Constellation Copper Reports First Quarter 2007 Financial Results

Denver, Colorado, May 10, 2007 - Constellation Copper Corporation ("Constellation" or the "Company") (TSX: CCU) is pleased to announce its financial results for the quarter ended March 31, 2007.  All dollar amounts are in US dollars unless otherwise stated.

Highlights

• First full quarter of commercial production at Lisbon Valley mine with production of 5,391,000 pounds of copper cathode at a cash cost of $1.92 per pound, excluding royalties and taxes of $0.05 per pound 
• Copper sales during the first quarter of 2007 were 5,871,000 pounds at an average price of $2.70 per pound 
• Continued drilling program at the San Javier property in Sonora, Mexico;  in April 2007, the Company announced an initial mineral resource for the deposit
• Focus during first quarter of 2007 at Terrazas property in Chihuahua, Mexico on engineering and estimating capital requirements and operating costs for an agitation leach processing alternative
• Received cash proceeds of $56,425,000, net of $2,545,000 of issuance costs, from sale of Cdn.$69 million 5.5% convertible unsecured senior debentures due in 2012
• Repaid entire Lisbon Valley project financing of $31.5 million, including interest, with proceeds from sale of convertible debentures

First full quarter of commercial production at Lisbon Valley

Copper production was 5,391,000 pounds and copper sales were 5,871,000 pounds during the first quarter of 2007.  During the first quarter of 2007, crusher throughput was lower than anticipated.  Also during the first quarter of 2007, low temperatures required restricting the flow of pregnant leach solution ("PLS") through the process facility.  The Company completed a conversion to a parallel flow configuration during March 2007, which is expected to increase PLS flow to 5,000 gallons per minute from the original design of 4,300 gallons per minute, a 16% increase.   The Company is currently renegotiating its primary sulfuric acid supply contract to change to a long term, fixed price contract based on market prices from the current contract price, which is adjusted upward if the price of copper increases above an indexed price.

Total tons mined in the first quarter of 2007 increased significantly compared with the first quarter of 2006 as mining progressed deeper into the deposits and encountered more waste cover which needed to be moved to access new ore.  The waste to ore ratio has increased significantly quarter over quarter, but is still below the average life of mine ratio of 2.4:1 for the project.  An increase in waste is expected as mining continues to access deeper ore zones and the ore within the higher grade GTO deposit is exposed.

The grade of ore crushed and placed on the leach pad in the first quarter of 2007 increased significantly compared with the first quarter of 2006, as the deeper and higher grade portions of the deposits are accessed.  The grade of ore mined and placed is projected to continue to increase throughout 2007.  Total tonnage to the pad in the first quarter of 2007 was constrained by cold weather operating conditions, and averaged approximately 13,000 tons per day against a forecast of 16,000 tons per day.  The lower than expected average daily throughput rate resulted in lower than forecasted total copper to the leach pad and lower than forecasted copper production for the first quarter of 2007. 

Construction of a Phase 3 pad expansion and intermediate leach solution ("ILS") pond began the first week of May.  Completion of the pad expansion and ILS pond will allow the Company to load more ore on the leach pad and re-circulate or "stack" low-grade PLS solutions coming off of the leach pad to increase over time the PLS grade sent to the solvent extraction circuit.

Exploration and Development

During the quarter ended March 31, 2007, the Company continued evaluation of drilling results at the San Javier project in Sonora, Mexico.  The Company is currently in the in-fill drilling second phase of a three phase program.  The boundary definition drilling first phase was completed in early 2007.  The final resource estimation phase is expected to be completed in late 2007.  A preliminary economic scoping study is expected in mid-year 2007. 

During the first quarter of 2007, the Company continued engineering and estimating capital requirements and operating costs for the agitation leach processing alternative at the Terrazas property in Chihuahua, Mexico. The current focus is on a fully integrated plant that can produce all of the sulfuric acid and generate all of the power required to produce nominally 9,000 tonnes per annum cathode copper and 70,000 tonnes per annum zinc metal.  The Company is also evaluating other zinc resources that would be amenable to agitation leaching to enhance the economics of the project. 

In May 2007, the Company amended the Option to Purchase Agreement to acquire the mineral rights covering the Terrazas zinc-copper project located in Chihuahua, Mexico.  The amendment extends the option period for up to eighteen months from April 26, 2007.  In consideration for the amendment the Company issued 25,000 shares of its common stock and while the extension is in effect will make monthly payments of $30,000 to the owner of the mineral rights.  After 12 months, the Company must issue 25,000 shares in order to continue the extension for another six months.

Results of Operations

The Company had a net loss of $6,794,000 ($0.04 per share) for the first quarter of 2007, its first full quarter of commercial production, compared to a net loss of $13,044,000 ($0.09 per share) for the first quarter of 2006. 

Revenues during the first quarter of 2007 were $15,842,000 from the sale of 5,871,000 pounds of cathode copper at an average price of $2.70 per pound.   Costs of sales, excluding depreciation and amortization costs, were $11,471,000, $1.95 per pound of copper sold.  Non-cash costs of $2,086,000, $0.36 per pound, are combined with non-operating depreciation and amortization of $20,000 and reported separately on the consolidated statement of operations.  Depreciation and amortization in the first quarter of 2006 was $15,000, all relating to corporate activities.  All mine operating expenditures in the first quarter of 2006 were capitalized.

The net loss for the first quarter of 2007 included a realized loss of $4,340,000 on derivative instruments, including $3,204,000 on settlement of forward sales contracts, $410,000 on the expiry of put options and $726,000 final settlement for December 2006 deliveries of cathode copper under t he terms of the Company's offtake agreement. 

