Lundin Mining First Quarter Results
April 29 2014 - 05:00PM
Marketwired
Lundin Mining First Quarter Results
TORONTO, ONTARIO--(Marketwired - Apr 29, 2014) - Lundin Mining
Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company")
today reported net earnings of $13.3 million ($0.02 per share) for
the quarter ended March 31, 2014. Cash flows of $27.5 million were
generated from operations in the quarter, not including the
Company's attributable cash flows from Tenke Fungurume.
Paul Conibear, President and CEO commented, "This year remains
an exciting year for the Company as we prepare to bring the high
grade Eagle nickel/copper mine into production. We are pleased that
Eagle continues to remain on time and budget with first saleable
concentrate expected in the fourth quarter of 2014. During the
first quarter, production at our operations was generally in-line
with expectations, however unit costs in some areas were higher
than our annual average cost guidance. Mine performance improved as
the quarter advanced and we maintain our annual production and cost
guidance."
Summary financial results for the quarter: |
|
|
Three months ended |
|
March 31 |
US$ Millions (except per share amounts) |
2014 |
2013 |
Sales |
149.9 |
|
188.2 |
Operating earnings1 |
43.1 |
|
68.1 |
Net earnings |
13.3 |
|
50.1 |
Basic earnings per share |
0.02 |
|
0.09 |
Cash flow from operations |
27.5 |
|
45.8 |
Ending net (debt) / cash position |
(148.3 |
) |
199.4 |
Operational Highlights
Wholly-owned operations: Copper, nickel, and lead
production all exceeded expectations, while zinc production was
in-line with targeted production. Higher throughput at Neves-Corvo
and Aguablanca resulted in better than expected copper and nickel
production, respectively, while significantly higher lead grades at
Zinkgruvan resulted in lead production exceeding expectations.
- Neves-Corvo produced 12,765 tonnes of copper and 14,228 tonnes
of zinc in the first quarter of 2014. Production from the Lombador
ore body resulted in a 39% increase in zinc production over the
comparable period in the prior year. Higher copper ore throughput
was more than offset by lower head grades and recoveries resulting
in lower copper production compared with the first quarter of 2013,
but was in-line with the mine plan for the first quarter of 2014.
Copper cash costs2 of $2.10/lb for the quarter were higher than
guidance ($1.90/lb) due primarily to unfavourable foreign exchange
rates and secondarily due to lower grades and recoveries than we
expect as yearly averages.
- Zinc production of 19,239 tonnes at Zinkgruvan met expectations
and was 23% higher than the comparable period in 2013, largely as a
result of increased levels of mining and milling of zinc ore and
improved head grades. Lead production of 9,133 tonnes exceeded
expectations and presents an increase of 39% over the comparable
period in 2013. Cash costs for zinc of $0.45/lb were higher than
guidance ($0.35/lb) mostly due to higher levels of by-product
inventory at period-end.
- Aguablanca continued to display strong operational performance,
with current quarter production of 1,980 tonnes of nickel and 1,652
tonnes of copper. This exceeded both expectations for the first
quarter of 2014 and production levels of the prior year comparable
period. Lower mining costs resulted in cash costs of $2.98/lb of
nickel for the quarter, also below both guidance of $4.50/lb and
the prior year quarter ($4.66/lb).
1 Operating earnings is a non-GAAP measure defined as sales,
less operating costs (excluding depreciation) and general and
administrative costs.
2 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.
Tenke: Tenke operations continue to perform well.
- Lundin's attributable share of first quarter production
included 11,871 tonnes of copper cathode and 713 tonnes of cobalt
in hydroxide. The Company's attributable share of Tenke's sales
included 9,168 tonnes of copper at an average realized price of
$3.07/lb and 872 tonnes of cobalt at an average realized price of
$9.21/lb.
- Attributable operating cash flow from Tenke for the first
quarter of 2014 was $27.7 million. Cash distributions received by
Lundin Mining in the quarter were $16.7 million, lower than
expected due to timing of shipments and lower copper price.
- Operating cash costs for the first quarter of 2014 were
$0.89/lb of copper sold, better than the revised full year guidance
of $1.22/lb and prior year's cost of $1.23/lb for the first quarter
of 2013.
Eagle Nickel/Copper Project: advancing on time, on
budget.
- There are approximately 700 people currently working at the
mine and mill, including contractors. All of the major equipment
has been delivered and is in an advanced stage of installation. As
of March 31, 2014, construction is progressing as planned at 79%
project completion.
- Capital costs are on budget, expecting to come in at the
original forecast of $400 million from the date of acquisition.
$160 million has been spent since that time, of which $62 million
was spent in the first quarter of 2014. The majority of remaining
costs to complete construction are within fixed price
contracts.
- Operations hiring is well advanced with all key positions
filled.
- Mine area facility commissioning has started and mill
commissioning is expected to start in the third quarter of 2014.
Eagle is on track to ship first saleable copper and nickel
concentrates in the fourth quarter of 2014. Ore processing and
concentrate production are expected to reach full design rates in
the second quarter of 2015.
Financial Performance
- Operating earnings for the first quarter of 2014 were $43.1
million, a decrease of $25.0 million from the $68.1 million
reported in the comparable quarter of 2013. The decrease was
primarily attributable to lower realized metal prices ($14.8
million) and lower sales volumes at Neves-Corvo and Aguablanca
($10.0 million).
