TORONTO, July 29, 2020 /CNW/ - (TSX: LUN) (Nasdaq
Stockholm: LUMI) Lundin Mining Corporation ("Lundin
Mining" or the "Company") today reported second quarter 2020 net
earnings attributable to Lundin Mining shareholders of $38.7 million ($0.05 per share) and adjusted
earnings2 of $52.8 million
($0.07 per share). Cash flows of
$37.6 million were generated from
operations in the period and adjusted operating cash
flow2 was $179.0 million
($0.24 per share). Adjusted
EBITDA2 were $231.5
million for the quarter.
Marie Inkster, President and CEO
commented, "Our operations performed well in the second quarter,
particularly in light of adapting many business processes and
implementing preventative measures to protect our workforce and
communities from the ongoing risk of COVID-19. We have refocused
our efforts and are providing proactive assistance and resources to
our local communities to best address needs as the pandemic
continues to evolve differently in each region.
Our operations are set for an improved second half of the
year. While we have reduced Candelaria's full year production
guidance, Eagle's copper production has been increased, and cash
cost guidance for both Chapada and Eagle have been improved. The
2020 capital expenditure guidance for ZEP has increased slightly as
minor project works are continuing that will help facilitate a
smooth restart and ramp-up of construction activities when that
occurs.
Lastly, we are proud to announce the issuance of our 2019
Sustainability Report. We believe you will find the report once
again provides a comprehensive disclosure of our ESG performance,
commitments and strategies for the future."
Summary Financial Results
|
|
Three months
ended
|
|
|
Six months
ended
|
|
|
June
30,
|
|
|
June
30,
|
|
US$ Millions (except
per share amounts)
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
Revenue
|
533.3
|
|
369.3
|
|
|
911.3
|
|
785.6
|
|
|
Gross
profit
|
142.1
|
|
25.1
|
|
|
119.4
|
|
166.3
|
|
|
Attributable net
earnings (loss)1
|
38.7
|
|
(7.8)
|
|
|
(72.7)
|
|
43.9
|
|
|
Net earnings
(loss)
|
48.3
|
|
(8.6)
|
|
|
(65.3)
|
|
52.3
|
|
|
Adjusted earnings
(loss)1,2
|
52.8
|
|
(11.1)
|
|
|
11.7
|
|
51.9
|
|
|
Adjusted
EBITDA2
|
231.5
|
|
75.6
|
|
|
321.8
|
|
252.6
|
|
|
Basic and diluted net
earnings (loss) per share1
|
0.05
|
|
(0.01)
|
|
|
(0.10)
|
|
0.06
|
|
|
Adjusted basic and
diluted earnings (loss) per share1,2
|
0.07
|
|
(0.02)
|
|
|
0.02
|
|
0.07
|
|
|
Cash flow from
operations
|
37.6
|
|
204.5
|
|
|
121.0
|
|
266.6
|
|
|
Adjusted operating
cash flow2
|
179.0
|
|
49.9
|
|
|
206.9
|
|
189.1
|
|
|
Adjusted operating
cash flow per share2
|
0.24
|
|
0.07
|
|
|
0.28
|
|
0.26
|
|
|
Cash and cash
equivalents
|
283.9
|
|
735.1
|
|
|
283.9
|
|
735.1
|
|
|
Net (debt)
cash2
|
(220.0)
|
|
661.1
|
|
|
(220.0)
|
|
661.1
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and six months
ended June 30, 2020.
|
Highlights
Operational Performance
Operations performed well in the quarter with copper production
at all operations higher than the prior year comparable quarter and
record combined throughput of over 1.0 million tonnes at
Neves-Corvo. With the exception of Candelaria, production at all
mines remain on target to achieve previously disclosed annual
guidance, despite challenges of the COVID-19 pandemic.
Furthermore, cash costs at all operations were in-line or better
than expected. For Chapada and Eagle, annual cash cost guidance is
improving by 24% and 15%, respectively.
