Constellation Copper Corporation - 2007 Year End Financial Results



    TSX: CCU

    DENVER, CO, March 18 /CNW Telbec/ - Constellation Copper Corporation
(CCU : TSX) announced its financial results for the year ended December 31,
2007. All dollar amounts are United States dollars unless otherwise stated.

    
    Recent Developments
    -------------------

    - A comprehensive management evaluation in November 2007 resulted in the
      decision to cease normal mining and crushing activities at Lisbon
      Valley at the end of January 2008 and convert to a "leach only"
      operation. In connection with the conversion the Company recorded asset
      impairments of $102.2 million during 2007.
    - Copper production in 2007 at Lisbon Valley was 19,773,000 pounds of
      copper cathode at a cash cost of $1.85 per pound, excluding royalties
      and taxes of $0.05 per pound.
    - Copper sales during 2007 were 20,317,000 pounds at an average price per
      pound of $3.16, before the impact of derivative instruments put in
      place primarily as a requirement of the Lisbon Valley project
      financing. During 2007, the realized loss on derivative instruments was
      $22.9 million or $1.13 per pound of copper sold.
    - A preliminary economic assessment ("PEA") for the San Javier property
      in Sonora, Mexico was completed in 2007, indicating the project is both
      technically and economically feasible.
    - Limited engineering and evaluation activities continue at the Terrazas
      property in Chihuahua, Mexico. The Company is currently evaluating
      various outside financing sources to fund further Terrazas development,
      including property payments due in 2008.
    - In February 2008, the Company amended its commodity swap arrangements
      to defer $5.1 million of copper forward contract settlement payments
      and also to close-out 7.4 million pounds of copper forward sales at a
      fixed price of $3.08 per pound.

    Going concern and liquidity
    ---------------------------

    There is significant doubt about the Company's ability to continue as a
going concern.
    At December 31, 2007, the Company had $3,182,000 of cash. The Company
continues to pursue various near term financing alternatives, including bank
financing, equity investment, mergers, and sale of certain assets or sale of
the entire company. In addition to only paying a portion of February and March
2008 forward sales settlements, the Company has been unable to pay many of its
vendor obligations when they were originally due, which may eventually result
in vendors requiring payment before delivery of goods and services necessary
to continue operations.
    The entire Cdn.$69.0 million convertible debenture may be considered in
default and payable immediately if the Company is unable to pay approximately
$2,000,000 of interest on the convertible debentures when due on March 31,
2008.
    The Company may consider filing for legal protection from its creditors in
both Canada and the United States if cash liquidity problems can not be
resolved.

    Results of Operations
    ---------------------

    The Company had a net loss of $116,013,000 or $0.65 per share in 2007. The
net loss in 2007 includes asset impairments of $102,183,000, related to
continued production problems and the conversion to a leach only operation at
Lisbon Valley.
    Revenues in 2007 were $64,285,000 from the sale of 20,317,000 pounds of
cathode copper at an average price of $3.16 per pound, net of settlement
adjustments. Costs of sales, excluding depreciation and amortization costs,
were $38,539,000, or $1.90 per pound of copper sold. Non-cash costs of
$6,752,000, $0.33 per pound sold, are combined with non-operating depreciation
and amortization of $72,000 and reported separately on the consolidated
statement of operations.
    General and administrative expenses were $3,904,000 in 2007. Stock-based
compensation expense in 2007 was $1,179,000, net of $154,000 capitalized.
Depreciation and amortization expense was $6,824,000 in 2007. Exploration
expense, representing early stage exploration activities, was $803,000 in
2007. Effective January 1, 2007, the Company began capitalizing expenditures
at San Javier.
    Results in 2007 include a realized loss of $22,925,000 and an unrealized
gain of $11,112,000 related to derivative instruments. The majority of
realized and unrealized gains and losses relate to a series of derivative
instruments entered into primarily as a requirement of Lisbon Valley project
financing. Losses on derivative instruments are realized as they are settled
or expire, with an offsetting unrealized gain. Unrealized gains and losses on
outstanding derivative instruments are recorded as they are marked-to-market
at forward copper prices at year end.
    In 2007, the Company sold its investment in the common shares of an
Australian mining company for proceeds and a realized gain of $178,000. The
Company also sold 422 acres of land in Grand County, Utah for proceeds of
$1,640,000 and a gain of $585,000
    The Company had interest income and interest expense of $713,000 and
$5,711,000, respectively, in 2007.
    The Company recorded a loss on foreign exchange of $7,813,000 in 2007,
primarily relating to its convertible debentures, which are denominated in
Canadian dollars.

