Lundin Mining Corporation ("Lundin Mining" or the "Company") (TSX:LUN)(OMX:LUMI)
today reported net earnings of $16.6 million ($0.03 per share) for the quarter
ended June 30, 2013. Cash flows of $26.6 million were generated from operations,
not including the Company's attributable cash flows of $32.4 million from Tenke
Fungurume.
Paul Conibear, President and CEO commented, "During the second quarter, our
operations continued, overall, to perform well and we remain on track to achieve
our 2013 production guidance. Tenke had another record copper production quarter
and cash distributions received to date exceeded original expectations.
Due to the on-going weakness in metal prices, the Company has implemented
initiatives to reduce or defer capital investments and some exploration spending
until metal markets improve. We continue to evaluate our operations with the aim
to actively preserve margins and maximize profitability.
The second quarter also marked a milestone of regenerating growth in the Company
with the acquisition of the high grade Eagle Mine. The transaction represents a
significant achievement in our long-stated objective of acquiring a high
quality, advanced stage asset in a low risk, mining oriented jurisdiction.
Construction is ramping up well at the Eagle mine and mill site and we look
forward to an exciting year ahead as it comes into production in 2014."
Summary financial results for the quarter and year-to-date:
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Three months ended Six months ended
June 30 June 30
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US$ Millions (except per share amounts) 2013 2012 2013 2012
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Sales 176.3 172.3 364.4 385.1
Operating earnings(1) 49.2 80.4 117.2 185.8
Net earnings 16.6 44.1 66.6 102.4
Basic earnings per share 0.03 0.08 0.11 0.18
Cash flow from operations 26.6 119.0 72.4 170.3
Ending cash position 230.0 323.6 230.0 323.6
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(1) Operating earnings is a non-GAAP measure defined as sales, less operating
costs (excluding depreciation) and general and administrative costs.
Operational Highlights
Wholly-owned operations: Overall mine performance during the quarter achieved
objectives. Copper and lead production for the quarter were largely in-line with
expectations while nickel production was higher than anticipated. Zinc
production improved from the first quarter of 2013; however, cash costs per
pound(1) of zinc continued to be higher than expected. Copper, zinc and lead
production guidance for Neves-Corvo and Zinkgruvan has been maintained as
originally reported. Nickel and copper production guidance at Aguablanca has
been increased reflecting excellent mine performance year-to-date.
-- Neves-Corvo produced 14,102 tonnes of copper and a record 13,940 tonnes
of zinc in the second quarter of 2013. Copper production was largely on
target, assisted by high mining and milling volumes. Cash costs per
pound of copper sold were $1.85/lb for the quarter, slightly higher than
guidance of $1.80/lb.
-- At Zinkgruvan, zinc production for the quarter improved to 18,599 tonnes
but continued to be negatively impacted by changes in mine sequence
resulting in lower head grades and recoveries. Lead production was
excellent at 10,461 tonnes produced during the quarter. Cash costs per
pound of zinc sold were $0.43/lb for the quarter, due to lower grades
and a stronger SEK.
-- At Aguablanca, ore milled, grades and plant recoveries for both nickel
and copper were all better than expectations for the quarter with cash
costs of $3.50/lb of nickel sold. Aguablanca produced 1,876 tonnes of
nickel and 1,516 tonnes of copper during the quarter.
Tenke: Tenke achieved another quarterly record in mining, milling and copper
production volumes and cash distributions to the Company year-to-date have
exceeded expectations.
-- Second quarter production included 55,126 tonnes of copper cathode and
2,305 tonnes of cobalt in hydroxide. Tenke sold 48,285 tonnes of copper
at an average realized price of $3.10/lb and 2,493 tonnes of cobalt were
sold at an average realized price of $8.48/lb.
-- Attributable operating cash flow from Tenke for the second quarter of
2013 was $32.4 million ($76.1 million year-to- date).
-- Excess operating cash flows of $27.3 million were distributed to the
Company in the second quarter of 2013 ($72.3 million year-to-date).
-- Operating cash costs for the second quarter of 2013 were $1.23/lb of
copper sold, in-line with the $1.22/lb reported in the prior year
comparable quarter.
