Coppernico Metals Inc

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

Stefan Ioannou - Haywood Securities Aleksandra Bukacheva - BMO Capital Markets Marco Rodriguez - Stonegate Capital Markets Craig Hutchinson - TD Securities Kyle Franklin - Canaccord Genuity

Thank you, Salvi. After opening remarks by management in which we will review the business and operational results for the 2015 third quarter, we will open the lines to participants for questions as noted by Salvi.

Please note that 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 outcome to differ materially from 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 for his remarks.

Thank you, Rod. It’s Jim O'Rourke, President and Chief Operating -- Chief Executive Officer.

Good morning, everyone, and thank you for joining us. Today, we will discuss the 2015 third quarter results of operation at Copper Mountain Mining and our corporate financials.

I’ll briefly summarize the financial results and provide an update on various operational activities, after which Rod will provide financial details for the 2015 third quarter. For those of you following on the webcast, we will refer to the page number of the supporting slides that we have provided.

For the three months ended September 30, 2015, the company completed a total of four shipments of copper concentrate, generating $63.7 million in revenue after provisional pricing adjustment of negative $5.7 million. The 2015 third quarter mine performance has continued to show improvement in production and reduce operating costs, which was continued to be our main focus.

Production for the three months ended September 30, 2015 was 20.4 million pounds of copper, 6,300 ounces of gold and 64,900 ounces of silver, bringing the year-to-date production to 58.2 million pounds of copper, 21,900 ounces of gold and 219,300 ounces of silver. Page three provides a historical production graph.

We provided the copper equivalent to note the higher gold as we continue our operation in the Pit 2 area of the Superpit. Copper Mountain’s third quarter 2015 production benefited from the continued improvements in the mill throughput, which averaged 37,400 for the period.

Page four provides a graph of improvements in mill throughput during the year and over the period. Site cash cost per pound of copper produced net of precious metal credits was US$1.21 for the period, a decrease of 11%, compared to a US$36 in the second quarter of 2015.

The Corporation total cash cost per pound of copper sold net of precious metal credits was US$1.72 per pound of copper, a decrease of 5%, compared to a US$81 in the second quarter of 2015. Site total cash costs were reduced on a per pound of copper basis as a result of cost reduction measurements taken at the mine site and also helped by the favorable U.S.

Canadian exchange rate. Page five provides a graph of the historical quarterly cash cost at the mine and total bases.

Approximately 90% of the site operating costs are composed of 10 major categories. Site management has successfully tackled these major cost centers and has reduced operating costs from the budget by 11.5% year-to-date.

Page six provides a pie chart of our mine site costs, site cost include the $1 per tonne milled paid to the partners for the secondary crusher. We continue to strive improvements at the mine site and this has positioned the company well to weather the current global market conditions.

In addition, Copper Mountain’s bottomline continues to benefit from a weaker Canadian dollar relative to the U.S. dollar as approximately 88% of the company's operating costs have a Canadian dollar cost base.

And keeping with our cost reduction trend, no major capital expenditures are plan for the balance of 2015. During the third quarter, the company continued with the mine -- with mining ore from mainly the Pit 2 area where a majority of the ore is mined from for the balance of this year.

And I’d like to point out that Pit 2 is little higher in gold than the other barriers. Page 7 provides a plan view of the mining areas, with Pit 2 area to the north of the super pit.

At the same time, the company continues with the Stage 3 pushback on the west end of Pit 3. During the quarter, the company received approval from the BC government to incorporate the Virginia and the Oriole deposits into the mine plan.

Mining from the Virginia area was commenced with overburden removal and while the Oriole deposit will be incorporated into mine plan once the Virginia pit is completed. Page 4 provides a picture of the BC 4,000 shovel loading in the Virginia pit.

Management is planning for the first ore delivery to the concentrator from Virginia in December. Ore from Virginia had been planned for October, but the delay resulted from the delay in receiving the mine permit amendment that was submitted to government last October 2014.

Also, Virginia and Oriole deposits will provide small volumes of higher grade ore that will be blended into the mill feed over the next two years. During the quarter, a total of 14.7 million tonnes of material was mined, including 5.4 million tonnes of ore and 9.3 million tonnes of waste.

The mining rate at the end of the period was in the range of 160,000 tonnes per day moved. Mill throughput from the concentrator continued to improve month-over-month, achieving a record quarterly average rate of 37,400 tonne per day during the third quarter, approximately 7% above the design capacity of 35,000 tonne per day.

