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GlobeStar Mining Declares Commercial Production
GlobeStar Mining Corp. has declared commercial production as of Jan.
1, 2009, at its 100-per-cent-owned Cerro de Maimon copper-gold-silver mine
located in the Dominican Republic. (All amounts are in U.S. dollars unless
otherwise noted.)
The sulphide mill has been producing copper, gold and silver in
concentrate at its design capacity since mid-November 2008 and the oxide
plant has been in continuous production of gold-silver precipitate since
mid-December 2008. Concentrate shipments commenced in early November and have
continued on a regular basis through year end. This sustained level of
mining, processing and sales activity has resulted in the declaration of
commercial production.
Fourth Quarter Highlights
- Production of approximately 5.1 million pounds of copper; 1,500
ounces of gold and 120,000 ounces of silver in 7,700 tonnes of concentrate.
- Shipment of 7,290 tonnes of copper concentrate to smelters in China.
- Proceeds received in December 2008 from fourth quarter concentrate
shipments totalled $4.8 million, with a further $3.7 million in expected
proceeds from fourth quarter shipments to be received in early 2009.
- One-half of the 2% net smelter return royalty on the Cerro de Maimon
mine was purchased for $1 million.
- Copper concentrate inventories in excess of 1,900 tonnes at year
end.
- Construction of the production facilities was complete at year end
except for work associated with the expanded surface water retention pond.
Fourth Quarter Production and Shipments
During the fourth quarter of 2008, the sulphide plant milled 89,800
tonnes of ore grading 3.5% copper. Copper recoveries in the sulphide mill
were 75% during the quarter but averaged over 80% in December 2008 as
operations were optimized. Production in the fourth quarter of 2008 totalled
approximately 7,700 tonnes of copper concentrate containing approximately 5.1
million pounds of copper; 1,500 ounces of gold and 120,000 ounces of silver.
Concentrate grades averaged approximately 30% copper, 5.9 grams of gold
per tonne and 465 grams of silver per tonne during the fourth quarter of
2008.
Six copper concentrate shipments were made to smelters in China during
the period November 6, 2008 to December 23, 2008 totalling 7,290 dry metric
tonnes.
The oxide plant began operating in mid-December and is currently
running at 75% of design capacity due to the higher than expected clay
content in the oxide ore. Additional flocculent treatment capacity is being
added to the oxide mill circuit to control the higher clay content of the ore
and full production from the oxide plant is anticipated by the end of the
first quarter of 2009.
2009 Outlook
Globestar has used a copper price of $1.50 per pound, a gold price of
$700 per ounce and a silver price of $9.50 per ounce in developing this 2009
outlook.
(See accompanying
Cautionary Statements Concerning Forward-Looking Statements.)
Copper production during
2009 from the Cerro de Maimon mine is expected to total approximately 29
million pounds from the processing of 475,000 tonnes of sulphide ore grading
on average 3.3% copper. Gold and silver contained in the copper concentrate
is forecast to total approximately 7,300 ounces and 368,000 ounces,
respectively. During 2009, Globestar expects to sell a majority of its copper
concentrates under sales contracts to overseas smelters. Discussions are
underway to finalize the marketing contracts relating to the anticipated
production in 2009.
The oxide plant is
scheduled to process 245,000 tonnes of oxide ore producing approximately
14,000 ounces of gold and 280,000 ounces of silver in dore.
Gross revenue from the
sale of approximately 27 million payable pounds of copper, 21,000 ounces of
payable gold and 614,000 ounces of payable silver is projected to be $60
million.
Operating earnings before
depreciation, after $24 million of mine operation costs and $11 million of
treatment, refining and freight charges, are forecast at approximately $25
million. Depreciation is projected to be approximately $10 million.
Globestar has hedged a portion
of its 2009 production with synthetic put options on 6,322,850 pounds of
copper, 32,400 ounces of gold and 480,000 ounces of silver at $2.67 per
pound, $650 per ounce and $11.50 per ounce, respectively.
Net income, after $5
million in general and administrative costs, $11 million in derivative gains,
$2 million of interest costs and $6 million in taxes, is forecast at
approximately $13 million.
Cash flow from operating
activities is projected to be approximately $26 million. Exploration and
sustaining capital expenditures are scheduled to be approximately $4 million
and $3 million, respectively. Cash out-flows for financing activities are
forecast to be $14 million.
Exploration expenditures
during 2009 will be focused on expanding the ore reserves of the Cerro de
Maimon copper-gold-silver mine, drilling in the Bayaguana gold-copper
district located approximately 40 kilometres east of the mine, pursuing new
exploration and acquisition opportunities in Mexico and Central America, and
to a limited extent advancing Globestar's nickel properties in the Dominican
Republic.
Cash balances at the end
of 2009 are projected to be $10 million.
Globestar's net income
and operating cash flow are materially impacted by changes in the price of
copper. At a copper price of $2.00 per pound, net income and operating cash
flow are forecast at approximately $20 million (an increase of 54%) and $32
million (an increase of 23%), respectively. At a price of $1.00 per pound of
copper, net income and operating cash flow are estimated at approximately $6
million (a decrease of 54%) and $19 million (a decrease of 27%),
respectively.
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