Centenario Copper Corporation
TSX : CCT

Centenario Copper Corporation

November 14, 2008 08:00 ET

Centenario Reports Third Quarter 2008 Results

TORONTO, ONTARIO--(Marketwire - Nov. 14, 2008) - Centenario Copper Corporation ("Centenario" or the "Company") (TSX:CCT) reports its financial results for the three and nine month period ending September 30, 2008. Set out herein are the highlights and an excerpt from the MD&A for the three and nine month period ended September 30, 2008. The interim Financial Statements and Management Discussion and Analysis of the Company are available on the Company's web site at www.centenariocopper.com and on SEDAR at www.sedar.com. All amounts are expressed in US dollars unless otherwise stated.

Highlights:

- Franke SX-EW copper project nearing start-up - first cathode projected for early February, 2009

-- Construction stage substantially complete and pre-commission activities underway. One month delay in start-up expected, due to late interconnection with Chilean power grid.

-- Projected Franke Project capital cost now $234 million, up 11% from $210 million previously. Increase due to cost inflation, change orders, scope changes, in part to accommodate the anticipated integration of nearby China deposit into the mine plan.

- Franke Project funding status and partial re-purchase of copper hedge book

-- Projected Franke Project funding requirements, up to final payments in April 2009, exceed currently committed funding sources by $26 million. Funding shortfall driven by capital cost increase and severe fall in copper price, which has significantly reduced expected initial operating cash flow. Starting in May 2009, positive operating cash flow expected, supported by copper forward sales program.

-- Company's copper hedge book has mark-to-market value of $77 million, as of November 13, 2008. Lender consent received for partial hedge repurchase to generate $26 million in proceeds, subject to final documentation, and maximum close-out price of $1.90/lb. Release of proceeds to Company subject to satisfactory completion of Lender due diligence and Company's ability to continue to meet the terms of the Franke Credit Agreement, or such amendments as the Lenders may require.

- Fast track evaluation of copper targets continued at near-by Pelusa Property

-- Updated mineral resource released for China deposit - Measured & Indicated leachable mineral resources increased to 29.0 million tonnes at 0.55% CuT.

-- Evaluation substantially completed for combining China oxide starter pit into the existing Franke mine plan, which would reduce near-term acid requirements. NI 43-101 compliant Technical Report currently in progress and expected. Metallurgical test work to commence shortly on China mixed and secondary sulphide resources, for potential inclusion in future revision to mine plan.

-- Diamond drill program undertaken at China Sur target, to test underlying primary sulphide zone. Assays anticipated for release in December, together with results of in-fill RC drill program of the leachable zone.

- Pan de Azucar second drilling exploration program completed

-- Final assays expected in November, followed by revised geological model and resource evaluation.

-- Satisfactory results from recently completed flow rate sustainability tests on two water wells.

- Reassessment of discretionary spending underway, in light of current industry environment: Management reviewing all future discretionary expenditures for potential deferral, pending improved conditions and/or availability of free cash flow from operations.

- Earnings: Q3 2008 earnings of $44.4 million ($0.87 earnings per share basic and $0.86 fully diluted), or a loss of $9.2 million ($0.18 loss per share) excluding derivative income, foreign exchange, stock based compensation, and amortization.

CENTENARIO COPPER CORPORATION

(Expressed in thousands of US dollars, unless otherwise stated)

Extract from the Company's Management Discussion and Analysis:

REVIEW OF PROJECTS

Franke

The construction stage at the Franke Project is now substantially complete. Final electrical, piping and instrumentation activities are underway and the project pre-commissioning stage has begun. Mining activities have commenced and ore is being stockpiled in preparation for the start-up of the process plant. The water pipeline is undergoing final inspection and water is available on site. The local plant area 23kv power grid is operational, drawing from diesel generator sets on site, which provides sufficient power for most pre-commissioning activities. Due to delays in finalizing and documenting contractual arrangements with the owner of the local electrical sub-station, the Company now anticipates that the completion of the interconnection to the Chilean power grid will be delayed until mid-December, at which time ore processing can commence. Based on the achievement of this interconnection schedule, the Company currently projects first cathode production will occur in early February, 2009.

