(TSX: LUN; Nasdaq Stockholm: LUMI) Lundin
Mining Corporation (“Lundin Mining” or the “Company”)
today reported cash flows of $62.1 million generated from
operations in its first quarter. Net earnings from continuing
operations attributable to Lundin Mining shareholders were $51.7
million ($0.07 per share) for the quarter ended March 31, 2019.
First quarter net earnings include a loss on our
equity investment in Freeport Cobalt of $11.9 million ($0.02 per
share) which was impacted by an inventory write-down.
Marie Inkster, President and CEO commented,
“This is a very exciting time for Lundin Mining. We are pleased
with our results in the first quarter of 2019 with all mines
operating well.
We anticipate closing of the recently announced
Chapada acquisition early in the third quarter. Ramp-up of the
Candelaria underground mines and more ore production from the open
pit are expected to increase copper ore grades in the second half
of this year. Eagle East remains on schedule for first ore to the
mill in the fourth quarter, and the Neves-Corvo Zinc Expansion
Project continues to make meaningful development progress.
We remain well positioned to deliver 2019 annual
production and cost guidance and improved production and cash flow
in the coming years.”
Summary financial results for the
quarter:
|
|
|
|
Three months ended |
|
|
|
|
March 31, |
|
US$ Millions (except per share amounts) |
|
|
2019 |
|
20184 |
|
|
Revenue |
|
|
416.4 |
|
470.5 |
|
|
Gross
profit |
|
|
141.2 |
|
149.9 |
|
|
Attributable net earnings 1 |
|
|
51.7 |
|
81.3 |
|
|
Net
earnings |
|
|
60.9 |
|
87.1 |
|
|
Basic
and diluted earnings per share2 |
|
|
0.07 |
|
0.11 |
|
|
Cash
flow from operations |
|
|
62.1 |
|
172.9 |
|
|
Cash
and cash equivalents |
|
|
734.7 |
|
1,639.1 |
|
|
Net cash 3 |
|
|
658.9 |
|
1,183.2 |
|
1 Attributable to shareholders of Lundin Mining
Corporation. 2 Basic and diluted earnings per share
attributable to shareholders of Lundin Mining Corporation.3 Net
cash is a non-GAAP measure defined as cash and cash equivalents,
less long-term debt and lease liabilities, before deferred
financing fees.4 On adoption of IFRS 16, Leases, the Company
has elected not to restate comparative periods presented.
Highlights
Operational PerformanceAll
metal production exceeded expectations during the first quarter,
with the exception of copper which was impacted by lower than
planned grades at Neves-Corvo. Metal production for 2019 is
expected to achieve annual guidance last reported.
Candelaria (80% owned): The
Candelaria operations produced, on a 100% basis, 32,778 tonnes of
copper, and approximately 20,000 ounces of gold and 320,000 ounces
of silver in concentrate during the quarter. Copper production in
the quarter was higher than the prior year comparable period
primarily due to higher mill throughput. Copper cash costs1 of
$1.62/lb for the quarter were marginally higher than full year
guidance but lower than the prior year quarter. Candelaria is on
track to meet annual 2019 copper production. Copper head grades are
expected to increase in the second half of the year as more ore is
sourced directly from Phase 10 of the open pit.
Ramp-up of the Candelaria Underground mine
continues with the North Sector achieving a current production rate
of approximately 10,500 tonnes per day. Development of the South
Sector is progressing well with a production start-up date now
projected by the end of the third quarter of 2019.
Eagle (100% owned): Eagle
produced 4,213 tonnes of nickel and 3,897 tonnes of copper during
the quarter. Nickel and copper production were both lower than the
prior year quarter due to planned lower ore grades and severe
winter weather conditions which impacted ore transportation to the
mill. Nickel cash costs of $0.37/lb for the quarter were better
than full year guidance and the prior year comparable period,
primarily due the implementation of IFRS 16, Leases which resulted
in a reduction in cash costs of $0.11/lb in the current
quarter.
Development of Eagle East continues to progress
ahead of schedule and budget, with first ore scheduled into the
mill by the fourth quarter of 2019.
