TORONTO, July 24, 2019 /CNW/ - (TSX: LUN;
Nasdaq Stockholm: LUMI) Lundin Mining
Corporation ("Lundin Mining" or the "Company") today
reported cash flows of $204.5 million
generated from operations in its second quarter. Net loss
attributable to Lundin Mining shareholders was $7.8 million (-$0.01 per share) for the quarter ended
June 30, 2019.
Please view PDF version of News Release.
Marie Inkster, President and CEO
commented, "Our operations continued to perform well in the
second quarter though declining metal prices had a meaningful
impact on the quarter's earnings. The Company, and in particular
Candelaria, is set for a particularly strong second half of the
year with increased copper grades and production and our guidance
now includes production and costs for our newest mine, Chapada in
Brazil. The integration of Chapada
has progressed very positively and we are excited for the future
potential of this operation.
Construction progress continued on our many reinvestment and
expansion projects. Following continuous close monitoring of the
Neves-Corvo Zinc Expansion Project, revisions have been made to
schedule and cost. Commissioning is expected to commence in the
first quarter of 2020 with a phased approach and ramp-up to full
production by the end of 2020. The Candelaria reinvestment
initiatives and Eagle East are advancing well, all trending
slightly ahead of schedule and budget setting the stage for
excellent future cash flow generation from these
investments."
Summary financial results for the quarter and
year-to-date:
|
Three months
ended
|
|
Six months
ended
|
|
June
30,
|
|
June
30,
|
US$ Millions (except
per share amounts)
|
2019
|
|
20184
|
|
2019
|
|
2018
|
Revenue
|
369.3
|
|
467.7
|
|
785.6
|
|
938.1
|
Gross
profit
|
25.1
|
|
155.1
|
|
166.3
|
|
305.0
|
Attributable net
(loss) earnings1
|
(7.8)
|
|
78.8
|
|
43.9
|
|
160.1
|
Net (loss)
earnings
|
(8.6)
|
|
87.5
|
|
52.3
|
|
174.6
|
Basic and diluted net
loss per share2
|
(0.01)
|
|
0.11
|
|
0.06
|
|
0.22
|
Cash flow from
operations
|
204.5
|
|
118.3
|
|
266.6
|
|
291.2
|
Cash and cash
equivalents
|
735.1
|
|
1,512.5
|
|
735.1
|
|
1,512.5
|
Net cash
3
|
661.1
|
|
1,063.5
|
|
661.1
|
|
1,063.5
|
|
|
1
|
Attributable to
shareholders of Lundin Mining Corporation.
|
2
|
Basic and diluted
earnings per share attributable to shareholders of Lundin Mining
Corporation.
|
3
|
Net cash is a
non-GAAP measure defined as cash and cash equivalents, less debt
and lease liabilities, before deferred financing fees.
|
4
|
On adoption of IFRS
16, Leases, the Company has elected not to restate comparative
periods presented.
|
Highlights
Operational Performance
Production remains largely on target to achieve the Company's
annual guidance. Copper grades are expected to be higher in the
second half of the year as higher-grade ore is accessed at
Neves-Corvo and Candelaria. Copper and nickel cash costs are higher
than the prior year comparatives due to lower metal prices for
by-products.
Candelaria (80% owned): The Candelaria
operations produced, on a 100% basis, 33,633 tonnes of copper, and
approximately 21,000 ounces of gold and 292,000 ounces of silver in
concentrate during the quarter. Copper production in the quarter
was lower than the prior year comparable period primarily due to
lower mill throughput resulting from maintenance stops. Copper cash
costs1 of $1.86/lb for the
quarter were higher than the prior year quarter owing to higher
maintenance and diesel and energy costs. Ore grades are expected to
increase and cash costs decrease over the remainder of the year as
more ore is sourced directly from the open pit and less from
the low grade stockpile.
Development of the Candelaria Underground South Sector is
progressing well with production start-up expected before the end
of the third quarter of 2019.
Eagle (100% owned): Eagle produced 3,398
tonnes of nickel and 3,732 tonnes of copper during the quarter.
Nickel and copper production were both lower than the prior year
quarter reflecting the planned lower ore grades. Nickel cash costs
of $3.14/lb for the quarter were
higher than the prior year comparable period, primarily as a result
of lower by-product credits.
Development of Eagle East continues to progress ahead of
schedule and under budget, with first ore feed to the mill
scheduled in the fourth quarter of 2019.
Neves-Corvo (100% owned): Neves-Corvo
produced 9,615 tonnes of copper and 18,251 tonnes of zinc for the
quarter, both lower than the prior year comparable period. For
copper, production was affected by lower head grades resulting from
a change in mine sequencing. Zinc production was also negatively
affected by lower head grades, as well as lower recoveries. Copper
cash costs of $1.88/lb for the
quarter were higher than the prior year period owing primarily to
lower by-product credits.
