                                    2008          2007
                                                ------------  ------------
Assets
Current
   Cash and cash equivalents                          19,417        54,479
   Accounts receivable                                   836           705
   Income taxes recoverable                           14,562             -
   Commodity taxes recoverable                         3,418         4,181
   Inventory                                          21,378        24,918
   Prepaid expenses and deposits                       2,078         6,440
   Future tax asset                                    5,609         2,883
   Deferred loss on derivative instruments             1,629             -
                                                ------------  ------------
                                                      68,927        93,606

Restricted cash                                        1,825         1,825
Long term inventory                                   40,799        20,912
Long term deposits                                       373         1,854
Mineral properties and property, plant and
 equipment                                           138,465       136,036
                                                ------------  ------------

                                                     250,389       254,233
                                                ============  ============
Liabilities
Current
   Accounts payable and accrued liabilities           22,874        17,547
   Deferred revenue                                        -           326
   Income taxes payable                                    -        14,501
   Derivative instruments                             20,706         8,143
   Current portion of notes payable                    7,016         6,915
                                                ------------  ------------
                                                      50,596        47,432

Accounts payable and accrued liabilities               2,197         3,197
Notes payable                                         72,467        73,446
Asset retirement obligation                            5,451         4,907
Derivative instruments                                     -         3,440
Future income taxes                                   14,163         7,849
                                                ------------  ------------
                                                     144,874       140,271
                                                ------------  ------------
Shareholders' Equity

Capital stock                                        103,276       102,807
Contributed surplus                                      988         1,174
Accumulated other comprehensive loss                 (13,990)       (7,388)
Retained earnings                                     15,241        17,369
                                                ------------  ------------
                                                     105,515       113,962
                                                ------------  ------------

                                                     250,389       254,233
                                                ============  ============



Frontera Copper Corporation
Consolidated Statements of Operations
US$ (in thousands except per
 share amounts)                     (unaudited)           (unaudited)
                                    2nd Quarter           Year-to-Date
                                ---------  ---------  ---------  ---------
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------


Revenue                            29,897     50,818     61,841     79,768

Cost of sales and expenses
   Cost of sales                   23,311     18,567     54,557     32,999
   Depreciation, depletion
    and amortization                1,806      2,880      3,997      4,803
   Exploration                        149        143        175        246
   Administration                      83      1,884      1,592      3,228
                                ---------  ---------  ---------  ---------
                                   25,349     23,474     60,321     41,276
                                ---------  ---------  ---------  ---------

Other (income) and expenses
   Interest income                   (164)      (471)      (580)      (725)
   Long-term interest and
    accretion                       2,995      3,567      5,945      6,395
   Foreign exchange (gain) loss     1,080      5,631     (1,921)     6,277
   Unrealized (gain) loss on
    derivatives contracts             627      1,548        (46)     1,556
                                ---------  ---------  ---------  ---------
                                    4,538     10,275      3,398     13,503
                                ---------  ---------  ---------  ---------

Income (loss) before income
 taxes                                 10     17,069     (1,878)    24,989
Income taxes                         (951)    (7,235)      (250)   (10,225)
                                ---------  ---------  ---------  ---------

Net income (loss) for the
 period                              (941)     9,834     (2,128)    14,764
                                =========  =========  =========  =========


Income (loss) per share - Basic     (0.01)      0.15      (0.03)      0.23
                      - Diluted     (0.01)      0.15      (0.03)      0.23

Weighted average common shares
    outstanding - Basic            64,518     63,929     64,515     63,740
                - Diluted          64,899     64,731     64,934     64,493



Frontera Copper Corporation
Consolidated Statements of Retained Earnings (Deficit)
US$ (in thousands)

                                        (unaudited)         (unaudited)
                                        2nd Quarter        Year-to-Date
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------


Retained earnings (deficit),
 beginning of period                  16,182    (9,544)   17,369   (14,474)

Net income (loss) for the period        (941)    9,834    (2,128)   14,764
                                    --------  --------  --------  --------

Retained earnings, end of period      15,241       290    15,241       290
                                    ========  ========  ========  ========



