Frontera Copper Corporation
TSX : FCC
TSX : FCC.NT
TSX : FCC.NT.A

Frontera Copper Corporation

August 10, 2007 12:44 ET

Frontera Copper Reports Second Quarter 2007 Results and Announces Conference Call

TORONTO, ONTARIO--(Marketwire - Aug. 10, 2007) -

(All dollar amounts are expressed in United States currency unless otherwise noted)

Frontera Copper Corporation (TSX:FCC)(TSX:FCC.NT)(TSX:FCC.NT.A) today reports financial and operating results for the quarter ending June 30, 2007.

Highlights

- 53% improvement in copper production compared to the first quarter of 2007

- Total cash costs per pound decreased by $0.27 ($0.25 including prepaid royalties)

- Cash and cash equivalents increased by $24.3 million



Financial Results

(Millions of dollars, except per share)


Quarters Year-to-date
June March June June June
2007 2007 2006 2007 2006
-------------------------------------------------
Revenues(1) 50.8 29.0 - 79.8 -
Net earnings 9.8 5.0 (8.3) 14.8 (11.2)
Net earnings per share 0.15 0.08 (0.17) 0.23 (0.23)
Cash flows from
operations before
working capital changes 27.3 11.9 (4.7) 39.2 (7.7)
Closing cash balances 48.7 24.4 22.7 48.7 22.7

(1) The Piedras Verdes operations commenced production in October 2006.


Net income for the three months ended June 30, 2007 includes net foreign exchange losses of $5.6 million ($5.6 million after tax or $0.09 per share) and unrealized losses on derivative contracts of $1.5 million ($1.1 million after tax or $0.02 per share) compared to net foreign exchange losses of $3.2 million ($3.2 million after tax or $0.07 per share) for the three months ended June 30, 2006.

Net income for the six months ended June 30, 2007 includes net foreign exchange losses of $6.3 million ($6.3 million after tax or $0.10 per share) and unrealized losses on derivative contracts of $1.6 million ($1.1 million after tax or $0.02 per share) compared to net foreign exchange losses of $2.6 million ($2.6 million after tax or $0.05 per share) for the six months periods ended June 30, 2006.

During the three months and six months ended June 30, 2007, the Company's realized price on its copper cathode sales was $3.23 per pound and $3.09 per pound, respectively.

Capital expenditures for property, plant and equipment totaled $13.7 million in the second quarter of 2007 and $23.0 million year to date in 2007, compared to $24.3 million in the second quarter of 2006 and $51.2 million in year to date 2006.

Gary Loving, President and Chief Executive Officer said, "With the Piedras Verdes mine in full operation, we continue to look for opportunities to improve our operating cost structure in order to drive down our unit costs. Our cash balances are building rapidly and the company is well positioned to quickly pursue growth opportunities as they are identified."

Results from Operations

During the second quarter of 2007, the Piedras Verdes operations produced 15.9 million pounds of "LME Grade A" quality cathode copper and sold 15.7 million pounds of cathode copper pursuant to an off-take agreement with Gerald Metals, Inc. ("Gerald Metals"). This is a 53% improvement in production from the first quarter of 2007 when the operation produced 10.4 million pounds and sold 10.1 million pounds of cathode copper.

Cost of sales during the three and six months ended June 30, 2007 totaled $18.6 million and $33.0 million, respectively. Total cash costs per pound for the three months ended June 30, 2007 were $1.10 ($1.18 including prepaid royalties) and for the six months ended June 30, 2007 total cash costs per pound were $1.20 ($1.28 including prepaid royalties). As the operation sustains full production and starts to access the areas of the ore body which are expected to consume less acid, the Company estimates that unit costs will begin to approach the estimated mine life average of less than $1.00 per pound.

Revenue from the sale of copper cathodes during the three months and six months ended June 30, 2007 totaled $50.8 million and $79.8 million, respectively. The Company sells 100% of its copper cathode Free Carrier (FCA) at the mine site to Gerald Metals. In addition, the Company has entered into a limited hedging program to hedge the revenue from the sale of the first 50% of forecasted monthly copper cathode sales through February 2009 by entering into forward sales.