Construction progressed on the Zinc Expansion Project ("ZEP") in
the quarter, with underground development of conveyor ramps
completed. Surface construction in the second quarter was focused
on mechanical installation of the materials handling system, as
well as continuing construction on the SAG mill, flotation
equipment, tailings and water supply piping systems, and a new
paste fill thickener.
Rates of advance during the quarter on surface facilities were
negatively affected by engineering and construction delays and
lagged targeted advance rates. Total project capital cost is now
estimated to be $450 million (€380
million), with pre-production costs expected to be $430 million (€360 million). Capital spend for
2019 has been reduced to $140 million
(€120 million) as project work is deferred to 2020. See additional
detail in the Outlook section.
Zinkgruvan (100% owned): Zinc production of
18,865 tonnes and lead production of 6,219 tonnes were higher than
the prior year quarter due to planned higher grades of both metals.
Second quarter zinc cash costs of $0.41/lb were in-line with the prior year
comparable period.
|
|
|
|
|
|
|
|
|
|
|
Total
production
|
|
(Contained metal
in concentrate - tonnes)
|
2019
|
|
2018
|
|
YTD
|
Q2
|
Q1
|
|
Total
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Coppera
|
93,807
|
47,685
|
46,122
|
|
199,630
|
48,206
|
52,770
|
51,098
|
47,556
|
|
Zinc
|
77,562
|
37,116
|
40,446
|
|
152,041
|
42,024
|
36,062
|
37,075
|
36,880
|
|
Nickel
|
7,611
|
3,398
|
4,213
|
|
17,573
|
3,501
|
4,697
|
4,234
|
5,141
|
|
a - Candelaria's
production is on a 100% basis.
|
|
|
|
|
|
|
|
1
|
Cash cost/lb of
copper, zinc and nickel are non-GAAP measures defined as all cash
costs directly attributable to mining operations, less royalties
and by-product credits.
|
Financial Performance
- Gross profit for the quarter ended June
30, 2019 was $25.1 million, a
decrease of $130.0 million in
comparison to the $155.1 million
reported in the second quarter of the prior year. The decrease was
primarily due to lower revenues as a result of lower metal prices
($57.7 million) and price adjustments
($41.4 million), higher depreciation
expense ($21.0 million) as well as
higher zinc treatment and refining charges resulting from the
finalization of the 2019 contractual terms during the current
quarter.
On a year-to-date basis, gross profit was $166.3 million, a decrease of $138.7 million from the $305.0 million reported in the prior year
comparative period. The decrease was primarily due to lower
revenues as a result of lower realized metal prices arising largely
from negative price adjustments in the second quarter ($78.2 million), lower sales volumes ($29.8 million), higher depreciation ($10.3 million) and higher zinc treatment and
refining charges.
- Net loss for the quarter ended June 30,
2019 was $8.6 million, a
decrease of $96.1 million from net
earnings of $87.5 million reported in
the prior year quarter. The decrease was attributable to lower
gross profit, partially offset by lower income taxes ($49.9 million).
On a year-to-date basis, net earnings were $52.3 million, a decrease of $122.3 million from the $174.6 million reported in the prior year
comparative period. The decrease was attributable to lower gross
profit, and lower income from our equity investment ($22.9 million), partially offset by lower income
taxes ($44.6 million).
- Net cash as at June 30, 2019 was
$661.1 million, a decrease of
$143.3 million in comparison to
December 31, 2018. The decrease
resulted from cash used for capital investments exceeding operating
cash flow in the current year, as well as a $63.0 million increase in debt consisting of a
fixed term loan for $35 million and
an increase in lease liabilities of $39.0
million as a result of the implementation of IFRS 16,
Leases.
Financial Position
- Cash and cash equivalents of $735.1
million for the quarter ended June
30, 2019 remained relatively unchanged from the $734.7 million reported in the first quarter of
2019.
- Cash flow from operations for the quarter ended June 30, 2019 was $204.5
million, an increase of $86.2
million in comparison to the $118.3
million reported in the second quarter of 2018. The increase
was primarily attributable to higher comparative change in non-cash
working capital ($153.8 million) and
lower current taxes partially offset by lower revenues.
On a year-to-date basis, cash flow from operations was $266.6 million, a decrease of $24.6 million in comparison to the six months
ended June 30, 2018 ($291.2 million). The decrease was primarily due
to lower sales revenues ($152.5
million), partially offset by comparative change in non-cash
working capital ($74.3 million) and
lower current taxes.