    Financial Position
    ------------------

    At December 31, 2007, the Company held cash and cash equivalents of
$3,182,000. Additionally, at December 31, 2007, the Company had restricted
cash of $4,548,000, relating to bonding and insurance arrangements for future
Lisbon Valley reclamation and closure obligations. At December 31, 2007,
working capital was $11,900,000.
    The Company used $15,900,000 in operating activities during 2007,
including $20,579,000 in building ore-in-process, material and supplies, and
finished goods inventories at the Lisbon Valley mine and $16,136,000 to settle
forward sales contracts.
    Cash used in investing activities amounted to $14,682,000 in 2007. The
Company spent $7,458,000 on mineral property additions and $6,284,000 on
plant, property and equipment additions during 2007. Proceeds from the sale of
assets were $1,818,000 in 2007. Also during 2007, the Company paid deposits of
$689,000 on additional leased mining equipment and paid a total of $2,069,000
into restricted cash accounts, including earned interest.
    Cash provided by financing activities totaled $28,038,000 in 2007. In
March 2007, the Company received proceeds of $58,970,000 from the issuance of
convertible debentures and $1,500,000 from an amendment to its bank financing.
A portion of the proceeds from the convertible debentures was used to repay
$30,685,000 of long term debt.

    Outlook
    -------

    Lisbon Valley mine
    ------------------

    In November 2007 the Company decided to convert the Lisbon Valley mine to
a leach only operation. Mining and crushing operations were completed, as
planned, at the end of January 2008. The Company anticipates monthly
production of approximately 1.0 to 1.5 million pounds of copper in 2008.
    Leaching of ore on the leach pad is expected to continue as long as it
remains economical, depending on recovery rates, market copper prices and
operating costs, including the successful re-negotiation of the terms of
certain material contracts. At present, leaching is expected to continue until
June 2010.

    Development and exploration projects
    ------------------------------------

    The Company is currently unable to commit significant funding to its San
Javier and Terrazas development projects. Since both development projects have
property payments scheduled during 2008, the Company is investigating
re-negotiation of the payment schedules, obtaining outside financing in the
form of a joint venture or selling either or both of the projects.
    All of the Company's exploration activities have been suspended in order
to conserve cash.

    Subsequent Events
    -----------------

    In February 2008, the Company finalized an amendment to its commodity swap
transaction arrangement with Investec Bank (UK) Limited ("Investec"). Under
the terms of the amendment, Investec agreed to defer payment of forward sales
contracts originally due in November 2007, December 2007 and January 2008
until a final due date no later than December 31, 2008. The total amount
deferred of $5,084,000, including $3,768,000 for settlements payable prior to
December 31, 2007, accrues interest from original due dates at the London
Interbank Offered Rate ("LIBOR"), plus 4 percent, payable no later than
December 31, 2008. Under certain circumstances, the deferral and interest due
dates are subject to acceleration by Investec.
    In connection with the amendment, the Company previously agreed to
close-out approximately 50% of its copper forward sales contracts due after
November 2007, amounting to 7.4 million pounds sold forward at an average
contract price of $1.86 per pound. The settlements of the closed out
contracts, at an average fixed price of $3.08 per pound, are payable on the
original maturity dates, except for the January 2008 settlement, which is
deferred. The advance close-out fixed the loss on these contracts at
approximately $8,947,000. The remaining outstanding forward sales contracts
due after November 2007, also 7.4 million pounds at an average contract price
of $1.86 per pound, are being settled at prevailing London Metal Exchange
(LME) average monthly copper prices.
    The forward sales contracts due in January 2008, consisting of portions at
fixed and market copper prices, were settled for a loss of $1,316,000, which
was deferred in accordance with the amendment. The combined fixed and market
price forward sales contracts due in February and March 2008 were settled for
losses of $1,424,000 and $1,699,000, respectively. Through March 14, 2008, the
Company has paid $1,300,000 to Investec for these settlements.
    In connection with the amendment, in February 2008 the Company issued
Investec 5,000,000 warrants to purchase common shares of the Company, at an
exercise price of $0.16 per share (Cdn.$0.16 at date of issue). The warrants
expire on the later of January 31, 2009, or the date all amounts due under the
swap arrangement are paid in full, but in no case later than June 30, 2009.
The fair value of the warrants will be charged directly to expense.
    In addition to providing periodic operating and financial reports to
Investec, the Company also agreed to allow Investec to sweep the Lisbon Valley
bank accounts for cash in excess of a prescribed minimum balance on each
settlement date after February 2008, until all amounts due have been paid. The
Company is currently out of compliance with respect to certain of its loan
covenants with Investec. The Company has not been advised of any adverse
actions to be taken in regard to the compliance matters.

