(All figures, except per share amounts, are in $ US thousands unless otherwise
stated or unless context requires otherwise)
Quadra Mining Ltd. (the "Company" or "Quadra") (TSX:QUA) announces net earnings
of $80.5 million or $0.89 per share (basic) for the year ended December 31, 2009
compared to $38.6 or $0.61 per share (basic) for the year ended December 31,
2008. Earnings in 2009 benefited from a strong recovery in copper prices which
increased from $1.32/lb. to $3.33/lb. over the course of 2009. Earnings in 2009
were also impacted by a $54.5 million accounting loss on derivatives which was
also a result of the increasing copper prices in the year. Adjusted earnings,
which exclude the impact of the derivative loss, the gains on marketable
securities and tax adjustments, were $117.5 million or $1.31 per share (basic)
for the year ended December 31, 2009 compared to $13.2 million or $0.21 per
share (basic) for the previous year. Operating cash flow before changes in
working capital of $141.9 million or $1.58 per share in 2009 was slightly lower
compared to $155.3 or $2.47 per share in 2008. During the year 2009, Quadra
recorded revenues of $459.5 million from the sale of 144.7 million pounds of
copper and 95,735 ounces of gold.
Earnings for the fourth quarter of 2009 increased to $46.4 million or $0.47 per
share (basic) from a loss of $126.1 million or $1.94 per share (basic) in the
fourth quarter of 2008, due to higher copper prices and to higher metal sales
volumes in the fourth quarter of 2009. Adjusted earnings for the quarter, which
exclude the impact of the derivative loss, the gains on marketable securities
and tax adjustments, were $50.9 million or $0.51 per share in the fourth quarter
of 2009.
Operating and
Financial Summary
US $ 000s (except Three months ended Year ended
per share data and December 31, December 31, December 31, December 31,
production data) 2009 2008 2009 2008
---------------------------------------------------------------------------
Revenues 170,493 (7,058) 459,541 487,501
Copper produced
(million lbs) 46.7 35.3 164.0 159.7
Copper sales
(million lbs) 45.0 29.2 144.7 147.2
Gold produced (ounces) 25,148 26,913 98,970 137,628
Gold sales (ounces) 24,057 22,844 95,735 125,712
Adjusted earnings (1) 50,858 (154,834) 117,510 13,217
Adjusted earnings per
share (basic) $ 0.51 $ (2.38) $ 1.31 $ 0.21
Earnings for the period 46,454 (126,080) 80,482 38,609
Basic earnings per share $ 0.47 $ (1.94) $ 0.89 $ 0.61
Diluted earnings per share $ 0.46 $ (1.94) $ 0.89 $ 0.60
Cash flow from operations
before working capital (2) 51,665 (70,854) 141,891 155,304
Cash flow from operations
before working capital -
per share $ 0.52 $ (1.09) $ 1.58 $ 2.47
Net changes in non-cash
working capital (3,448) (28,263) (74,532) (5,220)
Cash flow from operations 48,217 (99,117) 67,359 150,084
(1) Adjusted earnings is a non-GAAP financial measure and consists of net
earnings with adjustments made to exclude the loss (gain) on
derivatives, gains on marketable securities and the tax impact of these
items. See reconciliation of adjusted earnings in section below "Non-
GAAP Financial Measures".
(2) Cash flow from operations before working capital is a non-GAAP financial
measure and consists of cash provided from operating activities less net
changes in non-cash working capital.
Paul Blythe, President and CEO of Quadra comments, "During 2009 we had to
overcome several challenges at Robinson and Carlota, and we still succeeded in
delivering solid financial results despite the low copper price during the early
part of the year. We are pleased with the overall production of 164.0 million
pounds of copper and 98,970 ounces of gold. As previously announced, (see Press
Release: January 11, 2010) the operating performance at Robinson and Carlota
improved considerably during the fourth quarter and our new Franke Mine achieved
commercial production, becoming our third asset to contribute revenue on the
statement of earnings."
"Our strong financial results for the fourth quarter 2009 were a result of the
improving copper price, which increased from $2.78 per pound on September 30th
to $3.33 at year end, and also from strong sales volumes, including the first
copper sales from our new Franke mine."
Paul Blythe concludes, "In 2009 we reached our fifth year anniversary as a
public Company and with the acquisition of Centenario Copper we brought the
Franke project into operation as our third producing mine. We produced a
positive study on Sierra Gorda and our memorandum of understanding to form a
Strategic Joint Venture with State Grid International Development would address
the funding requirements for the Sierra Gorda project and allow development to
proceed rapidly once we have the feasibility study and permits in place. The
Company is in a strong position to continue with its growth mandate of becoming
a producer of approximately 500 million pounds of copper a year."
On Monday, March 8th 2010 at 10.00am ET (7.00am PST) senior management will host
a conference call to report on the Company's financial results and performance
for the fourth quarter and year ended December 31st, 2009. The Memorandum of
Understanding to establish a Strategic Joint Venture with State Grid
International Development Limited will also be discussed. The North American
toll free number for this conference call is 1-866-226-1792 while the
international number is 1-416-340-2216. To access the simultaneous webcast,
visit Quadra's website at www.quadramining.com or www.InvestorCalendar.com. The
playback version of the call will be available until Monday, March 15th 2010 at
1-416-695-5800 or North American toll free 1-800-408-3053 and using the pass
code: 4012115.
Mr. Paul Blythe, President & CEO of Quadra Mining Ltd. (TSX:QUA) will also be
presenting on Monday March 8th, 2010 at 3.40pm (ET) at the PDAC Conference
Exchange Forum, being held in Room 803AB at the Metro Toronto Convention Centre.
The following Management Discussion and Analysis ("MD&A") of Quadra Mining Ltd.
and its subsidiaries ("Quadra" or the "Company") has been prepared as at March
7, 2010 and is intended to be read in conjunction with the accompanying audited
consolidated financial statements for the year ended December 31, 2009. This
MD&A contains 'forward looking information' and reference to the cautionary
statement at the end of this MD&A is advised. Additional information relating to
the Company, including its Annual Information Form, is available on the SEDAR
website at www.sedar.com. The Company is a reporting issuer in all provinces and
territories of Canada and its common shares are traded on the Toronto Stock
Exchange under the symbol: QUA.
All financial information in this MD&A is prepared in accordance with the
Canadian Generally Accepted Accounting Principles and all dollar amounts are
expressed in thousands of United States dollars unless otherwise indicated.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Quadra is a mining company that owns and operates the Robinson copper mine
("Robinson" or "Robinson Mine") near Ely, Nevada, which has been in production
since 2004, the Carlota mine ("Carlota" or "Carlota Mine"), a heap leach - SX/EW
copper operation in Arizona, which commenced operations in 2008 and the Franke
mine ("Franke" or "Franke Mine"), a heap leach - SX/EW copper operation in
northern Chile, which achieved commercial production in October 2009. The
Company also owns the Sierra Gorda project ("Sierra Gorda"), an advanced
copper-molybdenum project in northern Chile, and the Malmbjerg molybdenum
project ("Malmbjerg") in Greenland. Quadra's strategic plan is based on growing
to a production rate in excess of 500 million pounds of copper per year from
diverse operations and with a pipeline of development projects in place for long
term sustainability and growth.
FOURTH QUARTER AND RECENT HIGHLIGHTS:
- For the fourth quarter of 2009, the Company recorded earnings of $46.4 million
or $0.47 per share (basic) driven by strong copper prices and sales volumes.
- Adjusted earnings(i) were $50.9 million or $0.51 per share (basic) after
making adjustments to exclude the loss on derivatives and gains on marketable
securities, the tax effects of these items and taxes in respect of prior years.
- Total revenues from the Company's three operating mines were $170.5 million
for the fourth quarter of 2009 compared to ($7.1) million for the same period of
2008. All revenues in 2008 were generated by the Robinson Mine.
- The company produced 46.7 million pounds of copper and 25,148 ounces of gold,
which slightly exceeded revised guidance.
- Cash flow from operating activities (before working capital changes)(i) was
$51.7 million or $0.52 per share (basic) compared to ($70.9) million or ($1.09)
per share (basic) for the fourth quarter of 2008.
- The Franke Mine achieved commercial production and generated revenues of $20.8
million from the sale of 6.9 million pounds of copper cathodes.
- The Company executed a memorandum of understanding with State Grid
International Development, a wholly owned subsidiary of State Grid Corporation
of China, the largest Chinese utility company and a major end user of copper,
for the formation of a joint venture (the "Strategic JV"). The Strategic JV will
develop and operate Quadra's Sierra Gorda project and Franke Mine and seek to
invest in other prospective copper assets, initially in Chile (see section below
"Subsequent Event").
2009 HIGHLIGHTS:
- Earnings for the year ended December 31, 2009 were $80.5 million or $0.89 per
share (basic) compared to earnings of $38.6 million or $0.61 per share (basic)
in 2008.
- Adjusted earnings(i) for 2009 were $117.5 million or $1.31 per share (basic)
compared to $13.2 million or $0.21 per share (basic) in 2008, after making
adjustments to exclude the loss on derivatives and gains on marketable
securities, the tax effects of these items and taxes in respect of prior years.
- Total revenues from the Company's three operating mines were $459.5 million
for 2009 compared to $487.5 million for 2008. All revenues in 2008 were
generated by the Robinson Mine.
- The Company produced 164.0 million pounds of copper and 98,970 ounces of gold
in 2009 compared to 159.7 million pounds of copper and 137,628 ounces of gold in
2008.
