TORONTO, Oct. 28, 2020 /PRNewswire/ -- (TSX: LUN) (Nasdaq
Stockholm: LUMI) Lundin Mining Corporation ("Lundin
Mining" or the "Company") today reported cash flows of $272.2 million generated from operations in its
third quarter 2020. Adjusted operating cash flow2 for
the quarter was $262.0 million
($0.36 per share). Attributable net
earnings for the quarter was $122.4
million ($0.17 per share) and
adjusted earnings2 was $106.4
million ($0.14 per
share). Adjusted EBITDA2 was $300.3 million for the quarter.
Marie Inkster, President and CEO
commented, "Though we have had challenges on several fronts over
the past month, each has been met with immediate action plans. Our
team is organized and determined. We will respond to adversity with
action, to overcome our challenges in the most expeditious way
possible.
Safety stand downs across our organization have given us time
to honour our colleague at Neves-Corvo and reflect on our shared
commitment to our goal of Zero Harm. Both our Alcaparrosa mine at
Candelaria and Eagle mine were recognized by national governing
bodies for their outstanding safety records, and our Company is
on-track for our lowest injury rate year.
Operationally, noticeable progress has been made at
Candelaria to improve overall mill throughput. The operation is
well positioned for a return to full production rates once fair and
sustainable labour agreements are reached. Chapada's strong
performance continued until late in the quarter. The team has done
an excellent job to minimize the expected impact and to take
advantage of the downtime, as seen by reinstated 2020 guidance.
Official restart of the Zinc Expansion Project at Neves-Corvo is
scheduled for early 2021 with planned fourth quarter 2020
activities to include commissioning of the SAG mill with waste. And
lastly, Eagle and Zinkgruvan continue to perform well, taking
advantage of the improving nickel, copper and zinc prices, as
evidenced by Eagle's record cash cost and free cash flow
generation."
Summary Financial Results
|
Three months
ended
|
|
Nine months
ended
|
|
September
30,
|
|
September
30,
|
US$ Millions (except
per share amounts)
|
2020
|
2019
|
|
2020
|
2019
|
Revenue
|
600.7
|
538.7
|
|
1,512.0
|
1,324.4
|
Gross
profit
|
199.3
|
128.6
|
|
318.8
|
294.9
|
Attributable net
earnings1
|
122.4
|
26.4
|
|
49.6
|
70.2
|
Net
earnings
|
133.6
|
32.1
|
|
68.3
|
84.4
|
Adjusted earnings
1,2
|
106.4
|
25.6
|
|
120.0
|
77.5
|
Adjusted
EBITDA2
|
300.3
|
224.3
|
|
622.1
|
476.9
|
Basic and diluted net
earnings per share1
|
0.17
|
0.04
|
|
0.07
|
0.10
|
Adjusted basic and
diluted earnings per share1,2
|
0.14
|
0.03
|
|
0.16
|
0.11
|
Cash flow from
operations
|
272.2
|
111.6
|
|
393.2
|
378.2
|
Adjusted operating
cash flow2
|
262.0
|
155.0
|
|
468.9
|
344.1
|
Adjusted operating
cash flow per share2
|
0.36
|
0.21
|
|
0.64
|
0.47
|
Cash and cash
equivalents
|
220.0
|
184.6
|
|
220.0
|
184.6
|
Net
debt2
|
124.0
|
185.0
|
|
124.0
|
185.0
|
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 nine months
ended September 30, 2020.
|
Highlights
Operational Performance
All operations continued to effectively manage costs, but metal
production was impacted by lower grades and throughput. In
addition, while there was no significant impact to production, the
Company had two unplanned operational suspensions in the last week
of the quarter.
The Company continues to manage and respond to the COVID-19
pandemic and has implemented preventative measures to ensure the
safety of its workforce, local communities and other key
stakeholders. To date, production disruptions as a result of
COVID-19 have been minimal and there has been no significant
disruption in the delivery or receipt of goods at our
operations.