As the Company adapts to a new way of operating under COVID-19,
Lundin Mining continues to manage and respond to the pandemic
within the framework of its Crisis Management and Pandemic Response
Plan, along with recommendations of health authorities and local
and national regulatory requirements. The Company has implemented
preventive measures to ensure the safety of its workforce, local
communities and other key stakeholders. The Zinc Expansion Project
("ZEP") at Neves-Corvo continues to be temporarily suspended and
business continuity measures have been implemented at all of our
sites in an effort to mitigate and minimize potential future
impacts of this pandemic, particularly with travel and contractors
from outside the immediate mine regions.
During the second quarter of 2020, the fast-growing infection
rates in Brazil, Chile and the USA have increased the risk of outbreaks in
the communities near Chapada, Candelaria and Eagle whereas rates of
infection in the areas near our operations in Sweden and Portugal remained relatively stable. In
the event of a localized outbreak in any of our operating
jurisdictions, there may be a need to implement increased isolation
and containment measures to prevent the spread of the
virus. These actions could impact production levels, delay
maintenance activities and disrupt supply chains.
To date, production disruptions have been minimal and there has
been no significant disruption in the delivery or receipt of goods
at our operations as a result of COVID-19.
Candelaria (80% owned): Candelaria produced 35,060
tonnes of copper, and approximately 21 thousand ounces of gold in
concentrate on a 100% basis. Copper production for the quarter was
higher than the prior year quarter primarily due to higher copper
head grades and recoveries as more higher-grade open pit and
underground ore was mined. However, throughput was lower than
planned due to ore hardness, operational issues and an unplanned
maintenance stop. In addition, COVID-19 has further delayed the
Candelaria Mill Optimization Project ("CMOP") and installation of
the final ball mill motor is now planned for January 2021; accordingly, full year production
guidance has been reduced. Copper cash costs1 of
$1.36/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 13,799 tonnes
of copper and approximately 23 thousand ounces of gold in-line with
plan. Copper cash costs of $0.21/lb
were better than expected benefitting from favourable foreign
exchange and higher gold by-product prices.
Eagle (100% owned): Eagle produced 3,380 tonnes of
nickel and 4,102 tonnes of copper during the quarter. Nickel
production was comparable to the prior year comparable quarter.
Copper production was higher than the prior year quarter as a
result of higher grades. Nickel cash costs of $1.13/lb for the quarter were lower than the
prior year comparable quarter due primarily to lower treatment and
refining costs.
Neves-Corvo (100% owned): Neves-Corvo produced
10,559 tonnes of copper and 18,986 tonnes of zinc for the quarter.
Copper production was higher than the prior year quarter
benefitting from record throughput and better recoveries, while
zinc production was higher due to higher grades. Copper cash costs
of $1.75/lb for the quarter were
lower than the prior year quarter due to favourable foreign
exchange which was partially offset by lower by-product credits
stemming from lower realized zinc prices.
Major construction and commissioning of ZEP continues to be
temporarily suspended to reduce the risk of the spread of COVID-19
to employees, contractors and local communities.
Zinkgruvan (100% owned): Zinc production of 12,596
tonnes and lead production of 3,799 tonnes was lower than the prior
year quarter due to grades and lower throughput as a result of the
sequencing of copper production. Zinc cash costs of $0.56/lb were higher than the prior year quarter
as a result of lower sales volumes and by-product credit metal
prices.