The price the Company receives for its copper cathode sales to Gerald Metals is based on the average COMEX price for the month following the month of shipment ("M+1 Pricing"), minus an adjustment to account for a premium over the COMEX price, and freight, insurance, and financing costs incurred by Gerald Metals. For the three months ended June 30, 2007, the Company's average realized price was $3.23 per pound, compared to the average COMEX price of $3.46 per pound and for the six months ended June 30, 2007 the Company's average realized price was $3.09 per pound compared to the average COMEX price of $3.09 per pound. Differences in the Company's realized copper prices in comparison to the quoted COMEX prices are due to varying monthly sales levels, the M+1 Pricing arrangement and the results of the Company's hedging program. During the three months and six months ended June 30, 2007 revenues include 8,157,000 pounds and 9,204,000 pounds of copper cathode sales, which were priced at the average price the Company received under its forward sales hedging program of $3.07 per pound and $3.03 per pound, respectively.

In addition to the realized hedging losses, which have been included in revenue, the Company recorded unrealized losses on derivative contracts of $1.5 million ($1.1 million after tax) for the quarter ending June 30, 2007 and $1.6 million ($1.1 million after tax) for the year to date. The unrealized losses on derivative contracts relate to the ineffective portion of the Company's derivative instruments, which are marked to market at the end of each reporting period.

As at June 30, 2007, the Company has the following outstanding forward sales contracts with major financial institutions, which are being accounted for as cash flow hedges as follows:



Pounds Sold Average Sales Price Fair Market Value
Year Forward Per Pound at June 30th
---- ----------- ------------------- ------------------
('000s) $ (in thousands of $)
2007 17,527 3.00 (7,416)
2008 34,998 2.81 (14,418)
2009 8,598 2.62 (3,399)
------- ---- --------
Total 61,123 2.84 (25,233)


During the three months and six months ended June 30, 2007, the Company incurred net foreign exchange losses of $5.6 million and $6.3 million compared to a net foreign exchange losses of $3.2 million and $2.6 million during the three months and six months ended June 30, 2006, respectively. The foreign exchange losses primarily relate to the notes payable, which are denominated in Canadian dollars. During both the second quarters of 2007 and 2006, the Canadian dollar strengthened significantly against the United States dollar resulting in losses on the notes payable partially offset by gains on the Company's Canadian dollar cash and cash equivalent balances.

During 2007, the Company has applied approximately $28 million of non-capital losses (future tax benefit of $7,790,000) and accrued current income taxes payable of $1.9 million both as a result of the earnings generated by its wholly owned Mexican subsidiary Cobre del Mayo, S.A. de C.V., the owner and operator of the Piedras Verdes operations. In addition, the Company has accrued current income taxes payable of $0.8 million related to withholding taxes on intercompany interest charges.

Cash and cash equivalents were $48.7 million at June 30, 2007. During the three months and six months ended June 30, 2007, cash and cash equivalents increased by $24.3 million and $15.2, respectively, compared to decreases of $14.5 million and $12.1 million during the three months and six months ended June 30, 2006, respectively, when the mine was under construction. At August 3, 2007, the Company's cash and cash equivalents were approximately $58 million.

During the three months ended June 30, 2007, cash flows from operating activities were $36.5 million compared to a negative $7.4 million during the three months ended June 30, 2006. Cash flows from operating activities during the three months ended June 30, 2007 include a decrease in working capital balances (excluding cash) of $9.2 million, primarily reflecting decreases in accounts receivable of $2.2 million, commodity taxes recoverable of $5.7 and prepaid expenses and deposits of $1.9 million, and increases in accounts payable of $1.0 million and income taxes payable of $3.0 million, partially offset by a increase in inventory of $5.7 million. During the three months ended June 30, 2007, the Mexican authorities brought the processing of the Company's IVA returns up to date.