- The cash cost per pound of copper produced(i) at the Robinson Mine was $1.25
per pound in 2009 compared to $1.15 per pound in 2008. In 2009, the Carlota and
Franke Mines were ramping up production and therefore the cash cost per pound of
copper produced number was not comparable.
- Cash flow from operating activities (before working capital changes)(i) was
$141.9 million or $1.58 per share (basic) compared to $155.3 million or $2.47
per share (basic) for 2008
- Robinson and Carlota continue to sustain excellent safety records with a
combined Total Incidence Rate of 1.59 compared to the U.S. average of 3.24.
- In April 2009, the Company completed the acquisition of Centenario Copper
Corporation ("Centenario"), and its 100% owned Franke Mine, in exchange for
14,368,563 Quadra common shares and 574,000 Quadra options valued at $66.9
million.
- In July 2009, the Company announced the completion of a scoping study for the
Sierra Gorda project, which included a preliminary economic assessment and an
updated mineral resource estimate that recommended proceeding with
pre-feasibility and feasibility studies.
- In April 2009, the Company completed a bought-deal equity financing for gross
proceeds of $71.6 million.
- The Company ended 2009 with $133.2 million of cash on hand.
(i) See "Non-GAAP Financial Measures" below for additional information.
FINANCIAL PERFORMANCE
Earnings
The Company recorded earnings of $80.5 million or $0.89 per share (basic) for
the year ended December 31, 2009, compared to earnings of $38.6 million or $0.61
per share (basic) in 2008. Earnings in 2009 benefited from a strong recovery in
copper prices which increased from $1.32/lb. to $3.33/lb. over the course of the
year. Earnings in 2009 were also impacted by a $54.5 million accounting loss on
derivatives which was also a result of the increasing copper prices. Although
the average copper price in 2008 was higher than the current year, earnings and
revenues in 2008 were impacted by the substantial fall in copper prices late in
the year, and by a $95.7 million write down of the Malmbjerg molybdenum project.
Earnings for the fourth quarter of 2009 were $46.5 million or $0.47 per share
(basic) compared to a loss of $126.1 million or $1.94 per share (basic) for the
fourth quarter in 2008. The increased earnings in 2009 are primarily due to
higher copper prices and to higher metal sales volumes in the fourth quarter of
the current year. The fourth quarter earnings in 2008 were also impacted by
significant negative provisional pricing adjustments and by a $95.7 million
write down of the Malmbjerg project.
The copper price increased from $2.79 per pound on September 30, 2009 to $3.33
per pound on December 31, 2009 resulting in positive adjustments on final
settlement of provisionally priced sales recorded in the fourth quarter. Whereas
in the fourth quarter of 2008, copper prices fell sharply from $2.91/lb to
$1.33/lb resulting in significant negative provisional pricing adjustments (see
section below "Revenues").
Operating Income
Operating income for the quarter and year ended December 31, 2009 and 2008 was
as follows:
Three months Three months Year Year
ended ended ended ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
---------------------------------------------------
Robinson 51,696 (78,173) 142,479 176,524
Carlota 7,192 (15,249) 18,346 (15,249)
Franke 4,469 - 4,469 -
---------------------------------------------------
Operating income 63,357 (93,422) 165,294 161,275
---------------------------------------------------
---------------------------------------------------
Operating income for 2009 was broadly in line with 2008, as the decline in
Robinson's operating income was offset by increased operating income from the
Carlota Mine and a first contribution from Franke. Robinson's operating income
for 2009 declined due to lower revenues (see "Revenues") partially offset by
lower royalties and mineral taxes. Carlota's operating income in 2009 included
the reversal of a $15.2 million start-up inventory adjustment which was recorded
in the fourth quarter of 2008 due to the significant reduction in copper prices
late last year.
Operating income for the fourth quarter of 2009 was significantly higher than
fourth quarter of 2008. The increased operating income is primarily due to
higher average copper prices and higher sales volumes in 2009 (see "Revenues").
The 2008 fourth quarter operating loss includes negative provisional pricing
adjustments of $65 million related to third quarter sales at Robinson, and a
$15.2 million leach pad inventory write down at Carlota.
Revenues
To view the Revenues table, please click on the following link:
http://media3.marketwire.com/docs/qua38rev.pdf
Robinson revenues
At the Robinson Mine, revenues are generated by the sale of copper from
concentrates. Revenues are generally recognized at the time of delivery to a
customer based on metal prices at that time, however, under Robinson's current
sales contracts, which follow normal industry practice, final pricing for copper
sold in concentrate is generally set at least three months after the time of
arrival of a shipment at the customer's port of delivery. As a result,
Robinson's quarterly revenues include estimated prices for sales, based on
forward copper prices at quarter end, as well as pricing adjustments for sales
that occurred in previous quarters, based on the actual price received and the
price at quarter end for sales from previous quarters that were not settled in
the quarter.
In 2009, revenues from Robinson concentrate sales were lower than 2008 due to
lower sales volumes and lower average copper prices. The lower sales volumes in
2009 were a result of lower copper and gold production in the current year (see
"Review of Operations and Projects").
In the quarter ended December 31, 2009, revenues from concentrate sales at the
Robinson Mine were significantly higher than the fourth quarter of 2008 due to
higher sales volumes, higher copper prices and the impact of provisional price
adjustments. Fourth quarter revenues in 2008 included negative provisional price
adjustments of $85 million, which exceeded the initial provisional revenues of
$78 million recorded on fourth quarter shipments, and therefore caused negative
net revenues. In the fourth quarter of 2009, copper prices increased resulting
in positive pricing adjustments of $3.7 million related to the third quarter
sales. In addition, the Company recorded a positive price adjustment of $10
million related to the fourth quarter shipments from Robinson which were
revalued using a copper price of $3.34 at December 31, 2009.
At September 30, 2009, receivables included approximately 16.6 million pounds of
copper provisionally valued at $2.79 per pound. During the fourth quarter, these
receivables were settled at an average final price of $3.02 per pound. In the
fourth quarter, Robinson shipped approximately 32 million pounds of copper at an
average provisional price of $2.85 per pound, of which 12.5 million pounds was
settled during the quarter at an average final price of $3.06 per pound. At
December 31, 2009, receivables include 20 million pounds of copper which has
been provisionally valued at $3.34 per pound.
Carlota revenues
At the Carlota Mine, revenues are generated by the sale of copper cathodes. The
pricing of copper cathode sales is generally set in the month of shipment and
therefore pricing adjustments in subsequent periods are minimal.
In 2009, Carlota recorded revenues of $61.1 million from the sale of 26.3
million pounds of copper cathode. For the fourth quarter of 2009, Carlota
generated $19.2 million revenues from the sale of 6.4 million pounds of copper
cathode. Carlota commenced cathode production late in the fourth quarter of 2008
but did not sell any product in 2008.
Franke revenues
Revenues are generated by the sale of copper cathodes. Under Franke's current
sales contracts, final pricing for copper sold is generally set one month after
the time of shipment. As a result, Franke's quarterly revenues include estimated
prices for sales, based on forward copper prices at quarter end, as well as
pricing adjustments for sales that occurred in previous quarters, based on the
actual price received.
In the fourth quarter of 2009, Franke commenced recognizing revenues and
recorded revenues of $20.8 million from the sale of 6.9 million pounds of copper
cathode.
Operating expenses
To view the Operating expenses table, please click on the following link:
http://media3.marketwire.com/docs/qua38opex.pdf
Robinson
Cost of sales at Robinson were lower in 2009 than 2008 as a result of the lower
sales volumes in the current year and the capitalization of $17.8 million of
stripping costs related to the new Ruth pit area. No stripping costs were
capitalized in 2008.
Fourth quarter cost of sales at Robinson in 2009 were in line with the same
period in 2008 as sales volumes and operating costs were generally in line with
the fourth quarter of 2008.
Amortization, depletion, depreciation and accretion were slightly higher in 2009
than in 2008. The increased amortization, depletion, depreciation and accretion
in the fourth quarter of 2009 are mainly due to the amortization of stripping
costs that were capitalized earlier in 2009.
Royalties and mineral taxes were lower in 2009 than in 2008 primarily due to the
lower average copper price and lower sales volumes. Royalties and mineral taxes
in for the fourth quarter of 2009 were higher than the same quarter of 2008
mainly due the higher copper prices and higher sales volumes in the fourth
quarter of 2009.
Carlota
In 2009, cost of sales at Carlota was $43.9 million. No cost of sales was
recorded at Carlota in 2008.
In the fourth quarter of 2008 Carlota recorded an adjustment of $15.2 million to
reduce the carrying value of its copper cathode and leach pad inventory to net
realizable value. During 2009 Carlota recorded reversals of this inventory
adjustment in the amount of $9.7 million due to the increase in copper prices
and the resulting increase in the net realizable value of the inventory. The
inventory adjustment has been fully reversed as of December 31, 2009.
Amortization, depletion, depreciation and accretion were $5.4 million in 2009.
The Carlota Mine was under construction during 2008 and no sales were recorded
and therefore, no amortization, depletion and depreciation was recorded for
Carlota in 2008.
Royalties and mineral taxes at Carlota were $3.1 million in 2009. No royalties
and mineral taxes were recorded in 2008 as the Carlota Mine was in a
pre-production phase.
Franke
The Franke Mine achieved a commercial rate of ore production and commenced
recognizing revenues and operating expenses during the fourth quarter of 2009.
The Franke Mine recorded cost of sales of $14.3 million and amortization,
depletion and depreciation of $2.1 million in the fourth quarter of 2009.
General & administrative and other expenses
General and administrative expenses for 2009 were $18.5 million compared to
$16.5 million in 2008, reflecting the Company's increased activity level. In
2009, stock-based compensation expense was $6.8 million compared to $9.1 million
in 2008. Stock-based compensation expense includes the amortization of the fair
value of the options granted, as calculated on the date of grant, over the two
year vesting period and the accrual of the fair value restricted stock units
over their vesting period. Options granted in 2009 had a lower initial fair
value than 2008 option grants, which resulted in lower amortization in 2009.
During 2009, the Company received cash proceeds of $23.3 million from the
exercise of put options for 35 million pounds of copper (see section below
"Financial Instruments"). However, the significant increase in the price of
copper during 2009 has resulted in a decrease in the fair value of the Company's
copper collars, put options and other derivatives, resulting in a loss on
derivatives of $54.5 million in 2009 and $14.8 million for the fourth quarter of
2009. In 2008, the Company recorded a gain on derivatives of $31.1 primarily
related to an increase in value of copper put options as the copper price
decreased in the latter half of 2008.
In 2009, the Company recorded net interest and other income of $3.6 million
compared to $4.3 million in 2008. Other income in 2009 primarily related to
realized and unrealized gains on marketable securities, partially offset by
interest and other expenses. In 2008, other income primarily related to interest
income and a gain on the sale of marketable securities, partially offset by
interest and other expenses.
In the fourth quarter of 2009, net interest and other income increased to $4.2
million from $0.6 million in the same period of 2008, primarily due to an
unrealized gain on marketable securities of $5.8 million in the fourth quarter
of 2009.
In the fourth quarter of 2008, the Company recorded a $95.7 million write down
related to the impairment of the Malmbjerg mineral property.
In 2008, the Company repaid its Senior Credit Facility and recorded a loss of
settlement of debt of $15.9 million.
The Company recorded an income tax expense of $11.7 million in 2009, compared to
$17.2 million in 2008. The tax expense in 2009 has been recorded based on an
annual effective tax rate of 24% (2008 - 23%). The 2009 income tax expense
includes a recovery of $10.3 million to set up Chilean tax assets not previously
recognized. This recovery was recorded in the fourth quarter of 2009. The 2008
income tax expense also includes a future income tax recovery of $17.8 million
related to the write down of the Malmbjerg mineral property.
REVIEW OF OPERATIONS AND PROJECTS
Historical production and forecasted production from the Company's three
operating mines is summarized as follows:
Three months ended Year ended
December 31 December 31 FORECAST 2010
------------------ -------------- -------------
2009 2008 2009 2008 2010
Copper production
(Million lbs)
Robinson Mine 29.3 34.5 122.5 159.7 135
Carlota Mine 8.0 - 28.0 - 50
Franke Mine 9.4 - 13.5 - 65
------------------ -------------- -------------
46.7 34.5 164.0 159.7 250
Gold production (ozs)
Robinson Mine 25,148 26,913 98,970 137,628 80,000
ROBINSON MINE (NEVADA)
Three months ended Year ended
December 31 December 31
------------------ -----------------
2009 2008 2009 2008
Copper production (Million lbs) 29.3 34.5 122.5 159.7
Gold production (ozs) 25,148 26,913 98,970 137,628
Waste mined (Tonnes 000's) 13,893 13,527 46,016 57,784
Ore mined (Tonnes 000's) 2,850 3,362 14,478 14,396
Ore milled (Tonnes 000's) 3,422 3,358 13,548 13,842
Copper grade (%) 0.59 0.69 0.64 0.68
Gold grade (g/t) 0.31 0.48 0.31 0.46
Copper recovery 65.9% 68.1% 63.6% 76.7%
Gold recovery 73.1% 52.2% 73.0% 66.8%
Onsite costs $60,241 $59,659 $206,334 $237,570
Offsite costs $12,637 $13,089 $ 46,583 $ 62,693
------------------ -----------------
Total onsite and offsite costs $72,878 $72,748 $252,917 $300,263
Cash cost per pound of copper
produced $ 1.51 $ 1.58 $ 1.25 $ 1.15
Capital expenditure $ 7,604 $14,699 $ 21,370 $ 49,426
Total ore and waste mined, together with copper produced were all lower in 2009
than in 2008 due to changes required to the mine plan as a result of an MSHA
ruling on the operations in the Veteran pit and to the highly variable
metallurgical performance of the Wedge pit. Annual production performance for
2009 was in line with the revised guidance of 120-125 million pounds of copper
and slightly exceeded revised guidance of 90,000 ounces of gold. Copper recovery
declined due to higher soluble copper (non-recoverable) in 2009 while gold
production in 2009 decreased compared to 2008, primarily due to declining head
grade for the year.
Copper production in the fourth quarter of 2009 was lower than the fourth
quarter of 2008. During the fourth quarter of 2009 recoveries from the Ruth pit
area continued to be affected by the highly variable metallurgy. Gold production
in the fourth quarter of 2009 was also lower than the same quarter of 2008,
primarily attributable to lower gold head grades.
Robinson Operating and Capital Costs
Operating costs are comprised of onsite and offsite costs (see "Non-GAAP
Financial Measures"). Onsite costs include all stripping costs (including those
capitalized for accounting purposes) and are primarily driven by the volume of
waste and ore moved, payroll costs, supplies and equipment maintenance costs,
and royalties. Onsite costs in 2009 were lower than 2008, primarily due to a
$14.8 million reduction in royalty expenses as a result of lower copper
revenues; a $4.7 million reduction in blasting agent consumption; a $6.4 million
reduction in diesel costs due to lower prices; and a $4.1 million reduction in
the Company's gainshare program payment due to lower production. Onsite costs in
the fourth quarter of 2009 were slightly higher than the fourth quarter of 2008,
and were significantly higher than the previous quarters in 2009, primarily due
to timing of planned component replacements on mining equipment.
Offsite costs are primarily driven by smelting and refining charges, the volume
of concentrate transported, and rail and ocean freight rates. Offsite costs in
2009 were lower than 2008 due to lower ocean freight rates and lower concentrate
sales volumes in 2009, partially offset by higher charges for smelting and
refining.
The cash cost per pound of copper produced was $1.25 in 2009 as compared to
$1.15 in 2008. The increase in the current year is due to lower copper
production and lower gold by-product revenues, partially offset by lower onsite
and offsite costs. For the fourth quarter of 2009, the cash cost per pound of
copper produced was $1.51, slightly less than the same period in 2008. The cash
cost per pound of copper produced is a non-GAAP term and consists of onsite
costs (including all stripping costs), and offsite costs, less by-product
revenue, divided by the pounds of copper produced in the period (see "Non-GAAP
Financial Measures").
Capital expenditures at Robinson in 2009 were primarily related to development
of the Ruth pit and an expansion to the flotation circuit in the mill.
Robinson Outlook
In 2010, mining will continue in both the Veteran Pit and Ruth Pit areas. In
order to better define the metallurgical variability of the ore in the upper
levels of Ruth, a detailed definition drill program is being carried out to
collect samples for metallurgical testing and provide a higher density of
drilling for resource estimation.
It is expected that the complex nature of the Robinson ore body will continue to
cause metal production variations from quarter to quarter. Additional flotation
capacity was installed in the fourth quarter of 2009 and contracts were
negotiated with concentrate customers that give Robinson more flexibility with
respect to concentrate grade. Both measures are expected to help mitigate
metallurgical challenges in 2010.
Onsite costs are expected to increase slightly in 2010 over 2009 primarily as a
result of expected increases in tonnage mined and milled. Capital costs are
expected to be $30 million primarily focussed on Ruth Pit development, scheduled
replacement of equipment, updated reclamation bonding, and additions to the
mining fleet.
CARLOTA MINE (ARIZONA)
Three months ended Year ended
December 31, 2009 December 31, 2009
------------------ -----------------
Copper cathode production
(Million lbs) 8.0 28.0
Waste mined (Tonnes 000's) 3,692 17,896
Ore mined (Tonnes 000's) 2,619 7,102
Ore placed (Tonnes 000's) 2,619 7,103
Copper grade (%) 0.37 0.32
------------------ -----------------
Onsite costs $20,048 $74,695
Capital expenditure $ 9,525 $26,716
Total tonnes mined in 2009 at Carlota were in line with expectations; however
fewer than scheduled ore tonnes were delivered to the pad as mining equipment
had to be allocated to unplanned bench development work above the Pinto Creek
diversion. The Pinto Creek diversion channel was completed in the fourth quarter
of 2009 allowing the operation to focus on the planned mining schedule. Loading
equipment availability also impacted total material mined and will be resolved
by the addition of a new loader to the mining fleet in the first quarter of
2010.
Carlota produced its first copper cathode in December 2008 and in 2009 the mine
focused on ramping up production. However 2009 copper production of 28 million
pounds was below original mine plan estimates in part because of lower than
scheduled ore mined as noted above and in part because of lower than planned
leaching rates.
With the completion of the diversion channel, pit expansion into the higher
grade, chalcocite enriched ore body underlying the creek bed began during the
fourth quarter, as per the mine plan. Steps continue to be taken to improve pad
performance and percolation rates and reagent adjustments began to show progress
in the fourth quarter of 2009. Fourth quarter copper production of 8.0 million
pounds reflected initial recovery of ore stacked during the quarter, and
slightly exceeded expectations.