    Attached to this press release are the Company's comparative financial
statements for 2007 and 2006. For a more complete discussion, please refer to
the Company's audited financial statements and MD&A for the year ended
December 31, 2007 on the SEDAR website at www.sedar.com.

    As previously announced, the Company will host a conference call on
Tuesday, March 18, 2008 at 11:00 AM (EDT), to discuss 2007 results. To
participate in the conference call, please dial (416) 644-3420 (Toronto and
surrounding area), or toll free 1-800-595-8550. To ensure your participation,
please call approximately five minutes prior to the scheduled start of the
call.

    This press release contains certain forward-looking statements. In certain
cases, forward-looking statements can be identified by the use of words such
as "plans", "expects" or "does not anticipate", or "believes", or variations
of such words and phrases or statements that certain actions, events or
results "may", "could", "would", "might" or "will" "be taken", "occur" or "be
achieved". Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include, among others, risks related
to changes in commodity and power prices, changes in interest and currency
exchange rates, inaccurate geological and metallurgical assumptions (including
with respect to the size, grade and recoverability of mineral reserves and
resources), unanticipated operational difficulties (including failure of
plant, equipment or processes to operate in accordance with specifications,
cost escalation, unavailability of materials and equipment, delays in the
receipt of government approvals, industrial disturbances or other job action,
and unanticipated events related to health, safety and environmental matters),
political risk, social unrest, and changes in general economic conditions or
conditions in the financial markets. Although the Company has attempted to
identify important factors that could cause actual actions, events or results
to differ materially from those described in forward-looking statements, there
may be other factors that cause actions, events or results to differ from
those anticipated, estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking statements.


    Constellation Copper Corporation
    Consolidated Balance Sheets
    As at December 31, 2007 and 2006

    (in thousands of U.S. dollars)

                                                         2007           2006
                                                            $              $

    Assets

    Current assets
    Cash and cash equivalents                           3,182          5,726
    Other current assets                                1,779          1,487
    Inventories                                        37,973         31,150
                                                   --------------------------
                                                       42,934         38,363

    Property, plant and equipment                       3,891         84,357
    Mineral properties                                 16,492         12,121
    Deferred charges and other assets                       -          7,068
    Restricted cash                                     4,548          2,479
                                                   --------------------------
                                                       67,865        144,388
                                                   --------------------------
                                                   --------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities           11,163          7,977
    Derivative instruments                             19,871         13,928
    Current portion of long-term debt                       -          8,587
                                                   --------------------------
                                                       31,034         30,492

    Asset retirement obligations                        3,754          2,314
    Long-term debt                                     52,037         20,598
    Other long-term liabilities                         1,722         12,882
                                                   --------------------------
                                                       88,547         66,286
                                                   --------------------------

    Shareholders' (Deficit) Equity

    Capital stock                                     151,130        150,211
    Convertible debentures                             14,796              -
    Stock options                                       3,883          2,666
    Warrants and brokers' options                         297              -
    Deficit                                          (190,788)       (74,775)
    Accumulated other comprehensive income                  -              -
                                                   --------------------------
                                                      (20,682)        78,102
                                                   --------------------------

                                                       67,865        144,388
                                                   --------------------------
                                                   --------------------------


    Constellation Copper Corporation
    Consolidated Statements of Operations, Comprehensive Loss and Deficit
    For the years ended December 31, 2007 and 2006

    (in thousands of U.S. dollars, except for share and per share amounts)

                                                         2007           2006
                                                            $              $

    Revenues                                           64,285          9,992
                                                   --------------------------

