TORONTO, Oct. 23, 2019 /CNW/ - (TSX: LUN;
Nasdaq Stockholm: LUMI) Lundin Mining
Corporation ("Lundin Mining" or the "Company") today
reported cash flows of $111.6 million
generated from operations in the third quarter. Net earnings
attributable to Lundin Mining shareholders were $26.4 million ($0.04 per share) for the quarter ended
September 30, 2019.
Third quarter net earnings include a negative revaluation on
derivative liabilities related to the acquisition of the Chapada
mine of $16.0 million ($0.02 per share), a negative variable
consideration adjustment related to metal streaming agreements of
$9.9 million ($0.01 per share), a deferred tax expense arising
from foreign exchange translation in Brazil of $15.6 million ($0.02 per share), and an unrealized gain on
foreign exchange of $9.9 million
($0.01 per share).
Marie Inkster, President and CEO
commented, "Our operations performed well in the third quarter.
Candelaria achieved a significant step-up in production and
decrease in cash costs, with ore from Phase 10 of the open pit now
contributing to mill feed. The integration of Chapada progressed
very well as evidenced by a strong first operating quarter. We
remain on track to deliver improved production and cost guidance
for the year.
Construction progress continued on our many reinvestment and
expansion projects, with several important milestones reached. The
Candelaria South Sector underground mine project was completed
ahead of schedule and successfully handed over to the operations
team. First ore was mined from Eagle East and fed to the mill,
ahead of schedule and budget. At Neves-Corvo, the Zinc Expansion
Project progressed well and remains on target to meet the most
recent project budget and schedule. With many of our reinvestment
initiatives nearing completion in the coming quarters, we are well
positioned to deliver increasing production and cash flow."
Summary financial results for the quarter and
year-to-date:
|
Three months
ended
|
|
Nine months
ended
|
|
September
30,
|
|
September
30,
|
US$ millions (except
per share amounts)
|
2019
|
|
20184
|
|
2019
|
|
20184
|
Revenue
|
538.7
|
|
379.7
|
|
1,324.4
|
|
1,317.8
|
Gross
profit
|
128.6
|
|
59.6
|
|
294.9
|
|
364.6
|
Attributable net
earnings1
|
26.4
|
|
7.0
|
|
70.2
|
|
167.1
|
Net
earnings
|
32.1
|
|
9.1
|
|
84.4
|
|
183.7
|
Basic and diluted net
earnings per share2
|
0.04
|
|
0.01
|
|
0.10
|
|
0.23
|
Cash flow from
operations
|
111.6
|
|
140.9
|
|
378.2
|
|
432.1
|
Cash and cash
equivalents
|
184.6
|
|
1,469.9
|
|
184.6
|
|
1,469.9
|
Net (debt) cash
3
|
(185.0)
|
|
1,031.7
|
|
(185.0)
|
|
1,031.7
|
|
|
1
|
Attributable to
shareholders of Lundin Mining Corporation.
|
2
|
Basic and diluted
earnings per share attributable to shareholders of Lundin Mining
Corporation.
|
3
|
Net (debt) cash is a
non-GAAP measure defined as cash and cash equivalents, less 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 Performance
Operations performed well in the quarter with production in-line
with expectations. The Company remains on track to meet annual
guidance and has lowered cash cost guidance for both Neves-Corvo
and Chapada. Furthermore, several significant project milestones
were achieved in the third quarter. Candelaria South Sector project
was successfully completed and the Eagle East project reached first
ore.
Candelaria (80% owned): Candelaria produced
40,698 tonnes of copper, and approximately 24,000 ounces of gold
and 355,000 ounces of silver in concentrate on a 100% basis. Copper
production in the quarter was higher than the prior year comparable
quarter as well as the second quarter of 2019, primarily due
to improved copper head grades as more ore was sourced directly
from the open pit and less from stockpiles. Copper cash costs
of $1.39/lb for the quarter were
better than the prior year comparable quarter and the previous
quarter owing to improved per unit operating costs, as well as the
impact of favourable foreign exchange.
The Candelaria South Sector underground mine was successfully
transferred to operations in the quarter, ahead of schedule. Mine
production from the Candelaria North and South Sector underground
mines is ramping up to the permitted limit of 14,000 tonnes per
day.
Chapada (100% owned): Acquisition of the Chapada
copper-gold mine in Brazil was
completed on July 5, 2019. Cash
consideration paid was $757.0
million, net of cash held in the acquired operations and
working capital adjustments which amounted to $43.0 million.
During the period of Lundin Mining's ownership, Chapada produced
17,645 tonnes of copper and approximately 34,000 ounces of gold and
81,000 ounces of silver. Copper cash costs of $0.35/lb were better than expected with lower
operating costs, favourable exchange rate and higher precious metal
credits. Cash cost guidance for the second half of 2019 has been
lowered to $0.80/lb to reflect this
better than expected performance.