Carlota Operating and Capital Costs
Carlota's onsite operating costs are mainly driven by the volume of waste and
ore moved, payroll costs, supplies, process reagents, fuel, electricity,
equipment maintenance costs, and royalties. Onsite costs in 2009 were in line
with the Company's expectations. Onsite costs in 2008 primarily related to mine
construction activities.
Capital expenditures at the Carlota Mine in 2009 were primarily related to
construction costs for the Pinto Creek diversion, leach pad construction
activities, the purchase of two used haulage trucks and the buyout of a royalty
agreement.
Carlota Outlook
The Company continues to evaluate methods of improving percolation rates,
including pad construction techniques, material handling strategies and fines
agglomeration. Column testing is being conducted on different leach chemistry
control methodologies. This testing is being done to improve future metal
production. Some of these approaches are longer term projects and are not
expected to significantly impact 2010 production.
Rainfall events in 2010 have caused significant upsets to solution chemistry,
and have also impacted the mine plan. Although first quarter copper production
is expected to be lower than forecast, plans have been revised to maintain the
planned metal production for 2010. This assumes more normal rainfall levels for
the remainder of the year.
Onsite costs in 2010 are expected to increase compared to 2009 due to increased
mine production. Capital expenditures are expected to be $35 million, primarily
related to the planned leach pad expansion and mine equipment purchases. There
will be costs incurred to recover from the early 2010 rain events. Current
estimates are $5 million, but these may change once a full picture of actions
required has been developed.
FRANKE MINE (CHILE)
On April 8, 2009 the Company completed the acquisition of Centenario Copper
Corporation ("Centenario") and its 100% owned Franke Mine ("Franke"), a heap
leach - SX/EW copper project in northern Chile. Quadra acquired all the
outstanding common shares of Centenario through a plan of arrangement
("Arrangement") under the provisions of the Business Corporations Act. Under the
terms of the Arrangement, the Centenario shareholders received 0.28 of a Quadra
common share for each common share of Centenario. Outstanding options to acquire
Centenario shares were exchanged for options to acquire Quadra shares, based on
the same exchange ratio. A total of 14,368,563 common shares and 574,000 stock
options of the Company were issued in exchange for all of the outstanding common
shares and stock options of Centenario. Based on the closing Quadra share price
on April 8, 2009, the fair value of the consideration, including transaction
costs, was $66.9 million.
The Franke processing plant was designed with a capacity of 66 million pounds of
copper cathode production per annum over its current nine year mine life. Prior
to the acquisition of Centenario by Quadra, construction of the Franke Mine
facilities had been substantially completed. Construction was completed by
Quadra during the second quarter of 2009 and the operation commenced harvesting
copper cathode in July 2009.
Three months ended Year ended
December 31, 2009 December 31, 2009
------------------ -----------------
Copper cathode production
(Million lbs) 9.4 13.5
Waste mined (Tonnes 000's) 621 2,149
Ore mined (Tonnes 000's) 832 1,542
Ore placed (Tonnes 000's) 826 1,378
Copper grade (%) 0.85 0.83
------------------ -----------------
Onsite costs $22,867 $40,277
Capital expenditure $ 4,992 $25,741
A total of 13.5 million pounds of copper cathode was produced at Franke during
the second half of 2009. Mine production was from the Franke orebody. The plant
processed ore from the mine as well as stockpiled material from previous small
scale mining operations.
The ramp up schedule for the Franke Mine was impacted by residual design and
construction issues, the most significant of which were the solution pond
construction quality, performance of the primary crushing system and pad loading
system. The pond liner issues were substantially resolved during the second
quarter and one of the ponds was re-constructed in the third quarter. The
primary crusher feed system was modified in the fourth quarter and is now
capable of producing at design levels.
Franke Operating and Capital Costs
Franke's operating costs are mainly driven by the volume of waste and ore moved
by the mining contractor, acid costs, payroll costs, fuel, electricity and
equipment maintenance costs. Onsite costs in the fourth quarter of 2009 were in
line with the Company's expectations. Since the acquisition, the Company has
also incurred $25.7 million of capital expenditures on construction, start-up
activities and other project development costs.
Franke Outlook
Franke is still ramping up production. This ramp up will continue to put
pressure on the pit and plant systems to perform according to design. As with
all heap leach operations it will take time to get enough information to fully
evaluate resource/reserve performance and leach pad performance in terms of
recovery and acid consumption. Preliminary analysis of leach pad recovery
indicates that stockpile material may have negatively impacted copper recovery.
Results are not conclusive at this time. These studies will be ongoing during
2010.
The remaining design issues at Franke are the reliability of the pad loading
conveyor system and dust control across the crushing plant. Both will be
addressed in the first half of 2010. A plant optimization study is being
conducted to identify bottlenecks and identify and prioritize opportunities.
The major operating costs components for Franke are labour, acid, power, and
fuel. Acid supply has been contracted in advance for 2010 with half of the
required quantity contracted for at a price dependent on copper price and the
remainder at a fixed price. Average acid costs for 2010 are expected to be in
the $80-$90 per tonne range based on current copper price. Power costs are also
controlled by contract.
There is no cost history for the operation but the Company anticipates total
onsite operating costs will be in the range of $100 million, based on current
input costs and exchange rates. Capital expenditures are expected to be $12
million mainly consisting of plant modifications and dust mitigation measures
but excluding optimization opportunities.
SIERRA GORDA (CHILE)
On July 23, 2009 the Company announced the completion of the Sierra Gorda
scoping study, including a preliminary economic assessment based on measured and
indicated resources and an updated NI 43-101 compliant mineral resource
estimate. The scoping study has been filed as a Technical Report on SEDAR.
The study contemplates an open pit and concentrator operation processing 111,000
tonnes of mill feed per day producing between 250 and 400 million pounds of
copper per annum over a 25 year mine life at an average cash cost of $0.79 per
pound. The project would also have significant molybdenum production, averaging
33 million pounds per year over the first eight years, and declining thereafter.
This high level of molybdenum production results in an average cash cost of
$0.34 per pound produced during these first eight years. Using a long term
copper price of $2.00 per pound, molybdenum price of $12 per pound and gold
price of $800 per ounce, the project produces an after-tax net present value
(10% discount rate) of $622 million and an internal rate of return of 16%.
During 2009, the Company incurred costs of $16.4 million for advancement of the
Sierra Gorda project. The principal activities were infill and condemnation
drilling, metallurgical testwork, and infrastructure studies. Preparation of the
Environmental Impact Study ("EIS") commenced, with an expectation that it would
be submitted in the first quarter of 2010.
The infill drilling program is designed to increase the amount of measured and
indicated resources to the confidence level required for pre-feasibility and
feasibility studies. By year end, six diamond drill rigs were actively drilling.
This drilling will also collect samples for metallurgical testwork. The program
of condemnation drilling continued to ensure that the waste dump, production
facilities and tailings disposal site would not be placed over potential
resources. As of year end, the combined programs had completed 15,000 meters of
drilling. The project has significant measured and indicated oxide resources
that were assumed to be waste for the purposes of the scoping study but will be
subject to future economic studies.
The Sierra Gorda project is subject to several lawsuits that have been filed in
Chilean courts against the Company's wholly-owned Chilean subsidiary (see
section below "Contingencies"). The plaintiffs are minority shareholders in the
legal mining companies (SLMs) that previously owned certain of the mining
tenements that were optioned to Quadra in 2004. The plaintiffs are alleging that
the SLM's were not authorized to sell the mining tenements. Although Quadra
believes that the option agreements are valid and that the legal claims are
without merit, the outcome is uncertain. Should the claims not be resolved on a
timely basis, the development of the project may be impacted.
Sierra Gorda Outlook
Based on the results of the scoping study, Quadra is advancing the project to
pre-feasibility study at a cost of approximately $40 million excluding any land,
water rights and mineral claim acquisition activities. SNC-Lavalin Group Inc.
was selected to conduct the pre-feasibility study. That study is on schedule to
be completed in December 2010.
It is expected that the EIS application will be submitted at the end of the
first quarter of 2010. A historical review of other projects in Chile shows that
this process has taken anywhere from 9 to 15 months to complete.
SUBSEQUENT EVENT
In the first quarter of 2010, Quadra executed a memorandum of understanding
("MOU") with State Grid International Development Limited ("SGID"), a wholly
owned subsidiary of State Grid Corporation of China, the largest Chinese utility
company and a major end user of copper for the formation of a joint venture (the
"Strategic JV"). The Strategic JV will develop and operate Quadra's Sierra Gorda
project and Franke mine and seek to invest in other prospective copper assets,
initially in Chile. The parties will be entitled to their proportionate share of
the concentrate or cathode production of the Strategic JV on arms-length terms.
Quadra shall be responsible for supervising day-to-day operations of the
Strategic JV under the oversight and direction of a Board of Directors
consisting of an equal number of representatives from both parties. SGID will
lead the efforts of the Strategic JV to arrange the necessary project financing
with a target of not less than a 60:40 debt equity ratio, subject to a bankable
feasibility study and other conditions.
The final detailed structuring of the transaction will be determined before the
definitive agreements are signed. Quadra will contribute the Sierra Gorda
project and the Franke Mine, representing $900 million in assets, and SGID will
contribute capital to each gain a 50% equity interest in the Strategic JV.
