TORONTO, Feb. 20, 2020 /CNW/ - (TSX: LUN; Nasdaq
Stockholm: LUMI) Lundin Mining Corporation ("Lundin
Mining" or the "Company") today reported cash flows of $186.4 million generated from operations in its
fourth quarter and $564.6 million for
the year. Net earnings attributable to Lundin Mining shareholders
were $97.0 million ($0.13 per share) for the quarter and $167.3 million ($0.23 per share) for the year ended
December 31, 2019. Adjusted earnings2 were
$ 93.2 million ($0.13 per share) for the fourth quarter and
adjusted EBITDA2 were $234.6
million for the fourth quarter.
Marie Inkster, President and CEO
commented, "This is a very exciting time for Lundin Mining. Over
the last few years we have invested significantly in our operations
and now we are beginning to realize the benefits. We saw
improvement during the second half of 2019 as reflected in our
operating and financial results. Momentum is expected to continue
and increase this year as we achieve improved tonnages from the
open pit and underground at Candelaria, complete the remaining
aspects of the Candelaria Mill Optimization Project and ramp-up the
Neves-Corvo Zinc Expansion Project. These and other capital
investments have positioned the Company well to deliver multiple
years of strong production, decreasing cash costs and free cash
flow generation."
Summary Financial Results
|
Three months
ended
|
|
Twelve months
ended
|
|
December
31,
|
|
December
31,
|
US$ Millions (except
per share amounts)
|
2019
|
20183
|
|
2019
|
20183
|
|
|
|
|
|
|
Revenue
|
568.4
|
407.7
|
|
1,892.7
|
1,725.6
|
Gross
profit
|
145.5
|
72.0
|
|
440.4
|
436.6
|
Attributable net
earnings1
|
97.0
|
28.8
|
|
167.3
|
195.9
|
Net
earnings
|
104.8
|
31.8
|
|
189.2
|
215.4
|
Adjusted
earnings1,2
|
93.2
|
34.8
|
|
159.5
|
183.6
|
Adjusted
EBITDA2
|
234.6
|
157.4
|
|
705.7
|
643.2
|
Basic and diluted net
earnings per share1
|
0.13
|
0.04
|
|
0.23
|
0.27
|
Adjusted basic and
diluted net earnings per share1,2
|
0.13
|
0.05
|
|
0.22
|
0.25
|
Cash flow from
operations
|
186.4
|
44.2
|
|
564.6
|
476.4
|
Cash and cash
equivalents
|
250.6
|
815.4
|
|
250.6
|
815.4
|
Net (debt) cash
2
|
(60.2)
|
804.4
|
|
(60.2)
|
804.4
|
1
Attributable to shareholders of Lundin Mining
Corporation.
|
2 These are non-GAAP measures. Please
refer to the Company's discussion of non-GAAP measures in its
Management's Discussion and Analysis for the year ended December
31, 2019.
|
3 On
adoption of IFRS 16, Leases, the Company has elected not to restate
comparative periods presented.
|
Highlights
Operational Performance
All operations successfully met or exceeded the Company's most
recent annual metal production guidance. Candelaria, Chapada,
Neves-Corvo and Zinkgruvan all achieved annual cash costs in-line
with or better than the most recent guidance. Further, both
Neves-Corvo and Zinkgruvan set all-time annual records for ore
mined. Annual capital expenditures of $665.3
million were marginally lower than the most recent guidance
of $695.0 million.
Significant achievements during the year ended December 31, 2019 include successful acquisition
and integration of the Chapada mine, completion of pre-production
development of the Candelaria Underground South Sector project and
processing of first ore from Eagle East. In addition, progress on
the Candelaria Mill Optimization Project and Neves-Corvo's Zinc
Expansion Project ("ZEP") continues to advance in-line with the
latest schedule and capital cost guidance.
Candelaria (80% owned): The Candelaria operations
produced, on a 100% basis, 146,330 tonnes of copper, approximately
88,000 ounces of gold and 1.3 million ounces of silver in
concentrate during the year. Copper production was in-line with
market guidance and higher than the prior year, a reflection of
mining and processing higher grade ore following successful mining
of the open pit Phase 10 pushback and development of the Candelaria
South Sector. Copper cash costs1 of $1.54/lb were better than annual guidance and the
prior year.
As noted above, pre-production development of the Candelaria
South Sector underground mine was successfully completed and the
project was transferred to operations, ahead of schedule. Mine
production from Candelaria's North and South Sector underground
mines ramped up to an average of 13,500 tonnes per day during the
fourth quarter.
Chapada (100% owned): Acquisition of the Chapada
mine was completed on July 5, 2019.
During the period of Lundin Mining's ownership, Chapada produced
30,529 tonnes of copper and approximately 54,000 ounces of gold.
Copper production exceeded guidance, and gold production was
in-line with expectations. Copper cash costs of $0.58/lb were better than guidance with higher
precious metal credits and favourable foreign exchange effects.
Eagle (100% owned): Eagle production for the year
met guidance, producing 13,494 tonnes of nickel and
14,297 tonnes of copper. Nickel cash costs of $2.84/lb for the year were higher than guidance
and prior year due to lower sales volumes.
Development of Eagle East reached an important milestone with
first ore extracted and processed ahead of schedule, and with
project costs expected to be below budget.
Neves-Corvo (100% owned): Neves-Corvo produced
41,436 tonnes of copper and 73,202 tonnes of zinc for the year,
meeting guidance. Copper cash costs of $1.59/lb for the year were in-line with the most
recent guidance though higher than the prior year due to lower
by-product credits.
ZEP continued to advance in accordance with the revised schedule
and budget for the phased start-up and production during 2020.
Zinkgruvan (100% owned): Zinc production of 78,313
tonnes met guidance and was higher than the prior year. Zinc, lead
and copper production all exceeded the prior year as a result of
higher head grades and metal recoveries. Zinc cash costs of
$0.39/lb for the year were in-line
with guidance.
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 secured revolving credit facility (the "Credit
Facility").
- The execution of a third amended and restated credit agreement
was announced by the Company on August 28,
2019. The Credit Facility was increased to $800.0 million, with a $200.0 million accordion option to total
$1.0 billion, with reduced costs of
borrowing and an extended term to August
2023.
- On September 5, 2019, the Company
reported its Mineral Resource and Mineral Reserve estimates as at
June 30, 2019. 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 1,757 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.
- On December 2, 2019, the Company
announced that its joint venture with Freeport-McMoRan Inc.,
Freeport Cobalt, had completed the sale of its cobalt refinery in
Kokkola, Finland and related
cobalt cathode precursor business to Umicore for total cash
consideration of approximately $200.0
million, including net working capital of approximately
$50.0 million at the time of close
(the "Freeport Cobalt Transaction"). The Company received
approximately $114.2 million in funds
distributed by the joint venture, including attributable proceeds
of the Freeport Cobalt Transaction.
- During 2019 approximately 4.3 million shares were purchased by
the Company under its normal course issuer bid ("NCIB"). All shares
purchased under the NCIB were cancelled. On December 5, 2019, the Company renewed its NCIB
which allows the Company to purchase up to 63,797,653 common shares
over a period of twelve months commencing on December 9, 2019.
Financial Performance
- Gross profit for the year ended December
31, 2019 was $440.4 million,
an increase of $3.8 million in
comparison to the prior year. The increase reflects the addition of
Chapada's gross profit contribution of $104.4 million. Gross profit variances from the
other operations include higher depreciation expense ($40.5 million), lower realized metal prices
($34.0 million) and higher treatment
and refining charges ($24.5
million).
- For the year ended December 31,
2019, net earnings of $189.2
million, was $26.2 million
lower compared to the prior year. Lower net earnings in the current
year were due to negative revaluation adjustments for marketable
securities and derivatives ($37.6
million) and lower income from investment in associates
($23.7 million), partially offset by
lower finance costs ($21.4
million).
- Adjusted earnings for the year were lower than the prior year
primarily due to lower realized foreign exchange gains offset by
lower exploration and business development expenses and finance
costs.
- Net debt position at December 31,
2019 was $60.2 million
compared to net cash of $804.4
million at December 31, 2018.
The movement from a net cash to a net debt position ($864.6 million) was largely attributable to the
acquisition of Chapada ($757.0
million), cash used for capital investments in excess of
operating cash flow ($100.7 million)
and dividends paid ($66.4 million),
partially offset by distributions received from investment in
associate ($114.2 million).
Financial Position and Financing
- In 2019, the Company acquired the Chapada 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 the revolving credit
facility. Offsetting this was cash held in the acquired operations
and working capital adjustments totaling $43.0 million.