Neves-Corvo (100% owned):
Neves-Corvo produced 8,868 tonnes of copper and 18,773 tonnes of
zinc for the quarter. For copper, the impact of lower head grades
was partially offset by higher recoveries this quarter. Zinc head
grades, in contrast, were 5% higher than the prior year comparable
period and positively impacted production. Copper cash costs of
$0.92/lb for the quarter were lower than full year guidance and the
prior year period owing to higher-by-product credits.
Construction on the Zinc Expansion Project
(“ZEP”) was approximately 54% complete at quarter-end. Surface
facilities construction continued with the SAG building and
flotation equipment installation. Underground development advanced
with breakthrough of the last conveyor gallery and continued civil
and mechanical construction. Careful monitoring of timeline and
cost is ongoing to ensure the project remains on track.
Zinkgruvan (100% owned): Zinc
production of 21,673 tonnes was higher than the prior year quarter
reflecting higher head grades, while lead production of 5,832
tonnes was lower than the prior year quarter due to lower
throughput. First quarter zinc cash costs of $0.44/lb were slightly
higher than full year guidance but remain on target to achieve
annual guidance. Zinc cash costs approximated the prior year
comparable period.
Total Production |
(Contained metal in concentrate - tonnes) |
2019 |
|
2018 |
Q1 |
|
Total |
Q4 |
Q3 |
Q2 |
Q1 |
Coppera |
46,122 |
|
199,630 |
48,206 |
52,770 |
51,098 |
47,556 |
Zinc |
40,446 |
|
152,041 |
42,024 |
36,062 |
37,075 |
36,880 |
Nickel |
4,213 |
|
17,573 |
3,501 |
4,697 |
4,234 |
5,141 |
a -
Candelaria's production is on a 100% basis. |
1 Cash cost/lb of copper, zinc and nickel are
non-GAAP measures defined as all cash costs directly attributable
to mining operations, less royalties and by-product credits.
Financial Performance
- Gross profit for the quarter ended March 31, 2019 was $141.2
million, a decrease of $8.7 million in comparison to the $149.9
million reported in the first quarter of the prior year. The
decrease was primarily due to lower revenues as a result of lower
sales volumes ($70.4 million), partially offset by lower production
costs ($34.7 million) and depreciation expense ($10.8
million).
- Net earnings for the quarter ended March 31, 2019 were $60.9
million, a decrease of $26.2 million from the $87.1 million
reported in the first quarter of 2018. The decrease was
attributable to lower gross profit, lower income from equity
investment ($16.7 million) and higher income taxes ($5.3 million),
partially offset by lower interest expense.
- Net cash for the quarter ended March 31, 2019 was $658.9
million, a decrease of $145.5 million in comparison to December 31,
2018. The decrease was attributable to lower operating cashflows,
increased spend on capital investments, and an increase in lease
liabilities of $30.0 million as a result of the implementation of
IFRS 16, Leases on January 1, 2019.
Financial
Position
- Cash and cash equivalents decreased $80.7 million during the
quarter ended March 31, 2019, from $815.4 million to $734.7
million.
- Cash flow from operations for the quarter ended March 31, 2019
was $62.1 million, a decrease of $110.8 million in comparison to
the $172.9 million reported in the first quarter of 2018. The
decrease was primarily attributable to lower comparative change in
non-cash working capital ($79.4 million) and lower revenue and
production costs.
- Cash used in investing activities increased when compared to
the prior year quarter. During the first quarter of 2019,
investments in mineral properties, plant and equipment increased to
$182.0 million from $150.7 million in the prior year comparable
period. The increase in capital investments related primarily to
ZEP ($18 million) and the Mine Fleet Reinvestment Program at
Candelaria ($12 million).
- During the quarter, Candelaria completed a $35 million term
loan financing to assist with management of short-term working
capital.
- As of April 24, 2019, the cash balance was approximately $760
million.
Corporate Highlights
- On April 15, 2019, the Company announced it had entered into a
definitive purchase agreement with Yamana Gold Inc. (“Yamana”) to
purchase its 100% ownership stake in Mineração Maracá Indústria e
Comércio S/A, which owns the Chapada copper-gold mine located in
Brazil, for cash consideration of $800 million, subject to
customary adjustments. In addition, Yamana will retain a 2.0% net
smelter return royalty on future gold production from the Suruca
gold deposit and receive contingent consideration of up to $125
million over five years if certain gold price thresholds are met
and contingent consideration of $100 million on potential
construction of a pyrite roaster.
The purchase price is expected to be funded from
the Company’s current cash balance and a portion of its $550
million revolving credit facility. Completion of the acquisition is
expected to occur early in the third quarter of 2019 and is subject
to typical closing conditions, including third-party and requisite
regulatory approvals.
Outlook
2019 Production, Cash Cost and Capital Expenditure
GuidanceProduction, cash cost and capital expenditure
guidance for 2019 remains unchanged from that provided on November
28, 2018 (see news release “Lundin Mining Provides Operational
Outlook & Update”).
(contained tonnes in concentrate) |
|
Tonnes |
|
Cash Costsa |
Copper |
Candelaria (100%) |
|
145,000 - 155,000 |
|
$1.60/lbb |
|
Eagle |
|
12,000 - 15,000 |
|
|
|
Neves-Corvo |
|
40,000 - 45,000 |
|
$1.70/lb |
|
Zinkgruvan |
|
2,000 - 3,000 |
|
|
|
Total |
|
199,000 - 218,000 |
|
|
Zinc |
Neves-Corvo |
|
71,000 - 76,000 |
|
|
|
Zinkgruvan |
|
76,000 - 81,000 |
|
$0.40/lb |
|
Total |
|
147,000 - 157,000 |
|
|
Nickel |
Eagle |
|
12,000 - 15,000 |
|
$2.20/lb |
a. Cash
costs are based on various assumptions and estimates, including but
not limited to: production volumes, as noted above, commodity
prices (Cu: $2.80/lb, Zn: $1.10/lb, Ni: $6.00/lb, Pb: $0.95/lb),
foreign exchange rates (€/USD:1.15, USD/SEK:9.00, USD/CLP:650) and
operating costs.b. 68% of Candelaria's total gold and silver
production are subject to a streaming agreement and as such cash
costs are calculated based on receipt of $408/oz and $4.08/oz
respectively, on gold and silver sales in the year. |
2019 Guidancea |
|
|
$ millions |
Candelaria (100% basis) |
|
|
|
|
Capitalized
Stripping |
|
|
130 |
|
Los Diques TSF |
|
|
10 |
|
New Mine Fleet
Investment |
|
|
75 |
|
Candelaria Mill
Optimization Project |
|
|
50 |
|
Candelaria Underground
Development |
|
|
40 |
|
Other
Sustaining |
|
|
70 |
Candelaria
Sustaining |
|
|
375 |
Eagle
Sustaining |
|
|
15 |
Neves-Corvo
Sustaining |
|
|
65 |
Zinkgruvan Sustaining |
|
|
50 |
Total Sustaining Capital |
|
|
505 |
Eagle
East |
|
|
30 |
ZEP (Neves-Corvo) |
|
|
210 |
Total Expansionary Capital |
|
|
240 |
Total Capital Expenditures |
|
|
745 |
a. Forecast
capital expenditures have been reported on a cash basis. |
2019 Exploration Investment
GuidanceExploration investments are expected to decrease
from $80 million to $70 million in 2019, of which $59 million will
be spent on in-mine and near mine-targets ($14 million at
Candelaria, $15 million at Eagle, $23 million at Zinkgruvan and $7
million at Neves-Corvo). The majority of the decrease is due to a
change in focus from near-mine targets at Eagle to regional targets
with fewer drill rigs.
About Lundin Mining
Lundin Mining Corporation is a diversified
Canadian base metals mining company with operations in Chile, the
USA, Portugal and Sweden, primarily producing copper, zinc and
nickel. In addition, Lundin Mining holds an indirect 24% equity
stake in the Freeport Cobalt Oy business, which includes a cobalt
refinery located in Kokkola, Finland.
The information in this release is subject to the disclosure
requirements of Lundin Mining under the EU Market Abuse Regulation.
This information was publicly communicated on April 24, 2019 at
6:45 p.m. Eastern Time.
For further information, please contact:Mark
Turner, Director, Business Valuations and Investor Relations:
+1-416-342-5565Brandon Throop, Manager, Investor Relations:
+1‐416‐342‐5583Robert Eriksson, Investor Relations Sweden: +46 8
440 54 50
Cautionary Statement on Forward-Looking
Information
Certain of the statements made and information
contained herein is “forward-looking information” within the
meaning of applicable Canadian securities laws. All statements
other than statements of historical facts included in this News
Release, including but not limited to statements regarding the
prospects of the industry and Lundin Mining Corporation’s (“Lundin
Mining” or the “Company”) prospects, plans, future financial and
operating performance and business strategy, constitute
forward-looking information. Forward-looking information is based
on current expectations, estimates, forecasts and projections as
well as beliefs and assumptions made by the Company’s management.
Such forward-looking information includes, but is not limited to,
statements about the Company’s plans, prospects, position, future
results, and business strategies; the timing and amount of future
production; costs of production; project and permitting timelines;
the Company’s outlook and guidance on estimated metal production
and production profile; costs, and exploration and capital
expenditures; timing and possible outcome of pending litigation;
technical information, including the results of any Preliminary
Economic Assessment, Feasibility Study, or Mineral Resource and
Mineral Reserve estimations (as such terms are defined in the
definitions adopted by the Canadian Institute of Mining, Metallurgy
and Petroleum Council on May 10, 2014 (the “CIM Standards”)), life
of mine estimates, and mine and mine closure plans; the parameters
and assumptions underlying the Mineral Resource and Mineral Reserve
estimates and financial analysis; anticipated market prices of
metals, currency exchange rates, and interest rates; the Company’s
anticipated capital and operating costs for its material mineral
properties; the development and implementation of the Company’s
Responsible Mining Management System; the Company’s ability to
comply with contractual and permitting or other regulatory
requirements; the receipt and maintenance of all necessary
permitting and approvals; the Company’s intentions with respect to
exploration and development activities at its projects;
expectations regarding the results of operations and production at
the Company’s mines; the intentions of the Company regarding the
acquisition of the Chapada mine (the “Chapada Acquisition”) and the
terms, timing, completion and any anticipated benefits thereof; and
the Company’s integration of acquisitions (including the Chapada
Acquisition) and any anticipated benefits thereof. Words such as
“aim”, “anticipate”, “assumption”, “believe”, “budget”,
“commitment”, “continue”, “contingent”, “endeavour”, “estimate”,
“expansionary”, “expect”, “exploration”, “feasibility”,
“flexibility”, “forecast”, “focus”, “forecast”, “foresee”,
“forward”, “future”, “growth”, “guidance”, “initiative”, “intend”,
“likely”, “model”, “objective”, “on track”, “opportunity”,
“option”, “outlook”, “PEA”, “phase”, “plan”, “positioning”,
“potential”, “predict”, “preliminary”, “priority”, “profile”,
“project”, “probable”, “proposed”, “prospect”, “ramp-up”, “risk”,
“schedule”, “seek”, “strategy”, “study”, “target”, “uncertainty” or
“view”, or any variations of or similar terminology or statements
that certain actions, events or results “could”, “may”, “might”,
“should”, “would”, or “will” be taken, occur, or be achieved, or
the negatives or variations of any of the foregoing terms or
expressions, are intended to identify such forward-looking
information.
Forward-looking information is based on various
factors and assumptions including, without limitation, the
expectations and beliefs of management, including that the Company
can access financing, appropriate equipment and sufficient labour;
assumed and future price of copper, nickel, zinc and other metals;
anticipated costs; ability to achieve goals; and that the political
environment in which the Company operates will continue to support
the development and operation of mining projects. Certain important
factors that could cause actual results, performance or
achievements to differ materially from those in the forward-looking
statements include, among others, metal price volatility;
discrepancies between actual and estimated production; Mineral
Reserve and Mineral Resource estimates, and metallurgical
recoveries; mining operational and development risks; litigation
risks; regulatory restrictions (including environmental regulatory
restrictions and liability); changes in national and local
government legislation, taxation, controls or regulations and/or
change in the administration of laws, policies and practices,
expropriation or nationalization of property and political or
economic developments in jurisdictions in which the Company carries
on business, or may carry on business in the future; delays,
suspensions or technical challenges associated with capital
projects; higher prices for fuel, steel, power, labour and other
consumables; currency fluctuations; the speculative nature of
mineral exploration; the global economic climate; dilution; share
price volatility; competition; loss of key employees; additional
funding requirements; and defective title to mineral claims or
property. Although the Company believes that the expectations
reflected in the forward-looking information contained herein are
reasonable, these statements, by their nature, involve risks and
uncertainties and are not guarantees of future performance.
