Lundin Mining Fourth Quarter and Full Year Results
February 20 2014 - 6:16PM
Marketwired
Lundin Mining Fourth Quarter and Full Year Results
TORONTO, ONTARIO--(Marketwired - Feb 20, 2014) - Lundin Mining
Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company")
today reported net earnings of $42.1 million ($0.07 per share) for
the quarter and $136.7 million ($0.23 per share) for the year ended
December 31, 2013. Cash flows of $53.9 million were generated from
operations in the quarter and $153.7 million for the year, not
including the Company's significant attributable cash flows from
Tenke Fungurume of $141.8 million.
Paul Conibear, President and CEO commented, "We are
pleased with our financial performance in 2013. Throughout the
year, we focused on achieving reliable operating results and
capital investment discipline on relatively low-risk, attractive
return growth projects while maintaining a strong balance sheet.
Our strategy remains unchanged for 2014, and we look forward to
delivering another strong year of performance from all of our
operations and bringing the high grade Eagle mine on stream by year
end."
Summary financial results for the quarter and
year-to-date: |
|
Three months ended |
|
Twelve months ended |
|
December 31 |
|
December 31 |
US$ Millions (except per share amounts) |
2013 |
2012 |
|
2013 |
2012 |
Sales |
186.9 |
176.4 |
|
|
727.8 |
721.1 |
Operating earnings1 |
66.9 |
51.8 |
|
|
243.1 |
308.7 |
Net earnings/(loss) |
42.1 |
(17.1 |
) |
|
136.7 |
123.2 |
Basic earnings per share |
0.07 |
(0.03 |
) |
|
0.23 |
0.21 |
Cash flow from operations |
53.9 |
49.4 |
|
|
153.7 |
194.0 |
Ending cash position |
116.6 |
275.1 |
|
|
116.6 |
275.1 |
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 and nickel production
exceeded the high end of our production guidance, while zinc and
lead met our overall targets. Higher throughput at Neves-Corvo
resulted in better than expected copper production, while nickel
and copper production at Aguablanca was assisted by better than
expected throughput, grades and recoveries.
- Neves-Corvo produced 56,544 tonnes of copper and an annual
record of 53,382 tonnes of zinc in 2013. Operational improvements
generated higher throughput levels, but slightly lower recoveries
resulted in lower copper production compared with the prior year.
The 2012 zinc plant expansion and initial mining of the higher
grade Lombador deposit generated record zinc metal production in
2013. Copper cash costs1 of $1.90/lb for the year were in line with
latest guidance ($1.90/lb), but higher than the prior year
($1.79/lb).
- At Zinkgruvan, zinc and lead production for the year of 71,366
and 32,874 tonnes, respectively, were negatively impacted by paste
backfill and local ground control issues resulting in lower
production than the prior year and slightly lower volumes than
expected. Cash costs for zinc of $0.32/lb were slightly higher than
latest guidance ($0.30/lb) and the prior year ($0.13lb), largely as
a result of lower volumes.
- Aguablanca had strong production performance throughout the
year, generating 7,574 tonnes of nickel and 6,242 tonnes of copper,
well above guidance. Cash costs of $3.78/lb of nickel for the year
benefited from higher production levels and was significantly below
guidance of $4.50/lb.
Tenke: Tenke continued to perform well, setting an
annual production record, despite experiencing power interruptions
in the second half of the year.
- Lundin's attributable share of annual production included
50,346 tonnes of copper cathode and 3,060 tonnes of cobalt in
hydroxide, exceeding copper production guidance of 50,000 tonnes.
The Company's attributable share of Tenke's sales included 49,404
tonnes of copper at an average realized price of $3.21/lb and 2,784
tonnes of cobalt at an average realized price of $8.02/lb.
- Attributable operating cash flow from Tenke for 2013 was $168.4
million. Cash distributions of $141.8 million were received by
Lundin Mining in the year, consistent with guidance provided at the
beginning of 2013.
- Operating cash costs for the year were $1.21/lb of copper sold,
slightly better than latest guidance of $1.24/lb and prior year's
cost of $1.23/lb.
Financial Highlights
- Operating earnings for the year ended December 31, 2013 were
$243.1 million, a decrease of $65.6 million from the $308.7 million
reported in 2012. The decrease was primarily attributable to lower
realized metal prices and prior period price adjustments ($58.8
million), lower sales volumes ($18.8 million), unfavourable
exchange rates ($12.0 million), and a change in sales mix ($9.5
million), partially offset by higher operating earnings from a full
year of production at Aguablanca ($38.4 million).
- For the year ended December 31, 2013, sales of $727.8 million
increased $6.7 million from the prior year ($721.1 million) which
was mainly as a result of the restart of operations at Aguablanca
($91.9 million), offset by lower realized metal prices and prior
period price adjustments, lower overall sales volume, and a change
in sales mix.
- Average London Metal Exchange ("LME") metal prices for copper,
zinc, and nickel for the year ended December 31, 2013 were lower
(2% - 14%) than that of the prior year, while lead prices improved
slightly (4%) in 2013.