Eagle (100% owned): Eagle produced 3,232
tonnes of nickel and 3,042 tonnes of copper during the quarter,
in-line with expectations and well positioned to meet annual
guidance. Although gross operating costs were lower and better than
plan, nickel cash costs of $3.25/lb
for the quarter were higher than the prior year quarter and the
second quarter of 2019 due to lower sales volumes of nickel and
copper. Cash costs remain on track to meet annual guidance of
$2.60/lb.
Development of Eagle East reached an important milestone with
first ore extracted at the end of September, ahead of budget and
schedule. First Eagle East ore was fed to the mill on October 1, 2019.
Neves-Corvo (100% owned): Neves-Corvo
produced 12,055 tonnes of copper and 18,232 tonnes of zinc for the
quarter. Copper production was higher than the prior year
comparable quarter and each of the first two quarters of 2019,
benefitting from improved recoveries. Zinc production was generally
in-line with both the prior year comparable period and the second
quarter 2019. With lower than expected gross operating costs in the
quarter, copper cash cost guidance has been lowered to $1.60/lb from $1.70/lb.
The Zinc Expansion Project ("ZEP") has advanced on schedule and
budget in accordance to the phased strategy for start up and
production during 2020. Construction progress focused on mechanical
and electrical installation of the underground crusher and
materials handling system, plant infrastructure and a new paste
tailings thickener.
Zinkgruvan (100% owned): Zinc production of
16,796 tonnes was lower than the prior year quarter and second
quarter of 2019 due to ore availability and lower mill throughput,
but remains on track to meet full year guidance. Lead production of
6,291 tonnes was better than both the prior year comparable period
and the previous quarter owing to improved grades and recoveries.
Zinc cash costs of $0.42/lb in the
third quarter were higher than the prior year comparable period
largely owing to higher zinc treatment and refining charges;
however, annual zinc cash cost guidance remains unchanged at
$0.40/lb.
Total
production
|
(Contained metal
in concentrate - tonnes)
|
2019
|
2018
|
YTD
|
Q3
|
Q2
|
Q1
|
Total
|
Q4
|
Q3
|
Q2
|
Q1
|
Coppera
|
168,367
|
74,560
|
47,685
|
46,122
|
199,630
|
48,206
|
52,770
|
51,098
|
47,556
|
Zinc
|
112,590
|
35,028
|
37,116
|
40,446
|
152,041
|
42,024
|
36,062
|
37,075
|
36,880
|
Nickel
|
10,843
|
3,232
|
3,398
|
4,213
|
17,573
|
3,501
|
4,697
|
4,234
|
5,141
|
a - Copper production
includes results from Chapada for the period of Lundin Mining's
ownership, as well as Candelaria's production on a 100%
basis.
|
Financial Performance
- Gross profit for the quarter ended September 30, 2019 was $128.6 million, an increase of $69.0 million compared to the $59.6 million reported in the third quarter of
the prior year. The increase was primarily due to the addition of
Chapada mine during the current quarter ($47.9 million). The impact of higher copper
and precious metals sales volumes ($20.2
million) and higher realized metal prices net of price
adjustments ($14.6 million),
primarily attributable to nickel, was partially offset by higher
depreciation expense at Candelaria ($25.6
million).
On a year-to-date basis, gross profit was $294.9 million, a decrease of $69.7 million from the $364.6 million reported in the prior year
comparative period. The decrease was primarily due to lower metal
prices and price adjustments ($67.5
million), higher depreciation ($44.8
million) and higher zinc treatment and refining charges
($12.5 million). This was partially
offset by the addition of Chapada mine which contributed
$47.9 million to gross profit since
acquisition.
- Net earnings for the quarter ended September 30, 2019 were $32.1 million, an increase of $23.0 million from net earnings of
$9.1 million reported in the prior
year quarter. The increase was attributable to higher gross profit,
partially offset by higher income taxes ($34.0 million).
On a year-to-date basis, net earnings were $84.4 million, a decrease of $99.3 million from the $183.7 million reported in the prior year
comparative period. The decrease was attributable to lower gross
profit for reasons as noted above, and lower income from our equity
investment in Freeport Cobalt ($33.7
million), partially offset by lower income taxes
($10.6 million).
- Net debt as at September 30, 2019
was $185.0 million, a change of
$989.4 million compared to net cash
of $804.4 million at
December 31, 2018. The movement from
a net cash to a net debt position was largely attributed to the
acquisition of Chapada ($757.0
million), cash used for capital investments exceeding
operating cash flow in the current year of approximately
$147.5 million and $49.7 million in dividend payments.