Also during the first quarter of 2007, the Company recorded a $2,605,000 loss relating to unamortized financing costs from the Lisbon Valley project loan, interest expense of $878,000, a foreign exchange loss of $664,000, and a gain on the sale of land of $585,000.  Interest expense was capitalized prior to achieving commercial production.  The foreign exchange loss relates primarily to the strengthening of the Canadian dollar to the US dollar for the outstanding Cdn.$69.0 million convertible debentures and accrued interest.  The Company had an unrealized loss on derivative instruments of $12,656,000 and a gain on the sale of an investment of $696,000 in the first quarter of 2006.

General and administrative expenses were $796,000 for the quarter ended March 31, 2007, compared to $697,000 in the quarter ended March 31, 2006.  Stock based compensation expense was $386,000, net of $54,000 capitalized, and $135,000, with no amounts capitalized, for the quarters ended March 31, 2007 and 2006, respectively.  The increase in stock based compensation expense relates primarily to a grant of 4,015,000 options during June 2006. 

During the first quarter of 2007, the Company expensed $107,000 for exploration activities on properties on which mineral resources had not yet been identified compared to exploration expense of $207,000 in the first quarter of 2006. In accordance with its accounting policies, in the first quarter of 2007 the Company began capitalizing costs on the San Javier project.  In prior periods costs related to San Javier were expensed.  Interest income was $109,000 in the first quarter of 2007 compared to $88,000 in the first quarter of 2006.

Cash Flows

The Company's cash balance at March 31, 2007 was $28,059,000 compared to $5,726,000 at December 31, 2006.  The higher cash balance is due primarily to proceeds from the issuance of convertible debentures, partially offset by the repayment of the Lisbon Valley project financing. 

Cash used in operating activities was $3,752,000 for the quarter ended March 31, 2007, compared with $2,895,000 for the first quarter of 2006.  The increase in cash used in operating activities in the first quarter of 2007 relates primarily to the settlement of forward contracts and provisional sales agreements and net increases in working capital, partially offset by the net cash generated from the sale of copper.  The settlements of forward sales contracts required by the Lisbon Valley project financing commenced in April 2006.  During the first quarter of 2007, the Company's forward sales settlements required total cash payments of $3,204,000.   

Cash used in investing activities was $1,355,000 in the first quarter of 2007 compared to $13,158,000 during the quarter ended March 31, 2006.  Expenditures in the quarter ended March 31, 2007 on mineral properties and property, plant and equipment were $1,211,000 and $1,424,000, respectively.  In connection with the repayment of the Lisbon Valley financing in March 2007, the lender returned $191,000 of restricted cash to the Company.  During the first quarter of 2007, the Company also paid a $518,000 deposit on the lease of a new loader and received net proceeds of $1,640,000 for the sale of land located in Grand County, Utah.

In March 2007, the Company amended its credit agreement with Investec Bank (UK) Limited, increasing its overall loan facility by $1,500,000.  Other terms remained substantially unchanged.  The proceeds were used to fund settlements of forward sales contracts originally due in February and March 2007.  Pursuant to the amendment, the Company issued to the lender 1,271,186 warrants to purchase common shares at an exercise price of $1.18 (approximately Cdn$1.36 when issued) per share.  In connection with the amendment, the Company paid $57,000 in financing costs. 

Also in March 2007, the Company received gross proceeds of $58,970,000 from the sale of Cdn.$69.0 million of convertible debentures.  In connection with the sale, the Company paid $2,545,000 in financing costs (Cdn.$2,974,000), including commissions  The net proceeds of the convertible debentures were allocated between debt and equity components based on the relative fair value of each component.  The net proceeds allocated to the debt component were $41,629,000 and the remainder of $14,796,000 was allocated to equity.  A portion of the proceeds was used to repay the outstanding Lisbon Valley loan principal of $30,685,000 and accrued interest of $768,000.  The remainder of the proceeds will be used to settle some or all of the outstanding forward sales, and for working capital.

Forward sales contracts are settled based on the difference between the average monthly London Metals Exchange ("LME") price and the contract price.  The average LME price of copper has increased dramatically from $2.57 per pound in January and February 2007 to $3.52 per pound in April 2007.  As a result of the increase in copper prices, the cost to close out the outstanding forward sales contracts, in advance of the original contract maturity dates, has also risen significantly.  The remaining outstanding forward sales contracts will be closed out in advance of scheduled monthly maturities depending on market conditions. 

During the first quarter of 2007, a total of 300,000 options were exercised at a price of Cdn.$1.00 per share.  Proceeds from the exercise were $257,000.

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

As previously announced, the Company will host a conference call on Thursday, May 10, 2007 at 12:00 PM (EDT), to discuss 2007 first quarter results.   To participate in the conference call, please dial (416) 646-3097 (Toronto and surrounding area), (514) 807-8791 (Montreal and surrounding area, or Toll free 1-800-814-3911.  To ensure your participation, please call approximately five minutes prior to the scheduled start of the call.

THIS PRESS RELEASE CONTAINS FINANCIAL STATEMENTS.  CLICK HERE TO VIEW ORIGINAL PDF DOCUMENT.

For further information please contact:

Constellation Copper Corporation
John A. Labate, Chief Financial Officer
Michelle Hebert, Manager-Corporate Affairs
Tel: (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
Media - Lynda Martineau lmartineau@renmarkfinancial.com
Tel.: (514) 939-3989 
Fax : (514) 939-3717
www.renmarkfinancial.com
 

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 recover ability 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 materi ALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS.  ACCORDINGLY, READERS SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS.