TORONTO, April 29, 2020 /CNW/ - (TSX: LUN; Nasdaq
Stockholm: LUMI) Lundin Mining Corporation ("Lundin
Mining" or the "Company") today reported cash flows of $83.4 million generated from operations in its
first quarter 2020. Net loss attributable to Lundin Mining
shareholders was $111.5 million
($0.15 per share) for the quarter.
Adjusted loss2 was $40.6
million ($0.06 per share) for
the first quarter and Adjusted EBITDA2 were $90.3 million for the quarter.
Marie Inkster, President and CEO
commented, "Our operations performed well in the first quarter,
responding quickly and decisively to mitigate the risks presented
by the COVID-19 global pandemic. Proactive measures were taken at
each of our operations to ensure the safety of our employees,
contractors and communities, and have allowed us to continue to
operate safely and responsibly in all of our jurisdictions.
Although declining metal prices and provisional pricing had
meaningful impacts on the quarter's earnings, we remain in a strong
financial position. While we have adjusted our production
guidance, our coordinated and focused response during this time,
coupled with favourable movement of foreign exchange rates, has
resulted in lower cash cost guidance for several of our operations.
We have also reviewed and reduced our capital and exploration
expenditure guidance for the year to preserve our financial
strength in the event that this period of low prices is
prolonged."
Summary Financial Results
|
|
|
Three months
ended
March 31,
|
US$ Millions (except
per share amounts)
|
2020
|
2019
|
Revenue
|
378.0
|
416.4
|
Gross (loss)
profit
|
(22.7)
|
141.2
|
Attributable net
(loss) earnings 1
|
(111.5)
|
51.7
|
Net (loss)
earnings
|
(113.6)
|
60.9
|
Adjusted (loss)
earnings2
|
(40.6)
|
62.9
|
Adjusted
EBITDA2
|
90.3
|
177.0
|
Basic and diluted
(loss) earnings per share1
|
(0.15)
|
0.07
|
Adjusted basic and
diluted net (loss) earnings per share
|
(0.06)
|
0.09
|
Cash flow from
operations
|
83.4
|
62.1
|
Cash and cash
equivalents
|
366.9
|
734.7
|
Net (debt)
cash2
|
(117.7)
|
658.9
|
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 three
months ended March 31, 2020
|
Highlights
Operational Performance
On March 11, 2020 the World Health
Organization declared the rapidly spreading COVID-19 outbreak a
global pandemic. Lundin Mining has been closely monitoring
developments in the COVID-19 outbreak since January 2020 and has implemented preventive
measures to ensure the safety of our workforce and local
communities. To date, there have been no outbreaks of COVID-19 at
any of our sites and there have been no significant disruptions to
production, shipment of concentrate or supply chain. However, we
have made changes to our business and how we operate in order to
minimize the risks to our employees, communities and other
stakeholders. In Portugal, the Zinc Expansion Project ("ZEP")
at Neves-Corvo has been temporarily suspended and at all of our
operations changes have been made to implement new procedures in
order to reduce the risk of the spread of COVID-19. Some of these
actions were detailed in the Company's news release dated
March 25, 2020 entitled, Lundin
Mining Provides Update on Readiness and Response to COVID-19, and
Operational and Guidance Update.
Lundin Mining continues to manage and respond to COVID-19 within
the framework of its Pandemic Response Plan, along with
recommendations of health authorities and local and national
regulatory requirements. The Company has implemented business
continuity measures in an effort to mitigate and minimize potential
impacts of this pandemic.
Candelaria (80% owned): Candelaria produced 36,297 tonnes
of copper, and approximately 21,000 ounces of gold in concentrate
on a 100% basis. Copper production in the quarter was higher than
the prior year comparable quarter primarily due to higher copper
head grades as more ore was sourced directly from the open pit and
underground mines as opposed to stockpiles. Copper cash
costs1 of $1.31/lb for the
quarter were better than the prior year comparable quarter largely
owing to the impact of favourable foreign exchange.
Chapada (100% owned): Chapada produced 11,881 tonnes of
copper and approximately 18,000 ounces of gold, as planned. Copper
cash costs of $0.92/lb were better
than guidance benefitting from favourable foreign exchange rates
and higher gold by-product prices.