Corporate Highlights
- On July 5, 2019, the Company
announced the closing of the acquisition of a 100% ownership stake
in Mineração Maracá Indústria e Comércio SA, which owns the Chapada
copper-gold mine located in Brazil from Yamana Gold Inc.
The net purchase price of $757.0
million was funded by cash on hand and a drawdown of
$285.0 million on the
Company's revolving credit facility.
- On August 28, 2019, the Company
announced that it had executed a third amended and restated credit
agreement that increases its secured revolving credit facility (the
"Credit Facility") to $800.0 million, with a $200.0 million accordion option to total
$1.0 billion, reduces the cost of
borrowing, and extends the term to August
2023, from October 2022.
- On September 5, 2019, the Company
reported its Mineral Resource and Mineral Reserve estimates as at
June 30, 2019, on SEDAR
(www.sedar.com). On a consolidated and attributable basis,
estimated contained metal in the Proven and Probable Mineral
Reserve categories totaled 5,507 thousand tonnes of copper,
including 1,800 thousand tonnes from Chapada, 3,231 thousand tonnes
of zinc, 108 thousand tonnes of nickel, 977 thousand tonnes of
lead and 6.8 million ounces of gold.
- During the third quarter of 2019, the Company purchased over
1.3 million shares under the existing normal course issuer bid
("NCIB"). On a year-to-date basis, nearly 2.6 million shares have
been purchased. All shares purchased under the NCIB were
cancelled.
Financial Position
- Cash and cash equivalents of $184.6
million as at September 30,
2019 has decreased from the $735.1 million reported in the second
quarter of 2019 and the $815.4
million reported at December 31,
2018.
- The Company ended the third quarter of 2019 with a net debt
balance of $185.0 million, compared
to net cash positions of $661.1
million at June 30, 2019 and
$804.4 million at December 31, 2018.
- During the quarter ended September 30,
2019, the Company acquired the Chapada copper-gold mine for
net cash consideration of $757.0
million. The purchase price of $800.0
million at the date of acquisition was paid using cash on
hand of $515.0 million and a
$285.0 million drawdown on its
revolving credit facility. Offsetting this was cash held in the
acquired operations and working capital adjustments totalling
$43 million.
- For the quarter ended September 30,
2019 cash and cash equivalents decreased by $550.5 million, a decrease of $507.9 million in comparison to the prior year
quarter's decrease in cash and cash equivalents of $42.6 million. The decrease was largely due to
the net impact of the acquisition of Chapada ($472.0 million), a comparative change in non-cash
working capital ($100.7 million),
partially offset by higher gross profit before depreciation.
On a year-to-date basis, cash and cash equivalents decreased by
$630.9 million compared with the
reduction of $97.1 million in the
prior year. The incremental decrease in the current period was
largely due to the net cash impact of the acquisition of Chapada
($472.0 million), a comparative
change in non-cash working capital ($26.3
million) and lower gross profit before depreciation.
- As of October 23, 2019, the
Company had a cash and net debt balance of approximately
$167 million and $192 million,
respectively.
Outlook
2019 Production and Cash Cost
Production and cash cost guidance for 2019 has been improved
from that disclosed in our Management's Discussion and Analysis for
the three and six months ended June 30,
2019. Cash cost guidance has been lowered for Chapada and
Neves-Corvo, reflecting lower operating costs as well as higher
by-product credits at Chapada. The production guidance range has
been tightened, with the lower end of the range being increased for
both copper and zinc.
Since October 18, 2019,
Chile has experienced widespread
civil unrest that started in Santiago and has spread to other regions
including Atacama. Candelaria operations continue with a focus on
maintaining the safety and security of our employees, as well as
the environment and our facilities. To date, there has been no
material impact on operations. However, the situation continues to
evolve and further negative developments could materially impact
the operations of Candelaria.
|
2019
Guidance
|
Previous
Guidancea
|
Revised
Guidanceb
|
|
(contained
tonnes)
|
Tonnes
|
|
C1
Cost
|
Tonnes
|
|
C1
Cost
|
|
Copper
|
Candelaria
(100%)
|
145,000 -
155,000
|
|
$1.60/lb
|
145,000 -
155,000
|
|
$1.60/lb
|
|
|
Chapadac
|
27,000 -
30,000
|
|
$1.10/lb
|
27,000 -
30,000
|
|
$0.80/lbd
|
|
|
Eagle
|
12,000 -
15,000
|
|
|
13,000 -
15,000
|
|
|
|
|
Neves-Corvo
|
38,000 -
42,000
|
|
1.70/lb
|
40,000 -
42,000
|
|
$1.60/lb
|
|
|
Zinkgruvan
|
2,000 -
3,000
|
|
|
2,000 -
3,000
|
|
|
|
|
Total
|
224,000 -
245,000
|
|
|
227,000 -
245,000
|
|
|
|
Zinc
|
Neves-Corvo
|
71,000 -
76,000
|
|
|
73,000 -
76,000
|
|
|
|
|
Zinkgruvan
|
76,000 -
81,000
|
|
$0.40/lb
|
76,000 -
81,000
|
|
$0.40/lb
|
|
|
Total
|
147,000 -
157,000
|
|
|
149,000 -
157,000
|
|
|
|
Nickel
|
Eagle
|
12,000 -
14,000
|
|
$2.60/lb
|
12,000 -
14,000
|
|
$2.60/lb
|
a. Guidance as
outlined in our Management's Discussion and Analysis for the three
and six months ended June 30, 2019.
