Quadra Mining Ltd.

Quadra Mining Ltd.

December 01, 2008 08:00 ET

Quadra Mining Provides 2009 Guidance and Operations Update

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
Copper production 130 million lbs. 50 million lbs. 180 million lbs.
Gold production 125,000 ounces N/A 125,000 ounces

At the end of the third quarter, Quadra had a cash balance of $266 million and no debt. This cash balance is being impacted in the fourth quarter primarily by repayments to customers for provisional pricing adjustments due to the sharp decrease in the copper price, and also by capital expenditures at both mines. As a consequence, the Company estimates that at current copper prices its cash balance, including marketable securities, will be approximately $125 million at the end of 2008. At current copper prices and assuming the production forecast is met, this cash balance is not expected to decline in the first half of 2009 due to the copper put options in place.

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
Copper production 160 million lbs. 130 million lbs.
Gold production 130,000 ounces 125,000 ounces
Onsite Costs ($ millions)(2)(3) $ 245 $ 220
Offsite Costs ($ millions)(3) $ 65 $ 60
Total onsite and offsite costs ($ millions) $ 310 $ 280
Cash cost per pound of copper produced(1)(3) $ 1.22 $ 1.40
Capital expenditures and bonding ($ millions) $ 70 $ 40
(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).

The strong production results at Robinson in 2008 are a result of higher than planned head grades and recoveries. The higher recoveries are a result of operating practices developed to date and have been applied to the 2009 production guidance. The higher than anticipated head grades are due to the treatment of the supergene ore in the block model and are not expected to continue in the future. The balance of the ore in the existing Veteran pit is hypogene.

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.

This Press Release contains "forward-looking information" that is based on Quadra's expectations, estimates and projections as of the dates as of which those statements were made. This forward-looking information includes, among other things, statements with respect to Quadra's business strategy, plans, outlook, long-term growth in cash flow, earnings per share and shareholder value, projections, targets and expectations as to reserves, resources, results of exploration (including targets) and related expenses, property acquisitions, mine development, mine operations, mine production costs, drilling activity, sampling and other data, estimating grade levels, future recovery levels, future production levels, capital costs, costs savings, cash and total costs of production of copper, gold and other minerals, expenditures for environmental matters, projected life of Quadra's mines, reclamation and other post closure obligations and estimated future expenditures for those matters, completion dates for the various development stages of mines, availability of water for milling and mining, future copper, gold, molybdenum and other mineral prices (including the long-term estimated prices used in calculating Quadra's mineral reserves), currency exchange rates, debt reductions, timing of expected sales and final pricing of concentrate sales, the percentage of anticipated production covered by option contracts or agreements, anticipated outcome of litigation and personnel issues. Generally, this forward-looking information can be identified by the use of forward-looking terminology such as "outlook", "anticipate", "project", "target", "believe", "estimate", "expect", "intend", "should", "scheduled", "will", "plan" and similar expressions. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause Quadra's actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to:

- Uncertainties related to the accuracy of reserve and resource estimates and estimates of future production and future cash and total costs of production and the geotechnical or hydrogeological nature of ore deposits, diminishing quantities or grades of reserves and variable metallurgical performance of these reserves.

- Uncertainties related to expected production rates, timing of production and the cash and total costs of production and milling.

- Uncertainties relating to copper, gold, molybdenum and other mineral prices, which are beyond the Company's control.

- Provisional payments on concentrate material that the Company sells; uncertainty in the final metal prices used for the computation of final settlement exists such that final settlement could be less than the cost of production plus other liquidity requirements.

- Operating and technical difficulties in connection with mining development or production activities.

- Uncertainties and costs related to Quadra's exploration and development activities, such as those associated with determining whether copper, gold, molybdenum or other mineral reserves exist on a property.

- Uncertainties related to feasibility studies and other studies that provide, among other matters, estimates of expected or anticipated costs, expenditures and economic returns from a mining project.

- Uncertainties related to the completion, start-up and ongoing production at Carlota, including costs associated with the construction of the Pinto Creek Diversion.

- Uncertainties related to capital cost estimates for mine construction activities.

- Uncertainties relating to the availability of adequate water resources for mining and milling operations and uncertainties related to whether the Company will be able to pump water in the expected quantities from the properties on which it holds water rights.

- Uncertainties related to the ability to obtain and retain or renew necessary licences, permits, and other government authorizations, including the necessary permits to complete the dewatering of the Ruth pit, at operating and development projects.

- Uncertainties related to the ability to obtain necessary electricity, surface rights, water rights and title for operating and development projects and project delays due to third party opposition.

- Uncertainties in obtaining additional financing that may result in delay or postponement of development projects.

- Uncertainties related to the future development or implementation of new technologies, research and development and, in each case, related initiatives and the effect of those on our operating performance.

- Uncertainties related to judicial or regulatory proceedings, including whether the permits required for development and operating activities will be obtained and whether existing permits will be challenged.

- Changes in, and the effects of, the laws, regulations and government policies affecting Quadra's mining operations, particularly laws, regulations and policies relating to:

-- mine expansions, environmental protection and associated compliance costs arising from exploration, mine development, mine operations, reclamation and mine closures;

-- expected effective future tax rates or royalties in jurisdictions in which Quadra's operations are located;

-- the protection of the health and safety of mine workers; and

-- mineral rights ownership in countries where Quadra's mineral deposits are located.

- Changes in general economic conditions, the financial markets and in the demand and market price for copper, gold, molybdenum and other minerals, diesel fuel, petroleum, steel, concrete, sulphuric acid, explosives, truck tires and other operating supplies, refining and treatment costs, transportation charges, electricity and other forms of energy, mining equipment, and fluctuations in exchange rates, particularly with respect to the value of the U.S. dollar and Canadian dollar.

- The effects of derivative instruments to protect against fluctuations in copper, gold and other metal prices, exchange rate movements, fuel price changes, and the associated mark to market risks.

- Uncertainties related to the collectibility of amounts owed to the Company by contract counter-parties including, but not limited to, sales contracts and derivative contracts.

- Unusual or unexpected formations, seismic activity, cave-ins, flooding, pressures, pit wall failures and other similar incidents (and the risk of inadequate insurance or inability to obtain insurance to cover these risks).

- Changes in accounting policies and methods used to report Quadra's financial condition.

- Uncertainties associated with critical accounting assumptions and estimates.

- Environmental issues and liabilities associated with mining including processing and stock piling ore.

- Geopolitical uncertainty and political and economic instability in countries in which Quadra operates.

- Labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in markets in which Quadra operates mines, or extreme weather conditions, environmental hazards, industrial accidents or other events or occurrences, including third party interference that interrupt the production of minerals in Quadra's mines or interrupt the delivery of Quadra's product to customers.

- Uncertainties relating to development projects, including whether the Sierra Gorda project and the Malmbjerg molybdenum project can be brought into production.

- Quadra's reliance on a single producing property and on a start-up property.

- Uncertainties related to potential future breaches of covenants and undertakings contained in agreements, by Quadra or its suppliers, that could result in a significant loss to Quadra.

A discussion of these and other factors that may affect Quadra's actual results, performance, achievements or financial position is contained in the filings by Quadra with the Canadian provincial securities regulatory authorities, including Quadra's Annual Information Form. This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking information. Quadra disclaims any intent or obligations to update or revise publicly any forward-looking statements whether as a result of new information, estimates or options, future events or results or otherwise, unless required to do so by law.

Contact Information

  • Quadra Mining Ltd.
    Sophie Taylor
    Manager, Investor Relations
    (604) 689-8550
    Quadra Mining Ltd.
    Paul Blythe
    (705) 444-1316