Coppernico Metals Inc

Jim O'Rourke – Chief Executive Officer Rod Shier – Chief Financial Officer

Stefan Ioannou – Haywood Securities Mark Turner – Scotia Bank Aleem Ladak – PI Financial Corporation David Foster – Merrill Lynch John Hayes – BMO Capital Markets Adam Low – Raymond James Garnet Salmon – Jennings Capital Ian Parkinson – JMP Securities

Thank you Joanna. After opening remarks by management in which we will review the business and operational results for Q2 2013, we’ll open the lines to all participants for question as noticed by Joanna.

Please note that the comments made today that are not of a historical factual nature may contain forward-looking statements. This information by its nature is subject to risks and uncertainties that may cause the stated outcomes to differ materially from the actual outcomes.

Please refer to the bottom of our latest news release for more information. I will now turn the call over to Jim O’Rourke, Chief Executive Officer, for his remarks.

Thank you, Rod. Good morning everyone and thank you for joining us.

Today we are going to discuss the second quarter operational and financial results for Copper Mountain Mining Corporation. I will briefly review the mines’ operational results for the period and provide you with an update on various activities, after which Rod will provide a financial commentary on the quarter.

During the period the company completed a total of three shipments of copper concentrate, generating $45.7 million in revenue net of provisional pricing adjustments. The mine produced a total of 15.7 million pounds of copper, 56,000 ounces of gold, and 71,000 ounces of silver.

For the three months ending June 30th 2013, total cash cost per pound sold net of precious metal credit was $2.32 US. Site cash cost per pound of copper produced net of precious metal credits was $1.81US for the period.

Mining activities continued from both in Pit 2 and Pit 3 areas during the quarter as planned and averaged approximately 171,000 tonnes per day mining. In total, 14.7 million tonnes were mined including 4.4 million tonnes of ore and 10.3 million tonnes of waste.

Ore delivered to the mill was mainly from Pit 2 area and lower grade and that plan in the balance of the year when the majority of the mill feed was the higher grade from the Pit 3 area. The average strip ratio for the quarter was 2.3 to 1 as compared to the average 2.1 strip ratio projected in the current life of mine plan.

This first quarter the concentrator milled a total of 2.5 million tonnes of ore and an average copper head grade of 0.33% copper. Mill improvements were achieved during the quarter, in spite of the mill transformer lost time incident in mid-May it was fully repaired by early June, a week ahead of the announced schedule.

Supplier in mill crews reacted expeditiously to minimize our downtime. The repaired transformer had all three sets of coils replaced and was fully inspected and certified as new prior to being returned to service.

The mine exited the quarter on a positive note with two mill availability at 92.3%, mill averaging throughput 12% higher than that in the first half and copper production of 6.1 million pounds for the month. Average mill availability was 86.6% for the quarter which is our record operating time for quarter since commissioning.

Copper rate coverage for the second quarter were 87.3% as compared to 82.7% from the first quarter of 2013 which can be attributed to reagent testing and the expert system optimization which is continuously being improved to maximize our recoveries. Plans for the mill operation for the balance of the year includes, all available methods to provide finer ore to the SAG mill.

Higher powder factor blasting of ore is continuing to maximize fragmentation; the contract pressure continues to provide about 4500 tonne per day of minus 2-inch ore. Although their reliability has not in at levels that we would like to see.

The contractor is working to improve their operating performance. In addition to this limited contract in crushing, the mine purchased a new portable crusher in late July for approximately $1.5 million to provide up to 7500 tonnes per day of minus 2-inch material for the SAG mill.

The new portable crushers located at the course ore stockpile and provide a more direct impact on the SAG mill feed. The combination of these three short-term measures has yielded positive results toward increasing throughput.

However, we are still struggling to achieve our defined 35,000 tonne per day on a consistent basis. Currently, mill throughput rates in the 30,000 tonnes to 32,000 tonne per day range are being achieved with these short-term improvements.

Ore sizing information available from the cameras on the SAG mill that continues measures the feed fact have proven to be very helpful in analyzing the effects of the finer feed to the SAG mill throughput. Test runs in the plant with various amounts of pre-crushed ore to the minus 2-inch range demonstrated the potential of the throughput increase as possible.

These analyses favor long-term solution of proceeding with the installation of a secondary crusher which will provide a long-term tonnage solution. Engineering studies have been completed that confirm the economic liability of this expansion.

