Lundin Mining Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company")
today reported net earnings of $27.9 million ($0.05 per share) for the quarter
ended September 30, 2013. Cash flows of $27.4 million were generated from
operations, not including the Company's attributable cash flows of $42.2 million
from Tenke Fungurume.
Paul Conibear, President and CEO commented, "Our European operations continued
to perform generally in-line with expectations and as we enter into the fourth
quarter we are pleased to be able to modestly increase production guidance for
copper, zinc and nickel.
Tenke experienced another excellent quarter, despite power interruptions in
September, which highlights the excellent operating performance of the asset.
Year-to-date cash distributions received from Tenke now total over $110 million.
At Eagle, construction has ramped up very well, with commissioning expected in
the fourth quarter of 2014. We look forward to ending the year with a strong
operating performance, well positioned for the future with our conservative
balance sheet further improved by capital cost constraint measures and the
recent completion of a flexible, low cost debt financing package."
Summary financial results for the quarter and year-to-date:
Three months ended Nine months ended
September 30 September 30
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US$ Millions (except per share
amounts) 2013 2012 2013 2012
Sales 176.4 159.6 540.9 544.6
Operating earnings(1) 58.9 71.1 176.1 256.9
Net earnings 27.9 37.9 94.6 140.3
Basic earnings per share 0.05 0.07 0.16 0.24
Cash flow from operations 27.4 (25.7) 99.7 144.6
Ending cash position 137.1 255.9 137.1 255.9
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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: Copper, zinc, and lead production were largely in-line
with expectations for the quarter, with total zinc production at its highest
levels in years. Production costs at Neves-Corvo were higher than planned. At
Zinkgruvan, excellent cash costs in the quarter brought year-to-date results
back in line with expectations. At Aguablanca, both metal production and costs
continued to be better than expectations. As a result, production guidance has
been updated to increase nickel and copper production at Aguablanca. As well,
guidance for copper production at Zinkgruvan and zinc production at Neves-Corvo
have also been increased. Cash cost guidance for Neves-Corvo has been increased
to $1.90/lb1 of copper (from $1.80/lb) and for Aguablanca, it has been reduced
to $4.50/lb of nickel (from $5.00/lb).
-- Neves-Corvo produced 12,629 tonnes of copper and a record 14,723 tonnes
of zinc in the third quarter of 2013. While operational improvements
continue to drive high throughput levels, copper cash costs of $2.23/lb
for the quarter were higher than guidance of $1.80/lb. The increase is a
result of lower copper grades and recoveries, costs associated with the
increased production of zinc, a higher number of contractors, shaft and
mill maintenance costs in the quarter related to the annual shutdown,
and the continued low zinc price significantly affecting by-product
credits.
-- At Zinkgruvan, zinc production for the quarter improved to 18,743 tonnes
with better head grades and recoveries when compared to the prior
quarter. Cash costs for zinc were $0.06/lb, well below guidance of
$0.30/lb and the lowest since 2007, primarily as a result of higher by-
product credits.
-- Aguablanca continued to have strong production results in the third
quarter, as ore milled, grades and plant recoveries for both nickel and
copper continued to exceed expectations. Year-to-date, 5,461 tonnes of
nickel and 4,557 tonnes of copper in concentrate have been produced.
Cash costs of $3.67/lb nickel for the quarter were lower than guidance
of $5.00/lb.
Tenke: Tenke continued to perform well, achieving the second best quarter on
record for milling volumes, despite experiencing power interruptions in
September which impacted operating rates. While the situation has improved,
Freeport-McMoRan Copper & Gold Inc. ("Freeport") is working closely with its
power provider and DRC authorities to address the situation.
-- Third quarter production included 49,541 tonnes of copper cathode and
3,659 tonnes of cobalt in hydroxide. Tenke sold 53,104 tonnes of copper
at an average realized price of $3.19/lb and 2,803 tonnes of cobalt were
sold at an average realized price of $8.57/lb.
-- Attributable operating cash flow from Tenke for the third quarter of
2013 was $42.2 million ($118.3 million year-to- date). Cash
distributions of $38.4 million were received by Lundin Mining in the
third quarter of 2013 ($110.7 million year-to-date).
-- Operating cash costs for the third quarter of 2013 were $1.23/lb of
copper sold, the same as reported in the prior year comparable quarter.
Total production from the Company's assets including attributable share of Tenke:
YTD Q3 Q2 Q1
(tonnes) 2013 2013 2013 2013
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Copper 48,168 15,087 16,065 17,016
Zinc 91,952 33,466 32,539 25,947
Lead 26,402 9,119 10,692 6,591
Nickel 5,461 1,788 1,876 1,797
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Tenke
attributable
Copper 38,191 11,890 13,230 13,071
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FY Q4 Q3 Q2 Q1
(tonnes) 2012 2012 2012 2012 2012
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Copper 63,878 14,224 15,573 16,936 17,145
Zinc 122,204 29,161 28,452 31,972 32,619
Lead 38,464 8,353 9,365 9,780 10,966
Nickel 2,398 1,705 693 - -
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Tenke
attributable
Copper 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 third quarter of 2013 were $58.9 million, a
decrease of $12.2 million from the $71.1 million reported in the
comparable quarter of 2012. The decrease was largely attributable to
lower realized metal prices ($11.8 million), higher per unit production
costs ($8.5 million), and unfavourable exchange rates ($3.7 million),
partially offset by higher operating earnings at Aguablanca ($9.4
million).
