SOURCE: Frontera Copper Corporation

May 15, 2008 08:00 ET

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

TORONTO and PHOENIX, AZ--(Marketwire - May 15, 2008) - Frontera Copper Corporation (TSX: FCC) (TSX: FCC.NT) (TSX: FCC.NT.A) today reported financial results and operational performance for the quarter ended March 31, 2008.

First Quarter Summary

--  Net loss of $1.2 million ($0.02 per share basic and diluted)
--  Copper cathode production and sales of 9.9 million pounds
--  Average cash cost of $3.14 per pound
--  Cash flow from operating activities of negative $18.5 million
--  Closing cash balance of $29.5 million
--  1.5 million man hours and one calendar year without a lost time

Financial Results

(millions of dollars, except per share)

                             1Q08      4Q07       3Q07      2Q07     1Q07
                          --------  --------  --------- --------- --------
Revenues                      31.9      37.5       50.1      50.8     28.9
Net earnings/(loss)           (1.2)      6.7       10.3       9.8      4.9
Net earnings/(loss) per
 share - basic               (0.02)     0.11       0.16      0.15     0.08
Cash flows from
 operating activities        (18.5)     (3.1)      23.6      36.3     (1.3)
Closing cash balances         29.5      54.5       58.8      48.7     24.4
                          --------  --------  --------- --------- --------

For the three months ended March 31, 2008, Frontera Copper reported a net loss of $1.2 million ($0.02 per share basic and diluted), compared to net income of $4.9 million ($0.08 per share basic and diluted) for the three months ended March 31, 2007. Revenues of $31.9 million in the first quarter of 2008 and $28.9 million in the first quarter of 2007 were reduced by $5.8 million and $0.9 million, respectively, due to the effect of the company's copper hedging program.

Alan Edwards, President and Chief Executive Officer, said, "Our first quarter performance was negatively impacted by slower copper recoveries stemming from sulfuric acid supply issues that began in the second half of last year. We believe that the modifications in our operating strategy which are now being implemented will better enable us to maximize the effectiveness of the acid that is available to us at economical prices. Looking ahead, given continuing strength in the copper market, our operating cash flow should become positive again as our acid costs are reduced, our 2008 Mexican tax installments are completed and our copper hedging program winds down early next year."

Results from Operations

                          --------------------------------------- ---------

                              1Q08      4Q07      3Q07      2Q07      1Q07
                          --------- --------- --------- --------- ---------
"LME Grade A" quality
 copper cathode (millions
 of lbs.):
    Produced                    9.9      12.3      15.1      15.9      10.4
    Sold                        9.9      12.6      15.7      15.7      10.1

Cash costs per pound
 sold ($):
    (Excluding prepaid
     royalties)                3.14      1.39      1.13      1.10      1.37
    (Including prepaid
     royalties)                3.14      1.46      1.21      1.18      1.43

Revenue ($ millions)           31.9      37.5      50.1      50.8      28.9

Average price per pound:
    Realized ($)               3.21      2.97      3.20      3.23      2.87
    COMEX ($)                  3.53      3.26      3.48      3.46      2.71
                          --------- --------- --------- --------- ---------

The company's Piedras Verdes operation in Mexico produced and sold 9.9 million pounds of "LME Grade A" quality copper during the first quarter of 2008, compared to production of 12.3 million pounds and sales of 12.6 million pounds of copper in the fourth quarter of 2007. Cash operating costs for the 2008 first quarter were $3.14 per pound compared to $1.46 per pound in the 2007 fourth quarter, reflecting higher acid consumption and prices combined with lower production. The higher acid costs were principally due to purchases of expensive acid on the spot market to supplement supply shortages caused by the continuing labor dispute at the operation's primary supplier.

As previously announced, leach solution chemistry was negatively impacted during the second half of 2007 due to inadequate supplies of sulfuric acid. The unfavorable changes in solution chemistry resulted in slower than expected rates of copper recoveries, culminating in reduced levels of copper production in the fourth quarter of 2007. In order to improve the leach pad solution chemistry, the mining rate was temporarily reduced early in the first quarter of 2008 and substantial quantities of higher-priced acid were purchased in the spot market to supplement the reduced level of acid deliveries from the primary supplier. As solution chemistry improved during the course of the quarter, the mining rate was accelerated. However, during March the operation encountered unusually high acid-consuming ores, which resulted in lower copper production.