In August 2008, Centenario indicated that the capital cost for completing the Franke Project was $210,000 including owner costs and pre-startup plant and work-in-progress working capital. Based on most recent information, the forecasted cost to completion of the Franke Project is now estimated at $234,000. The increase projected cost is due to changes in each of the plant capital cost, owner costs and working capital areas. Capital cost changes relate principally to overtime labour costs, other change orders and to scope changes for the Franke plant, in part to accommodate the anticipated integration of a portion of the nearby China deposit (a location at Pelusa) into the mine plan. It also includes allowances for certain capital items where the final cost may still be at risk, and a global contingency. Owner Cost changes relate principally to an accelerated ramp-up in operational labour force, prior to the completion of the plant. Working Capital changes relate principally to the inclusion of leach-pad overliner material that will continue to be placed on the leach pad into the first quarter of 2009, but is part of the overall plant cost, as well as the posting of a cash guarantee on a key operating contract, which was previously anticipated to be settled by way of a letter of credit. Remaining capital payments are projected to be paid over the period up to April 2009.

As discussed in more detail in the "Financing" and "Liquidity Outlook" Sections below, the Company currently projects (in the absence of the additional funding discussed below) that the Franke project would face a net funding shortfall of about $26,000, through to the end of April 2009. The Company expects to begin generating positive cash flow at Franke in May 2009, when it will start to benefit from its Copper Hedge (see below), which will allow the Company to fund the Franke operations. Company management is assessing all areas of capital expenditures and operating costs, in an ongoing effort to reduce the funding requirements of the Franke Project, both prior to, and after, the point at which it achieves positive operating cash flow.

The Company has in place a copper hedge which consists of the forward sale of 25.5 million pounds at an average price of $2.80/lb, for delivery between May and December, 2009 and 49.0 million pounds at an average price of $2.75/lb over the course of 2010, for a total of 74.5 million pounds of copper at an average price of $2.77/lb. Due to the recent severe decline in the copper price, this hedge position has become a significant asset, with a mark-to-market value of approximately $77,000 (before close-out costs), as of November 13, 2008.

The Company has sought and received the consent of the lenders under the Franke Credit Facility (the "Lenders"), to repurchase a portion of the 2010 copper hedge book to yield $26,000 in net proceeds, subject to documentation, which is anticipated to be finalized shortly, and achieving a maximum average hedge closeout price of approximately $1.90/lb, (the "Copper Hedge Repurchase"). For reference the July 2010 LME forward price closed at $1.75/lb on November 13, 2008. Subject to market conditions, the Company expects to complete the Copper Hedge Repurchase in the near future.

The proceeds from the Copper Hedge Repurchase (the "Hedge Proceeds") will be placed into an escrow account. The release of the Hedge Proceeds to the Company will be subject to the completion, to the satisfaction of the Lenders, of due diligence activities underway by the Lenders' Technical Agent in relation to an updated Franke Development Plan, which includes the revised capital cost and development schedule and a revised mine plan, which incorporates a China starter pit of oxide material into the previously standalone Franke mine plan. The revised mine plan is progressing, and it will be incorporated into an NI 43-101 compliant Technical Report currently underway. The release of the Hedge Proceeds and drawing of the remaining $5,000 available under the Franke Credit Facility will also be subject to the Company's ability to continue to meet the terms of the existing Franke Credit Facility, or such amendments as the Lenders shall require, which may include, but may not be limited to, revised pricing, covenant terms and loan amortization schedule and additional copper hedging.

The Company currently anticipates that Lenders' Technical Agent will complete its' due diligence review in the next several weeks and that it will be able to finalize a satisfactory agreement with its Lenders shortly thereafter in relation to any modifications that may be required to the Franke Credit Agreement in order to satisfy the conditions of release of the Hedge Proceeds to the Company. However, there can be no assurance that the Company will be able to reach definitive agreement with the Lenders, or will be able to meet the Lenders' conditions for the Copper Hedge Repurchase, or for the release of the Hedge Proceeds to the Company.