Consolidated Statements of Comprehensive Income (Loss)
US$ (in thousands)

                                        (unaudited)        (unaudited)
                                        2nd Quarter        Year-to-Date
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------


Net income (loss) for the period        (941)    9,834    (2,128)   14,764

Reclassification of loss on cash
 flow hedges to revenues               7,617     3,074    13,449     3,074

Change in loss on derivatives
 designated as cash flow hedges       (1,868)  (12,729)  (22,619)  (25,557)
                                    --------  --------  --------  --------

Unrealized gain (loss) on
 derivatives designated as cash
 flow hedges                           5,749    (9,655)   (9,170)  (22,483)

Income tax on derivatives
 designated as cash flow hedges       (1,610)    3,017     2,568     6,295

Tax valuation allowance                    -    (3,017)        -    (6,295)

                                    --------  --------  --------  --------
Other comprehensive income (loss)
 for the period                        4,139    (9,655)   (6,602)  (22,483)
                                    --------  --------  --------  --------

Comprehensive income (loss) for the
 period                                3,198       179    (8,730)   (7,719)
                                    ========  ========  ========  ========



Frontera Copper Corporation
Consolidated Statements of Cash Flows
US$ (in thousands)                      (unaudited)         (unaudited)
                                        2nd Quarter        Year-to-Date
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------

Cash flows from operating
 activities
Net income (loss) for the period        (941)    9,834    (2,128)   14,764
  Items not involving cash:
    Future income taxes                6,735     4,616     5,866     7,606
    Unrealized foreign exchange          914     5,755    (2,159)    6,201
    Depreciation, depletion and
     amortization                      2,778     4,140     5,666     6,938
    Accretion                            924       863     1,752     1,649
    Unrealized (gain) loss on
     derivative contracts                627     1,548       (46)    1,556
    Long term inventory               (5,980)     (258)   (9,035)     (439)
    Long term deposits                 1,488         -     1,481         -
    Write-off of deferred finance
     costs                                 -       522         -       522
                                    --------  --------  --------  --------
                                       6,545    27,020     1,397    38,797

Changes in non-cash working capital
 balances                            (15,444)    9,457   (28,810)   (3,605)
                                    --------  --------  --------  --------
Cash flows from operating
 activities                           (8,899)   36,477   (27,413)   35,192
                                    --------  --------  --------  --------

Cash flows from investing
 activities
  Property, plant and equipment       (1,157)  (13,703)   (7,917)  (23,005)
  Decrease in restricted cash              -         -         -     1,233
                                    --------  --------  --------  --------
Cash flows used in investing
 activities                           (1,157)  (13,703)   (7,917)  (21,772)
                                    --------  --------  --------  --------

Cash flows from financing
 activities
  Exercise of options                      -       504       283       601
                                    --------  --------  --------  --------
Cash flows from financing
 activities                                -       504       283       601
                                    --------  --------  --------  --------

Effect of exchange rate changes on
 cash                                     (2)    1,002       (15)    1,159
                                    --------  --------  --------  --------
Increase (decrease) in cash and
 cash equivalents during the period  (10,058)   24,280   (35,062)   15,180

Cash and cash equivalents,
 beginning of period                  29,475    24,447    54,479    33,547
                                    --------  --------  --------  --------

Cash and cash equivalents, end of
 period                               19,417    48,727    19,417    48,727
                                    ========  ========  ========  ========

Cash and cash equivalents consist
 of:
  Cash                                 5,481     2,311     5,481     2,311
  Cash equivalents                    13,936    46,416    13,936    46,416
                                    --------  --------  --------  --------

                                      19,417    48,727    19,417    48,727
                                    ========  ========  ========  ========

Supplemental information:
  Interest paid                        3,170     3,233     4,402     4,456
  Income taxes paid                    9,101         -    23,447         -

Contact Information

  • For further information, please see Frontera Copper's website at
    www.fronteracopper.com or contact:

    Rodney Prokop
    Vice President, Investor Relations
    (602) 424-5483
    Email Contact

    Alan Edwards
    President and Chief Executive Officer
    (602) 424-5488