Total Production
(Contained metal in
concentrate)
|
2020
|
2019
|
YTD
|
Q2
|
Q1
|
Total
|
Q4
|
Q3
|
Q2
|
Q1
|
Copper
(t)ab
|
127,452
|
65,285
|
62,167
|
235,498
|
67,131
|
74,560
|
47,685
|
46,122
|
Zinc (t)
|
68,529
|
31,582
|
36,947
|
151,515
|
38,925
|
35,028
|
37,116
|
40,446
|
Gold
(koz)ab
|
83
|
44
|
39
|
142
|
43
|
58
|
21
|
20
|
Nickel (t)
|
6,955
|
3,380
|
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 June 30, 2020, the Company
published its annual Sustainability Report which provides updates
on the economic, safety, environmental and social issues that are
of greatest interest to communities near the Company's operations,
employees, investors, and other stakeholders. A copy of the
Company's Sustainability Report is available on the Company's
website (www.lundinmining.com).
Financial Performance
- Gross profit for the quarter ended June
30, 2020 increased by $117.0
million compared to the prior year quarter. The increase was
primarily due to the addition of the Chapada mine ($59.3 million), higher realized metal prices and
price adjustments ($40.0 million) and
favourable foreign exchange ($19.0
million), partially offset by higher depreciation expense at
Candelaria ($22.1 million).
- On a year-to-date basis, gross profit decreased by $46.9 million from the prior year comparative
period. The decrease was primarily due to lower metal prices and
price adjustments ($154.4 million)
and higher depreciation ($59.4
million). These decreases were partially offset by the
addition of Chapada mine which contributed $81.2 million to gross profit, favourable foreign
exchange ($36.7 million) and higher
net sales volumes ($19.9
million).
- Net earnings for the quarter ended June
30, 2020 increased by $56.9
million from the prior year quarter. The increase was
attributable to higher gross profit, partially offset by higher
income taxes ($55.9 million).
- On a year-to-date basis, net earnings decreased by $117.6 million from the prior year comparative
period. The decrease was attributable to lower gross profit, higher
income taxes ($103.6 million) and
higher finance costs, partially offset by lower general exploration
and business development expenses and higher foreign exchange
gains.
- Adjusted earnings for the quarter were $63.8 million higher than the prior year quarter
due mainly to higher gross profit offset by higher income taxes. On
a year-to-date basis, adjusted earnings were $40.2 million lower than the prior year due to
lower gross profit.
Financial Position and Financing
- Cash and cash equivalents of $283.9
million as at June 30, 2020
decreased by $83.0 million during the
quarter including cash flow from operations of $37.6 million, which included an outflow of
$141.4 million for changes in working
capital. $100.2 million was invested
in capital expenditures.
- On a year-to-date basis, cash and cash equivalents increased by
$33.4 million. In addition to
$121.0 million in operating cash
flow, the Company drew down approximately $200.0 million in debt, invested $241.2 million in capital expenditures and
returned $42.6 million to
shareholders in dividend payments.
- Net debt of $220.0 million as at
June 30, 2020 reflects an increase of
$159.7 million since December 31, 2019. Operating cash flow of
$121.0 million was more than offset
by capital investment ($241.2
million) and dividend payments to shareholders ($42.6 million).
- As of July 29, 2020, the Company
had a cash and net debt balance of approximately $225.0 million and $190.0
million, respectively.
Outlook
All operations had a good quarter and, other than Candelaria,
are on track to meet previously disclosed production guidance.
Candelaria continued to experience lower throughput than planned
due to ore hardness, operational issues and unplanned maintenance
stops. Production guidance for Candelaria has been reduced to
reflect the lower production to date, as well as a further delay in
CMOP due to COVID-19. Cash costs at Chapada and Eagle have been
better than expected due to favourable by-product metal prices and,
at Chapada, favourable foreign exchange; accordingly, cash cost
guidance for these two operations has been reduced.