b. Cash costs are
based on various assumptions and estimates, including but not
limited to; production volumes, as noted above, commodity prices
(Cu: $2.60/lb, Zn: $1.05/lb, Ni: $7.50/lb, Pb: $0.90/lb, Au:
$1,450/oz.), foreign exchange rates (€/USD:1.15, USD/SEK:9.50,
USD/CLP:700, USD/BRL:3.95) and operating costs, for the remainder
of 2019.
c. Chapada is
expected to produce 50,000 to 55,000 ounces of gold under Lundin
Mining's ownership period.
d. Chapada cash costs
are calculated on a by-product basis and do not include the effects
of copper stream agreements. Effects of copper stream agreements
are reflected in copper revenue and will impact realized revenue
per pound.
|
2019 Capital Expenditure Guidance
Total capital expenditures for 2019, excluding capitalized
interest, remains unchanged at $695
million.
2019
Guidancea
|
|
$
millions
|
Candelaria Sustaining
(100% basis)
|
|
375
|
Chapada
Sustaining
|
|
25
|
Eagle
Sustaining
|
|
15
|
Neves-Corvo
Sustaining
|
|
65
|
Zinkgruvan
Sustaining
|
|
45
|
Total Sustaining
Capital
|
|
525
|
Eagle East
|
|
30
|
ZEP
(Neves-Corvo)
|
|
140
|
Total Expansionary
Capital
|
|
170
|
Total Capital
Expenditures
|
|
695
|
a. Guidance as
outlined in our Management's Discussion and Analysis for the three
and six months ended June 30, 2019.
|
2019 Exploration Investment Guidance
Exploration expenditures are expected to be $60 million, $10
million lower than previously guided. This reflects the
conclusion of the regional exploration drilling program at Eagle
and reduced drilling metres at Zinkgruvan.
About Lundin Mining
Lundin Mining is a diversified Canadian base metals mining
company with operations in Brazil,
Chile, Portugal, Sweden and the
United States of America, primarily producing copper, nickel
and zinc. 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 October 23, 2019 at 7:30
p.m. Eastern Time.
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
document constitute forward-looking information,
including but not limited to statements regarding the Company's
plans, prospects and business strategies; the Company's guidance on
the timing and amount of future production and its expectations
regarding the results of operations; expected costs; permitting
requirements and timelines; timing and possible outcome of pending
litigation; the results of any Preliminary Economic Assessment,
Feasibility Study, or Mineral Resource and Mineral Reserve
estimations, life of mine estimates, and mine and mine closure
plans; anticipated market prices of metals, currency exchange
rates, and interest rates; 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; anticipated exploration and development
activities at the Company's projects; and the Company's integration
of acquisitions (such as the Chapada mine) and any anticipated
benefits thereof. Words such as "believe", "expect",
"anticipate", "contemplate", "target", "plan", "goal", "aim",
"intend", "continue", "budget", "estimate", "may", "will", "can",
"could", "should", "schedule" and similar expressions identify
forward-looking statements.
Forward-looking information is necessarily based upon various
estimates 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, gold and other
metals; anticipated costs; ability to achieve goals; the prompt and
effective integration of acquisitions; that the political
environment in which the Company operates will continue to support
the development and operation of mining projects; and assumptions
related to the factors set forth below. While these factors and
assumptions are considered reasonable by Lundin Mining as at the
date of this document in light of management's experience and
perception of current conditions and expected developments, these
statements are inherently subject to significant business, economic
and competitive uncertainties and contingencies. Known and unknown
factors could cause actual results to differ materially from those
projected in the forward-looking statements and undue reliance
should not be placed on such statements and information. Such
factors include, but are not limited to: 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 and tailings 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 mine), including the ability
to achieve anticipated benefits, unanticipated difficulties or
expenditures relating to integration and diversion of management
time on integration; 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 MD&A for the year ended December 31, 2018, which are available on SEDAR
at www.sedar.com under the Company's profile. All of the
forward-looking statements made in this document are qualified by
these cautionary statements. 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 and 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 forward-looking information is not a
guarantee of future performance. 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
document. 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.
SOURCE Lundin Mining Corporation