On a year-to-date basis, operating earnings of $176.1 million were lower
than the $256.9 million reported for the first nine months of 2012. The
decrease was mainly attributable to lower realized metal prices and
prior period price adjustments ($47.5 million), higher per unit
production costs ($24.8 million), lower sales volumes ($16.4 million),
and a change in sales mix ($14.9 million), partially offset by higher
operating earnings at Aguablanca ($27.7 million).
-- For the quarter ended September 30, 2013, sales of $176.4 million
increased $16.8 million over the prior year ($159.6 million) largely as
a result of the restart of operations at Aguablanca ($14.7 million) and
higher net sales volume ($12.9 million), partially offset by lower
realized metal prices ($11.8 million).
Sales of $540.9 million for the nine months ended September 30, 2013
were $3.7 million lower than the comparable period in 2012 ($544.6
million). Lower realized metal prices and prior period price adjustments
($47.5 million), a change in sales mix ($17.4 million), and lower net
sales volume ($16.1 million) were largely offset by the restart of
operations at Aguablanca ($77.3 million).
-- Cash flow from operations for the current quarter was $27.4 million
compared to cash outflow of $25.7 million for the same period in 2012.
The increase in the cash flow of $53.1 million is mostly attributable to
changes in non-cash working capital.
For the nine months ended September 30, 2013, cash flow from operations
was $99.7 million compared to $144.6 million for same period in 2012.
Lower earnings and changes in non-cash working capital were the primary
contributors to the decrease.
-- Average metal prices for copper, zinc and nickel for the three and nine
months ended September 30, 2013 were lower (1% - 15%) than the same
periods in the prior year, while lead prices improved slightly over the
prior comparable periods (6% - 7%).
-- Operating costs (excluding depreciation) of $111.7 million in the
current quarter were higher than the prior year comparative quarter of
$82.3 million primarily as a result of increased zinc production at
Neves-Corvo, the restart of operations at Aguablanca, and higher per
unit production costs.
On a year-to-date basis, operating costs (excluding depreciation) for
the nine months ended September 30, 2013 of $347.8 million were $80.1
million higher than the $267.7 million reported for the same period in
2012 largely as a result of the restart of operations at Aguablanca, and
higher per unit production costs at Neves-Corvo and Zinkgruvan.
-- Net earnings of $27.9 million ($0.05 per share) in the current quarter
were $10.0 million lower than the $37.9 million ($0.07 per share)
reported in 2012. Net earnings were impacted by:
-- lower operating earnings ($12.2 million); and
-- higher depreciation, depletion and amortization expense ($7.2
million); offset by
-- lower general exploration and business development expenditures
($9.7 million).
-- Net earnings of $94.6 million ($0.16 per share) year-to-date were $45.7
million lower than the $140.3 million ($0.24 per share) reported in
2012. Earnings were impacted by:
-- lower operating earnings ($80.8 million); and
-- higher depreciation, depletion and amortization expense ($25.0
million); offset by
-- lower general exploration and business development expenditures
($17.9 million); and
-- lower tax expense of $40.0 million.
Corporate Highlights
-- On September 10, 2013, the Company reported its Mineral Reserve and
Resource estimates as at June 30, 2013, and filed an independent
National Instrument 43-101 Technical Report for its Eagle nickel/copper
project on SEDAR (www.sedar.com) on July 26, 2013. The Neves-Corvo and
Zinkgruvan mines had increases in total reserves from prior year's
estimates. The full press releases can be found on the Company's website
at www.lundinmining.com.
-- Subsequent to quarter-end, the Company completed amendments to its
credit agreement to provide for a new term loan of $250 million and an
extension on the maturity of the existing $350 million revolving credit
facility to October 2017. This arrangement is expected to provide a very
flexible, cost effective funding package to support completion of
construction of the Eagle Project. See press releases entitled "Lundin
Mining Secures Commitments for Eagle Project Funding", dated September
16, 2013 and "Lundin Mining Completes $600 Million Debt Facilities for
Eagle Project Funding", dated October 7, 2013.
-- The Company is pleased to welcome the appointment of Mr. Peter C. Jones
to the Company's Board of Directors. Mr. Jones brings to the Company's
Board a great depth of experience in operations at a senior management
level gained through previous positions as Interim President and Chief
Executive Officer of IAMGOLD Corp., President and Chief Operating
Officer of Inco Ltd., and President and Chief Executive Officer of
Hudson Bay Mining & Smelting Co.
Financial Position and Financing
-- Net debt(1) position at September 30, 2013 was $71.2 million compared to
net cash positions of $265.1 million at December 31, 2012 and $221.1
million at June 30, 2013.