The management is working with our partner and the project bankers to obtain agreement to expedite the project. Installation of a SAG mill pre-crusher or a secondary crusher that would be able to deliver minus 2-inch material ore on a consistent basis as projected to ensure the 35,000 tonne per day design capacity with the potential to increase the capacity of the concentrator up to the 40,000 tonne per day range or a 25% to 30% increase in tonnage.

Similar increases have been experienced by other mines in North America which have also installed secondary crushers to maximize production. Capital cost for the secondary crusher is projected to be approximately $40 million with the 12-months construction period.

Installation is planned to avoid any disruption in the operations. The $40 million capital investment provides an excellent return on capital and a short payback period of less than one year.

Adding to the secondary crush will provide a steadier operation and allow more reliable production forecast, increased copper production and resulting lower unit copper production costs. I’d now like to turn the call over to Rod to discuss the financial results.

Thank you.

Thank you, Jim. During the second quarter of 2013, the company recognized revenue of $45.7 million net of a $5.3 million negative pricing adjustments and $4 million in treatment charges based on an average provisional copper price of 318 per pound, as compared with revenues of $60.7 million net of pricing adjustments at an average provisional copper price of $3.44 per pound for the period ending June 30, 2012.

This reduction in revenue is primarily a result of lower sales volume and metal prices as compared to the same period last year. The mine shipped and sold a total of 14.7 million pounds of copper, 5,400 ounces of gold, and 66,000 ounces of silver during the three months ended June 30, 2013.

This compares to a total of 18.1 million pounds of copper, 5,600 ounces of gold, and 124,000 ounces of silver during the three months ended June 30, 2012. The decrease in sales volume is the result of the mine processing lower grade material averaging 0.33 copper head grade, this period as compared to an average grade of 0.41 copper during the same quarter last year as the mine was operating primarily from Pit 3.

Despite the mine handling more material this year, the net effect is lower copper production as a result of processing lower grade during the quarter which was again noted mainly mining from the Pit 2 area during this period. The cost of sales for the three months ended June 30, 2013 was $47.3 million, which resulted in a gross loss of $1.6 million, compared to cost of sales of $48.8 million which resulted in a gross profit of $11.9 million for the period ended last year.

General and administrative expenses for the three months ended June 30, 2013 were $1 million and very comparable to the $1.2 million for the three months ended June 30, 2012. Non-cash share-based compensation reflected a recovery of $42,000 for the three months ended June 30, 2013 compared to an expense of about $840,000 for the three-month period ended June 30, 2012.

The decrease in non-cash share-based compensation was a result of the stock options issued in prior periods now being fully vested. For the three months period ended June 30, 2013, the company recorded finance income of $86,000 and finance expense of $2.2 million which primarily consists of interest on loans and amortization of loan-related financing fees.

This compares to a finance income of $737,000 and finance expense of $2.5 million for the three months ended June 30, 2012. For the three months ended June 30, 2013, the company recognized a non-cash unrealized foreign exchange loss of $10.5 million related to the company's US-denominated debt as a result of the strengthening US dollar.

This compares with the non-cash unrealized foreign exchange loss of $6.7 million for the three months ended June 30, 2012. During the quarter, the company recognized a non-cash unrealized gain on the interest rate swap of about $2.3 million as compared with and unrealized loss of $3.3 million for the same period last year.

The non-cash unrealized gain on the interest rate swap for the quarter was a result of the revaluation of the interest rate swap entered into by the company as part of the project loan agreement which was required by the project lenders. It should be noted that these adjustments to income are required under IFRS and are of the non-cash nature as outlined in the company’s statement of cash flows.

For the quarter, the company recorded a current and deferred income tax and resource tax expense of $120,000 and $1.0 million as compared with a resource tax expense of $280,000 and no deferred taxes for the three months ended June 30, 2012. This all results in a net loss attributable to shareholders for of the company of $14.7 million or $0.15 per for the three months ended June 30, 2013 as compared to a net loss of $2.1 million or $0.02 per share for the three months ended June 30, 2012.

The net loss for the quarter was directly attributable to lower production rates resulting from lower revenues on metal sales as well as a negative pricing adjustment of $5.4 million on metal sales attributable to lower copper prices and a non-cash unrealized foreign exchange loss of $10.5 million as that was attributable to the company’s project debt that’s denominated in US dollars. If we remove all of the accounting non-cash items, the company recorded an adjusted income of $1.5 million or $0.02 per share for the three months ended June 30, 2013 compared with adjusted earnings of $17.6 million or $0.18 per share for the three months ended June 30, 2012.