Third quarter improvements included an average throughput of 39,100 tonne per day for the month of July, thus providing management with confidence that the targeted rate of 37,500 tonne per day is achievable on a consistent basis. Page 9 provides a graph of the quarterly cooper production and mill tonnage, achieved relative to our targets.

I would like to point out that on the graph the mill throughput for September is showing lower than the actual 35,435 -- 35,000 tonne per day. During the third quarter ended September 30th, the mill processed a total of 3.4 million tonnes of ore as compared to 3.2 million tonnes in the previous quarter.

The increase in throughput is directly attributable to the installation of the permanent secondary crusher and mine site management's ability to continue to optimize the crushing and grinding circuit. Page 10 provides a summary of the third quarter mill performance.

During the quarter, the mine continued to average a mill head grade of 0.33% copper, the same as year-to-date average. And we anticipate our copper head grade for the year will average that, which is approximately 0.41% copper equivalent.

Copper recovery averaged 82.4% for the three months ending September 30, 2015 and we have continued to see improvements in this area. Operating time for the mill continues to be consistent at 92.4%, which is slightly above our budget rate of 92%.

Copper production during the quarter was in line with guidance and we're still expecting to meet our guidance numbers for the year. Page 11 provides an overview of the third quarter production results.

Operating highlights for the third quarter include the record mill throughput averaging 37,400 tonne per day, which contributed to a strong quarterly production of the 20.4 million pounds of copper. The mine site also continues its excellent safety record, operating for 783 days without a single lost time incident as of September 30, 2015.

And just recently, we surpassed the 2 million man-hours work lost time incident free. Currently, management are fully focused on operational improvements and cost savings to ensure we continue to be successful in light of the current global resource market conditions.

An adaptive mine plan for 2016 are being optimized to further strengthen our operating base and ensure our long-term success. The mine is on track for meeting our 2015 guidance levels.

I will answer specific questions at the end and ask anything you're wishing with regard to details. I’d like now to turn it over to Rod Shier.

Thank you, Jim. The mine sold a total of 21.9 million pounds of copper, 7,800 ounces of gold and 65,300 ounces of silver during the three months ended September 30, 2015, as compared to sales of 25.3 million pounds of copper, 7,800 ounces of gold and 133,800 ounces of silver during the three months ended September 30, 2014.

This generated $63.7 million in revenue after pricing adjustments and smelter charges for the three months ended September 30, 2015, and this is based on an average realized copper price of US$239 per pound. This compares to $82.6 million in revenues after pricing adjustments and smelter charges based on an average provisional copper price of US$317 per pound for the three months ended September 30, 2014.

The decrease in revenue as a result of lower copper prices been realized by about 25% during the quarter, in addition to a slight decrease in sales volumes for the quarter over the comparable period in 2014. Cost of sales for the three months ended September 30, 2015, was $65.8 million, which resulted in a gross loss of $2.1 million, as compared to cost of sales of $63.7 million, which resulted in a gross profit of $18.8 million for the three months ended September 30, 2014.

The loss is again a result of lower copper prices been realized during the quarter. It should also be noted that the mine deferred $12.9 million in stripping activities last year, while we deferred zero dollars for the nine months so far.

So on a total dollar cost basis, you can see the benefit of some of the cost-cutting measures that have been achieved this year. General and administrative expenses for the three months ended September 30, 2015, were $1.5 million as compared to the $1.7 million for the three months ended September 30, 2014.

For the three months ended September 30, 2015, the company recorded finance expense of $2.8 million as compared to $1.9 million for the three months ended September 30, 2014. Finance expense primarily consists of interest on loans and the amortization of financing fees.

For the three months ended September 30, 2015, the company recognized the non-cash unrealized foreign exchange loss of $22 million, as compared with the non-cash unrealized foreign exchange loss of $15.3 million for the three months ended September 30, 2014, which primarily relates to the strengthening U.S. dollar as the company’s debt is denominated in U.S.

dollars and we report in Canadian dollars. During the third quarter, the company recognized the non-cash unrealized loss on the interest rate swap of $2.3 million, as compared with the non-cash unrealized gain on the interest rate swap of $200,000 for the three months ended September 30, 2014.

Both of which are related to the revaluation of the interest rate swap liability required under the company’s loan agreements. It should be noted that these non-cash adjustment to income are required under IFRS and do not affect the company's cash flow as outlined in the company MD&A and statement of cash flows.

This all resulted in a net loss attributable to the shareholders for the three months ended September 30, 2015, of $21.1 million, or about $0.18 per share, as compared to a net loss of $2.8 million, or $0.02 per share, for the three months ended September 30, 2014. Management of the company believe that as a result of the company having U.S.

denominated debt, selling copper, gold and silver in U.S. dollars and reporting the financial statements in Canadian dollars the unrealized foreign exchange loss or gain each quarter is misleading to the reader of the financial statements if just looking at net income only.