Pelusa

On the nearby Pelusa Property, a fast track evaluation of various copper targets continues. In early April, the Company completed Phase 4 drilling of the Leachable Copper Target area, which included infill drilling (to roughly 50 metre centers) at the China, China Sur, India and SW Japan targets. This was followed by a diamond drill program at China Sur, aimed at better defining the mineralized structure and following up on potentially economically interesting primary sulphide potential at depth below the leachable zone. As of September 30, 2008, 99,234 metres of drilling have been completed at the Pelusa Property 85,135 of reverse circulation drilling ("RC") and 14,099 metres of diamond drilling.

At China, an updated mineral resource calculation was released in August (see News Release 08-15, dated August 20, 2008) together with details of metallurgical test work conducted to date. At a cut-off grade of 0.3% total copper, the Measured & Indicated leachable mineral resource increased to 29.0 million tonnes at 0.55% total copper. A further 0.8 million tonnes at 0.48% total copper in included in the Inferred category. This compares the May 2007 Indicated Leachable mineral resource of 9.7 million tonnes at 0.58% CuT and a further 11.6 million tonnes at 0.55% CuT in the Inferred category. The earlier mineral resource also included a classification of primary sulphides, most of which has now been reclassified as secondary sulphides and is included in the updated leachable mineral resource estimate.

Preliminary metallurgical test work has demonstrated that China material is amenable to treatment by a typical leaching, solvent extraction and electro-winning process. Preliminary test work has indicated an average overall recovery estimate for the China leachable mineral resource of approximately 80%, with the oxide zone showing the highest recovery (85%) and the secondary sulphide zone the lowest (73%). The infill drilling has also confirmed the overall carbonate profile of the China resources, a key determinant in projecting acid consumption in the copper extraction process. The average carbonate level in the updated Measured & Indicated leachable mineral resource is 2.0%, as compared to the 4.1% average for the nearby Franke deposit. Metallurgical test work has resulted in a preliminary average acid consumption estimate for the China leachable mineral resource of around 47kg/t (as compared to 83kg/t for Franke reserves), with oxides generally exhibiting the lowest acid consumption (37 kg/t average) and the secondary sulphides the highest (57 kg/t). The metallurgical parameters for the oxide zone were based on the results of 2 column test programs, whereas the parameters for the mixed and sulphide zones were based on more preliminary bottle roll test work.

As a result of the encouraging increase in overall resource and metallurgical test work at China, Centenario announced in August that it was considering integrating a starter pit of China oxide material into the existing Franke mine plan. This evaluation is now substantially complete and will be released following the completion of a 43-101 compliant Technical Report currently in progress. The China deposit is located approximately 5.5km from the Franke Plant and ore would be trucked there for processing. Column test work of the China mixed and secondary sulphide material will start shortly and, assuming the current metallurgical estimates are validated, a further revision to the mine plan will be undertaken in 2009 to include these portions of China also.

The Company has, to date, received partial assay results from the recent China Sur diamond drill program (25 holes for 7,012 metres). The Company expects to be able to release the full assay results from this program in December, together with the results of the second phase of RC drilling conducted earlier this year (108 holes for 18,104 metres). Results to date indicate that mineralization at China Sur hosts both near surface leachable copper material as well as a strong underlying zone of primary sulphide mineralization that remains open at depth.

Geological and resource modeling continues at each of the China Sur, India and Japan areas of mineralization and will be released in due course. Following completion of resource evaluation activities, the Company expects to initiate a comprehensive metallurgical test program, directed at assessing overall leachable copper recoveries and acid consumption parameters across a variety of ore types from each deposit (including oxides, mixed and secondary sulphide material) and crush sizes (including run-of-mine material). This information will assist in determining optimum process flow sheets for use in mine planning and capital and operating cost parameters for pre-feasibility level studies. The timing and pace of these activities will be dependent on the availability of free cash flow from operations and/or additional financing in the capital markets.