While the Company has not experienced significant disruptions to
production, shipments of concentrate, or its supply chain due to
COVID-19, we caution that the global effects of COVID-19 are
continuing to evolve. The number of new cases in Brazil, Chile, and the USA have continued to increase. Given the
uncertainty of the duration and magnitude of the impact of
COVID-19, 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%)
|
160,000 -
175,000
|
$1.35/lbc
|
145,000 -
155,000
|
$1.35/lbc
|
|
|
Chapada
|
51,000 -
56,000
|
$0.85/lbd
|
51,000 -
56,000
|
$0.65/lbd
|
|
|
Eagle
|
15,000 -
18,000
|
|
17,000 -
19,000
|
|
|
|
Neves-Corvo
|
35,000 -
40,000
|
$2.10/lb
|
35,000 -
40,000
|
$2.10/lbc
|
|
|
Zinkgruvan
|
3,000 -
4,000
|
|
3,000 -
4,000
|
|
|
|
Total
|
264,000 -
293,000
|
|
251,000 -
274,000
|
|
|
Zinc
(t)
|
Neves-Corvo
|
70,000 -
75,000
|
|
70,000 -
75,000
|
|
|
|
Zinkgruvan
|
72,000 -
77,000
|
$0.60/lb
|
72,000 -
77,000
|
$0.60/lbc
|
|
|
Total
|
142,000 -
152,000
|
|
142,000 -
152,000
|
|
|
Gold
(oz)
|
Candelaria
(100%)
|
90,000 -
100,000
|
|
80,000 -
90,000
|
|
|
|
Chapada
|
85,000 -
90,000
|
|
85,000 -
90,000
|
|
|
|
Total
|
175,000 -
190,000
|
|
165,000 -
180,000
|
|
|
Nickel
(t)
|
Eagle
|
15,000 -
18,000
|
$1.00/lb
|
15,000 -
18,000
|
$0.85/lb
|
a. Guidance as
outlined in the Management's Discussion and Analysis for the three
months ended March 31, 2020.
b. Cash costs are
based on various assumptions and estimates, including but not
limited to: production volumes, as noted above, commodity prices
(Cu: $2.35/lb, Zn: $0.85/lb, Ni: $5.25/lb, Pb: $0.75/lb, Au:
$1,600/oz), foreign exchange rates (€/USD:1.15, USD/SEK:9.25,
USD/CLP:800, USD/BRL:5.00) and operating costs for the remainder of
2020.
c. 68% of
Candelaria's total gold and silver production are subject to a
streaming agreement and as such costs are calculated based on
receipt of $412/oz and $4.12/oz respectively, on gold and silver
sales. Silver production at Zinkgruvan and Neves-Corvo are also
subject to streaming agreements, and cash costs are calculated
based on receipt of approximately $4.40/oz and $4.30/oz,
respectively, on silver sales.
d. Chapada cash costs
are calculated on a by-product basis and do not include the effects
of copper stream agreements. Effects of copper stream agreements
are reflected in copper revenue and will impact realized revenue
per pound.
|
2020 Capital Expenditure Guidance
Sustaining capital expenditure guidance remains the same as the
prior quarter. ZEP capital expenditure guidance has been updated to
include a limited number of critical path items that can be
undertaken without introducing additional risk to the operation.
Total pre-production cost for ZEP remains unchanged from previous
guidance at €360 million.
($
millions)
|
Previous
Guidancea
|
Revisions
|
Revised
Guidance
|
Candelaria (100%
basis)
|
230
|
-
|
230
|
Chapada
|
40
|
-
|
40
|
Eagle
|
15
|
-
|
15
|
Neves-Corvo
|
55
|
-
|
55
|
Zinkgruvan
|
45
|
-
|
45
|
Total Sustaining
Capital
|
385
|
-
|
385
|
Zinc Expansion
Project (Neves-Corvo)
|
55
|
10
|
65
|
Total Capital
Expenditures
|
440
|
10
|
450
|
a. Guidance as
outlined in the Management's Discussion and Analysis for the three
months ended March 31, 2020.
|
2020 Exploration Investment Guidance
Planned exploration expenditures of $35.0
million in 2020 remain unchanged from guidance provided in
the previous quarter. 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, $6.0 million at
Zinkgruvan, $6.0 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 July
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