- Operating costs (excluding depreciation) of $461.2 million in
the current year were $76.2 million higher than the prior year of
$385.0 million largely as a result of the restart of operations at
Aguablanca ($53.8 million), higher net per unit production costs
($10.4 million) and unfavourable foreign exchange rates ($12.0
million).
- Net earnings of $136.7 million ($0.23 per share) in the current
year were $13.5 million higher than the $123.2 million ($0.21 per
share) reported in 2012. Excluding the after-tax impairment loss of
$62.1 million recorded in 2012 related to Aguablanca, net earnings
in 2013 were $48.6 million lower than 2012. Earnings were impacted
by:
- lower operating earnings primarily due to lower realized metal
prices and sales volumes ($65.6 million); and
- higher depreciation, depletion and amortization expense ($25.8
million) as a result of higher production at Neves-Corvo and the
restart of production at Aguablanca; offset by
- investment tax credits of $14.3 million received at
Neves-Corvo;
- $15.1 million in insurance proceeds for business interruption
at the Aguablanca mine received in the current year (2012: $7.9
million); and
- lower exploration and business development expenditures ($22.4
million).
- Cash flow from operations for the year was $153.7 million
compared to $194.0 million for 2012. The comparative decrease in
the cash flow is mostly attributable to lower operating
earnings.
Corporate Highlights
- On March 29, 2013, the Company announced completion of the
acquisition of 24% of the Kokkola cobalt refinery located in
Finland and the related sales and marketing business ("Freeport
Cobalt"), which now provides direct end-market access for the
cobalt hydroxide production from Tenke. The Company holds an
effective 24% ownership interest in Freeport Cobalt, with Freeport
McMoRan Copper & Gold Inc. ("Freeport", or "FCX") acting as
operator holding a 56% ownership interest, and La Générale des
Carrières et des Mines ("Gécamines"), the Congolese state mining
company, holding a 20% interest in Freeport Cobalt. The total
consideration paid by the Freeport/Lundin partnership was $348
million, excluding cash acquired. Under the terms of the agreement,
there is the potential for additional consideration of up to $110
million over a period of three years from acquisition date,
contingent upon the achievement of revenue-based performance
targets. Lundin Mining's share of the investment, including
acquired cash, was $116.3 million based on a 30%/70% split with
Freeport, which amounts will be repaid prior to any shareholder
distributions.
- On July 17, 2013, the Company completed the acquisition of the
high grade Eagle nickel/copper underground mine and associated
Humboldt mill ("Eagle Project" or "Eagle") from Rio Tinto Nickel
Company, a subsidiary of Rio Tinto plc ("Rio Tinto"). The Eagle
Project is located in the Upper Peninsula of Michigan, USA. Total
consideration paid was $314.9 million, consisting of a $250.0
million purchase amount plus project expenditures from January 1,
2013 until transaction closing of $64.9 million. The Company drew
down $200 million on its revolving credit facility and utilized
cash on hand to fund this acquisition.
- 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
Mineral Reserves from prior year's estimates.
- On October 7, 2013, 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.
Financial Position and Financing
- Net debt2 position at December 31, 2013 was $112.1 million
compared to a net cash position of $265.1 million at December 31,
2012.
- The $377.2 million decrease in net cash during the year was
primarily attributable to the acquisitions of Eagle ($318.0
million, including acquisition costs of $3.1 million) and Freeport
Cobalt ($116.3 million) and investments in mineral properties,
plant and equipment of $243.7 million. These uses of cash were
offset by cash flow from operations of $153.7 million and
distributions from Tenke of $141.8 million.
- The Company has corporate term and revolving debt facilities
available for borrowing up to $600 million. At December 31, 2013
the Company had $240.3 million committed against these facilities,
leaving debt capacity of $359.7 million available for future
drawdowns.
Outlook
2014 Production and Cost Guidance
- Production guidance for the three-year period of 2014 through
2016 for wholly-owned operations remains unchanged from the
guidance provided on December 4, 2013 (see news release entitled
"Lundin Mining Provides Operating Outlook for 2014-2016").
- Guidance on Tenke's production and cash cost has been updated
to reflect the most recent guidance provided by Freeport.