Pan de Azucar

Following the initial exploration discovery in the Carrizalillo Hill area in late 2007, the Company commenced an aggressive next phase of exploration in April 2008. To date, a total of 30,366 metres of RC drilling has been completed on various priority targets, including follow-up drilling (depth and strike extension) at the Carrizalillo Hill East and West discovery areas, initial drilling at the Fabiola target area and various geochemical target areas. Final assays from the RC program are expected to be received in November 2008 and will be used to develop a revised geological model and resource. Future exploration activities will be dependent on the availability of free cash flow from operations and/or additional financing in the capital markets.

The current program at Pan de Azucar also includes a flow rate sustainability test on 2 water wells located on the Pan de Azucar property. These wells were originally permitted for a combined flow rate of 55 litres per second, but recent water permitting amendments have required Centenario to demonstrate that these wells can sustain this water flow rate over a test period in order to be able to exploit them. These tests have now been completed and the results have been highly satisfactory.

REVIEW OF FINANCIAL RESULTS

Results of Operations - Three months ended September 30, 2008 compared with 2007

The Company had net earnings of $44,440 ($0.87 earnings per share basic $0.86 fully diluted) for the three months ended September 30, 2008 as compared to a net loss of $22,874 ($0.63 loss per share) in the same period in 2007 or a net increase of $67,314. The net earnings for the period reflects a non-cash mark-to-market gain of $52,677 with respect to a change in value of derivative instruments as compared to a $19,632 non-cash mark-to-market loss in the third quarter of 2007. The $52,677 derivative gain amount is comprised primarily of a $50,350 non-cash mark-to-market gain on the copper forward delivery contracts held by the Company and a non-cash $2,574 mark-to-market gain on the embedded derivative in the long-term water supply contract. Note 11(h) to the interim financial statements for the nine-month period ended September 30, 2008 details the components of the various derivative financial instruments held by the Company at September 30, 2008 and December 31, 2007. The value of the copper forward sale contract and the embedded derivative in the long-term water supply contract changed in direct correlation to the change in the price of copper during the period. The key factor determining the amount of such charge or credit is the price of copper, both spot price and the forward curve.

Exploration Expense

Exploration expenses were $8,589 in the third quarter of 2008 as compared to $1,611 in the same period in 2007, an increase of $6,978. Approximately $3,269 of the exploration expenses during the second quarter of 2008 were incurred at Pelusa, $4,405 at Pan de Azucar and $915 on other properties. Effective July 1, 2007, all development costs related to the Franke property are being capitalized pursuant to the Company's accounting policy. Development costs at the other properties were expensed.

General and Administrative Expense

General and administrative expenses decreased by $1,421, from $2,504 to $1,083, during the third quarter of 2007 as compared to 2008. This decrease is primarily due to the higher credit facility financing fees incurred during 2007.
Although headcount increased from the previous year, salaries and benefits are below last year. This is due to the Company's accounting policy, under which a significant portion of Chile administration expenses are being allocated to Construction In Progress and Pelusa exploration expenses.

Stock-based compensation expense during the three month period ended September 30, 2008 was $419 as compared to $556 in 2007, a decrease of $137. The stock based compensation in each period is comprised of the expense associated with stock options granted during the period and the value ascribed to shares issued as compensation to various officers, directors, employees and consultants. It is likely that similar charges will be recorded in future periods, however the amount of such charges is dependent on the number of stock options granted or shares issued as compensation, and the assumptions used to value them, including share price and volatility.

Interest Income

Interest income was $47 during the quarter as compared with $623 in 2007, a decrease of $576. The decrease is primarily due to lower balances invested as amounts are transferred to Chile to build the Franke mine. Under the Franke credit agreement the amounts in Chile are retained in secured accounts until spent and may not be invested.

Foreign Exchange

The Company recorded a $1,388 foreign exchange gain during the current period as compared to a $250 gain in 2007. The gain is primarily due to monetary items in Chile being held in Chilean pesos.