Given the uncertain availability and unfavorable economics of purchasing higher-priced acid from alternate sources and recognizing that the ongoing strike at the Company's primary acid supplier may not be resolved in the near term, Piedras Verdes has modified its operating strategy in order to maximize the recovery of copper with the available acid from its primary supplier. Commencing in April 2008, the operation instituted a revised cutoff grade strategy, which will ensure that only higher-grade, low acid-consuming ores are placed on the leach pads. Lower-grade ores and ores with higher acid consumption levels will be placed in stockpiles for future processing.

In addition, a leaching technique has been implemented which utilizes individual leach cell characteristics to define the cure amount and leach sequence in accordance with copper content and acid consumption estimates. The key to the strategy is to develop a leach cycle that circulates a certain amount of raffinate to each cell based on copper content. This strategy has been under development since the beginning of the year and has the potential to minimize acid consumption without negatively impacting copper recoveries.

The Company plans to purchase significantly less acid in the second quarter than in the first quarter and at a lower average cost. Copper production for the second quarter is projected at approximately the same level as the first quarter. In addition, the benefits of lower acid costs are expected to result in lower cash costs for the second quarter compared to the first quarter. The Company anticipates a return to profitability assuming it is able to obtain sufficient quantities of economically-priced sulfuric acid on a sustained basis to support its new operating strategy. However, given the dynamic acid market conditions and ongoing labor dispute at the operation's primary acid supplier, the Company is unable to provide more specific guidance for expected levels of copper production or operating costs for the balance of 2008.

The Company's cash balance as at March 31, 2008 was $29.5 million, a decrease of $25.0 million during the first quarter. The primary uses of cash during the quarter were for the payment of approximately $14 million of Mexican income tax installments related to the 2007 earnings of the Piedras Verdes operations, higher than normal operating costs due to the higher volumes and unit prices of acid, and capital expenditures of approximately $6.8 million.

The Company currently expects its cash balance to decrease in the second quarter, primarily due to the payment of 2008 Mexican income tax installments totaling approximately $8 million. These installments are calculated based on 2007 profitability as required under Mexican tax regulations. Based on current projections, the Company believes it has sufficient cash to meet its operating needs for the foreseeable future.

Frontera Copper is also pleased to announce that Orlando Bernal has joined the Piedras Verdes operating team. Orlando has accepted the position of Processing Manager, and brings to the Company valuable experience with Phelps Dodge Corporation and Cyprus Mining at the Cerro Verde mine in Peru. Orlando is a welcome complement to the already strong management team at Piedras Verdes, which includes Jesus Gutierrez and Joseph Campbell.


Frontera Copper Corporation (TSX: FCC) (TSX: FCC.NT) (TSX: FCC.NT.A) will hold a conference call at 11:00 a.m. EDT today to report on first 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 416-695-9745 or toll free 800-766-6630. A replay of the call will also be available through Thursday, May 29, by dialing 416-695-5800 or toll free 800-408-3053 and entering passcode 3260517.

The Company's March 31, 2008 Financial Statements and Management's Discussion and Analysis have been filed on SEDAR and are available on the Company's website.


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 17-year life of the operation.

For further information, please see Frontera Copper's website at

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)
                                                   March 31,   December 31,
                                                      2008         2007
                                                  -----------  -----------
   Cash and cash equivalents                           29,475       54,479
   Accounts receivable                                  1,190          705
   Commodity taxes recoverable                          6,937        4,181
   Inventory                                           27,748       24,918
   Prepaid expenses and deposits                        3,661        6,440
   Future tax asset                                     7,965        2,883
   Deferred loss on derivative instruments              2,135            -
                                                  -----------  -----------
                                                       79,111       93,606

Restricted cash                                         1,825        1,825
Long term inventory                                    23,967       20,912
Long term deposits                                      1,861        1,854
Mineral properties and property, plant and
 equipment                                            139,893      136,036
                                                  -----------  -----------

                                                      246,657      254,233
                                                  ===========  ===========
   Accounts payable and accrued liabilities            24,221       17,547
   Deferred revenue                                         -          326
   Income taxes payable                                   323       14,501
   Derivative instruments                              25,828        8,143
   Current portion of notes payable                     6,104        6,915
                                                  -----------  -----------
                                                       56,476       47,432

Accounts payable and accrued liabilities                3,028        3,197
Notes payable                                          71,872       73,446
Asset retirement obligation                             4,999        4,907
Derivative instruments                                      -        3,440
Future income taxes                                     7,965        7,849
                                                  -----------  -----------
                                                      144,340      140,271
                                                  -----------  -----------
               Shareholders' Equity

Capital stock                                         103,276      102,807
Contributed surplus                                       988        1,174
Accumulated other comprehensive loss                  (18,129)      (7,388)
Retained earnings                                      16,182       17,369
                                                  -----------  -----------
                                                      102,317      113,962
                                                  -----------  -----------