Eagle (100% owned): Eagle produced 3,575 tonnes of nickel
and 4,378 tonnes of copper during the quarter with part of the
production from the Eagle East orebody. Nickel production was lower
than the prior year comparable period due to lower grades and
recoveries partially offset by increased mill throughput. Copper
production was higher than the prior year comparable period as a
result of increased throughput. Gross operating costs were better
than expectations. Nickel cash costs of $1.43/lb for the quarter were higher than the
prior year comparable quarter due to lower by-product credits
resulting from lower copper prices.
Neves-Corvo (100% owned): Neves-Corvo produced 9,075
tonnes of copper and 17,948 tonnes of zinc for the quarter. Copper
production was higher than the prior year comparable period
benefitting from higher grades, while zinc production was lower due
primarily to lower recoveries. Though operating costs in the
current quarter were in-line with Q1 2019, copper cash costs of
$2.24/lb were higher than the prior
year comparable quarter due to lower by-product credits stemming
from lower realized zinc prices.
On March 15, 2020, the Company
announced that construction and commissioning of ZEP would be
temporarily suspended to reduce the risk of the spread of COVID-19
to local communities, employees and contractors.
Zinkgruvan (100% owned): Zinc production of 18,999 tonnes
was lower than the prior year comparable quarter due to lower
grades and recoveries, partially offset by higher mill throughput.
Lead production of 8,013 tonnes was better than the prior year
comparable period owing to higher throughput and recoveries. Zinc
cash costs of $0.51/lb were higher
than Q1 2019 largely owing to higher zinc treatment and refining
charges.
1 This is
a non-GAAP measure. Please refer to the Company's discussion of
non-GAAP measures in its Management's Discussion and Analysis for
the three months ended March 31, 2020
|
Total Production
|
|
|
(Contained metal in
concentrate)
|
2020
|
2019
|
Q1
|
Total
|
Q4
|
Q3
|
Q2
|
Q1
|
Copper
(t)ab
|
62,167
|
235,498
|
67,131
|
74,560
|
47,685
|
46,122
|
Zinc (t)
|
36,947
|
151,515
|
38,925
|
35,028
|
37,116
|
40,446
|
Gold
(koz)ab
|
39
|
142
|
43
|
58
|
21
|
20
|
Nickel (t)
|
3,575
|
13,494
|
2,651
|
3,232
|
3,398
|
4,213
|
a - Candelaria's
production is on a 100% basis
|
b - Chapada results
included are for the Company's ownership period
|
Corporate Highlights
- On February 20, 2020, the Company
declared a 33% increase in cash dividend, to $0.04 per share, compared to the quarterly
dividend paid in 2019.
Financial Performance
- Gross loss for the quarter ended March
31, 2020 was $22.7 million, a
decrease in gross profit of $163.9
million compared to the first quarter of 2019. The decrease
was primarily due to lower revenues as a result of lower metal
prices ($51.2 million) and negative
price adjustments ($153.2 million),
partially offset by higher copper and nickel sales volumes
($35.0 million) and the addition of
the Chapada mine ($21.9 million).
- Net loss for the current quarter was $113.6 million, a decrease in net earnings of
$174.5 million from the first quarter
of 2019. The decrease was primarily attributable to lower gross
profit and higher deferred tax expense on the revaluation of
non-monetary assets at Chapada, partially offset by higher other
income derived from foreign exchange gains.
- Adjusted loss for the quarter was $ 40.6
million, compared to adjusted earnings of $ 62.9 million in Q1 2019 and reflects lower net
earnings offset by lower adjusted income taxes.
Financial Position and Financing
- Cash and cash equivalents increased $116.3 million during the quarter ended
March 31, 2020, from $250.6 million to $366.9
million.
- During the quarter, $120.0
million net was drawn on the Company's revolving credit
facility and an additional $55.0
million term loan was obtained by Candelaria, primarily for
the management of short-term working capital.
- Cash flow from operations of $83.4
million were offset by capital expenditures of $141.1 million and the effects of foreign
exchange which further reduced cash balances. During the current
quarter, the Company received proceeds of $25.7 million related to contingent consideration
from the 2017 sale of the Company's investment in the Tenke
Fungurume mine.
- Net debt as at March 31, 2020 was
$117.7 million, an increase of
$57.5 million from December 31, 2019. The increase in net debt
reflects capital expenditures and the impact of foreign exchange on
cash balances, partially offset by operating cashflows of
$83.4 million.
- As of April 29, 2020, the Company
had a cash and net debt balance of approximately $300.0 million and $185.0
million, respectively.