Change in Value of Derivative Instruments

Derivative income was $52,677 in the third quarter of 2008 as compared with a $19,632 loss in the comparable quarter in 2007, an increase of $72,309. As discussed above, the third quarter gain is primarily comprised of the $50,350 non-cash mark-to-market gain on the copper forward delivery contracts held by the Company and a non-cash $2,574 mark-to-market gain on the embedded derivative in the long-term water supply contract. Note 11(h) to the interim financial statements for the nine-month period ended September 30, 2008 details the components of the various derivative financial instruments held by the Company at September 30, 2008 and December 31, 2007.

Results of Operations - Nine months ended September 30, 2008 compared with 2007

The Company had net earnings of $11,345 ($0.24 earnings per share basic $0.23 fully diluted) in the nine months ended September 30, 2008 as compared to a net loss of $35,514 ($1.28 loss per share) in the same period in 2007 or a net increase of $46,859. The net earnings for the period reflects a non-cash mark-to-market gain of $30,468 with respect to a change in value of derivative instruments as compared to a $22,782 non-cash mark-to-market loss in 2007. The $30,468 derivative gain amount is comprised primarily of the non-cash $23,473 mark-to-market gain on the long-term acid supply contract and $4,581 non-cash mark-to-market gain on the copper forward delivery contracts held by the Company. Note 11(h) to the interim financial statements for the nine-month period ended September 30, 2008 details the components of the various derivative financial instruments held by the Company at September 30, 2008 and December 31, 2007.

Exploration Expense

Exploration expenses were $17,086 for the nine months ended September 30, 2008 as compared to $8,044 during the same period in 2007, an increase of $9,042. Of the total incurred, $9,266 were incurred at the Pelusa property, $6,507 at Pan de Azucar and $1,313 at other properties. During 2007, of the total exploration expense of $8,044, $3,798 was incurred on the Franke property, whereas no expense was recorded to the Franke property in 2008. Effective July 1, 2007, all development costs related to the Franke property are being capitalized pursuant to the Company's accounting policy.

General and Administrative Expense

General and administrative expenses were $5,315 during the nine months ended September 30, 2008 as compared with $5,587 during the same period in 2007, a decrease of $272. This decrease is due primarily to lower stock-based compensation expenses ($634), partially offset by higher public company costs, travel, and office administration costs. Although headcount increased significantly from the previous year, salaries and benefits are only $90 above last year. This small increase is due to the Company's accounting policy, under which a significant portion of Chile administration expenses are allocated to Construction In Progress and Pelusa exploration expenses

Stock-based compensation expense during the nine month period ended September 30, 2008 was $1,761 as compared to $2,395 in 2007, a decrease of $634. The stock based compensation in each period is comprised of the expense associated with stock options granted during the period and the value ascribed to shares issued as compensation to various officers, directors, employees and consultants. It is likely that similar charges will be recorded in future periods, however the amount of such charges is dependent on the number of stock options granted or shares issued as compensation, and the assumptions used to value them, including share price and volatility.

Interest Income

Interest income was $404 during the nine months ended September 30, 2008 as compared with $732 in 2007, a decrease of $328. The decrease is primarily due to lower balances invested as funds are transferred to Chile to build the Franke mine. Under the Franke credit agreement the amounts in Chile are retained in secured accounts until spent and may not be invested.

Foreign Exchange

The Company recorded a $2,874 foreign exchange gain during the current period, as compared to a $167 gain in 2007. The gain is due to the revaluation gain on monetary items in Chile held in Chilean pesos, partially offset by the unrealized mark to market loss of $1,648 on the ineffective hedge portion of the foreign exchange forward contracts.

Change in Value of Derivative Instruments

The derivative gain was $30,468 for the nine month period ended September 30, 2008 as compared with a $22,782 loss in the comparable period in 2007, for a net positive increase of $53,250. As discussed above, the most significant component of the 2008 gain was the $23,473 non-cash mark-to-market gain on the long-term acid supply contract and the $4,581 non-cash mark-to-market gain on the copper forward delivery contracts held by the Company. Note 11(h) to the accompanying interim financial statements for the nine-month period ended September 30, 2008 details the components of the various derivative financial instruments held by the Company at September 30, 2008 and December 31, 2007.