-- The $292.3 million decrease in net cash during the quarter was
attributable to the acquisition of Eagle ($315.3 million) and
investments in mineral properties, plant and equipment ($53.6 million),
partially offset by operating cash flows of $27.4 million and
distributions from Tenke of $38.4 million.
-- The $336.3 million decrease in net cash during the first nine months of
the year was primarily attributable to the acquisitions of Eagle and
Freeport Cobalt (formerly "Kokkola") for $315.3 million and $116.3
million, respectively, and investments in mineral properties, plant and
equipment of $127.2 million. These uses of cash were offset by cash flow
from operations of $99.7 million and distributions from Tenke of $110.7
million.
(1) Net debt 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 continuing
outperformance and improved outlook at Aguablanca. As well, guidance for
copper production at Zinkgruvan and zinc production at Neves -Corvo have
also been increased. Cash cost guidance for Neves-Corvo has been
increased to $1.90/lb of copper (from $1.80/lb) and for Aguablanca, it
has been reduced to $4.50/lb of nickel (from $5.00/lb).
-- Guidance on Tenke's production has been updated to reflect the most
recent guidance provided by Freeport.
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2013
Guidance
(contained Prior Guidance C1 Revised Guidance C1
tonnes) Tonnes Cost Tonnes(a) Cost(b)
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Copper Neves-Corvo 50,000 - 55,000 $ 1.80 50,000 - 55,000 $ 1.90
Zinkgruvan 2,500 - 3,500 3,500 - 4,000
Aguablanca 5,000 - 5,500 5,500 - 6,000
Wholly-owned 57,500 - 64,000 59,000 - 65,000
Tenke(@24%)(c) 49,000 $ 1.24 50,000 $ 1.24
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Total
attributable 106,500 - 113,000 109,000 - 115,000
Zinc Neves-Corvo 45,000 - 50,000 50,000 - 55,000
Zinkgruvan 73,000 - 78,000 $ 0.30 73,000 - 78,000 $ 0.30
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Total 118,000 - 128,000 123,000 - 133,000
Lead Zinkgruvan 33,000 - 36,000 33,000 - 36,000
Nickel Aguablanca 6,000 - 6,500 $ 5.00 6,500 - 7,000 $ 4.50
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a. Changes in estimated metal production from the prior guidance are
explained as follows:
-- Neves-Corvo's revised zinc production guidance reflects improved
throughput and recovery on Lombador ore.
-- Zinkgruvan copper production is expected to increase over prior
guidance due to higher mill throughput.
-- Aguablanca nickel and copper production is expected to be higher
than previously guided largely as a result of higher head grades and
recoveries.
b. Cash costs remain dependent upon exchange rates (forecast at
EUR/USD:1.30, USD/SEK:6.50) and metal prices (forecast at Cu: $3.30, Zn:
$0.85, Pb: $0.95, Ni: $6.50, Co: $12.00).
-- Neves-Corvo's C1 cash cost per pound of copper has increased due to
higher operational costs from use of more contractors and lower
forecasted by-product metal prices.
-- Aguablanca's C1 cash cost per pound of nickel has been lowered
largely as a result of higher expected nickel and copper production.
c. 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, are expected to be $210 million,
a $75 million reduction from original guidance. The Company and Freeport have
implemented initiatives to reduce or defer capital investments until metal
markets improve. Capital expenditures for the Eagle Project in 2013 are expected
to be $110 million (from date of acquisition). Details of the total estimated
capital expenditures of $320 million for 2013 are described below:
-- Sustaining capital in European operations - $100 million (original
guidance - $110 million), consisting of approximately $65 million for
Neves-Corvo and $35 million for Zinkgruvan.
-- New investment capital in European operations - $45 million (original
guidance - $60 million), including approximately $25 million for
Lombador Phase I and $5 million for an industrial water dam at Neves-
Corvo. In addition, approximately $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 from Aguablanca until
the first quarter of 2015. The capital investment in Zinkgruvan's ore
dressing plant ($13 million) has been deferred.
-- New investment in Eagle Project - $110 million (from date of
acquisition), in support of engineering and major equipment additions in
the year. Total capital cost of the project from the date of acquisition
(excluding capitalized interest) is estimated at $400 million(1).
-- New investment in Tenke - $65 million (original guidance - $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
Total exploration expenditures for 2013 (excluding Tenke) are estimated to be
$33 million, including Eagle exploration expenditures of $3 million (original
guidance, without Eagle - $38 million).
About Lundin Mining
Lundin Mining Corporation is a diversified Canadian base metals mining company
with operations in Portugal, Sweden and Spain and an advanced 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.
This document includes, but is not limited to, forward looking statements with
respect to the Company's estimated full year metal production, C1 cash costs and
capital expenditures. These estimates and other forward -looking statements are
based on a number of assumptions and 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 Project, the cost estimates for the Eagle
Project, 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 may also be
based on other 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
+1 416 348 0303 (FAX)
Lundin Mining Corporation
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50
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