As at June 30, 2013, the company had cash and cash equivalents of approximately $7 million as compared to cash balance of $8.7 million at the end of the first quarter. As at June 30 2013, the company had working capital deficit of approximately $1.7 million, as compared with working capital of $10.7 million at December 31 2012.

Subsequent to the end of the quarter on July 7, the company received $8.6 million of the $13.2 million receivable at quarter end for a shipment that occurred right before the end of the month. In addition subsequent to the end of the quarter, the company contributed and signed $18.8 million of mining equipment that is being used by the company’s subsidiary Copper Mountain Mine and was originally purchased in early 2012 for the mine by the parent company Copper Mountain Mining Corporation.

As a result, Mitsubishi Materials Corporation has contributed an additional $6.3 million in cash to Copper Mountain Mine to match the pro rata share of the company’s contribution. As at the end of this quarter, the mine has successfully completed the bank’s project banking completion test which resulted in the restricted cash account on the balance sheet being released.

On the hedging front, I’d like to remind everyone on the line today, that we have commodity hedging in place and extremely attractive debt financing package. I now like to open the lines up for questions that people may have.

Thanks very much guys. Just wondering on the revised guidance, just wondering you can add a little bit more color in terms of where you see the head grade behind the 65 million pounds to 70 million pounds grade and ore recoveries, if you could just – little bit more of maybe dust to it?

Well, I guess, the head grade would be more similar to what it was in 2012 when we were in Pit 3 and it would be up at least a little over 4% above where it was recently. The big thing that you are referring to the pounds of copper produced where we really suffer about – in year-to-date about 20% of our decreased copper production from guidance comes from the shortage of tonnes per hour milled or tonnes per day milled.

And about 9% came from the decrease in the head grade during the last quarter. So, we’d be about 4% above where we are this year.

Okay, so I guess, it’s fair to assume then that most of that is going to be obviously after the back of the throughput versus things like grade and ore recovery?

That’s correct, recovery as you know that probably was above our plan and above guidance. Our guidance is 82% sorry.

Now after this quarter, yeah.

Yeah, and we ended up 87%.

Great, thanks very much guys.

Okay.

Yeah, good morning. Just a few more operational questions and maybe I’ll hop to the back afterwards for a few financial ones.

But, Jim, just looking for a clarification, during the discussion here you said that the mills are currently operating 30,000 to 32,000 tonne per day range. Is that calendar tonnes per day or is that operating tonnes per day and you just related to that, have you been able to maintain sort of that 92 plus percent availability into July and August?

July is a little bit lower, but it’s I don’t have in front of me right now, but it’s in the 90% range, I think maybe 89% in that range.

Okay. So, sorry, does the 30, 000 to 32,000 worth today is that’s for calendar days?

Yeah, I think as we mentioned, we bought the new crusher in the latter part of July. The additional portable crusher and it’s we’ve now got it operating and we are still getting a little erratic time with it, but generally, we are in the 30,000 tonnes per day range.

Okay, on a calendar day, okay. And then just I guess, along line there are two sort of the head grade in the second half to be higher, are we still not, I guess, expecting the recoveries to come down slightly from that 87% maybe, given the mineralogy and I guess, some of the oxidation in Pit 3 or it should have come down closer to the 84%, 82%.?

It hasn’t to-date.

Okay.

What’s happened is we have been into the Pit 3 material very recently and our recoveries have managed to stay up. We have made a number of changes to the plant and in the plant area we have the cameras and we have some optimization we are doing rotation with reagents in that and we’ve been very fortunate in seeing a significant improvement.

So, I know historically the Pit 3 recoveries have been a little lower but currently, we have a little excess ball mill capacity that what we are used to so we are getting finer grains and as also as I said the optimization programs we have in place seems to be healthy. Recently, we have been getting fair amount of ore from Pit 3 and we have seen a substantial decrease in recoveries.

In fact that is still up about same as with the last month.

Yeah, it sounds very positive. I guess, just a one last question then from me before I jump to the back of the queue.

With respect, or can you maybe just give us a little bit more detail on where the discussions with the lenders, I guess the lending syndicator and to your partners are right now, since you’ve approved that the copper through the secondary crusher at the Copper Mountain Board level and I guess, just maybe your expectations of timing to that. I think, previously you had talked – maybe get the mill or the building for a secondary crusher up before the onset of winter.

So you could then construct the crusher inside during the winter months?

Well, I think as you probably know, Mark, I am going to turn a lot in this, but we still believe that we have time to do that. We are, as you mentioned, the Copper Mountain Board have approved that’s going ahead with it.