Outlook
As noted in the Highlights section, to date, the Company has not
experienced significant disruptions to production, shipments of
concentrate or its supply chain as a result of COVID-19. However,
the Company has reassessed production guidance in light of the
temporary suspension of ZEP and the other changes to operating
procedures that the Company has implemented to reduce the risk of
infections at our sites. In addition, cost reduction programs have
been implemented to respond to the low metal price environment. As
a result, certain capital and operational spending has been
eliminated or deferred.
The following changes have been made to production guidance:
Candelaria: Full year guidance range for copper
production has been widened and gold production has been moderately
reduced. Copper cash cost guidance has been lowered to $1.35/lb, reflecting favourable foreign exchange
rates.
Chapada: Copper production guidance is maintained.
Gold production is moderately reduced reflecting lower recoveries.
Annual cash cost guidance for copper has been reduced to
$0.85/lb, reflecting favourable
foreign exchange rates and higher gold by-product prices.
Eagle: Production and cost guidance remains
unchanged.
Neves-Corvo: Full year guidance range for copper
production has been lowered to reflect first quarter production.
Due to uncertainty regarding the timing of the restart of ZEP, full
year zinc production guidance for 2020 has been lowered to reflect
current production rates without contribution from ZEP. The Company
is currently reviewing 2021 zinc production estimates, and
accordingly, previously provided guidance should no longer be
relied upon. Copper cash cost guidance for 2020 has been increased
to $2.10/lb to reflect lower zinc
by-product credits.
Zinkgruvan: Full year zinc production guidance has
been moderately reduced to reflect lower average head grades
expected for the year. Annual cash cost guidance for zinc has been
moderately increased to $0.60/lb.
We caution that the global effects of COVID-19 are still
evolving. Given the uncertainty of the duration and magnitude of
the impact, our production and cash cost estimates are subject to a
higher than normal degree of uncertainty. The guidance below does
not reflect any potential for additional suspensions or other
significant disruption to operations due to COVID-19.
2020 Production and Cash Cost Guidance
|
Previous
Guidancea
|
Revised
Guidance
|
(Contained metal in
concentrate)
|
Tonnes
|
Cash
Costs
|
Tonnes
|
Cash
Costsb
|
Copper
(t)
|
Candelaria
(100%)
|
165,000 -
175,000
|
$1.45/lbb
|
160,000 -
175,000
|
$1.35/lbc
|
|
Chapada
|
51,000 -
56,000
|
$1.15/lbc
|
51,000 -
56,000
|
$0.85/lbd
|
|
Eagle
|
15,000 -
18,000
|
|
15,000 -
18,000
|
|
|
Neves-Corvo
|
38,000 -
43,000
|
$1.80/lb
|
35,000 -
40,000
|
$2.10/lbc
|
|
Zinkgruvan
|
3,000 -
4,000
|
|
3,000 -
4,000
|
|
|
Total
|
272,000 -
296,000
|
|
264,000 -
293,000
|
|
Zinc
(t)
|
Neves-Corvo
|
95,000 -
105,000
|
|
70,000 -
75,000
|
|
|
Zinkgruvan
|
77,000 -
82,000
|
$0.55/lb
|
72,000 -
77,000
|
$0.60/lbc
|
|
Total
|
172,000 -
187,000
|
|
142,000 -
152,000
|
|
Gold
(oz)
|
Candelaria
(100%)
|
100,000 -
105,000
|
|
90,000 -
100,000
|
|
|
Chapada
|
90,000 -
95,000
|
|
85,000 -
90,000
|
|
|
Total
|
190,000 -
200,000
|
|
175,000 -
190,000
|
|
Nickel
(t)
|
Eagle
|
15,000 -
18,000
|
$1.00/lb
|
15,000 -
18,000
|
$1.00/lb
|
a. Guidance as
outlined in the Management's Discussion and Analysis for the year
ended December 31, 2019
b. Cash costs are
based on various assumptions and estimates, including but not
limited to: production volumes, as noted above, commodity prices
(Cu: $2.25/lb, Zn: $0.85/lb, Ni: $5.00/lb, Pb: $0.75/lb, Au:
$1,500/oz), foreign exchange rates (€/USD:1.10, USD/SEK:9.50,
USD/CLP:850, USD/BRL:4.75) and operating costs for the remaining of
2020
c. 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 approximately $4.40/oz and $4.30/oz
d. Chapada cash costs
are calculated on a by-product basis and do not include the effects
of its copper stream agreements. Effects of copper stream
agreements are reflected in copper revenue and will impact realized
revenue per pound
|
2020 Capital Expenditure Guidance
Total sustaining capital expenditures guidance has been reduced
by $80.0 million. Sustaining capital
expenditure deferrals include deferred stripping, mine development,
underground drilling and equipment. The ZEP capital expenditure
guidance includes payments for work performed to date.