                                                      246,657      254,233
                                                  ===========  ===========

Frontera Copper Corporation
Consolidated Statements of Operations
US$ (in thousands except per share amounts)              (unaudited)
                                                         1st Quarter
                                                      2008         2007
                                                  -----------  -----------

Revenue                                                31,944       28,950

Cost of sales and expenses
   Cost of sales                                       31,246       14,432
   Depreciation, depletion and amortization             2,191        1,923
   Exploration                                             26          103
   Administration                                       1,509        1,344
                                                  -----------  -----------
                                                       34,972       17,802
                                                  -----------  -----------

Other (income) and expenses
   Interest income                                       (416)        (254)
   Long-term interest and accretion                     2,950        2,828
   Foreign exchange (gain) loss                        (3,001)         646
   Unrealized (gain) loss on derivatives
    contracts                                            (673)           8
                                                  -----------  -----------
                                                       (1,140)       3,228
                                                  -----------  -----------

Income (loss) before income taxes                      (1,888)       7,920
Income taxes                                              701       (2,990)
                                                  -----------  -----------

Net income (loss) for the period                       (1,187)       4,930
                                                  ===========  ===========

Income (loss) per share - Basic                         (0.02)        0.08
                        - Diluted                       (0.02)        0.08

Weighted average common shares
 outstanding - Basic                                   64,512       63,549
             - Diluted                                 64,963       64,573

Frontera Copper Corporation
Consolidated Statements of Retained Earnings (Deficit)
US$ (in thousands)
                                                        1st Quarter
                                                      2008         2007
                                                  -----------  -----------

Retained earnings (deficit), beginning of period       17,369      (14,474)

Net income (loss) for the period                       (1,187)       4,930
                                                  -----------  -----------

Retained earnings (deficit), end of period             16,182       (9,544)
                                                  ===========  ===========

Consolidated Statements of Comprehensive Income (Loss)
US$ (in thousands)
                                                        1st Quarter
                                                      2008         2007
                                                  -----------  -----------

Net income (loss) for the period                       (1,187)       4,930

Unrealized loss on derivatives designated as cash
 flow hedges, (net of tax of $4,177,000 and
 $3,278,000)                                          (10,741)      (9,550)

Tax valuation allowance                                     -       (3,278)

                                                  -----------  -----------
Other comprehensive loss for the period               (10,741)     (12,828)
                                                  -----------  -----------

Comprehensive loss for the period                     (11,928)      (7,898)
                                                  ===========  ===========

Frontera Copper Corporation
Consolidated Statements of Cash Flows
US$ (in thousands)                                      (unaudited)
                                                        1st Quarter
                                                      2008         2007
                                                  -----------  -----------

Cash flows from operating activities
Net income (loss) for the period                       (1,187)       4,930
   Items not involving cash:
      Future income taxes                                (869)       2,990
      Unrealized foreign exchange                      (3,073)         446
      Depreciation, depletion and amortization          2,888        2,798
      Accretion                                           828          786
      Unrealized (gains) losses on derivative
       contracts                                         (673)           8
      Long term inventory                              (3,055)        (181)
      Long term deposits                                   (7)           -
                                                  -----------  -----------
                                                       (5,148)      11,777

Changes in non-cash working capital balances          (13,366)     (13,062)
                                                  -----------  -----------
Cash flows used in operating activities               (18,514)      (1,285)
                                                  -----------  -----------

Cash flows from investing activities
   Property, plant and equipment                       (6,760)      (9,302)
   Decrease in restricted cash                              -        1,233
                                                  -----------  -----------
Cash flows used in investing activities                (6,760)      (8,069)
                                                  -----------  -----------

Cash flows from financing activities
   Exercise of options                                    283           97
                                                  -----------  -----------
Cash flows from financing activities                      283           97
                                                  -----------  -----------

Effect of exchange rate changes on cash                   (13)         157
                                                  -----------  -----------

Decrease in cash and cash equivalents during the
 period                                               (25,004)      (9,100)

Cash and cash equivalents, beginning of period         54,479       33,547
                                                  -----------  -----------

Cash and cash equivalents, end of period               29,475       24,447
                                                  ===========  ===========

Cash and cash equivalents consist of:
   Cash                                                 5,788        6,608
   Cash equivalents                                    23,687       17,839
                                                  -----------  -----------

                                                       29,475       24,447
                                                  ===========  ===========

Supplemental information:
   Interest paid                                        1,232        1,223
   Income taxes paid                                   14,346            -

Contact Information

  • Contact:

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

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