Rod has been working with a number of groups with regard to debt financing and we are scheduled to travel to Tokyo at the month and present of our plan to the banks and our partners and we are hoping that there will be a decision by the end of September.

Okay, end of September. Thank you, I have a few more questions, but I’ll jump to the end of the queue.

Thanks guys.

Hi, good morning everyone. Just to confirm when you said 32,000 tonnes per day that you are reaching in July, that’s for operating day or calendar day?

We reach then on a calendar day basis. As I mentioned the little crusher was installed near the end of July and so, some of the results are still a little erratic.

So when you talk about the averages we are hitting it on a day, not day basis but not on a consistent basis.

Okay, great. Thanks and then finally, in the guidance you mentioned that 65 million pounds to 70 million pounds is expected for the – your assuming 32,000 tonnes per day.

Again, is that for calendar or operating day?

I am sorry. I missed out a little bit.

In the guidance paragraph the new guidance was 65 million pounds to 70 million pounds there was a caveat to that saying that it is assumed that the mill operates at 32,000 tonnes that’s for operating or calendar day?

That’s for calendar day.

Okay, great. That’s it for me.

Thank you.

Hi, thanks. So my questions were also on the calendar versus operating day and that’s covered.

Just on the cash cost side, where do you see cash cost through the end of the year and what’s the trend like going forward beyond that?

Do you want to talk to that?

Sure. Hi, David.

We haven’t guidance on the 2014 at this stage. That will happen later in the year towards the end of the year.

We are expecting cost to stay where they are. Right now, we are running, we are pretty consistent, it’s throughput that gives us the unit cost an issue.

We are pretty consistent as $14.5 million a month plus about $1.15 million extra on top of that for these additional measures that Jim was talking about. So we’re running about $15.6 million per month, pretty consistently adjusted and on what are we getting through the mill to get your unit cost.

And where were that – okay, and that’s going to drive where it is on a per pound basis what you got.

Exactly, exactly.

And how do you see the trend, sorry.

I guess the only other thing Jim mentioned that we are now moving back into Pit 3 too. So you would expect a little bit better as Jim pointed out on the grade and that will help your cost as well.

Your unit costs.

Okay. Back to the throughput, how do you see that trending?

So if you are at 30,000 tonnes per day now through to the end of the year, are you expecting – in order to get to the 32,000 on average wouldn’t that mean that you need to be around 33,000 tonnes, 34,000 tonnes in Q4? Is that kind of the expectation trend upwards towards the end of the year and how do you get there?

Our plan is to average 32,000 tonnes a day per calendar day for the balance of the year in the second half.

Okay and do you see Q4 better than Q3 or is kind of flat?

We projected it flat for both the last two quarters.

Okay, very good. That’s all from me.

Thank you. Good morning gentlemen.

Question, first off, on the rest of the year, you mentioned you bought that actually secondary crushers, you have any other capital items for the remainder of the year?

No, nothing, nothing significant.

Okay, next question I had was, is there anything big in the maintenance schedule in the next half of the year?

Are you talking about the mill?

Mill, yes in the mill.

No, well, there is this month and that should be the end of the major one. Typically, we are looking at plus 90% for the balance of the year, for the second half.

Okay. So, my last question is about, the addition of the secondary crusher.

We’ve got $40 million in capital to bring it online. Is that just the initial capital would you need an additional working capital to bring that into position for down time or things like that or is that the whole bill for it?

That’s the whole bill John. With regard to the downtime, the location of the head of course ore stockpile.

So, we are not anticipating any downtime.

And finally, for the last question, sorry for that, when you go back into Pit 3, what happens to the waste to ore ratio? Are you going to see it kind of come back a bit or is it going to be less material handling or presume that Pit layback that you are working on is all of that done?

No, we are continuing to mine at the same rate in the 175,000 tonne a day range.

Okay. Thank you.

Good morning guys. I think to the update so far, I think most of the questions that had regarding what your outlook is going forward have been answered.

The one thing I just want to clarify on the $6.3 million that you are getting from Mitsubishi this is essentially repayment by them for their stake, 25% stake in the purchase of about $24 million in equipment in 2012? Is that right?

No it’s not quite right, no Adam, we bought the equipment for about $18.8 million, when I say we, I mean the parent company and the mine has used that equipment since, I guess early 2012 and we’ve just formalized it and contributed in kind essentially to the project and as they are a 25% partner. They – then match their 25% share of that total package which is $6.3 million, because we are putting in $18.8 they have to put in $6.3 to match it as keep to the 25% 75% relationship.

Okay.

It’s cash that goes in.

All right. Thank you.