- Cash used in investing activities decreased when compared to
the prior year comparable period for the quarter, reflecting lower
investment in mineral properties, plant and equipment, as well as
higher distributions received from the investment in associate. On
a year-to-date basis cash used in investing activities increased
due mainly to capital expenditures related to Candelaria
Underground South Sector and the Mill Optimization project.
- Cash used in financing activities remained relatively
consistent quarter over quarter. On a year-to-date basis,
financing activities include proceeds of $35.0 million from a term loan in the first
quarter of 2019.
As of July 24, 2019, the Company had
a cash balance of approximately $190.0
million and net debt of approximately $170.0 million. This change from June 30, 2019 reflects the Company's acquisition
of the Chapada mine which was financed by $515 million in cash and a $285 million draw against the Company's revolving
credit facility.
Corporate Highlights
- On May 23, 2019, the Company
announced that Freeport Cobalt, the Company's joint venture with
Freeport-McMoRan Inc. had entered into a definitive agreement to
sell its cobalt refinery in Kokkola, Finland and related cobalt cathode precursor
business to Umicore for cash consideration of approximately
US$150 million, plus working capital
at the time of close (the "Transaction"). Lundin Mining is entitled
to receive 30 percent of the proceeds of the Transaction. The joint
venture will retain Freeport Cobalt's fine powders, chemicals,
catalyst, ceramics and pigments businesses.
The Transaction is subject to the completion of the separation of
Freeport Cobalt, the receipt of required regulatory approvals, and
other customary closing conditions. The Transaction is expected to
close by year-end 2019.
- 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.
Total cash consideration paid at closing by the Company was
$800 million, funded by cash on hand
and a drawdown of $285 million on the
Company's revolving credit facility.
Outlook
2019 Production and Cash Cost
Production and cash cost guidance for 2019 has been revised from
that disclosed in our Management's Discussion and Analysis for the
three months ended March 31, 2019 to
reflect higher cash costs at our Eagle mine, primarily due to
expected lower by-product price, as well as lower grades resulting
in lower nickel metal produced and sold. In addition, production
guidance has been updated for copper production at our Neves-Corvo
mine and nickel production at our Eagle mine. The revised
guidance also includes six months of production and cash cost
guidance for the Chapada mine. 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 will be a component
of the copper revenue and will impact realized revenue per
pound.
|
2019
Guidance
|
Previous
Guidancea
|
Revised
Guidanceb
|
|
|
(contained
tonnes)
|
Tonnes
|
|
C1
Cost
|
Tonnes
|
|
C1
Cost
|
|
|
Copper
|
Candelaria
(100%)
|
145,000 -
155,000
|
|
|
$1.60/lb
|
145,000 -
155,000
|
|
|
$1.60/lb
|
|
|
|
Chapadac
|
-
|
|
|
-
|
27,000 -
30,000
|
|
|
$1.10/lb
|
|
|
|
Eagle
|
12,000 -
15,000
|
|
|
|
12,000 -
15,000
|
|
|
|
|
|
|
Neves-Corvo
|
40,000 -
45,000
|
|
|
$1.70/lb
|
38,000 -
42,000
|
|
|
1.70/lb
|
|
|
|
Zinkgruvan
|
2,000 -
3,000
|
|
|
|
2,000 -
3,000
|
|
|
|
|
|
|
Total
attributable
|
199,000 -
218,000
|
|
|
|
224,000 -
245,000
|
|
|
|
|
|
Zinc
|
Neves-Corvo
|
71,000 -
76,000
|
|
|
|
71,000 -
76,000
|
|
|
|
|
|
|
Zinkgruvan
|
76,000 -
81,000
|
|
|
$0.40/lb
|
76,000 -
81,000
|
|
|
$0.40/lb
|
|
|
|
Total
|
147,000 -
157,000
|
|
|
|
147,000 -
157,000
|
|
|
|
|
|
Nickel
|
Eagle
|
12,000 -
15,000
|
|
|
$2.20/lb
|
12,000 -
14,000
|
|
|
$2.60/lb
|
|
a.
|
Guidance as outlined
in our Management's Discussion and Analysis for the three months
ended March 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: $2.70/lb,
Zn: $1.10/lb, Ni: $5.50/lb, Pb: $0.80/lb, Au: $1,250/oz), foreign
exchange rates (€/USD:1.15, USD/SEK:9.00, USD/CLP:675,
USD/BRL:3.75) and operating costs.
|
c.
|
Chapada is expected
to produce 50,000 to 55,000 ounces of gold for the second half of
2019.
|
2019 Capital Expenditure Guidance
Total capital
expenditures, excluding capitalized interest, are forecast to be
$695 million, $50 million lower than previously disclosed. A
project cost review of ZEP has confirmed lower spending
requirements in 2019 as costs are deferred to 2020; however, total
cost for the project is increasing. The revised capital expenditure
guidance includes capital spending over the second half of 2019 for
the Chapada mine.