- For the quarter ended March 31, 2014, sales of $149.9 million
decreased by $38.3 million from the first quarter of the prior year
($188.2 million) mainly due to lower realized metal prices and
lower nickel and copper sales than in the prior year first quarter.
Increased zinc and lead volumes were not enough to offset the
decrease in nickel and copper sales volumes.
- Average London Metal Exchange ("LME") metal prices for copper,
lead and nickel for the quarter ended March 31, 2014 were lower
(11%, 8% and 15%, respectively) than that of the comparable quarter
in the prior year, while zinc prices remained flat.
- Operating costs (excluding depreciation) of $100.2 million in
the current quarter were lower than the prior year comparative
quarter ($113.5 million) primarily as a result of decreased sales
volumes at Neves-Corvo and Aguablanca, partially offset by
increased sales volumes at Zinkgruvan and unfavourable foreign
exchange rates.
- Net earnings of $13.3 million ($0.02 per share) for the three
months ended March 31, 2014 were $36.8 million lower than the $50.1
million ($0.09 per share) reported for corresponding quarter in the
prior year. Earnings were impacted by:
- lower operating earnings primarily due to lower realized metal
prices and lower sales volumes ($25.0 million);
- lower income from equity investment in Tenke Fungurume ($12.9
million); and
- no contribution from insurance proceeds as compared to the
$15.1 million in insurance proceeds for business interruption at
the Aguablanca mine received in the first quarter of 2013;
partially offset by
- higher net tax recovery ($12.5 million), primarily as a result
of lower taxable income
- Cash flow from operations for the current quarter was $27.5
million compared to $45.8 million in the first quarter of 2013. The
comparative decrease in the cash flow is attributable to lower
operating earnings in the current quarter.
Financial Position and Financing
- Net debt position at March 31, 2014 was $148.3 million compared
to $112.1 million at December 31, 2013.
- The $36.2 million increase in net debt during the quarter was
attributable to investments in mineral properties, plant and
equipment of $92.4 million, primarily the development of the Eagle
project, partially offset by operating cash flows of $27.5 million,
distributions from Tenke of $16.7 million and $10.8 million
reduction in restricted funds.
- The Company has corporate term and revolving debt facilities
available for borrowing up to $600 million. At March 31, 2014 the
Company had $262.3 million committed against these facilities,
leaving debt capacity of $337.7 million available for future
drawdowns.
Outlook
2014 Production and Cost Guidance
- 2014 production and cash cost guidance for wholly-owned
operations remains unchanged from that provided on February 20,
2014 in the Company's annual MD&A. Freeport-McMoRan Copper
& Gold Inc.'s ("Freeport", or "FCX") forecast copper production
at Tenke of 47,900 tonnes is down slightly from the 48,400 tonnes
previously guided. Tenke's full year cash cost is expected to be
lower than guided earlier (now $1.22/lb versus previous guidance of
$1.28/lb of copper), largely as a result of higher realized cobalt
prices. Given its performance year-to-date, Aguablanca's nickel and
copper production are expected to be at the top end of the guidance
range. Aguablanca's production and cash cost guidance will be
re-assessed mid-year.
(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 |
47,900 |
$1.22/lb |
|
Total attributable |
107,900 - 115,900 |
|
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:1.35, USD/SEK:6.50) and metal prices (forecast at Cu:
$3.15/lb, Zn: $0.90/lb, Pb: $0.95/lb, Ni: $6.50/lb, Co: $12.00/lb).
Prior guidance forecast EUR/USD at 1.30, Zn at $0.87/lb and Pb at
$1.00/lb. |
b |
|
Freeport has provided updated 2014 sales and cash costs guidance.
Tenke's 2014 production is assumed to approximate Freeport's sales
guidance. |
2014 Capital Expenditure Guidance
Capital expenditures for 2014 are expected to be $440 million
(including Eagle, but excluding Tenke), a $20 million reduction
from previous guidance. Major capital investments for 2014 are as
follows:
- Sustaining capital in European operations - $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 - $40 million
(previous guidance - $60 million), consisting of:
- Lombador - $25 million (previous guidance - $44 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. Redesign
and optimization of development has allowed for a combination of
cost savings and the deferral of certain expenditures into
2015.
- Neves-Corvo zinc plant debottlenecking and zinc expansion
studies - $5 million: For the installation of a zinc tailings
recovery circuit, zinc expansion feasibility studies and Santa
Barbara hoisting shaft capacity increase design work.
- 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, to complete
construction of the Humboldt mill and Eagle mine.
- New investment in Tenke - $50 million, estimated by the Company
as its share of the remaining Phase II expansion costs, 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. The Company
believes it is reasonable to expect Lundin's attributable cash
distributions from Tenke to be in the range of $100 to $130 million
in 2014, below previous guidance due to lower copper prices.
Guidance will be updated again at the end of the second quarter
reflecting copper price trends and expectations for the balance of
the year.
2014 Exploration Guidance
- Total exploration expenses for 2014 (excluding Tenke) are
estimated to be $35 million, $5 million less than prior guidance.
These expenditures will be principally directed towards underground
and surface mine exploration at Neves-Corvo, Zinkgruvan and Eagle,
select greenfield 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 USA, 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 in the Risk and
Uncertainties section of 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.
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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