Capital Expenditures

During the three and nine month period ended September 30, 2008 capital expenditures were $46,703 and $112,475, respectively, virtually all related to the construction of the Franke mine. Effective July 1, 2007, the Company began capitalizing development expenditures related to the Franke Property following a decision by the Company's board of directors to place the property into commercial production. Significant capital expenditures will continue to be recorded by the Company throughout 2008.

Financing Activities

The Company's financing activities during the nine month period ended September 30, 2008 consisted primarily of completing an equity financing in March 2008, and drawdowns under the Franke Credit Facility in March 2008 and September 2008.

On August 21, 2007 the Company entered into the Franke Credit Agreement for up to $110,000 to meet funding requirements to develop the Franke Property. As at September 30, 2008, the Company has drawn $105,262 under the Franke Credit Facility (March 31, 2008: $54,262 and September 4, 2008: $51,000).

On March 27, 2008, the Company completed an offering of 10,000,000 special warrants at CAD $5.80 per special warrant for gross proceeds of CAD $58,000 ($57,159). In connection with the offering the Company paid an agents' commission of CAD $2,900 ($2,858) and offering expenses of $406. The net proceeds of the offering were $53,895. On May 6, 2008 the Company received a final receipt for a short form prospectus to qualify the distribution of 10,000,000 common shares upon conversion of the 10,000,000 special warrants which were issued by the Company on March 27, 2008. The special warrants were converted to freely trading common shares effective May 9, 2008.

Approximately 70% of the projected developments costs of the Franke Project are denominated in Chilean pesos with the balance in US dollars. A significant portion of the funding for the Franke Project has been provided by the $110,000 project debt facility, creating a mismatch between the currency of funding and the currency of expenditures. In March and April 2008, the Company entered into a series of forward contracts to sell USD and purchase Chilean pesos intended to protect the Franke property development capital cost from further fluctuations in the US dollar/Chilean peso exchange rate.

On October 17, 2008 the Company converted $27,000 into Chilean pesos at an average exchange rate of 613 Chilean pesos to the US dollar.

As discussed in more detail below, the forecasted cost for completing the Franke project is now estimated to be approximately $234,000 including Owner costs and pre-startup plant and work-in-progress working capital.

LIQUIDITY AND CAPITAL RESOURCES

For the three and nine months ended September 30, 2008, cash flows used in operations (before working capital items) were $7,773 and $15,429, respectively, compared with $2,679 and $10,129, respectively during the three and nine month period ended September 30, 2007. The increase in operational cash requirements for the three and nine month period ended September 30, 2008 compared to 2007 resulted primarily from higher exploration expenses partially offset by realized foreign exchange gains. Exploration expenses are expected to decrease during the remainder of 2008 as compared to 2007 levels, as the Company focuses on completion of the Franke mine. General and administrative expenses will also increase during the remainder of 2008 due to increased staffing levels to support the ramp up to Franke's operating status; however, a significant portion of these expenses are being capitalized to the Franke project.

During the three and nine month period ended September 30, 2008 capital expenditures related to the Franke mine amounted to $46,447 and $111,757, respectively, as compared with nil during the same periods in 2007.

Cash and cash equivalents were $59,985 at September 30, 2008 as compared to $54,763 as at June 30, 2008 and $31,693 at December 31, 2007. Certain amounts have been segregated as restricted cash for use in the Franke development plan to cover potential overrun expenditures pursuant to the terms of the Franke Credit Facility ($10,000), and with respect to collateral posted for foreign exchange contracts ($8,019) in place to convert US dollars to Chilean peso.

As the Company has no producing mines at this time, its capital funding requirements have been covered through offerings in the equity and debt markets as detailed elsewhere in this report and in the interim financial statements for the three and nine months ending September 30, 2008. The Company has no current source of operating revenues or cash flows. Currently, debt and equity markets are extremely constrained. In the event the Company cannot finalize agreements with its Lenders to obtain additional sources of funding to cover the Company's funding shortfall, it would be required to seek additional funding from the capital markets. In such an event, there can be no assurance that such funding would be available on terms acceptable to the Company.