($
millions)
|
Previous
Guidancea
|
Revisions
|
Revised
Guidance
|
Candelaria
(100% basis)
|
265
|
(35)
|
230
|
Chapada
|
60
|
(20)
|
40
|
Eagle
|
15
|
-
|
15
|
Neves-Corvo
|
75
|
(20)
|
55
|
Zinkgruvan
|
50
|
(5)
|
45
|
Total Sustaining
Capital
|
465
|
(80)
|
385
|
Zinc Expansion
Project (Neves-Corvo)
|
155
|
(100)
|
55
|
Total Capital
Expenditures
|
620
|
(180)
|
440
|
a. Guidance as
outlined in the Management's Discussion and Analysis for the year
ended December 31, 2019.
|
2020 Exploration Investment Guidance
Planned exploration expenditures are expected to be $35.0 million in 2020, $20.0 million lower than previous guidance.
Reductions include deferred drilling, and some planned geophysical
surveys. Most of the planned expenditures for 2020 will be spent
supporting in-mine and near-mine targets at our operations
including $15.0 million at
Candelaria, $7.0 million at
Zinkgruvan, $7.0 million at Chapada,
and $2.0 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 April 29, 2020 at 18:00
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 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 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: volatility and
fluctuations in metal and commodity prices; global financial
conditions and inflation; 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, and natural phenomena
such as earthquakes, flooding or unusually severe weather;
uninsurable risks; changes in the Company's share price, and
volatility in the equity markets in general; the threat associated
with outbreaks of viruses and infectious diseases, including the
novel COVID-19 virus; risks related to negative publicity with
respect to the Company or the mining industry in general; reliance
on a single asset; 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; actual ore mined
and/or metal recoveries varying from Mineral Resource and Mineral
Reserve estimates, estimates of grade, tonnage, dilution, mine
plans and metallurgical and other characteristics; 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; ore processing efficiency;
risks inherent in and/or associated with operating in foreign
countries and emerging markets; security at the Company's
operations; changing taxation regimes; health and safety risks;
exploration, development or mining results not being consistent
with the Company's expectations; unavailable or inaccessible
infrastructure and risks related to ageing infrastructure;
counterparty and credit risks and customer concentration; risks
related to the environmental regulation and environmental impact of
the Company's operations and products and management thereof;
exchange rate fluctuations; reliance on third parties and
consultants in foreign jurisdictions; community and stakeholder
opposition; civil disruption; the potential for and effects of
labour disputes or other unanticipated difficulties with or
shortages of labour or interruptions in production; uncertain
political and economic environments; litigation; regulatory
investigations, enforcement, sanctions and/or related or other
litigation; risks associated with the structural stability of waste
rock dumps or tailings storage facilities; changes in laws,
regulations or policies including but not limited to those related
to mining regimes, permitting and approvals, environmental and
tailings management, labour, trade relations, and transportation;
climate change; compliance with environmental, health and safety
laws; enforcing legal rights in foreign jurisdictions; information
technology and cybersecurity risks; estimates of future production
and operations; estimates of operating, cash and all-in sustaining
cost estimates; delays or the inability to obtain, retain or comply
with permits; compliance with foreign laws; risks related to mine
closure activities and closed and historical sites; challenges or
defects in title; the price and availability of key operating
supplies or services; historical environmental liabilities and
ongoing reclamation obligations; indebtedness; funding requirements
and availability of financing; liquidity risks and limited
financial resources; risks relating to attracting and retaining of
highly skilled employees; risks associated with acquisitions and
related integration efforts, including the ability to achieve
anticipated benefits, unanticipated difficulties or expenditures
relating to integration and diversion of management time on
integration; the estimation of asset carrying values; internal
controls; competition; dilution; existence of significant
shareholders; conflicts of interest; activist shareholders and
proxy solicitation matters; risks relating to dividends; risks
associated with business arrangements and partners over which the
Company does not have full control; and other risks and
uncertainties, including but not limited to those described in the
"Risks and Uncertainties" section of the Annual Information Form
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.
SOURCE Lundin Mining Corporation