Thereafter each party can contribute 50% of any further equity requirement to
maintain its interest.
In addition, as part of the MOU, SGID and Quadra have agreed to undertake a
private placement pursuant to which SGID will subscribe for shares representing
approximately 9.9% of Quadra's outstanding shares on a post-subscription basis
(approximately 10.9 million shares) at a price of $Cdn 13.91 per share, being
the market price of Quadra common shares on the date the Company applied for TSX
approval during the course of negotiations. The private placement will be
structured as a subscription receipt, with the proceeds to be released to Quadra
and the shares to be released to SGID, upon closing of the Strategic JV. Under
the MOU, a SGID nominee will be invited to join the Board of Quadra.
The MOU is non-binding except in certain limited respects but establishes the
basis for the negotiation of definitive Strategic JV agreements. Execution of
definitive agreements is subject to a number of conditions for the benefit of
both parties and common to agreements of this nature, including further due
diligence and the applicable regulatory and government approvals. Both parties
anticipate that the execution of definitive agreements will occur late in the
second quarter of 2010.
MALMBJERG MOLYBDENUM PROJECT (GREENLAND)
In May 2009, the Company received the exploitation license for the project.
While there have been no significant expenditures at Malmbjerg during 2009, the
Company has continued to advance environmental baseline studies and commitments
associated with the Environmental Statement Impact Analysis.
Malmbjerg Outlook
Additional development activities at Malmbjerg have been suspended. Quadra is
continuing the search for a partner or partners to advance the project through
to production.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flow from operating activities of $67.4 million in
2009 compared to $150.1 million in 2008. The decrease in operating cash flow is
driven by the lower revenues and changes in working capital in 2009. The changes
in working capital primarily relates to the inventory balance which increased
from $88.3 million to $186.8 million during 2009, mainly due to the build up of
leach pad inventory at Carlota and Franke.
Capital spending at the Robinson Mine in 2009 was $21.5 million for mill
equipment upgrades and development works for the Ruth pit area. The Company also
spent $17.8 million on deferred stripping at the Ruth pit area and paid $4.2
million to increase environmental bonding at Robinson. Capital expenditures at
the Carlota Mine in 2009 were $25.2 million primarily for the purchase of
equipment and construction of Pinto Creek Diversion. Since its acquisition of
Centenario in April 2009, the Company has spent $34.8 million on the
construction and development of the Franke Mine, and an additional $42.0 million
was spent on settlement of pre-acquisition payables that the Company inherited
from Centenario. The Company has also spent $12.4 million at Sierra Gorda for
exploration, development and land payments in 2009.
During 2009, the Company sold marketable securities for total proceeds of $55.4
million. During the fourth quarter of 2009, the Company made an investment of
$9.2 million, representing a 7.9% interest in Far West Mining Ltd., a publicly
traded company engaged in the evaluation, acquisition, exploration and
development of mining properties, with current operations in Chile and
Australia.
On April 16, 2009, the Company completed a bought-deal equity financing with a
syndicate of underwriters through which the Company issued 16,200,000 common
shares at a price of C$4.65 per common share for gross proceeds of $62.3 million
(C$75.3 million). The underwriters also exercised an option to acquire an
additional 2,430,000 common shares which increased the gross proceeds of the
offering to $71.6 million (C$86.6 million).
Centenario's copper derivative positions were closed out immediately after
completion of the acquisition in April. The proceeds of $30.7 million were used
to repay a portion of Centenario's existing long-term debt and the remaining
loan balance of $38.3 million was repaid by May 14, 2009.
On May 14, 2009 Quadra signed an agreement with a syndicate of lenders in which
the lenders provided a $37.5 million secured project debt facility to a
wholly-owned Chilean subsidiary of the Company. In the first quarter of 2010,
the project finance facility was increased by $12.5 million, to a total of $50
million, without any additional hedging requirements. The facility now consists
of an amortizing $42.5 million project finance facility and a $7.5 million
working capital facility bearing interest at LIBOR plus 5.75% and 6.75%,
respectively. The Company is required to make semi-annual scheduled principal
payments commencing in March 2010 and semi-annual principal payments equal to
67% of the Excess Cash Flow from the Franke Mine. Excess Cash Flow is net of
scheduled debt repayments and other adjustments as computed under the terms of
the facility agreement.
At December 31, 2009, the Company had cash and cash equivalents of $133.2
million. These amounts are comprised of cash deposits and highly liquid
investments that are readily convertible to cash. The counter-parties include
banks, governments and government agencies.
At December 31, 2009, the Company had working capital of $217.3 million as
compared to $196.8 million at December 31, 2008. At December 31, 2009, accounts
receivable and revenues include approximately 20.2 million pounds of copper that
has been provisionally valued at $3.34 per pound. The final pricing for these
provisionally priced sales is expected to occur between January 2010 and March
2010. Changes in the price of copper from the amounts used to calculate the
provisional values will impact the Company's revenues and working capital
position in the first quarter of 2010. On March 5, 2009 the copper price was
$3.39/lb.
Liquidity Outlook
The Company's future profitability and cash position is highly dependent on the
price of copper and gold. Future changes in the price of copper will also impact
the final settlement price of provisionally priced sales. The Company has
purchased copper put options to protect a minimum floor price for a portion of
its future copper production, and the Company also has copper collar contracts
which cap the copper sales price at $2.16/lb for 19.8 million pounds of copper
from the Franke Mine over the first six months of 2010 (see "Financial
Instruments").
The Company is planning to spend $40 million before the end of 2010 to complete
the Sierra Gorda pre-feasibility study and may incur other expenses at Sierra
Gorda including land, water rights and mineral claim acquisitions. In 2010, the
Company expects total capital expenditures of approximately $77 million at its
three operating mines. The Franke project loan facility has scheduled principal
repayments in 2010 and additional semi-annual payments are required in an amount
equal to 67% of Excess Cashflow from the Franke Mine, as defined in the
agreement. At current metal prices, the majority of the loan balance would be
repaid during 2010.
At current metal prices, the Company expects that it would be able to fund the
Sierra Gorda pre-feasibility study and other capital requirements from existing
cash on hand and internally generated funds. In the event of a decline in metal
prices, the Company may require external financing to complete the Sierra Gorda
pre-feasibility study and maintain an appropriate minimum cash balance.
Based on the results of the scoping study, development of the Sierra Gorda
project will require a total capital cost in the range of $1.7 billion and total
costs in the range of $2.0 billion. The Company has been in discussions with
potential partners with the objective of putting in place the financing for the
project. The Company has executed a memorandum of understanding ("MOU") with
State Grid International Development Limited ("SGID") for the formation of a
joint venture (the "Strategic JV") (see section above "Subsequent Event"). The
MOU is non-binding except in certain limited respects but establishes the basis
for the negotiation of definitive Strategic JV agreements. The final detailed
structuring of the transaction will be determined before the definitive
agreements are signed. Quadra will contribute the Sierra Gorda project and the
Franke Mine, representing $900 million in assets, and SGID will contribute
capital to each gain a 50% equity interest in the Strategic JV. Thereafter each
party can contribute 50% of any further equity requirement to maintain its
interest. SGID will lead the efforts of the Strategic JV to arrange the
necessary project financing with a target of not less than a 60:40 debt equity
ratio, subject to a bankable feasibility study and other conditions.
Commitments and contractual obligations
---------------------------------------------------------------------------
Payment Due By Period
---------------------------------------------------------------------------
Less
($000's) than 1-2 2-3 3-4 4-5 After
1 year years years years years 5 years Total
---------------------------------------------------------------------------
Project debt facility 37,500 12,500 - - - - 50,000
Reclamation liabilities 389 279 1,197 3,164 7,551 90,887 103,467
Franke Mine contracts 26,486 26,764 26,933 21,807 19,575 92,793 214,359
Robinson Mine power
supply contract 9,154 9,166 9,179 - - - 27,499
Minimum lease payments
(capital and operating) 16,737 8,172 2,429 587 - - 27,926
---------------------------------------------------------------------------
Total 90,266 56,882 39,738 25,558 27,126 183,680 423,251
---------------------------------------------------------------------------
Project debt facility
On May 14, 2009 Quadra signed an agreement with a syndicate of lenders in which
the lenders provided a $37.5 million secured project debt facility to a
wholly-owned Chilean subsidiary of the Company. In January 2010, the Company
drew down an additional $12.5 million in connection with an increase in the
project debt facility from $37.5 million to $50.0 million (see "Liquidity and
Capital Resources").
Reclamation liabilities
The Company has estimated total future reclamation costs of $103.5 million
(undiscounted), which primarily relate to the closure of the Robinson, Carlota
and Franke Mines. The Company has estimated the fair value of this liability to
be $50.3 million at December 31, 2009 based on the estimated discounted future
payments. To secure a portion of the closure costs related to the Robinson and
Carlota Mines, the Company has posted environmental bonds and held cash in a
reclamation trust totalling $59.7 million as at December 31, 2009. The Company
revises the reclamation plan and cost estimate for the Robinson Mine annually as
required by US Bureau of Land Management and adjusts the amount of the bond
accordingly. The reclamation plan and cost estimate for the Carlota Mine is
updated every five years as required by the regulator and the amount of the bond
is adjusted accordingly.