As a result, management believe that readers of the financial statement should look to adjusted EBITDA, adjusted earnings and adjusted earnings per share as a better way to evaluate the company's performance during the period. Therefore, we removed all of the accounting non-cash items.

The company reported an adjusted EBITDA of $14.7 million and adjusted earnings of $2 million, or about $0.02 per share, for the three months ended September 30, 2015, as compared to an adjusted EBITDA of $34.4 million and adjusted earnings of $18.2 million, or $0.15 per share, for the three months ended September 30, 2014. As of September 30, 2015, the company had cash on hand of $18.5 million, as compared to $22.4 million at the end of the second quarter.

To-date we have paid back about US$83 million in principal and interest on our low cost strategic friendly debt. Our senior credit facility continues to have nominal semiannual principal repayments up until December 2021, at which time the balloon payment schedule comes into effect.

In addition, our highly favorable [JPAC] [ph] debt is currently carrying an interest rate of about 1%. In conclusion, the third quarter of 2015 delivered strong operational results, which contributed to the $18.1 million in cash flow from operations for the nine month period ended September 30, 2015.

We ended the quarter with $18.5 million in cash and continue to focus corporate and operational efforts on cost containment, as we navigate these depressed commodity prices to ensure we maximize cash flow. I now would like to open up the lines for any questions that people may have.

Okay. Thanks very much guys.

Good to see the cash cost coming so low. I’m just wondering in September you noted that the throughput was down below 35,000 tonnes.

Is that just your scheduled maintenance there or is there is something else going on?

Ian, that was just a mistake on the graph. It’s actually 35,400.

35, okay.

35,400.

Okay. Perfect.

And then…

What’s really interesting, Stefan, I just point out that for all three months, our tonnes per operating day have reached about just little under 40,000 tonne a day.

Okay

So in September, the reason it was down is strictly because of scheduled maintenance on the SAG mill.

Okay. That was because of the scheduled maintenance.

Okay. And going into Q4, have we already had or are we going to see later this quarter any scheduled maintenance that we should be aware of or is it pretty steady state quarter?

We will have scheduled maintenance. We do it every month but we still plan to maintain our 92% operating ton.

Okay.

And I feel pretty confident about that.

Okay. Great.

And then just -- I know Pit 2 has typically had higher gold grade associated with it. But the gold production was actually down a little bit in Q2 versus say -- sorry in Q3 versus Q1 and Q2.

If that was just a grade and it hasn’t been where you are mining specifically within Pit 2 or what’s going on there?

Yeah. I think in that particular area there was a little ore.

We’re starting to blend Pit 3 and Pit 2 together now. And there is some overlap there on the -- I guess, you should call the peninsular area between the two pits.

So we do get some mixing there. But I think overall it will be up.

Okay. Okay.

And maybe just one last question. Just obviously on what the debt and everything and the free cash flow profile of the company, current copper prices.

There is a mention in the liquidity section of the MD&A, just that you maybe looking to extend some of the corporate guarantees. Do you have any sort of timing for that or more thought on that?

Yes, Stefan. That’s something that we’ve done every year and typically it happens in May of each year.

We've gone to the bank and asked for just an extension of that guarantee on an annual basis.

Okay.

And we've done that from day one.

Okay. So just sort of another rollover basically is what you’re looking at?

That’s right.

Okay. Great.

Thanks very much guys.

Thank you, Operator. Good morning gentlemen.

I have a question. Just looking at your reserve prices, you think its $350 Canadian which works out to about US$260 and you have lost reserve estimation.

So what I’m wondering is what are the spot rates now if copper prices here potentially below $225. Have you potentially thought about -- would you think you might have any changes to your reserve and might that result in some form of impairment?

I’m just kind of wondering how that might relate to your balance sheet covenants considering debt balances are growing and deficit is also growing because of the foreign exchange movement. Can you perhaps help us bring that?

Are you referring to the oil reserves?

Correct.

Okay. With regard to the oil reserve, you’re correct.

I mean, we do use dollar in there when we do our optimization. But it really hasn’t affected us and offer a lot in the sense that we’re using about the same cut-off.

I see. So you are not thinking in terms of -- you wouldn’t -- let me put it this way.

What level of the corporate price might trigger potential revision to your reserve?

What price?

Yes. Like $2 -- is that $2?

Is that $1.75? What is the level of corporate price that might force you to use a higher cut-off grade?

I don’t know. That’s pretty tough answer because I’d be speculating.