Although the Company has attempted to identify important factors
that could cause actual results to differ materially from those
contained in forward-looking information, there may be other
factors that cause results not to be as anticipated, estimated,
forecast or intended.
Forward-looking information and statements are
subject to a variety of known and unknown risks and uncertainties,
and ultimately, actual events or results may differ materially from
those reflected in the forward-looking information. Risks and
uncertainties that may impact the Company’s performance include,
without limitation, risks inherent in and/or associated with
operating in foreign countries; uncertain political and economic
environments; community activism, shareholder activism and risks
related to negative publicity with respect to the Company or the
mining industry in general; changes in laws, regulations or
policies including but not limited to those related to permitting
and approvals, environmental management, labour, trade relations,
and transportation; delays or the inability to obtain necessary
governmental approvals and/or permits; regulatory investigations,
enforcement, sanctions and/or related or other litigation; risks
associated with business arrangements and partners over which the
Company does not have full control; risks associated with
acquisitions and related integration efforts (including with
respect to the Chapada Acquisition); the risk that the Chapada
Acquisition will not be completed on the terms set out in the
definitive purchase agreement, or at all; competitive responses to
the announcement of the Chapada Acquisition: competition;
development or mining results not being consistent with the
Company’s expectations; estimates of future production and
operations; operating, cash and all-in sustaining cost estimates;
allocation of resources and capital; litigation; uninsurable risks;
volatility and fluctuations in metal and commodity prices; the
estimation of asset carrying values; funding requirements and
availability of financing; indebtedness; foreign currency
fluctuations; interest rate volatility; changes in the Company’s
share price, and equity markets, in general; changing taxation
regimes; counterparty and credit risks; health and safety risks;
risks related to the environmental impact of the Company’s
operations and products and management thereof; unavailable or
inaccessible infrastructure and risks related to ageing
infrastructure; risks inherent in mining including but not limited
to risks to the environment, industrial accidents, catastrophic
equipment failures, unusual or unexpected geological formations or
unstable ground conditions; actual ore mined varying from estimates
of grade, tonnage, dilution and metallurgical and other
characteristics; ore processing efficiency; risks relating to
attracting and retaining of highly skilled employees; ability to
retain key personnel; the potential for and effects of labour
disputes or other unanticipated difficulties with or shortages of
labour or interruptions in production; the price and availability
of energy and key operating supplies or services; the inherent
uncertainty of exploration and development, and the potential for
unexpected costs and expenses including, without limitation, for
mine closure and reclamation at current and historical operations;
risks associated with the estimation of Mineral Resources and
Mineral Reserves and the geology, grade and continuity of mineral
deposits including but not limited to models relating thereto;
actual ore mined and/or metal recoveries varying from Mineral
Resource and Mineral Reserve estimates; mine plans, and life of
mine estimates; the possibility that future exploration,
development or mining results will not be consistent with
expectations; natural phenomena such as earthquakes, flooding, and
unusually severe weather; potential for the allegation of fraud and
corruption involving the Company, its customers, suppliers or
employees, or the allegation of improper or discriminatory
employment practices, or human rights violations; security at the
Company’s operations; breach or compromise of key information
technology systems; materially increased or unanticipated
reclamation obligations; risks related to mine closure activities;
risks related to closed and historical sites; title risk and the
potential of undetected encumbrances; risks associated with the
structural stability of waste rock dumps or tailings storage
facilities; and other risks and uncertainties, including but not
limited to those described in the “Risk and Uncertainties” section
of the Annual Information Form for the year ended December 31, 2018
and the “Managing Risks” section of the Company’s management’s
discussion and analysis for the year ended December 31, 2018, which
are available on SEDAR at www.sedar.com under the Company’s
profile. Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which may have been used.
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
information. Accordingly, there can be no assurance that
forward-looking information will prove to be accurate, and so
readers are advised not to place undue reliance on forward-looking
information. The forward-looking information contained herein
speaks only as of the date of this News Release. The Company
disclaims any intention or obligation to update or revise
forward‐looking information or to explain any material difference
between such and subsequent actual events, except as required by
applicable law.
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