Operations Status

Ore continues to be placed on the heap leach pad in lifts of five meters (previously 10 meter lifts). In addition, approximately two-thirds of the ultimate acid requirement is being applied by pre-soaking the ore with a strong solution of sulfuric acid and water, prior to rinsing with normal raffinate solutions. With the thinner five meter lifts, the leach cycle is reduced to approximately 60 days. The top-down acid cure is expected to increase the amount of recovered copper during the first cycle leach by providing most of the acid earlier in the cycle. These operating adjustments had a positive impact on the grade of copper in the leach solutions and the plant was operating at approximately 100% of plating capacity by the end of April.

The total acid consumed per tonne of ore has decreased slightly to a current average of approximately 14 kg/tonne from the previous average of about 15 kg/tonne. The life of mine average acid consumption is estimated at 9.2 kg/tonne.

Phase 2A of the expanded leach pad is complete and in use and Phase 2B is nearly complete. During the second quarter, solution flows were increased to nearly 2,000 cubic meters per hour from approximately 1,500 cubic meters per hour in order to transition solutions onto the newly completed Phase 2 leach pad, without significantly decreasing the amount of solution delivered to the Phase 1 leach pad. The increased solution flows have temporarily increased power and reagent costs. The additional area created by the Phase 2 leach pad will allow the operation to extend the leaching time on the initial leach cycle, vary solution application rates and commence curing.

The Phase 2 capital project managed by M3 Engineering & Technology, which started in late 2006, is expected to be completed during 2007 at total cost of approximately $28 million. The Company recently made a decision to start construction of the Phase 3 leach pad expansion later this year at an estimated cost of $16.8 million, to provide the operation greater flexibility in its leaching operations and solution flow management. Total capital expenditures for 2007 are now forecast at approximately $37 million and include $23 million for completing the Phase 2 capital project, $7 million for the Phase 3 leach pad expansion, and $7 million for the purchase of certain Ejido land and other projects at the Piedras Verdes operations. The remainder of the expenditure for the Phase 3 leach pad will be made in the first half of 2008.

Development of Phase 8 of the mine plan has commenced and as the ore in this area is predominantly chalcocite, it is anticipated that it will consume less acid. This ore is also expected to have better physical characteristics which should improve the percolation of leach solutions.

As at the end of June, more than 16.8 million tonnes of ore containing over 85 million pounds of recoverable copper had been placed on the leach pads since commencing mining operations last year.

Exploration

During 2006 and 2007, the Company conducted a diamond drilling program at Cerro Chato, which is approximately 1.5 kilometers west of the main Piedras Verdes ore body. A total of 3,377 meters of diamond drilling was completed in 27 holes. Final analytical results for all holes were received in July 2007. The exploration drilling program was successful in discovering approximately 15 million tonnes of oxide mineralization at Cerro Chato. However, the drill hole density is insufficient to allow for estimation of a mineral resource at this time. Additional infill drilling on 50 meter centers will be required in order to delineate 43-101 compliant resources.

The mineralized zones tested at Cerro Chato appear to be similar in grade to the ores currently being mined at the Piedras Verdes operation. In addition, preliminary metallurgical test results indicate that some of the Cerro Chato mineralization has metallurgical characteristics, which are similar to the ores currently being mined at Piedras Verdes and could therefore potentially add to the life of the operation. More extensive testing is needed to adequately quantify the recovery and acid consumption properties of the Cerro Chato material.

Corporate Development

The Board and management believe there is significant scope for consolidation amongst small to mid-tier copper producers and the Company continues to evaluate opportunities to grow its business through mergers, acquisitions, joint ventures and exploration. The Company is concentrating on opportunities in Canada, United States, Mexico, Peru and Chile with the focus on copper projects, given the highly prospective nature of those regions and the considerable experience which management has in these countries and in the copper industry.