    Cost and Expenses
      Cost of sales                                    38,539          6,850
      General and administrative                        3,904          3,269
      Stock-based compensation                          1,179          1,888
      Depreciation and amortization                     6,824          1,322
      Exploration                                         803          3,521
                                                   --------------------------
                                                       51,249         16,850

    Other (Income) Expense
      Interest income                                    (713)          (535)
      Interest expense                                  5,711            636
      Foreign exchange loss                             7,813             60
      Gain on sale of assets                             (763)          (696)
      Write-off of financing and deferred charges       3,005              -
      Realized loss on derivative instruments          22,925         17,767
      Unrealized (gain) loss on derivative
       instruments                                    (11,112)        25,488
      Asset impairment                                102,183              -
                                                   --------------------------
                                                      129,049         42,720
                                                   --------------------------

    Loss for the year                                 116,013         49,578
    Other comprehensive loss for the year                 158              -
                                                   --------------------------
    Comprehensive loss for the year                   116,171         49,578

    Loss for the year                                 116,013         49,578
    Deficit - Beginning of year                        74,775         25,197
                                                   --------------------------
    Deficit - End of year                             190,788         74,775
                                                   --------------------------
                                                   --------------------------

    Basic and diluted loss per share                     0.65           0.30
                                                   --------------------------
                                                   --------------------------

    Weighted average number of shares (000's)         179,018        165,142
                                                   --------------------------
                                                   --------------------------


    Constellation Copper Corporation
    Consolidated Statements of Cash Flows
    For the years ended December 31, 2007 and 2006

    (in thousands of U.S. dollars)

                                                         2007           2006
                                                            $              $

    Cash flows from (used in) operating activities
      Loss for the year                              (116,013)       (49,578)

      Items not affecting cash
        Depreciation and amortization                   6,824          1,322
        Stock-based compensation                        1,179          1,888
        Unrealized foreign exchange loss                8,412              -
        Write-off of deferred charges                   2,835            206
        Accretion expense                               2,116             23
        Realized loss on derivative instruments         5,816            972
        Unrealized (gain) loss on derivative
         instruments                                  (11,112)        25,488
        Gain on sale of assets                           (763)          (696)
        Asset retirement obligation                       (92)             -
        Asset impairments                             102,183              -

      Change in non-cash working capital items
        Inventories                                   (20,579)       (24,303)
        Prepaid expenses and other current assets        (293)          (547)
        Accounts payable and accrued liabilities        3,587          5,008
                                                   --------------------------
                                                      (15,900)       (40,217)
                                                   --------------------------

    Cash flows from (used in) investing activities
      Expenditures on mineral properties               (7,458)        (5,015)
      Expenditures on plant, property and equipment    (6,284)        (8,738)
      Increase in restricted cash, net of interest
       earned                                          (2,069)          (351)
      Purchase of mine reclamation insurance
       policy                                               -            (33)
      Deposit on leased equipment                        (689)          (888)
      Proceeds from sale of assets                      1,818            696
                                                   --------------------------
                                                      (14,682)       (14,329)
                                                   --------------------------

    Cash flows from (used in) financing activities
      Proceeds from issuance of capital stock -
       net                                                  -         19,171
      Proceeds from exercise of warrants and
       options                                            776         27,716
      Proceeds from long-term debt                     60,470         10,000
      Repayment of long-term debt                     (30,685)        (3,300)
      Proceeds from TDA grant                              79            220
      Financing costs                                  (2,602)          (336)
                                                   --------------------------
                                                       28,038         53,471
                                                   --------------------------

    Decrease in cash and cash equivalents              (2,544)        (1,075)

    Cash and cash equivalents - Beginning of year       5,726          6,801
                                                   --------------------------

    Cash and cash equivalents - End of year             3,182          5,726
                                                   --------------------------
                                                   --------------------------
    
    %SEDAR: 00002465E




For further information:

For further information: Constellation Copper Corporation: Patrick
James, Chief Executive Officer; Michelle Hebert, Manager, Corporate Affairs,
(720) 228-0055, Toll Free: 1-877-370-5400, Fax: (303) 863-1736,
info@constellationcopper.com, www.constellationcopper.com; Renmark Financial
Communications Inc.: Neil Murray-Lyon, nmurraylyon@renmarkfinancial.com;
Barbara Komorowski, bkomorowski@renmarkfinancial.com, (514) 939-3989, Fax:
(514) 939-3717, www.renmarkfinancial.com

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