I don’t honestly know the answer of that.

Okay.

We can get back to you on that one.

Okay. Thank you.

And then just with respect to how you think in terms of net debt to equity because there hasn’t been much disclosure, I guess, provided regarding your balance sheet covenants. But as we’re kind of looking at the statements that debt balances are growing because obviously your flow is getting stronger and then the deficit is also growing.

So it looks like your nominator is increasing, your denominator is decreasing. So I’m just wondering if there might be a concern that you might kind of push up against those covenants at some point.

Hi Sasha. Good question.

And that’s why referred to our debt as low-cost strategic friendly debt. There is really no covenant other than our debt service coverage ratio.

These agreements are filed on SEDAR and you can see that and that’s a debt service coverage ratio of 1.25 to 1. We tried to expand on our disclosure in the financial statements in that note for long term debt.

You will see that there is no debt to equity or other covenants in there. We just have that debt service coverage ratio.

That’s good to know. Thank you very much.

No problem.

Good morning. Thank you for taking my questions.

I just have a real kind of a couple quick ones here? Just want to following-up to earlier question on liquidity aspect of the debt service and the CapEx reserve?

So are you sort of implying that that should be no big issue as far as getting that down this May?

No. That’s just a guarantee extension as opposed to using our cash and putting up cash and we've done that from day one as we mentioned and have gotten extension annually each year.

Right. I’m sorry.

I was referring to paying that extension, it seems like you're pretty confident and that shouldn’t be an issue, is that correct?

That's right. I mean…

Okay.

We’ve got -- we receive that extension every year since we took out the debt.

Got you. And then last quick question, if maybe you can kind of frame a little bit your thoughts kind of moving into fiscal ’16, not looking for any kind of specific guidance, but if you can just kind of frame what you’re thinking right now?

Well, part of our budgeting process is going on right now and that won’t be done until towards the end of November, early December. And then at that time we would come out with a comment on 2016.

But as Jim commented that we’re in Pit 2 with a little bit of Pit 3 and that’s going to continue into 2016. So that’s about all I can say on that right now.

Yeah. Thanks a lot guys.

Thanks.

Hey, guys. Just a question follow-up on the throughput issue.

So for the month, quarter or Q3 you’re averaging about 37,000 tonnes a day and you had a very high utilization rate over 93%. If you look out to 2016, I believe you’re targeting somewhere about 40,000 tonnes per day, so about 8% to 10% higher than where we are at right now.

What areas are you looking at in terms of improvement to get that additional 8% to 10% bump?

We’re not budgeting 40,000 tonne a day, we’re budgeting 37,500.

Okay. So I’m going up to technical report you guys filed a few months back where its talk about 37,000 in 2015 going to 40,000.

Yeah. In there I think we said that each year we’ll put our guidance.

We’re in the budgeting process right now going through that. I mean, ultimately let me put the crusher and we said there was a target at some point to go to 40 but we reiterate our guidance each year based on what the operational parameters were and the market conditions at the time.

Right now we haven't given guidance for 2014 -- 2016. And we will be doing so later on in this year once the budgeting process is done.

But I would think 37,500 would be a more appropriate number in light of where the current markets are.

Okay. Thanks guys.

Also Craig, I mentioned that for the three months -- last three months anyway, things have been running pretty steady at around 40,000 tonnes per operating day. And we believe that it’s still considerable tweaking to do between the crusher and the Sag mill to see if we can push that a little higher.

So obviously, our objective will be to get up of that range. But I don’t think we can commit to that at this stage.

Okay. Thanks.

Good morning, everyone. I was just noticing that it looks like this quarter is a first time I think that there’s ever been a distribution to non-controlling interest, I assume that’s the payment of the JV.

I was wondering just if you could provide some color on whether or not you think those will continue for this year and maybe next.

Kyle, that relates to a distribution to the partners, that’s correct. And so a little bit of money did get paid back up to ourselves, the parent company 75% and 25% to Mitsubishi.

So the amount that goes outside of the copper mountain group does get recorded as cash coming out of our pocket a little bit if you want to look at it that way. Those are done on as required basis.

They're not required payments. And we just look at where the cash is in the company at the time and make a determination at that point in time.

So I can't really give you any color as to when the next one is going to be made. I think it determines a whole bunch of things like, where is our copper price at, where's our production profile at, all sorts of things.

Okay. Thanks.

Thank you very much. I appreciate everybody here dialing into our third quarter 2015 conference call.

And as usual, Jim and I are always available for questions if you have any follow-up ones you want to dial in directly to us. Thanks, again.

Good bye.