2007 Outlook

The Company continues to forecast that it will maintain its full, annualized production rate of 70 million pounds, which was achieved in late April, and realize production in the range of 60 million to 63 million pounds of "LME Grade A" quality copper cathode during 2007. The Company currently estimates that the full year's cash production cost will be in the range of approximately $1.12/lb to $1.20/lb sold ($1.19/lb to $1.27/lb including prepaid royalties). The higher cost estimated for 2007 is primarily related to less than full production during the ramp up period in the first four months of the year.

Conference Call

Frontera Copper will hold a conference call to report second quarter 2007 results on Monday, August 13, 2007 at 11:00 a.m. ET.

The conference call will be chaired by Mr. Gary Loving, President and Chief Executive Officer. Mr. Loving will be joined by Mr. Dave Peat, Vice President and Chief Financial Officer and Mr. Tim Swendseid, Vice President of Engineering.

If you wish to participate, please dial 416-641-6127 or Toll-Free 1-866-542-4238.

The call will be available for replay until August 27, 2007. Please dial 416-695-5800 or Toll-Free 1-800-408-3053 and enter Passcode: 3231600.

About Frontera Copper

Frontera Copper is a Canadian mining, development and exploration company whose principle activity is the production of copper cathode from the Piedras Verdes run-of-mine heap-leach copper operation in Sonora, Mexico. Production commenced in October, 2006 and reached the operations' full annual production rate of 70 million pounds of copper cathode in April 2007. A total of 942 million pounds of copper is projected to be produced during the 18-year life of the operation. Existing resources and prospective exploration targets adjacent to the main open-pit have the potential to extend the life of the project.

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,
2007 2006
-----------------------
Assets

Current
Cash and cash equivalents 48,727 33,547
Restricted cash - 1,233
Accounts receivable 701 1,645
Commodity taxes recoverable 3,221 5,817
Inventory 29,519 20,324
Prepaid expenses and deposits 4,457 5,741
-----------------------
86,625 68,307

Restricted cash 1,825 1,825
Deferred finance charges - 653
Property, plant and equipment 134,994 118,927
-----------------------

223,444 189,712
-----------------------
-----------------------
Liabilities
Current
Accounts payable and accrued liabilities 17,499 21,325
Income taxes payable 2,959 -
Derivative instruments 14,734 -
Current portion of notes payable 7,409 6,704
-----------------------
42,601 28,029

Accounts payable and accrued liabilities 1,825 1,825
Notes payable 73,600 65,663
Asset retirement obligation 5,471 5,235
Derivative instruments 10,499 -
Future income taxes 7,894 288
-----------------------
141,890 101,040
-----------------------
Shareholders' Equity

Capital stock 102,424 101,412
Contributed surplus 1,323 1,734
Accumulated other comprehensive income (22,483) -
Retained earnings (deficit) 290 (14,474)
-----------------------
81,554 88,672
-----------------------

223,444 189,712
-----------------------
-----------------------



Frontera Copper Corporation
Consolidated Statements of Operations
US$ (in thousands except per share amounts)
(unaudited) 2nd Quarter Six Months
-------------------------------------
2007 2006 2007 2006
-------------------------------------

Revenue 50,818 - 79,768 -

Cost of sales and expenses
Cost of sales 18,567 - 32,999 -
Depreciation, depletion and
amortization 2,880 - 4,803 -
Exploration 143 - 246 -
Administration 1,884 2,877 3,228 4,982
-------------------------------------
23,474 2,877 41,276 4,982
-------------------------------------

Other (income) and expenses
Interest income (471) (526) (725) (1,167)
Long-term interest and accretion 3,567 2,760 6,395 4,830
Foreign exchange loss 5,631 3,218 6,277 2,600
Unrealized losses on derivatives
contracts 1,548 - 1,556 -
-------------------------------------
10,275 5,452 13,503 6,263
-------------------------------------

Income (loss) before income taxes 17,069 (8,329) 24,989 (11,245)
Income taxes (7,235) - (10,225) -
-------------------------------------