LIQUIDITY OUTLOOK

The Company's principal funding requirements over the next year consist of completing the Franke project, which is currently scheduled to commence production of first cathode early in February 2009.

In August 2008, Centenario indicated that the capital cost for completing the Franke Project was $210,000 including owner costs and pre-startup plant and work-in-progress working capital. Based on most recent information, the forecasted cost to completion of the Franke Project is now estimated at $234,000. The increase in projected cost is due to changes in each of the plant capital cost, owner costs and working capital areas. Capital cost changes relate principally to overtime labour costs, other change orders and to scope changes for the Franke plant, in part to accommodate the anticipated integration of a portion of the nearby China deposit (a location at Pelusa) into the mine plan. It also includes allowances for certain capital items where the final cost may still be at risk, and a global contingency. Owner Cost changes relate principally to an accelerated ramp-up in the operational labour force, prior to the completion of the plant. Working Capital changes relate principally to the inclusion of leach-pad overliner material that will continue to be placed on the leach pad into the first quarter of 2009, but is part of the overall plant cost, as well as the posting of a cash guarantee on a key operating contract, which was previously anticipated to be settled by way of a letter of credit. Remaining capital payments are projected to be paid over the period up to April 2009.

As of the end of September, the projected net cost of completing the project is now estimated at $96,000, including payables of $25,000. The funding sources available to meet these payments total $75,000, consisting of $70,000 segregated in the project bank accounts, including restricted cash (which includes the cost overrun facility and collateral for currency hedges) and a remaining $5,000 available under the Franke Credit Facility. Based on the latest projections, the projected cost of completing the Franke project now exceeds the currently available funding sources by $22,000. In addition, the Company projects that the Franke project will incur an additional $4,000 of project related cash outflows in the period up to April 2009, including property payments, interest, operating working capital and overheads, which results in a total outstanding Franke project funding requirement of $26,000.

The Company had previously projected that a portion of the Franke project funding requirement would be met by positive operating cash flow between start-up and the final payment of capital cost payables in April 2009. In previous guidance, the Company had assumed an average realized copper price of $2.75/lb during the start-up period, which resulted in a projected EBITDA contribution of $18,000 during January-April 2009. However, in light of the recent precipitous decline in the copper price, the Company has revised the assumed copper price to $1.75/lb, for purposes of projecting operating cash flow. Based on the currently anticipated production ramp-up schedule, this would result in EBITDA of about $2,000 from start-up through April 2009, or a $16,000 decrease, as compared to the earlier projection. The recent severe fall in the copper price has significantly reduced the expected initial operating cash flow and its funding contribution to cost of the Franke Project.

In light of the current volatility in the copper price, the Company considers it prudent to now exclude any assumed funding contribution from operating profit to the projected cost of the Franke Project. Accordingly, the Company currently projects that, in the absence of the additional funding discussed below, the Franke Project would face a net funding shortfall of about $26,000, through to the end of April 2009. The Company expects to begin generating positive cash flow at Franke in May 2009, when it will start to benefit from its copper hedge (see below), which will allow the Company to fund the Franke operations. Company management is assessing all areas of capital expenditures and operating costs, in an ongoing effort to reduce the funding requirements of the Franke Project, both prior to, and after, the point at which it achieves positive operating cash flow.

The Company has in place a copper hedge which consists of the forward sale of 25.5 million pounds at an average price of $2.80/lb, for delivery between May and December, 2009 and 49.0 million pounds at an average price of $2.75/lb over the course of 2010, for a total of 74.5 million pounds of copper at an average price of $2.77/lb. Due to the recent severe decline in the copper price, this hedge position has become a significant asset, with a mark-to-market value of $77,000 (before close-out costs), as of November 13, 2008.