Total production from the Company's assets including attributable share of Tenke:
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YTD Q2 Q1 FY Q4 Q3 Q2 Q1
(tonnes) 2013 2013 2013 2012 2012 2012 2012 2012
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Copper 33,081 16,065 17,016 63,878 14,224 15,573 16,936 17,145
Zinc 58,486 32,539 25,947 122,204 29,161 28,452 31,972 32,619
Lead 17,283 10,692 6,591 38,464 8,353 9,365 9,780 10,966
Nickel 3,673 1,876 1,797 2,398 1,705 693 - -
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Tenke attri-
butable
Copper 26,301 13,230 13,071 38,105 10,602 9,947 8,632 8,924
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(1) Cash cost/lb of copper are non-GAAP measures defined as all cash costs
directly attributable to mining operating, less royalties and by-product
credits.
Financial Highlights
Financial Performance
-- Operating earnings for the second quarter of 2013 were $49.2 million, a
decrease of $31.2 million from the $80.4 million reported in the
comparable quarter of 2012. The decrease was largely attributable to
higher per unit production costs ($12.9 million), lower metal prices and
prior period price adjustments ($8.7 million) and sales mix ($6.1
million), with higher zinc sales and lower copper volumes from our
operations for the quarter.
On a year-to-date basis, operating earnings of $117.2 million were lower
than the $185.8 million reported for the first six months of 2012. The
decrease was mainly attributable to lower realized metal prices and
prior period price adjustments ($37.4 million), change in sales mix
($16.5 million) and lower sales volumes ($15.6 million), partially
offset by operating earnings at Aguablanca ($18.4 million).
-- For the quarter ended June 30, 2013, sales of $176.3 million increased
$4.0 million over the prior year ($172.3 million) largely as a result of
the restart of operations at Aguablanca ($19.8 million), partially
offset by lower realized metal prices and negative prior period price
adjustments ($8.7 million).
Sales of $364.4 million for the six months ended June 30, 2013 were
$20.7 million lower than the comparable period in 2012 ($385.1 million).
Lower realized metal prices and prior period price adjustments ($37.4
million) were partially offset by higher net sales volume ($16.7
million).
-- Cash flow from operations for the current quarter was $26.6 million
compared to $119.0 million for the same period in 2012. The decrease in
the cash flow is mostly attributable to lower operating earnings and
changes in non-cash working capital.
For the six months ended June 30, 2013, cash flow from operations was
$72.4 million compared to $170.3 million for same period in 2012. Lower
operating earnings and changes in non-cash working capital were the
primary contributors of the decrease.
-- Average metal prices for copper, zinc and nickel for the three and six
months ended June 30, 2013 were lower (2% - 13%) than the same periods
in the prior year, while lead prices improved slightly over the prior
comparable period (4% - 7%).
-- Operating costs (excluding depreciation) of $122.6 million in the
current quarter were higher than the prior year comparative quarter of
$85.6 million largely as a result of the restart of operations at
Aguablanca and higher per unit production costs at Neves-Corvo and
Zinkgruvan.
On a year-to-date basis, operating costs (excluding depreciation) for
the six months ended June 30, 2013 of $236.1 million were $50.7 million
higher than the $185.4 million reported for the first half of 2012.
Restart of operations of Aguablanca was the largest contributor to this
variance.
-- Net earnings of $16.6 million ($0.03 per share) in the current quarter
were $27.5 million lower than the $44.1 million ($0.08 per share)
reported in 2012. Earnings were impacted by:
-- lower operating earnings ($31.2 million);
-- higher depreciation, depletion and amortization expense ($7.1
million); and
-- lower net other income ($25.5 million) from reduced foreign exchange
gains; and
-- lower equity earnings from investment in associates ($8.3 million);
offset by
-- higher net tax recovery of $32.4 million.
-- Net earnings of $66.6 million ($0.11 per share) year-to-date were $35.8
million lower than the $102.4 million ($0.18 per share) reported in
2012. Earnings were impacted by:
-- lower operating earnings ($68.6 million); and
-- higher depreciation, depletion and amortization expense ($17.8
million); offset by
-- proceeds from Aguablanca insurance claim ($15.1 million); and
-- higher net tax recovery of $40.6 million.
