VANCOUVER, BRITISH COLUMBIA - Sherwood Copper Corporation (SWC: TSX-V) today announced its results for the three and nine months ended September 30, 2008 including results of operations at its high grade Minto copper-gold mine located in the Yukon. 

 

Sherwood generated $55.1 million of net revenue and $29.9 million of cash flow from mining operations^(x) during the three months ended September 30, 2008 (the ?Current Quarter?) and $116.1 million of net revenue and $68.3 million of cash flow from mining operations^(x) for the nine months ended September 30, 2008 (the ?Current Period?), as detailed below.  During the Current Quarter, Sherwood reported net income of $85.4 million (including $78.2 million in positive adjustments to unrealized forward sales) and an adjusted net income^(x) of $12.1 million (excluding adjustments to unrealized forward sales and other non-cash adjustments).  With the continued dramatic decline in metal prices subsequent to September 30, as at the date of the Company?s Q3 2008 MD&A, the mark-to-market of Sherwood?s copper hedge position was an estimated unrealized derivative instruments asset of approximately $71.2 million positive, for a net positive change of $128.8 million over that on September 30, 2008.  Copper prices declined from US$3.98 to US$1.57 per pound between June 30 and the date of this press release, a fall of over 60%, a fall somewhat mitigated by the fall in the Canadian dollar over the same time period.

 

?The results for the third quarter of 2008 reflects a transition period for the high grade Minto Mine as mill feed came from lower grade stockpiles with lower recoveries while mining operations focused on accessing the highest grade part of the Minto deposit, which will provide the mill feed for the rest of 2008 and all of 2009, and implementing the Phase III mill expansion to 3,200tpd,? said Stephen Quin, President & CEO of Sherwood Copper.  ?Excellent progress towards these objectives was achieved subsequent to the quarter end, with high grade ore (greater than 3% copper) starting to be fed into the mill in mid-October and, since the end of the first week of November, mill throughput has been averaging approximately 3,000 tpd (and individual days exceeding 3,400tpd), feed grade 3.7% copper as the ramp up continues and recoveries 95%.  The latter part of 2008 and all of 2009 should benefit from these efforts, with high grade mill feed and higher mill throughput planned for the entire period which, combined with Sherwood?s significant copper hedge book, puts the Minto Mine in an excellent position to prosper in the current world financial situation.? 

 

Copper production during Current Quarter was lower than during the prior two quarters, at 7.3 million pounds of payable copper, and costs higher at total cash costs^(x) of US$2.10 per pound produced, as mining operations focused on waste stripping in order to access high grade ore in Q4 2008.  As a result, ore processed came from relatively lower grade stockpiles which had lower than average recoveries.  Year-to-date production for 2008 totals 32.0 million pounds of payable copper at total cash costs^(x) of US$1.37 per pound, with Q4 expected to be a very strong production quarter due to higher grades and increased throughput, with costs per pound falling significantly as a result of the resulting higher copper production, reduced stripping, recently completed connection to grid electrical power and falling input costs, such as fuel. 

 

 

 

The Company recorded net income of $85.4 million and $19.0 million in the three months (the ?Current Quarter?) and nine months (the ?Current Period?) ended September 30, 2008 respectively.

Net revenue of $55.1 million on the sale of 19,683 dmt ($2,798 per dmt) of copper concentrate in the Current Quarter generated cash flow from mining operations^(x) of $29.9 million and income from mining operations of $20.4 million.  Net revenue of $116.1 million on the sale of 38,690 dmt ($3,000 per dmt) in the Current Period generated $68.3 million of cash flow from mining operations^(x) and $50.8 million of income from mining operations.  Concentrate sales are summarized in the table below.

 

 

A total of 8,708 dmt of copper concentrate were produced in the Current Quarter for a total of 36,416 tonnes produced during the Current Period.  There was no production in the comparable periods as the Company only achieved commercial production on October 1, 2007.  In the Current Quarter, 19,683 dmt were shipped bringing the total for the Current Period to 38,690 dmt.  At the end of the Current Period 4,421 dmt of copper concentrate with an average attributable cost of $2,619 per dmt (cash $1,845 and non-cash $774) were held in inventory.