The Company has sought and received the consent of the lenders under the Franke Credit Facility (the "Lenders"), to repurchase a portion of the 2010 copper hedge book to yield $26,000 in net proceeds, subject to documentation, which is anticipated to be finalized shortly, and achieving a maximum average hedge closeout price of approximately $1.90/lb, (the "Copper Hedge Repurchase"). For reference the July 2010 LME forward price closed at $1.75/lb on November 13, 2008. Subject to market conditions, the Company expects to complete the Copper Hedge Repurchase in the near future.

The proceeds from the Copper Hedge Repurchase (the "Hedge Proceeds") will be placed into an escrow account. The release of the Hedge Proceeds to the Company will be subject to the completion, to the satisfaction of the Lenders, of due diligence activities underway by the Lenders' Technical Agent in relation to an updated Franke Development Plan, which includes the revised capital cost and development schedule and a revised mine plan, which incorporates a China starter pit of oxide material into the previously standalone Franke mine plan. The revised mine plan is progressing, and it will be incorporated into an NI 43-101 compliant Technical Report currently underway. The release of the Hedge Proceeds and drawing of the remaining $5,000 available under the Franke Credit Facility will also be subject to the Company's ability to continue to meet the terms of the existing Franke Credit Facility, or such amendments as the Lenders shall require, which may include, but may not be limited to, revised pricing, covenant terms and loan amortization schedule and additional copper hedging.

The Company currently anticipates that Lenders' Technical Agent will complete its' due diligence review in the next several weeks and that it will be able to finalize a satisfactory agreement with its Lenders shortly thereafter in relation to any modifications that may be required to the Franke Credit Agreement in order to satisfy the conditions of release of the Hedge Proceeds to the Company. However, there can be no assurance that the Company will be able to reach definitive agreement with the Lenders, or will be able to meet the Lenders' conditions for the Copper Hedge Repurchase, or for the release of the Hedge Proceeds to the Company.

As at September 30, 2008, the Company's consolidated non-Franke available unrestricted cash balance is approximately $8,000. Non-Franke's funding requirements consist primarily of discretionary exploration activities and Canadian overheads. Based on current plans (ie before any reductions in expenditures) the Company believes it has adequate funding through February 2009. Company management is currently reviewing all areas of discretionary expenditures, to reduce and/or defer the funding requirements for non-Franke, thereby extending the funding horizon. Beyond April 2009, Franke is expected to be cash flow positive, and the Company may be able to fund its non-Franke activities through approved disbursements from Franke. Alternatively, it would be required to seek additional funding from the capital markets. In such an event, there can be no assurance that such funding would be available on terms acceptable to the Company.

Other Information

Additional information related to the Company is available for viewing on SEDAR at www.sedar.com and at the Company's website at www.centenariocopper.com.

CENTENARIO COPPER CORPORATION

Richard Colterjohn, President and CEO

About Centenario Copper Corporation:

The Company was founded in 2004 with the goal of becoming a mid-tier copper producer and consolidator, active in regions of low sovereign risk. Centenario currently operates exclusively in Regions II and III of Chile. The Company intends to achieve its goal through the acquisition and development of advanced, mid-sized copper projects. It then plans to enhance the scale and value of its principal projects through the roll-up of smaller satellite copper resources which exist regionally around the principal projects.

The Franke Property, located in Region II, is currently in construction and is projected to produce 30,000 tonnes of cathode copper per year, starting in early 2009. The Company believes that the contiguous Pelusa Property is highly prospective for developing additional leachable copper resources and is evaluating possible production scenarios, including processing at the Franke plant. The Pan de Azucar Property, located 45 km. from the Franke Property, is currently being evaluated as a possible nucleus for a second property cluster. The Company continues to evaluate other "in region" clustering opportunities which could reinforce its existing property portfolio.

Copies of NI 43-101 Technical Reports are posted on SEDAR and on the Company's web site. For more information, please visit the Company's website at www.centenariocopper.com.

CAUTIONARY STATEMENT: No stock exchange, securities commission or other regulatory authority has approved of disapproved the information contained herein. This News Release includes certain "forward-looking statements". All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding future plans and objectives of Centenario Copper Corporation, are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Centenario's expectations are the risks detailed herein and from time to time in the filings made by Centenario Copper Corporation with securities regulators.

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