Net income (loss) for the period 9,834 (8,329) 14,764 (11,245)
-------------------------------------
-------------------------------------

Income (loss) per share - Basic 0.15 (0.17) 0.23 (0.23)
- Diluted 0.15 (0.17) 0.23 (0.23)

Weighted average common shares
outstanding - Basic 63,929 48,191 63,740 48,131
- Diluted 64,731 48,191 64,493 48,131



Frontera Copper Corporation
Consolidated Statements of Retained Earnings (Deficit)
US$ (in thousands)
(unaudited)
2nd Quarter Six Months
-------------------------------------
2007 2006 2007 2006
-------------------------------------

Deficit, beginning of period (9,544) (14,759) (14,474) (11,843)

Net income (loss) for the period 9,834 (8,329) 14,764 (11,245)
-------------------------------------

Retained earnings (deficit), end of
period 290 (23,088) 290 (23,088)
-------------------------------------
-------------------------------------



Consolidated Statements of Comprehensive Income (Loss)
US$ (in thousands)
(unaudited)
2nd Quarter Six Months
-------------------------------------
2007 2006 2007 2006
-------------------------------------

Net income (loss) for the period 9,834 (8,329) 14,764 (11,245)

Unrealized losses on derivatives
designated as cash flow hedges:
Arising during the period
(net of tax of $3,017,000, Nil,
$6,295,000 and Nil, respectively) (6,638) - (16,188) -
Less: Tax valuation allowance (3,017) - (6,295) -
-------------------------------------
(9,655) - (22,483) -
-------------------------------------

Comprehensive income (loss) for the
period 179 (8,329) (7,719) (11,245)
-------------------------------------
-------------------------------------



Frontera Copper Corporation
Consolidated Statements of Cash Flows
US$ (in thousands)
(unaudited) 2nd Quarter Six Months
---------------------------------------
2007 2006 2007 2006
---------------------------------------
Cash flows from operating
activities
Net income (loss) for the period 9,834 (8,329) 14,764 (11,245)
Items not involving cash:
Stock-based compensation - 30 - 61
Future income taxes 4,616 - 7,606 -
Unrealized foreign exchange 5,755 2,988 6,201 2,511
Depreciation, depletion and
amortization 4,140 - 6,938 -
Accretion 863 589 1,649 1,018
Write-off of deferred finance costs 522 - 522 -
Unrealized losses on derivative
contracts 1,548 - 1,556 -
-------------------------------------
27,278 (4,722) 39,236 (7,655)

Changes in non-cash working capital
balances 9,199 (2,701) (4,044) (2,443)
-------------------------------------
Cash flows from operating
activities 36,477 (7,423) 35,192 (10,098)
-------------------------------------

Cash flows from investing
activities
Property, plant and equipment (13,703) (24,329) (23,005) (51,174)
Decrease in restricted cash - 16,343 1,233 26,191
-------------------------------------
Cash flows from investing
activities (13,703) (7,986) (21,772) (24,983)
-------------------------------------

Cash flows from financing
activities
Issue of notes and shares - - - 22,085
Exercise of warrants - 504 - 509
Exercise of options 504 - 601 -
-------------------------------------
Cash flows from financing
activities 504 504 601 22,594
-------------------------------------

Effect of exchange rate changes on
cash 1,002 410 1,159 361
-------------------------------------

Change in cash and cash equivalents
during the period 24,280 (14,495) 15,180 (12,126)

Cash and cash equivalents,
beginning of period 24,447 37,177 33,547 34,808
-------------------------------------

Cash and cash equivalents, end of
period 48,727 22,682 48,727 22,682
-------------------------------------
-------------------------------------

Retained earnings (deficit)
Cash 2,311 2,943 2,311 2,943
Cash equivalents 46,416 19,739 46,416 19,739
-------------------------------------

48,727 22,682 48,727 22,682
-------------------------------------
-------------------------------------

Supplemental information:
Interest paid 3,233 3,105 4,456 3,105
Income taxes paid - - - -


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