- Cash and cash equivalents decreased by $564.8 million during 2019. Cash flow from
operations of $564.6 million were
more than offset by capital expenditures of $665.3 million. In addition, the Company utilized
cash of $472.0 million during the
year for the acquisition of Chapada, and received $114.2 million in distributions from its equity
investment in Freeport Cobalt, including attributable proceeds of
the Freeport Cobalt Transaction.
- The Company ended 2019 with a net debt balance of $60.2 million compared to a net cash position of
$804.4 million at December 31, 2018.
- As of February 20, 2020, the
Company had a cash and net debt balance of approximately
$200 million and $90 million, respectively.
Outlook
2020 Production and Cash Cost
Production, cash cost and capital expenditure guidance for 2020
remains unchanged from that provided on November 26, 2019 (see news release "Lundin
Mining Provides Operational Outlook & Shareholder Returns
Update").
(contained metal in
concentrate)
|
|
Tonnes
|
|
Cash
Costsa
|
Copper
(t)
|
Candelaria
(100%)
|
|
165,000 -
175,000
|
|
$1.45/lbb
|
|
Chapada
|
|
51,000 -
56,000
|
|
$1.15/lbc
|
|
Eagle
|
|
15,000 -
18,000
|
|
|
|
Neves-Corvo
|
|
38,000 -
43,000
|
|
$1.80/lb
|
|
Zinkgruvan
|
|
3,000 -
4,000
|
|
|
|
Total
|
|
272,000 -
296,000
|
|
|
Zinc
(t)
|
Neves-Corvo
|
|
95,000 -
105,000
|
|
|
|
Zinkgruvan
|
|
77,000 -
82,000
|
|
$0.55/lb
|
|
Total
|
|
172,000 -
187,000
|
|
|
Gold
(oz)
|
Candelaria
(100%)
|
|
100,000 -
105,000
|
|
|
|
Chapada
|
|
90,000 -
95,000
|
|
|
|
Total
|
|
190,000 -
200,000
|
|
|
Nickel
(t)
|
Eagle
|
|
15,000 -
18,000
|
|
$1.00/lb
|
a. Cash costs are
based on various assumptions and estimates, including but not
limited to: production volumes, as noted above, commodity prices
(Cu: $2.70/lb, Zn: $1.10/lb, Ni: $6.00/lb, Pb: $0.90/lb, Au:
$1,350/oz), foreign exchange rates (€/USD:1.20, USD/SEK:8.50,
USD/CLP:675, USD/BRL:3.75) 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 $412/oz and $4.12/oz respectively, on gold and silver
sales in the year. Silver production at Zinkgruvan and Neves-Corvo
are also subject to streaming agreements, and cash costs are
calculated based on $4.30/oz and $4.39/oz, respectively.
c. Chapada cash costs
are calculated on a by-product basis and do not include the effects
of the its copper stream agreements. Effects of the copper stream
agreements are reflected in copper revenue and will impact realized
revenue per pound.
|
2020 Capital Expenditure Guidance
Capital expenditures, excluding capitalized interest, are
expected to be $620 million, as
outlined below.
2020
Guidance
|
|
$
millions
|
Candelaria
(100% basis)
|
|
265
|
Chapada
|
|
60
|
Eagle
|
|
15
|
Neves-Corvo
|
|
75
|
Zinkgruvan
|
|
50
|
Total Sustaining
Capital
|
|
465
|
Zinc Expansion
Project (Neves-Corvo)
|
|
155
|
Total Capital
Expenditures
|
|
620
|
2020 Exploration Investment Guidance
Planned exploration expenditures are expected to be $55 million in 2020, $10
million lower than previous guidance. The majority of the
decrease is due to a reduction in the planned activities on
regional exploration stage projects in South America. Planned
expenditures for 2020 will be spent supporting significant in-mine
and near-mine targets at our operations ($20
million at Candelaria, $15
million at Zinkgruvan, $10
million at Chapada, and $10
million at Neves-Corvo).
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, zinc,
gold and nickel.
The information in this release is subject to the disclosure
requirements of Lundin Mining under the EU Market Abuse Regulation.
The information was submitted for publication, through the agency
of the contact persons set out below on February 20, 2020 at 5:00
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, 2019, 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.
Mark Turner, Director, Business
Valuations and Investor Relations: +1-416-342-5565; Brandon Throop, Manager, Investor Relations:
+1‐416‐342‐5583; Robert Eriksson,
Investor Relations Sweden: +46 8 440 54 50