Franke Mine contracts
The Company has a long-term supply contract for sulphuric acid for use in the
copper extraction process at the Franke Mine. The minimum commitment under the
contract is estimated to be $4.1 million per annum subject to adjustment based
on the prevailing copper prices over the term of the contract which expires in
2022. The Company is committed to purchase 150,000 tonnes of sulfuric acid per
annum at a base price of $27/tonne. The base price for acid in the contract is
increased by $2.50/tonne for each $0.10/lb that the copper price exceeds
$1.10/lb.
The Franke Mine also has a long-term supply contract for industrial water. The
minimum commitment under the contract is estimated to be approximately $1.1
million per annum subject to adjustment based on the prevailing copper prices
over the term of the contract which expires in 2020. The copper price adjustment
requires, on an annualized basis, that approximately an additional $120 be paid
for each $0.15/lb that the copper price exceeds a base price of $1.50/lb.
The Company has also entered into various supply and other contracts for
operation and development of the Franke Mine.
Robinson Mine power supply contract
The Robinson Mine has a three year supply contract for electricity. The minimum
commitment under the contract is estimated to $8.8 million plus service charges
per annum over the term of the contact which expires in 2012.
MARKET TRENDS AND FUNDAMENTALS
Between 2006 and mid 2008, the growing demand for copper, particularly in China,
coupled with an inability of the copper industry to increase supply due to a
lack of immediate development projects, together with a weakening U.S. dollar
led to a substantial increase in the copper price. The subsequent global credit
and consumer confidence crises and the resulting global economic downturn led to
a collapse in the price of copper, which reached a low of $1.26 per pound in
December 2008, before recovering to $3.33 per pound at the end of 2009. The
sharp rebound in the price of copper was due to a significant tightening in the
global supply of copper scrap and continued strong Chinese demand. As copper
prices have rebounded, scrap availability improved during the third quarter. The
Company believes that, copper fundamentals will remain robust as continued
growth in Chinese copper demand coupled with increased rest-of-world copper
demand arising from the recovery in the global economy, will drive global copper
demand ahead of the growth in both scrap and primary mine supply.
The following graph shows the inventory level, as published by the London Metal
Exchange ("LME"), of copper and the spot price of copper from 2006 to February
26 2010.
To view the LME Copper Price & Inventory graph, please click on the following
link: http://media3.marketwire.com/docs/qua38lme.JPG
At December 31, 2009 the closing spot price was $3.33 per pound. At March 5,
2010, the closing spot price was $3.39 per pound. The reference price of copper
metal is determined by trading on the LME, where the price is set in U.S.
dollars at the end of each business day.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Company's revenues and cash flows are subject to fluctuations in the market
price of copper and gold. In addition, there is a time lag between the time of
initial payment on shipment and final pricing, and changes in the price of
copper and gold during this period impact the Company's revenues and working
capital position.
During 2008, the Company acquired copper put options to protect a minimum floor
price of $2.50/lb for a portion of its anticipated copper sales. At December 31,
2008, the Company had 35 million pounds of copper put options at a strike price
of $2.50/lb. These put options were exercised during the first six months of
2009, resulting in cash proceeds of $23.3 million for the Company.
During 2009 the Company purchased additional copper put options at a total cost
of $4.4 million. At December 31, 2009 the Company had 64 million pounds of
copper put options at an average strike price of $1.88. The expiry dates of
these puts are between January and June 2010.
Under the terms of the Franke project loan facility, the Company was required to
enter into a copper price protection program in order to establish a minimum
floor price for a portion of anticipated copper sales from the Franke Mine. In
May 2009 the Company entered into copper collar contracts at zero cost for 27.6
million lbs. of copper and also purchased copper put options for 15.0 million
lbs at a cost of $4.9 million. During 2009, 7.8 million copper collar contracts
were settled with cash payments of $6.2 million to the counterparties. At
December 31, 2009 the fair values of put and collar instruments outstanding are
as follows:
Pounds Floor Cap Fair
Expiry (millions) Instrument price price value
---------------------------------------------------------------------------
January 2010 to June 2010 19.8 Collar $ 1.79 $ 2.16 (24,726)
July 2010 to December 2010 15.0 Put $ 1.79 115
---------------------------------------------------------------------------
Total 34.8 (24,611)
---------------------------------------------------------------------------
Under the terms of these contracts, if the average LME cash price for the month
is less than the strike price of the put option or the floor price of the
collar, the Company will receive the difference in price for the contracted
number of pounds. If the average LME cash price for the month is higher than the
cap price of the collar, the Company will pay the difference in price for the
contracted number of pounds. The counter-parties consist of several
international financial institutions. The Company monitors its counter-party
exposures and does not believe there are any credit or collection issues at the
current time. The change in fair value of these instruments is recorded as a
derivative gain or loss on the statement of earnings.
The following table summarizes the impact of different copper prices on the
Company's cash flows from copper put options and collars in 2010:
--------------------------------------------------------
Cash flows from
copper put options
Copper price and collars for 2010
--------------------------------------------------------
$1.50/lb 34,374
--------------------------------------------------------
$2.00/lb -
--------------------------------------------------------
$2.50/lb (6,732)
--------------------------------------------------------
$3.00/lb (16,632)
--------------------------------------------------------
$3.50/lb (26,532)
--------------------------------------------------------
The Company has entered into NYMEX heating oil futures contracts and collar
contracts in order to manage the price risk associated with diesel fuel. In
2009, the Company settled 8.1 million gallons of NYMEX heating oil contracts.
These settlements resulted in cash payments of $6.2 million in 2009, which have
been recorded in cost of sales on the statement of earnings. During 2009, the
Company had entered into a total of 11.9 million gallons of NYMEX heating oil
futures and collars at no cost.
At December 31, 2009 the following NYMEX heating oil futures contracts remain
outstanding (December 31, 2008 - 7.2 million gallons):
Gallons
Expiry (millions) Contract Fair value
---------------------------------------------------------------------------
January to December 2010 8.4 Futures, strike price
$2.12/gallon 685
January to April 2010 2.5 Collars, cap $2.00/gallon;
floor $1.7/gallon 437
---------------------------------------------------------------------------
Total 10.9 1,122
---------------------------------------------------------------------------
CONTINGENCIES
The Company has been served with four lawsuits that were filed in Chilean Courts
against the Company's wholly-owned Chilean subsidiary, Minera Quadra Chile
Limitada. These lawsuits were served on August 13, 2007, April 2, 2008, June 20,
2008 and July 10, 2008 and seek to invalidate certain of the 10 option
agreements under which the Company acquired mining tenements that comprise a
significant part of the Sierra Gorda project. Based on advice of Chilean
counsel, Quadra believes that the option agreements are valid and that the
lawsuits are without merit. The Company settled one of the four lawsuits in the
second quarter of 2009 for less than $0.5 million.
The plaintiffs in the remaining three lawsuits are or were shareholders in the
"sociedades legales mineras" (SLM) or legal mining companies that owned certain
of the mining tenements that were optioned to the Company in 2004. The Company
believes it fully complied with the terms of all 10 option agreements and the
plaintiffs accepted all option payments until April 2007. In the first two
lawsuits, the plaintiffs are requesting that the option agreements be declared
null and void. The plaintiffs in these cases are claiming that the SLMs were not
authorized to sell the mining tenements under the option agreements. In the
third lawsuit, the plaintiffs argue that if either of the first two lawsuits are
successful then further option agreements are invalid by virtue of the fact that
the option agreements were intended to be exercised in either all or none of the
cases. The Court referred this matter to arbitration and the Company has applied
for a declaration from the arbitrator that the third lawsuit is without merit.
This arbitration is ongoing.
Although the Company believes, based on advice from Chilean counsel, that the
option agreements are valid and that the legal claims are without merit, the
outcome is uncertain. These lawsuits are subject to the procedural and
substantive laws of Chile and the allegations are based on the actions of the
SLM management, in respect of which Quadra has no direct knowledge. The Company
is vigorously defending these lawsuits, however, there is no assurance that it
will be successful. Furthermore, should the lawsuits not be resolved on a timely
basis, the project financing for the Sierra Gorda project could be delayed.
In the unlikely event the Company loses one or both of the first two lawsuits,
based on advice from Chilean counsel the precise legal situation is unclear in
that:
- The SLMs were dissolved automatically under Chilean law when the mining
tenements that are the subject of the lawsuits were sold to the Company. These
SLMs would somehow have to be recreated. Based on advice from Chilean counsel,
there is no Chilean precedent for this.
- Before the title to the mining tenements that are the subject of the lawsuits
are transferred back to the SLMs, Quadra should be entitled to be reimbursed all
amounts paid to the plaintiffs and other shareholders under the option
agreements.
- The mining tenements that are the subject of the lawsuits comprise an
important part of the Company's current plan for the development of the Sierra
Gorda project. Given Quadra's other landholdings in the area, the Company
believes that it would be very difficult for the plaintiffs in the lawsuits to
be able to economically exploit the mining tenements that are the subject of the
lawsuits.
In the event the Company loses its application in the third lawsuit for a
declaration that the case is without merit, Quadra would retain the mining
tenements that are the subject of the lawsuit. The plaintiffs would then have to
bring a new lawsuit similar to the first two lawsuits, alleging that the option
agreement is invalid.
The Company is aware that the same plaintiffs are attempting to initiate
additional lawsuits seeking to declare null and void the option agreements
relating to the mineral properties that are already the subject of the first
case. However, none of the Company or any of its subsidiaries has of the date
hereof been served with any additional legal actions.