Candelaria (80% owned): Candelaria produced 35,836 tonnes
of copper, and approximately 21 thousand ounces of gold in
concentrate on a 100% basis in the quarter. Copper production for
the quarter was lower than the prior year quarter primarily due to
lower grades. Ore milled during the third quarter of 2020
significantly improved over that achieved in the first two quarters
of the year as measures to address variability in ore hardness and
mill circuit availabilities began to take hold. Mining is advancing
through the areas of Phase 10 which were in proximity to where pit
wall displacement issues occurred in Phase 9, without issue. Copper
cash costs1 of $1.37/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 12,990 tonnes of
copper and approximately 24 thousand ounces of gold which were
lower than the prior year quarter due primarily to lower throughput
as a result of expected increase in ore hardness as well as the
mill interruption at quarter-end. Processing activities were
interrupted on September 27, 2020
when the protection system at the operation's main electrical
substation failed after the restoration of an outage, damaging all
four SAG and ball mill motors. Two spare motors have since been
installed and the operation is currently operating at approximately
30% of its throughput capacity. A return to full production is
expected late in the fourth quarter. Despite the late quarter
interruption, copper cash costs of $0.21/lb for the quarter were better than
expected benefitting from favourable foreign exchange and higher
gold by-product prices.
Eagle (100% owned): Eagle produced 4,854 tonnes of nickel
and 5,055 tonnes of copper during the quarter. Nickel and copper
production was higher than the prior year quarter due to higher
grades from Eagle East. By-product credits, aided by rising copper
prices, exceeded gross cash costs in the quarter resulting in
record nickel cash costs of $(0.63)/lb. Gross costs were lower primarily due
to treatment and refining charges.
Neves-Corvo (100% owned): Neves-Corvo produced 6,518
tonnes of copper and 15,459 tonnes of zinc for the quarter. Copper
and zinc production were lower than the prior year quarter due to
lower throughput. A voluntary 5-day suspension of mining and
milling operations took place following a fatal accident on
September 25, 2020. The Company held
safety stand downs at all its operations globally and remains
committed to safe production. Copper grades were also lower while
zinc grades improved over the prior quarter. Copper cash costs of
$1.97/lb for the quarter were higher
than the prior year quarter due to lower sales volumes which were
partially offset by higher by-product credits from higher zinc
prices.
Restart of the Zinc Expansion Project (ZEP) is on track for
early 2021. During the third quarter, work continued to prepare the
surface and underground construction sites for the restart.
Preparation work that is planned for the fourth quarter of 2020
includes ventilation raise work, activities on the SAG mill,
including commissioning with waste, and surface conveyor
installations.
Zinkgruvan (100% owned): Zinc production of 17,328 tonnes
was higher than the prior year quarter due to higher achieved
throughput. Lead production of 5,571 tonnes was lower than the
prior year quarter due to lower feed grades. Zinc cash costs of
$0.55/lb were higher than the prior
year quarter as a result of higher per-unit operating costs as well
as unfavourable foreign exchange.
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 and nine months ended September 30, 2020.
|
Total Production
|
|
|
|
(Contained metal in
concentrate)
|
|
2020
|
2019
|
YTD
|
Q3
|
Q2
|
Q1
|
Total
|
Q4
|
Q3
|
Q2
|
Q1
|
Copper
(t)a,b
|
188,896
|
61,444
|
65,285
|
62,167
|
235,498
|
67,131
|
74,560
|
47,685
|
46,122
|
Zinc (t)
|
101,316
|
32,787
|
31,582
|
36,947
|
151,515
|
38,925
|
35,028
|
37,116
|
40,446
|
Gold
(koz)a,b
|
128
|
45
|
44
|
39
|
142
|
43
|
58
|
21
|
20
|
Nickel (t)
|
11,809
|
4,854
|
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 Updates
- On September 8, 2020, the Company
reported its Mineral Resource and Mineral Reserve estimates as at
June 30, 2020. On a consolidated and
attributable basis, estimated contained metal in the Proven and
Probable Mineral Reserve categories totalled 5,518 kt of copper,
3,123 kt of zinc, 100 kt of nickel, 936 kt of lead and 6.9 million
ounces of gold.