 

Production costs (cash and non-cash) per dmt of copper concentrate increased during the Current Quarter to $2,654 in the Current Period compared with $1,333 and $1,373 in the second and first quarters of 2008 respectively as copper concentrate productions level decreased with the lower feed grade of 1.78% compared with 3.25% and 3.46% in the second and first quarters and lower recoveries.  Costs per tonne processed were comparable with prior quarters.  Mill feed in the Current Quarter was primarily from lower grade ore stockpile material while the mine concentrated on stripping the Phase III area of the main pit to release higher grade ore for processing in the fourth quarter of 2008 and all of 2009.  This lower grade material also had lower recoveries.  With access to significantly higher grade ore in the fourth quarter of 2008 and into 2009, a return to high recoveries and lower cost grid electrical power, unit production costs are expected to fall going forward.

 

 

The difference in the metal produced and the metal sold is due to timing differences between when the material is produced at the mine and when a sale can be recognized under Sherwood?s revenue recognition policy.  Under that policy, in order for a sale to be recognized, the metals have to be sold.  Metals produced but not sold are carried as inventory at the cost of production.  This timing difference is also affected by the availability of road transport from the mine to the Port of Skagway due to the freeze up and breakup of the Yukon River in fall and spring of each year.  

 

The Company reported net income of $85..4 million in the Current Quarter compared with a net loss of $36.9 million for the three months ended September 30, 2007 (the ?Comparative Quarter?).  The main reasons for this improvement was the generation of income from mining operations of $18.6 million and the recording of $78.2 million in a unrealized gain on derivative instruments compared to a loss from mining operations of $1.5 million and a loss of $38.1 million on derivative instruments in the Comparative Quarter; the quarters are not readily comparable from a mining operation perspective as the Company was in the development stage in the Comparative Quarter.

 

The Company reported a net income of $19.0 million in the Current Period compared with a net loss of $59.7 million for the nine months ended September 30, 2007 (the ?Comparative Period?). The main reasons for this improvement were income from mining operations of $45.8 million and an unrealized gain on derivative instruments of $1.7 million in the Current Period compared with a loss of $5.2 million from mining operations as the Company was still in the developments stage and an unrealized loss on derivative instruments of $61.0 million due to higher metal prices in the Current Period.

 

Sherwood?s net income or loss may vary significantly from quarter to quarter based on revenue recognition timing.  In addition, the mark-to-market of forward metal sales, expenses for stock based compensation and foreign exchange adjustments, all of which are non-cash adjustments, can swing significantly from period to period and therefore affect reported net income without any impact on cash or the financial strength of the Company. 

 

Additional details on the financial and production results are available in the Company?s unaudited consolidated interim financial statements and management discussion and analysis for the three and nine month periods ended September 30, 2008 filed on SEDAR at www.sedar.com.

 

Key operating statistics for the Minto Mine in the first, second and third quarters and year to date for 2008 are presented below:

 

 

19,683 dmt of copper concentrate were shipped in the Current Quarter.  The Company received provisional payments for these concentrates based on the copper price at time of shipment.  The final price is based on the average copper price in the months October and November of 2008.  Due to the substantial reduction in the copper price over the past few months the Company will have to repay an estimated US$22.5 million of these provisional payments ($US6.0 million has been repaid to date).  The Company brought forward copper hedge positions to cover approximately 100% of these metal sales to mitigate the reduced final settlement pricing by US$13.2 million.

 

As a result of delays in accessing the high grade ore following the previously reported flood event during the Current Quarter, processing of the high grade ore was delayed into Q4-2008. This delay, resulting in an extended period of processing lower grade material with lower recoveries, combined with a somewhat slower the planned ramp up to Phase III production levels, is expected to result in a reduction in 2008 copper production below that previously forecast.  However, since the high grade ore has now been accessed and mill throughput is climbing towards Phase 3 capacity, any deferred very high grade production will be processed in early 2009.

 

The technical information in this news release has been prepared in accordance with Canadian regulatory requirements set out in National Instrument 43-101 and reviewed by Stephen P. Quin, P. Geo., President  & CEO for Sherwood Copper Corporation.  The operational activities carried out at the Minto Mine have been carried out under the supervision of Randall Thompson, General Manager of the Minto Mine, and Kevin Weston, Chief Operating Officer for Sherwood Copper, who have reviewed and approved the information contained herein.  The exploration activities at the Minto Mine and Kutcho Project have been carried out under the supervision of Brad Mercer P. Geo., Sherwood?s VP Exploration.

 

Additional information on Sherwood and its Minto Project can be obtained on Sherwood?s website at http://www.sherwoodcopper.com.

 

 

Stephen P. Quin 604.687-7545 or Chris Curran 604-687-7545