TRANSACTIONS WITH RELATED PARTIES
One of the directors of the Company is a partner of an affiliate of Blake,
Cassels & Graydon LLP. In 2009, the Company incurred legal fees of $0.5 million
with that entity (2008: $0.6 million), all of which were at normal business
terms.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing financial statements management has to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Based on historical experience, current conditions and expert
advice, management makes assumptions that are believed to be reasonable under
the circumstances. These estimates and assumptions form the basis for judgments
about the carrying value of assets and liabilities and reported amounts for
revenues and expenses. Different assumptions would result in different estimates
and actual results may differ materially from results based on these estimates.
These estimates and assumptions are also affected by management's application of
accounting policies. Critical accounting policies and estimates are those that
affect the consolidated financial statements materially and involve a
significant level of judgment by management.
Mineral Properties
Mineral property development costs, including exploration, mine construction,
and stripping costs, are capitalized until production is achieved, and are then
amortized over the remaining life of the mine based on proven and probable
reserves. The determination of the extent of reserves is a complex task in which
a number of estimates and assumptions are made. These involve the use of
geological sampling and models as well as estimates of future costs. New
knowledge derived from further exploration and development of the ore body may
also affect reserve estimates. In addition the determination of economic
reserves depends on assumptions on long-term commodity prices and in some cases
exchange rates.
An impairment loss is recognized for a mineral property if its carrying value
exceeds the total undiscounted cash flows expected from its use and disposal.
Undiscounted cash flows for mineral properties are estimated based on a number
of assumptions including management's view of long-term commodity prices, proven
and probable reserves, estimated value beyond proven and probable reserves, and
estimates of future operating, capital, and reclamation costs. Based on
management's view of future metal prices and cost assumptions, the carrying
value of the Company's mineral properties was not impaired at December 31, 2009
Revenue Recognition
Sales are recognized and revenues are recorded at market prices when title
transfers and the rights and obligations of ownership pass to the customer. The
majority of the Company's product is sold under pricing arrangements where final
prices are determined by quoted market prices in a period subsequent to the date
of sale. For sales of Robinson's concentrates, final pricing is generally
determined three to four months after the date of sale. For the sales of copper
cathode, final pricing is generally determined in the month or the subsequent
month after the date of sale. The Company estimates provisional pricing for its
product based on forward prices for the expected date of the final settlement.
Subsequent variations in price are recognized as revenue adjustments as they
occur until the price is finalized. As a result, revenues include estimated
prices for sales in that period as well as pricing adjustments for sales that
occurred in the previous period. These types of adjustments can have a material
impact on revenues.
Asset Retirement Obligations, Reclamation and Mine Closure
Due to uncertainties concerning environmental remediation, the ultimate cost to
the Company of future site restoration could differ from the amounts provided.
In 2009 and in previous years the Company has revised its estimate of the timing
and amount of closure costs at its mines, which resulted in adjustments to the
liability recorded in the Company's financial statements. The estimate of the
total liability for future site restoration costs is subject to change based on
cost inflation, amendments to laws and regulations and may also change as new
information concerning the Company's operations becomes available. The Company
is not able to determine the impact on its financial position, if any, of
environmental laws and regulations that may be enacted in the future.
Future Income Tax Assets
Management believes that uncertainty exists regarding the realization of certain
future tax assets and therefore a valuation allowance has been recorded as of
December 31, 2009. At December 31, 2009 the Company had additional available
U.S. Alternative Minimum Tax Credits of $8.1 million, which have not been
recognized due to the uncertainty of realization. The Company also has not
recognized the benefit of the tax basis of Carlota and Franke in excess of the
acquisition price, and certain non-capital losses. However, the Company has
recognized a net current future income tax asset for other temporary differences
created between the tax and accounting basis of assets and liabilities in the
United States and Chile. Management estimates that, using long term copper
prices in line with its mine plan estimates, the future taxable income will be
sufficient to utilize the future tax assets which have been recognized.
OUTSTANDING SHARE DATA
The Company had 99,508,530 common shares issued and outstanding common shares at
December 31, 2009. As of March 7, 2010 the Company had 99,519,030 common shares
issued and outstanding.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting. Any system of internal
control over financial reporting, no matter how well designed, has inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
On April 8, 2009, the Company completed the acquisition of Centenario. As a
result, Centenario is a business that Quadra has acquired not more than 365 days
before the last day of the period covered by the annual filings. Management
believes that the internal controls and procedures of Centenario have a material
effect on its financial reporting internal controls. Quadra is integrating
Centenario's operations and will be expanding its internal control over
financial reporting compliance project to include Centenario over the next year.
Quadra will exclude Centenario from its disclosure controls and procedures and
internal controls over financial reporting assessments for the year ended
December 31, 2009, as permitted by NI 52-109 and applicable rules relating to
business acquisitions.
The internal controls over financial reporting at the corporate level remain
unchanged and will continue to be applied to the additional financial
information provided for annual reporting procedures. Management believes that
the corporate-level control environment is sufficiently strong and will continue
to mitigate risk of material error or fraud.
CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
Canadian publicly listed companies will be required to prepare financial
statements in accordance with IFRS for interim and annual periods beginning on
or after January 1, 2011. Quadra's reporting under IFRS will commence in the
first quarter of 2011.
The Company has appointed a project manager to lead the conversion to IFRS. The
project manager is working with other members of the finance group to execute
the implementation plan. The project planning is substantially completed and
included an initial diagnostic review of significant IFRS differences that was
completed by the Company's external auditors. Based on the work done so far, the
Company does not expect that the conversion to IFRS will have a significant
impact on its accounting processes and internal controls (including information
technology systems). The Company will be updating its disclosure controls and
procedures to ensure they are appropriate for reporting under IFRS. In addition,
the Company does not expect the conversion to IFRS to have a significant impact
on its risk management or other business activities.
Significant accounting impacts of conversion to IFRS
The Company has not yet completed its assessment of all accounting policy
differences that may arise on conversion to IFRS. The following is a summary of
the key accounting policy differences that have been identified to date. The
Company has not yet quantified the impact of these differences on its
consolidated financial statements
Property, Plant & Equipment - IFRS requires that the Company identify the
different components of its fixed assets and record amortization based on the
useful lives of each component. The Company has reviewed the depreciation of its
existing property, plant & equipment and does not expect any material
differences between IFRS and the Company's current depreciation policies.
In addition, based on the current IFRS guidance, the Company does not expect its
current accounting policies for stripping costs and exploration costs to be
impacted by the conversion to IFRS.
Business Combinations - IFRS 1 "First time adoption of International Financial
Reporting Standards" provides an exemption that allows companies transitioning
to IFRS not to restate business combinations entered into prior to the date of
transition. The Company plans to use this exemption and will not be restating
the accounting for any of its previous acquisitions.
Asset Retirement Obligations - IFRS will require the Company to re-measure its
asset retirement obligations on a quarterly basis using a current discount rate,
which may result in some variability in both the carrying value of the liability
and the income statement. The Company plans to use an IFRS 1 exemption and will
not to comply with IFRIC 1 "Changes in Existing Decommissioning, Restoration and
Similar Liabilities" for changes in such liabilities that occurred before the
date of transition.
Impairment - International Accounting Standard (IAS) 36, "Impairment of Assets",
uses a one-step approach for both testing for and measurement of impairment,
with asset carrying values compared directly with the higher of fair value less
costs to sell and value in use (which uses discounted future cash flows). This
may potentially result in more write-downs where carrying values of assets were
previously supported under Canadian GAAP on an undiscounted cash flow basis, but
could not be supported on a discounted cash flow basis. IFRS also has the
requirement under IAS 36 to reverse any previous impairment losses where
circumstances have changed such that the impairments have been reduced. Canadian
GAAP prohibits reversal of impairment losses.
A number of other differences between Canadian GAAP and IFRS have been
identified, but not yet assessed by the Company, including the accounting for
income taxes, financial instruments and disclosure requirements. These
differences may have a material impact on the Company's financial statements. A
more detailed review of the impact of IFRS on the Company's consolidated
financial statements is in progress and is expected to be completed during 2010.
SUMMARY OF QUARTERLY RESULTS
The following table summarizes the operating results of the most recent eight
quarters (unaudited):
To view the Summary of Quarterly Results table, please click on the following
link: http://media3.marketwire.com/docs/qua38sqr.pdf
The quarterly performance of the Robinson Mine varies as a result of changes in
head grade, metal recovery and waste stripping requirements. Due to the complex
nature of the Robinson ore body, volatility in metal prices, and industry cost
pressures the results have varied from quarter to quarter, and this is expected
to continue in the future.
The decline in the cash balance in the fourth quarter of 2008 is due to the
decline in copper prices, and the resulting impact of settlement of provisional
price adjustments.
In the fourth quarter of 2008, the Company recorded a $96 million write down
related to the impairment of the Malmbjerg mineral property.
In the second quarter of 2009, the Company completed the acquisition of
Centenario and, as a result, increased its total assets by $262 million and its
total liabilities by $195 million.