Corporate Highlights
-- On June 12, 2013, the Company announced that it agreed to acquire a high
grade nickel/copper underground project and associated Humboldt mill
("Eagle Mine") located in the upper peninsula of Michigan, USA, from Rio
Tinto. This acquisition was completed on July 17, 2013. Total cash
consideration paid was $315.3 million, which is subject to customary
post-closing adjustments.
Construction of the Eagle project is more than 50% complete with initial
production expected to commence in the fourth quarter of 2014. Costs to
complete are approximately $400 million. Annual production over the
first three years (2015-2017) is expected to average approximately
23,000 tonnes of nickel and 20,000 tonnes of copper per annum, with
additional by-product credits of precious metals and cobalt. Due to the
high nickel grades and strong by-product credits, C1 cash costs for the
first three years are expected to average approximately $2.00/lb nickel.
-- Mr. Colin Benner has stepped down as Director of the Company, effective
July 1, 2013, for personal reasons. We wish to express our sincere
thanks to Colin for his excellent contribution to the Company over the
past many years.
Financial Position and Financing
-- Net cash(1) position at June 30, 2013 was $221.1 million compared to
$265.1 million at December 31, 2012 and $199.4 million at March 31,
2013.
-- The $21.7 million increase in net cash during the quarter was primarily
attributable to cash generated from operating activities of $26.6
million and distributions from Tenke of $27.3 million, partially offset
by investments in mineral properties, plant and equipment ($37.0
million).
-- The $44.0 million decrease in net cash during the first six months of
the year was primarily attributable to the acquisition of Freeport
Cobalt (formerly "Kokkola") for $116.3 million and investments in
mineral properties, plant and equipment ($73.6 million), partially
offset by cash flow from operations of $72.4 million and distributions
from Tenke of $72.3 million.
-- Net debt balance at July 30, 2013 is approximately $100 million.
(1) Net cash is a non-GAAP measure defined as available unrestricted cash less
long-term debt and finance leases.
Outlook
2013 Production and Cost Guidance
-- Production and cash costs guidance for 2013 for the Company's wholly
-owned operations have been adjusted to reflect excellent performance
and improved outlook at Aguablanca, as well as higher cash costs per
pound of zinc at Zinkgruvan to account for impacts of higher costs
experienced in the first six months of 2013, unfavourable foreign
exchange and lower by -product metal prices.
-- Guidance on Tenke's production and cash costs have been updated to
reflect the most recent guidance provided by Freeport.
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2013 Guidance Prior Guidance Revised Guidance
C1 C1
(contained tonnes) Tonnes Cost Tonnes Cost(a)
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Copper Neves-Corvo 50,000 - 55,000 $ 1.80 50,000 - 55,000 $ 1.80
Zinkgruvan 2,500 - 3,500 2,500 - 3,500
Aguablanca 4,500 - 5,000 5,000 - 5,500
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Wholly-owned 57,000 - 63,500 57,500 - 64,000
Tenke (@24%)(b) 47,300 $ 1.18 49,000 $ 1.24
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Total attributable 104,300 - 110,800 106,500 - 113,000
Zinc Neves-Corvo 45,000 - 50,000 45,000 - 50,000
Zinkgruvan 73,000 - 78,000 $ 0.20 73,000 - 78,000 $ 0.30
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Total 118,000 - 128,000 118,000 - 128,000
Lead Zinkgruvan 33,000 - 36,000 33,000 - 36,000
Nickel Aguablanca 5,000 - 5,500 $ 5.00 6,000 - 6,500 $ 5.00
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a. Cash costs remain dependent upon exchange rates (forecast at
EUR/USD:1.30, USD/SEK:6.60) and metal prices (forecast at Cu: $3.30, Zn:
$0.85, Pb: $1.00,Ni: $6.85, Co: $12.00).
b. Freeport has provided 2013 sales and cash costs guidance. The sales
guidance is assumed to approximate Tenke's production.