- Production and cash cost guidance for 2014 are as follows:
|
|
|
|
(contained tonnes) |
Tonnes |
Cash Costsa |
Copper |
Neves-Corvo |
50,000 - 55,000 |
$1.90/lb |
|
Zinkgruvan |
3,000 - 4,000 |
|
|
Aguablanca |
5,000 - 6,000 |
|
|
Eagle |
2,000 - 3,000 |
|
|
Wholly-owned |
60,000 - 68,000 |
|
|
Tenke(@24%)b |
48,400 |
$1.28/lb |
|
Total attributable |
108,400 - 116,400 |
|
Zinc |
Neves-Corvo |
60,000 - 65,000 |
|
|
Zinkgruvan |
75,000 - 80,000 |
$0.35/lb |
|
Total |
135,000 - 145,000 |
|
Lead |
Neves-Corvo |
2,000 - 2,500 |
|
|
Zinkgruvan |
27,000 - 30,000 |
|
|
Total |
29,000 - 32,500 |
|
Nickel |
Aguablanca |
6,000 - 7,000 |
$4.50/lb |
|
Eagle |
2,000 - 3,000 |
|
|
Total |
8,000 - 10,000 |
|
|
a |
|
Cash
costs remain dependent upon exchange rates (forecast at
EUR/USD:1.30, USD/SEK:6.50) and metal prices (forecast at Cu:
$3.15/lb, Zn: $0.87/lb, Pb: $1.00/lb, Ni: $6.50/lb, Co:
$12.00/lb). |
|
b |
|
Freeport has provided 2014 sales and cash costs guidance. Tenke's
2014 production is assumed to approximate Freeport's sales guidance
provided. |
- Neves-Corvo: Copper production is expected to be maintained
above 50,000 tonnes per annum with an increasing zinc by-product
credit. The production forecast assumes that the zinc plant will be
used exclusively to process zinc ore, though the plant has already
proven to have the flexibility to process either zinc or copper
ores.
- Zinkgruvan: Zinc production is expected to remain relatively
steady, as plans to increase throughput by investment in a new
front end of the concentrator have been deferred indefinitely.
- Aguablanca: The Company has approved development of the
underground project which is expected to result in production
continuing until 2018. Total capital expenditures for the project
are expected to be approximately $30 million spread over the period
2014 - 2017. Economics of the underground project are expected to
be very attractive with a rapid payback period, even at current
depressed nickel prices.
- Eagle: The project remains on schedule and budget. Shipment of
the first saleable concentrates of copper and nickel are expected
to occur in the fourth quarter of 2014.
- Tenke: Freeport expects sales of copper in 2014 to be largely
consistent with that of 2013, with copper cathode sales of
approximately 202,000 tonnes, and an increase in cobalt sales to
13,600 tonnes.
2014 Capital Expenditure Guidance
- Capital expenditures for 2014 are expected to be $460 million
including Eagle and excluding Tenke (compared to $244 million in
2013, on the same basis). Major capital investments for 2014 are as
follows:
- Sustaining capital in European operations - $100 million (2013:
$100 million), consisting of approximately $55 million for
Neves-Corvo, $40 million for Zinkgruvan and $5 million across other
sites.
- New investment capital in European operations - $60 million
(2013: $46 million), consisting of:
- Lombador Phase I - $38 million: For underground vertical and
horizontal development and associated mine infrastructure related
to the development of the upper Lombador ore bodies for future high
grade zinc and copper production.
- Lombador Phase II and underground drilling - $6 million: For
horizontal development and ongoing exploration drilling in the
lower parts of the Lombador ore bodies.
- Neves-Corvo zinc plant expansion and shaft upgrade project
studies - $5 million: For the installation of a zinc tailings
recovery circuit and further studies on increasing the capacity of
the main Santa Barbara hoisting shaft.
- Aguablanca underground mining project - $10 million: For ramp
and initial ore body development and the installation of associated
mine infrastructure.
- New investment in Eagle Project - $300 million (2013: $98
million) to complete construction of the Humboldt mill and Eagle
mine.
- New investment in Tenke - $50 million (2013: $62 million),
estimated by the Company as its share of the remaining Phase II
expansion costs and other expansion related initiatives and
sustaining capital funding for 2014. All of the capital
expenditures are expected to be self-funded by cash flow from Tenke
operations. If current metal prices and operating conditions
prevail and construction of future phases of expansion are not
commenced in 2014, the Company believes it is reasonable to expect
Lundin's attributable cash distributions from Tenke to be in the
range of $130 to $150 million in 2014.
Exploration Investment
- Total exploration expenses for 2014 (excluding Tenke) are
estimated to be $40 million (2013: $34 million). These expenditures
will be principally directed towards underground and surface mine
exploration at Neves-Corvo, Zinkgruvan and Eagle, and on select
greenfields exploration programs and new business development
activities in South America and Eastern Europe.
About Lundin Mining
Lundin Mining Corporation is a diversified Canadian base metals
mining company with operations and development projects in
Portugal, Sweden and Spain and 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 report includes, but is not limited
to, forward looking statements with respect to the Company's
estimated full year metal production, cash costs, exploration
expenditures, and capital expenditures, as noted in the Outlook
section and elsewhere in this document. 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,
timing and amount of production from the Eagle Project, 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; litigation risks; 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 the forward-looking statements. Accordingly, readers
are advised not to place undue reliance on forward-looking
statements.
1 Cash cost/lb of copper, zinc or nickel are non-GAAP measures
defined as all cash costs directly attributable to mining
operating, less royalties and by-product credits.
2 Net cash/debt is a non-GAAP measure defined as available
unrestricted cash less long-term debt and finance leases.
Lundin Mining CorporationSophia ShaneInvestor Relations North
America+1-604-689-7842Lundin Mining CorporationJohn MiniotisSenior
Manager, Corporate Development and Investor
Relations+1-416-342-5565Lundin Mining CorporationRobert
ErikssonInvestor Relations Sweden+46 8 545 015 50
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