Revised Capital
Expenditure Guidance
|
|
($
millions)
|
|
Previous
Guidancea
|
|
Revisions
|
|
Revised
Guidance
|
|
Candelaria (100%
basis)
|
|
|
|
|
|
|
|
Capitalized
Stripping
|
|
130
|
|
-
|
|
130
|
|
Los Diques TSF
|
|
10
|
|
-
|
|
10
|
|
New Mine Fleet
Investment
|
|
75
|
|
-
|
|
75
|
|
Candelaria Mill Optimization
Project
|
|
50
|
|
-
|
|
50
|
|
Candelaria Underground
Development
|
|
40
|
|
-
|
|
40
|
|
Other Sustaining
|
|
70
|
|
-
|
|
70
|
|
Candelaria
Sustaining
|
|
375
|
|
-
|
|
375
|
|
Chapada
|
|
-
|
|
25
|
|
25
|
|
Eagle
Sustaining
|
|
15
|
|
-
|
|
15
|
|
Neves-Corvo
Sustaining
|
|
65
|
|
-
|
|
65
|
|
Zinkgruvan
Sustaining
|
|
50
|
|
(5)
|
|
45
|
|
Total Sustaining
Capital
|
|
505
|
|
20
|
|
525
|
|
Eagle East
|
|
30
|
|
-
|
|
30
|
|
ZEP
(Neves-Corvo)
|
|
210
|
|
(70)
|
|
140
|
|
Total Expansionary
Capital
|
|
240
|
|
(70)
|
|
170
|
|
Total Capital
Expenditures
|
|
745
|
|
(50)
|
|
695
|
a. Guidance as
outlined in our Management's Discussion and Analysis for the three
months ended March 31, 2019.
|
Zinc Expansion Project (Neves-Corvo)
The Company
expects total pre-production project costs to increase to
$430 million (€360 million). The
Company has been actively monitoring and regularly updating the
cost and schedule estimates including trend analysis to predict
costs and completion dates. The updated pre-production cost
estimate of €360 million is an increase of €55 million over the
previous estimate. The increase includes the following new
items:
- €7 million for underground paste backfill expansion (not
included in the initial project scope)
- €10 million of potential contractor claims for surface delays
and time extensions
- €10 million of owners and indirect costs on schedule delays,
and
- €28 million contingency (representing 15% of remaining
spend).
Capital spend for 2019 has been reduced to $140 million (€120 million) as project work is
deferred to 2020.
While commissioning of surface facilities is still expected to
commence by the end of the first quarter of 2020, a phased approach
is expected to take several quarters to ramp up with full
throughput rates expected by the fourth quarter of 2020.
Commissioning of the underground crushing and conveying systems is
expected to occur during the second quarter of 2020. As a result of
the schedule revisions, zinc production guidance for 2020 is now
expected to be between 90,000 - 100,000 tonnes.
2019 Exploration Investment Guidance
Exploration
expenditures remain unchanged at $70
million, of which $4 million
is related to Chapada.
About Lundin Mining
Lundin Mining is a diversified Canadian base metals mining
company with operations in Brazil,
Chile, Portugal, Sweden and the
United States of America, primarily producing copper, nickel
and zinc. In addition, Lundin Mining holds an indirect 24% equity
stake in the Freeport Cobalt Oy business, which includes a cobalt
refinery located in Kokkola, Finland.
The information in this release is subject to the disclosure
requirements of Lundin Mining under the EU Market Abuse Regulation.
This information was publicly communicated on July 24, 2019 at 8:00 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, 2018, which are available on SEDAR
at www.sedar.com under the Company's profile. All of the
forward-looking statements made in this document are qualified by
these cautionary statements. Although the Company has attempted to
identify important factors that could cause actual results to
differ materially from those contained in forward-looking
information, there may be other factors that cause results not to
be as anticipated, estimated, forecast or intended and readers are
cautioned that the foregoing list is not exhaustive of all factors
and assumptions which may have been used. Should one or more of
these risks and uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in forward-looking information. Accordingly,
there can be no assurance that forward-looking information will
prove to be accurate and forward-looking information is not a
guarantee of future performance. Readers are advised not to place
undue reliance on forward-looking information. The forward-looking
information contained herein speaks only as of the date of this
document. The Company disclaims any intention or obligation to
update or revise forward‐looking information or to explain any
material difference between such and subsequent actual events,
except as required by applicable law.
SOURCE Lundin Mining Corporation