2013 Capital Expenditure Guidance
Capital expenditures for 2013 (excluding Eagle Mine) are expected to be $230
million, a $55 million reduction from previous guidance. The Company and
Freeport have implemented initiatives to reduce or defer capital investments
until metal markets improve. Details of estimated 2013 capital expenditures are
as described below:
-- Sustaining capital in European operations - $105 million (from $110
million), consisting of approximately $65 million for Neves-Corvo and
$40 million for Zinkgruvan.
-- New investment capital in European operations - $50 million (from $60
million), including approximately $25 million for Lombador Phase I and
$10 million for an industrial water dam at Neves-Corvo. In addition, $15
million will be invested in additional wall stability measures and
pushbacks at Aguablanca to allow for future mining of ore rendered
inaccessible by pit stability issues. This will enable on-going
production to continue for Aguablanca until the first quarter of 2015.
The capital investment in Zinkgruvan's ore dressing plant has been
deferred.
-- New investment in Tenke - $75 million (from $115 million), estimated by
the Company as its share of the remaining Phase II expansion costs,
exploration and other expansion related initiatives and sustaining
capital funding for 2013. All of the capital expenditures are expected
to be self-funded by cash flow from Tenke operations. Assuming current
metal prices and operating conditions prevail, the Company expects to
continue to receive regular significant distributions from Tenke for the
remainder of 2013.
2013 Exploration Guidance
As a result of program restraint, total estimated exploration expenditures for
2013 (excluding Tenke) have been reduced to $28 million, compared to the
original plan of $38 million.
About Lundin Mining
Lundin Mining Corporation is a diversified Canadian base metals mining company
with operations in Portugal, Sweden and Spain and a development project in the
US, producing copper, zinc, lead and nickel. In addition, Lundin Mining holds a
24% equity stake in the world-class Tenke Fungurume copper/cobalt mine in the
Democratic Republic of Congo and in the Freeport Cobalt Oy business, which
includes a cobalt refinery located in Kokkola, Finland.
On Behalf of the Board,
Paul Conibear, President and CEO
Forward-Looking Statements
Certain of the statements made and information contained herein is
"forward-looking information" within the meaning of the Ontario Securities Act.
Forward-looking statements are subject to a variety of risks and uncertainties
which could cause actual events or results to differ from those reflected in the
forward-looking statements, including, without limitation, risks and
uncertainties relating to the estimated cash costs, the timing and amount of
production from the Eagle Mine, the cost estimates for the Eagle Mine, foreign
currency fluctuations; risks inherent in mining including environmental hazards,
industrial accidents, unusual or unexpected geological formations, ground
control problems and flooding; risks associated with the estimation of mineral
resources and reserves and the geology, grade and continuity of mineral
deposits; the possibility that future exploration, development or mining results
will not be consistent with the Company's expectations; the potential for and
effects of labour disputes or other unanticipated difficulties with or shortages
of labour or interruptions in production; actual ore mined varying from
estimates of grade, tonnage, dilution and metallurgical and other
characteristics; the inherent uncertainty of production and cost estimates and
the potential for unexpected costs and expenses, commodity price fluctuations;
uncertain political and economic environments; changes in laws or policies,
foreign taxation, delays or the inability to obtain necessary governmental
permits; and other risks and uncertainties, including those described under Risk
Factors Relating to the Company's Business in the Company's Annual Information
Form and in each management's discussion and analysis. Forward-looking
information is in addition based on various assumptions including, without
limitation, the expectations and beliefs of management, the assumed long term
price of copper, zinc, lead and nickel; that the Company can access financing,
appropriate equipment and sufficient labour and that the political environment
where the Company operates will continue to support the development and
operation of mining projects. Should one or more of these risks and
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in forward-looking
statements. Accordingly, readers are advised not to place undue reliance on
forward -looking statements.
FOR FURTHER INFORMATION PLEASE CONTACT:
Lundin Mining Corporation
Sophia Shane
Investor Relations North America
+1-604-689-7842
Lundin Mining Corporation
John Miniotis
Senior Business Analyst
+1-416-342-5565
Lundin Mining Corporation
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50
www.lundinmining.com
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