Hi, good morning guys.

Good morning.

I have three questions here, first question with regard to the capital costs of $40 million. In terms of financing, what sort of financial package are you guys looking at to finance this secondary crusher?

We are looking at funding the secondary crusher with essentially debt and a little bit of cash flow.

Okay and that typical bank loan or is it …

We are looking at a number of different scenarios. We haven’t picked the final one yet.

But it’s all project bank financing.

Okay and just in terms of the current situation with the working capital deficit, do you think that the company will need additional capital to be injected to – see the net?

No we do not, as we just mentioned to Adam, Mitsubishi just put in $6.3 million. We have restricted cash of $6 million released and that the cash at the end of the period we feel we are at the sufficient level to continue moving forward with sufficient cash flow each month.

Okay and then just final question on the cash costs. Would it be fair to see that the cash cost, C1 cash cost guidance for the year could be in the range of around $2.30 to $2.50 per pound?

No we didn’t give guidance for the year on cost; we just updated our production numbers.

Okay, great. Thanks.

Thanks.

Hi good morning guys. Thanks for taking the call.

Just filling on I guess, Mark’s questions earlier, Jim, and you are internally optimistic view pending positive outcome with your discussions in Tokyo later this month. How early could we actually see physical work start on the crusher products?

Well, I think, some of the minor items have already started, but if we get part of the – or the end of September, then we would plan to start immediately.

Okay and it’s a 12 month construction period after that?

Yeah, up to 12 months.

Up to 12 months. Okay, great.

Most of my other questions have been answered. Just one quick one on the accounting of this in kind equipment – is there anything to be worried going into Q3 Rod that we need to be are?

No, not at all. You see it as a consolidated statement that go on.

So you are not going to really see a change thereon. I mean, the only new thing coming in will be the injection of cash of $6.3 million from Mitsubishi.

Okay, guys. Great, thank you very much.

Yeah, thanks guys. Just two follow- up questions I guess a little bit different than the ones we have received so far.

Just, is there any sort of update that you can give us in terms of what the potential or root cause on a transformer failure might have been? Has it been; A it’s a 100% determined that it was a maybe a fault with something in the transformer as opposed to maybe being caused by something else at the mill?

We’ve had third-party consultants look at it. I don’t think we can say that there has been anything.

I mean, the suggestions of that everything from mouse climbing on bus wires to just unknown failure. It’s really haven’t been determined and the transformer is on the last 20, 30 years, so, quite unusual.

Okay, no, no. Just wondering if we had figured anything else.

And then just, my last question I know the $10.5 million in FX was unrealized with this quarter, but some point it does end up being realized. Just wondering, if there has been any thought given to partially hedging out the foreign exchange exposure on the debts and the repayments there.

I know there is partial natural hedge with receiving US dollar revenues for the commodity price but with part of your cost being fixed in Canadian dollars to what there just has been, any sort of thought process around that?

Yeah, your question with regard to the debt, you are quite correct, it’s a natural hedge with the US dollars. So there is nothing to do there.

With respect to Canadian dollars, we are not hedged at this point in time and our position is to continue to take advantage of markets when the exchange rates move and we convert money over on a required basis. But we have no hedging in place, no plans right now for a US Canadian dollar hedging.

Okay, perfect. Thank you.

Thanks guys.

Sure, thanks. So back to the crusher, the additional crusher you were saying earlier can it get you comfortable with the 35,000 tonnes per day and then you can potentially get to 40,000 tonnes at some point.

Would there be any additional capital that’s needed to go from the 35,000 to 40,000?

No, in fact, it was quite interesting during the failure of the transformer. We were operating the mill with – side mill and one ball mill at the range of – sort of a bulb, 1000 tonne per hour which would indicate that the ball mill circuit have ample capacity and the rest of the mill does with the 2000 tonnes per hour range.

I think as I mentioned earlier, with these portable crushers, we are experiencing significant swings and the swings are mainly created from segregation in the stockpile. But when we do get the finer material into the SAG mill, we do operate up around 1700 ton, 1800 tonne an hour without any difficulty.

And then of course, we get course from the - sliding into the feeder and that in turn decreases the tonnage again, but the mill has operated in the 40,000 tonne a day range. And we haven’t had any difficulties.

No major changes.

All right, thanks for that. That’s it.

Okay well, thank you very much everyone. We appreciate you dialing into the second quarter conference call of Copper Mountain Mining Corporation.

And as usual, Jim and I are always available for questions if you have any additional follow-up once you want to call us on. Thank you very much and have a good day.

Thank you.