- On September 25, 2020, the
Company reported that a fatal accident occurred at its Neves-Corvo
mine in Portugal. The incident
occurred during underground mining operations. No other personnel
were injured in the incident and the scene has been secured.
Operations were temporarily suspended.
- On September 27, 2020, the
Company announced that processing activities have been interrupted
at the Chapada mine in Brazil. The
operation suffered a power outage in the morning of September 27, 2020 and when power was restored,
the protection system at the operation's main electrical substation
failed, resulting in significant damage to all four SAG and ball
mill motors. In addition to assessing a staged resumption of
processing, the Company will be bringing forward planned
maintenance and refocusing mining on waste removal and development
activities.
- On October 7, 2020, the Company
reported that mediation with Candelaria's Mine Workers Union, which
represents approximately 350 workers, ended without an agreement
thereby putting the Union in a legal position to strike.
On October 18, 2020, the Company
announced that despite mediation with the Candelaria AOS Union, the
parties had failed to reach an agreement and Candelaria AOS Union
could legally be on strike commencing October 20, 2020.
Both the Mine Workers Union and the AOS Union are currently on
strike and, as a result, Candelaria operations are temporarily
suspended. Critical works continue to be executed to protect
required onsite personnel, the operation and the environment.
Financial Performance
- Gross profit for the quarter ended September 30, 2020 was $199.3 million, an increase of $70.7 million compared to the prior year quarter.
The increase was primarily due to higher realized metal prices and
price adjustments ($81.0 million),
partially offset by lower sales volumes ($9.1 million).
- On a year-to-date basis, gross profit was $318.8 million, an increase of $23.8 million over the prior year comparative
period due to the acquisition of Chapada in July 2019 ($81.2
million) and favourable foreign exchange ($51.5 million), partially offset by lower metal
prices and price adjustments ($46.6
million) and higher depreciation ($67.6 million).
- Net earnings for the quarter ended September 30, 2020 were $133.6 million, an increase of $101.5 million compared to the prior year
quarter. The increase was attributable to higher gross profit,
lower finance costs and lower income taxes.
On a year-to-date basis, net earnings were $68.3 million, a decrease of $16.1 million from the prior year comparative
period as lower general exploration and business development
expenses, higher foreign exchange gains of $38.9 million and lower finance costs were more
than offset by higher income taxes from the inclusion of Chapada
mine
- Adjusted earnings for the quarter were $106.4 million, an increase of $80.8 million over the prior year quarter due
mainly to higher gross profit. On a year-to-date basis, adjusted
earnings were $120.0 million,
$42.5 million higher than the prior
year primarily due to higher gross profit, foreign exchange gains
and lower finance and general exploration and business development
costs.
Financial Position and Financing
- Cash and cash equivalents of $222.0
million as at September 30,
2020 decreased by $62.0
million during the quarter. Cash flow from operations of
$272.2 million was used to invest in
capital expenditures ($89.8 million),
pay shareholder dividends ($22.3
million) and the derivative liability related to the Chapada
acquisition ($25.0 million), as well
as make distributions to non-controlling interests ($26.0 million). The Company also repaid
approximately $160.0 million in debt
on a net basis, including $145.0
million on its revolving credit facility.
- On a year-to-date basis, cash and cash equivalents decreased by
$28.6 million as cash flow from
operations of $393.2 million was more
than offset by capital expenditure of $331.0
million and cash flow used in financing activities of
$80.7 million.
- Net debt of $124.0 million as at
September 30, 2020 reflects an
increase of $63.8 million since
December 31, 2019. Operating cash
flow of $393.2 million for the first
nine months of 2020 was offset by capital investment ($331.0 million), dividend payments to
shareholders ($64.9 million),
distributions paid to non-controlling interests of $26.0 million and the negative effect of foreign
exchange on cash of $23.0
million.