SELECTED ANNUAL INFORMATION
--------------------------------------------------------------------------
2009 2008 2007
--------------------------------------------------------------------------
Statement of operations ($000's)
Revenues 459,541 487,501 493,848
Earnings 80,482 38,609 134,545
Basic earnings per share $ 0.89 $ 0.61 $ 2.80
Diluted earnings per share $ 0.89 $ 0.60 $ 2.72
Financial positions ($000's)
Total assets 1,247,025 858,634 765,622
Total long-term financial liabilities 78,770 46,442 205,465
Dividends n/a n/a n/a
--------------------------------------------------------------------------
NON-GAAP FINANCIAL MEASURES
The cash cost per pound of copper produced, and onsite costs and offsite costs
are non-GAAP financial measures that do not have a standardized meaning under
Canadian Generally Accepted Accounting Principles ("GAAP"), and as a result may
not be comparable to similar measures presented by other companies. Management
uses these statistics to monitor operating costs and profitability. Onsite costs
include mining costs (including all pre-stripping costs), equipment operating
lease costs, mill costs, mine site general and administration costs,
environmental costs and royalties. Offsite costs include the costs of
transportation, smelting and refining of concentrate. For financial statement
reporting purposes, smelting and refining costs are netted against revenues.
Costs of sales, as reported on the statement of operations, is different that
the costs of production because of changes in concentrate inventory levels. The
following table shows a reconciliation of these non-GAAP financial measures to
the consolidated statements of operations:
Three months ended Year ended
December 31 December 31
------------------ -----------------
2009 2008 2009 2008
Cost of sales 60,504 59,104 190,553 254,511
Adjustment for change in concentrate
inventory 459 1,097 13,362 1,434
Refining and treatment charges 5,630 3,294 19,107 17,396
Capitalized stripping costs 1,162 - 17,835 -
Royalties 5,123 9,253 12,060 26,922
------------------ -----------------
Total onsite and offsite costs 72,878 72,748 252,917 300,263
By-product revenues (28,591) (18,249) (99,939) (116,506)
------------------ -----------------
44,287 $54,499 152,978 183,757
Copper production (million lbs.) 29.3 34.5 122.5 159.7
------------------ -----------------
Cash cost per pound of copper produced
at the Robinson mine $ 1.51 $ 1.58 $ 1.25 $ 1.15
------------------ -----------------
------------------ -----------------
Cashflow from operating activities (before working capital changes) is also not
a defined term under GAAP, and consists of cash provided from operating
activities less net changes in non-cash working capital.
Adjusted earnings and adjusted earnings per share are non-GAAP measures which
determine the performance of the Company, excluding certain impacts which the
Company believes are either non-recurring, or recurring, but of a nature which
are not reflective of the Company's underlying performance, such as the impact
of gain and loss on derivatives, gains and losses from marketable securities and
adjustments of prior year taxes. Management believes that these measures provide
investors with ability to better evaluate underlying performance. The following
table provides a reconciliation of earnings to adjusted earnings for the periods
presented:
Three months ended Year ended
December 31 December 31
------------------ -----------------
2009 2008 2009 2008
Net earnings - GAAP 46,454 (126,080) 80,482 38,609
Adjusting items:
Loss (gain) on derivatives 14,776 (37,343) 54,541 (31,088)
Gains on marketable securities (5,843) - (6,661) (1,888)
Tax impact of the above items (2,827) 8,589 (11,395) 7,584
Taxes in respect of prior years (1,702) - 543 -
------------------ -----------------
4,404 (28,754) 37,028 (25,392)
------------------ -----------------
Net earnings - Adjusted 50,858 (154,834) 117,510 13,217
------------------ -----------------
------------------ -----------------
Weighted-average number of shares
outstanding - basic 99,391 65,135 89,986 62,931
Earnings per share - adjusted $ 0.51 $ (2.38) $ 1.31 $ 0.21
March 7, 2010
This Press Release, that also comprises the MD&A, contains "forward-looking
information" that is based on Quadra's expectations, estimates and projections
as of the dates as of which those statements were made. This forward-looking
information includes, among other things, statements with respect to Quadra's
business strategy, plans, outlook, financing plans, long-term growth in cash
flow, earnings per share and shareholder value, projections, targets and
expectations as to reserves, resources, results of exploration (including
targets) and related expenses, property acquisitions, mine development, mine
operations, mine production costs, drilling activity, sampling and other data,
estimating grade levels, future recovery levels, future production levels,
capital costs, costs savings, cash and total costs of production of copper, gold
and other minerals, expenditures for environmental matters, projected life of
Quadra's mines, reclamation and other post closure obligations and estimated
future expenditures for those matters, completion dates for the various
development stages of mines, availability of water for milling and mining,
future copper, gold, molybdenum and other mineral prices (including the
long-term estimated prices used in calculating Quadra's mineral reserves),
end-use demand for copper, currency exchange rates, debt reductions, use of
future tax assets, timing of expected sales and final pricing of concentrate
sales, the percentage of anticipated production covered by option contracts or
agreements, anticipated outcome of litigation, anticipated impact of converting
to IFRS and personnel issues. Generally, this forward-looking information can be
identified by the use of forward-looking terminology such as "outlook",
"anticipate", "project", "target", "believe", "estimate", "expect", "intend",
"should", "scheduled", "will", "plan" and similar expressions. Forward-looking
information is subject to known and unknown risks, uncertainties and other
factors that may cause Quadra's actual results, level of activity, performance
or achievements to be materially different from those expressed or implied by
such forward-looking information, and developed based on assumptions about such
risks, uncertainties and other factors set out herein, including but not limited
to:
- uncertainties relating to fluctuations copper and other metal prices;
- uncertainties related to the possible recalculation or reduction in the
Company's mineral reserves and resources;
- uncertainties related to actual capital costs, operating costs and
expenditures, production schedules and economic returns from the Company's
mining projects;
- risks associated with the mineralogy at all Mines and projects including in
particular the complex mineralogy at the Robinson Mine;
- uncertainties related to the production ramp-up at the Carlota Mine, including
in particular uncertainty relating to the leaching rate and the existence of
fines;
- uncertainties relating to the production ramp-up at the Franke Mine;
- uncertainties related to the current global financial conditions;
- uncertainties related to the availability of future financing necessary to
undertake mining, processing, development and exploration activities on Quadra's
properties;
- uncertainties related to scoping study assumptions that are based on
preliminary testwork;
- Quadra's substantial reliance on the Robinson Mine for revenues;
- uncertainties related to Quadra's ability to expand or replace depleted reserves;
- risks related to the integration of businesses and assets acquired by Quadra,
including the recent acquisition of Centenario;
- inherent hazards and risks associated with mining operations;
- inherent uncertainties associated with mineral exploration;
- uncertainties related to the competitiveness of the mining industry;
- risks associated with Quadra being subject to government regulation, including
changes in regulation;
- risks associated with Quadra being subject to extensive environmental laws and
regulations, including change in regulation;
- risks associated with Quadra's need for governmental license and permits;
- risks that Quadra's title to its Sierra Gorda property is being challenged
pursuant to certain lawsuits currently underway in Chile;
- risks that Quadra's may not be granted all definitive surface rights necessary
for exploitation of Sierra Gorda;
- risk that Quadra may not find a suitable partner or obtain project financing
for Sierra Gorda;
- uncertainties related to the ability of Quadra and SGID to successfully
negotiate a definitive joint venture agreement and whether the conditions to
closing the joint venture will be completed;
- uncertainties relating to the receipt and timing of any necessary government
and regulatory approvals required to close the joint venture;
- uncertainties relating to the receipt of approval of SGID's proposed private
placement by the Toronto Stock Exchange;
- uncertainties relating to the availability of debt and equity financing to
Quadra and SGID, including SGID's ability to arrange financing for the proposed
joint venture on acceptable terms;
- political and country risk;
- risk of water shortages and risks associated with competition for water;
- Quadra's need to attract and retain qualified personnel;
- increases in off-site transportation and concentrate processing costs;
- Quadra's dependence on one railroad and one port to ship copper from the
Robinson Mine;
- risks related to the stability of mine pit walls;
- risks related to the need for reclamation activities on Quadra's properties,
including the nature of reclamation required and uncertainty of costs estimates
related thereto;
- uncertainties related to the amount of funding required to achieve full
production levels at the Franke Mine;
- uncertainties related to the construction quality and structural design at the
Franke Mine;
- risks associated with costs of operating supplies, including sulphuric acid;
- inherent risks associated with existing and future litigation;
- risks associated with taxation;
- risks related to Quadra's shareholder rights plan;
- risks associated with potential conflicts of interest;
- risks in the nature of investments; and
- risks related to hedging contracts and exposure to the credit risk of
counterparties.
A discussion of these and other factors that may affect Quadra's actual results,
performance, achievements or financial position is contained in the filings by
Quadra with the Canadian provincial securities regulatory authorities, including
Quadra's Annual Information Form. This list is not exhaustive of the factors
that may affect our forward-looking information. These and other factors should
be considered carefully and readers should not place undue reliance on such
forward-looking information. Quadra disclaims any intent or obligations to
update or revise publicly any forward-looking statements whether as a result of
new information, estimates or options, future events or results or otherwise,
unless required to do so by law.
ABOUT QUADRA MINING LTD. (TSX:QUA)
Quadra is a mining company that owns and operates the Robinson copper mine near
Ely, Nevada, which has been in production since 2004, the Carlota mine, a heap
leach - SX/EW copper operation in Arizona, which commenced operations in 2008
and the Franke mine a heap leach - SX/EW copper operation in northern Chile,
which achieved commercial production in October 2009. The Company also owns the
Sierra Gorda project, an advanced copper-molybdenum project in northern Chile,
and the Malmbjerg molybdenum project in Greenland. Quadra's strategic plan is
based on growing to a production rate in excess of 500 million pounds of copper
per year from diverse operations and with a pipeline of development projects in
place for long term sustainability and growth.
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