- As of October 28, 2020, the
Company had a cash and net debt balance of approximately
$280.0 million and $65.0 million, respectively.
Outlook
Candelaria's guidance was withdrawn on October 18, 2020 to reflect the temporary
suspension of operations due to the current labour action. Guidance
for Chapada assumes 60 days of production at approximately 30%
capacity following the mill interruption at the end of September.
Metal production guidance for Neves-Corvo has been updated and
tightened to reflect the impact of lower grades and ore
availability to date and expectations for the fourth quarter.
Cash costs at Chapada and Eagle have been better than expected
due to continued 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 a localized outbreak at the operations
may require the need to implement increased isolation and
containment measures which could impact production, delay
maintenance activities or disrupt supply chains. Given the
uncertainty of the duration and magnitude of the impact of
COVID-19, 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%)
|
145,000 -
155,000
|
$1.35/lbc
|
N/A
|
N/A
|
|
Chapada
|
51,000 -
56,000
|
$0.65/lbd
|
45,000 -
50,000
|
$0.55/lbd
|
|
Eagle
|
17,000 -
19,000
|
|
17,000 -
19,000
|
|
|
Neves-Corvo
|
35,000 -
40,000
|
$2.10/lb
|
32,000 -
34,000
|
$2.10/lbc
|
|
Zinkgruvan
|
3,000 -
4,000
|
|
3,000 -
4,000
|
|
|
Total
|
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 -
74,000
|
$0.60/lbc
|
|
Total
|
142,000 -
152,000
|
|
|
|
Gold
(oz)
|
Candelaria
(100%)
|
90,000 -
100,000
|
|
N/A
|
|
|
Chapada
|
85,000 -
90,000
|
|
80,000 -
85,000
|
|
|
Total
|
175,000 -
190,000
|
|
|
|
Nickel
(t)
|
Eagle
|
15,000 -
18,000
|
$0.85/lb
|
15,000 -
18,000
|
$0.50/lb
|
a. Guidance as
outlined in the Management's Discussion and Analysis for the three
and six months ended June 30, 2020. Chapada's guidance was
subsequently withdrawn on September 27, 2020. Candelaria's guidance
was subsequently withdrawn on October 18, 2020.
|
b. Cash costs are
based on various assumptions and estimates, including but not
limited to; production volumes, as noted above, commodity prices
(Cu: $3.00/lb, Zn: $1.10/lb, Ni: $6.50/lb, Pb: $0.85/lb, Au:
$1,900/oz.), foreign exchange rates (€/USD:1.20, USD/SEK:8.50,
USD/BRL:5.00) and operating costs, for the remainder of
2020.
|
c. Silver production
at Zinkgruvan and Neves-Corvo is subject to streaming agreements,
and cash costs are calculated based on receipt of approximately
$4.40/oz and $4.30/oz, respectively, on silver sales.
|
d. Chapada cash costs
are calculated on a by-product basis and do not include the effects
of copper stream agreements. Effects of copper stream agreements
are reflected in copper revenue and will impact realized revenue
per pound.
|
2020 Capital Expenditure Guidance
Candelaria's guidance for capital expenditures has been
withdrawn reflecting the temporary suspension of operations due to
the current labour action. Guidance for the other operations
remains unchanged from previous guidance.
($millions)
|
Guidance
|
Sustaining
Capital
|
|
Candelaria (100%
basis)
|
N/A
|
Chapada
|
40
|
Eagle
|
15
|
Neves-Corvo
|
55
|
Zinkgruvan
|
45
|
Zinc Expansion
Project (Neves-Corvo)
|
65
|
2020 Exploration Investment Guidance
Planned exploration expenditures of $35.0
million in 2020 remain unchanged from guidance in the
previous quarter. Planned expenditures for 2020 are focused on
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 October 28, 2020 at 18:30
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 or labour
disputes; timing for any required repairs and resumption of any
interrupted operations; 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.
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