Lundin Mining Corporation ("Lundin" or the "Company") (TSX:LUN)(OMX:LUMI) today
reported net income, before discontinued operations and impairment charges, of
$105.2 million ($0.19 per share) for the year and $72.2 million ($0.12 per
share) in the fourth quarter of 2009, up from a loss of $131.9 million (loss of
$0.32 per share) in the fourth quarter of 2008.
Mr. Phil Wright, President and CEO commented, "The large turnaround in profit in
the fourth quarter reflects the effect of stronger metal prices and the
continued good performance of our European operations.
"Tenke's ramp up to commercial production has gone extremely well and the mine
produced 70,000 tonnes of copper cathode during 2009.
"At year-end we had $141.6 million of cash on hand and net debt to equity stood
at only 1.7%. This puts us in a strong position to pursue our growth ambitions
for 2010," Mr. Wright said.
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Three Months
Twelve Months Ended Dec 31
(US $ millions (except per share Ended Dec 31 2009 2008
amount) 2009 2008 (unaudited) (unaudited)
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Sales 746.0 835.3 256.7 43.5
Operating earnings (loss) 373.2 323.2 152.2 (65.8)
Net income (loss) from continuing
operation before impairment 105.2 49.0 72.2 (131.9)
Net income (loss) 73.7 (957.1) 35.1 (728.5)
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Basic & diluted income (loss) per share:
From continuing operations before
impairment 0.19 0.12 0.12 (0.32)
From impairment and discontinued
operations (0.06) (2.53) (0.06) (1.45)
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Total: 0.13 (2.41) 0.06 (1.77)
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Cash provided by operations 137.4 215.0 97.0 46.5
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Highlights
- Sales revenue for the quarter was significantly higher than the prior year
corresponding quarter owing to improved metal prices.
- Operating earnings(1) of $152.2 million for the quarter represents an increase
of $218.0 million from a loss of $65.8 million in the fourth quarter 2008.
Virtually all of the improvement in operating earnings was related to improved
metal prices and the difference in price adjustments between quarters.
- Net income for the quarter included losses on derivative contracts of $27.4
million ($0.05 per share), of which $13.4 million was unrealized. Also included
was $37.1 million ($0.06 per share) related to impairment on the Salave gold
project in northern Spain (See news release dated February 11, 2010).
- Cash flow from operations for the quarter was $97.0 million, compared to $46.5
million for the corresponding quarter in 2008.
- Investment in in-mine and near-mine exploration has seen the growth of mineral
reserves to replace record ore tonnages mined during the year at both
Neves-Corvo and Zinkgruvan.
In addition, at Neves-Corvo there has been an increase of 11 million tonnes
(+44%) in measured and indicated copper resources (approximately 160,000 tonnes
of contained copper) and 20 million tonnes have been added in inferred copper
resources (See news release dated February 22, 2010).
- Production of all metals exceeded market guidance for the full year. Total
production was as follows:
-----------------------------------------------------------
Guidance Total Q4 Q3 Q2 Q1
tonnes 2009 2009 2009 2009 2009 2009
-----------------------------------------------------------
Copper 91,000 93,451 23,868 21,351 23,992 24,240
Zinc(i) 100,000 101,401 20,011 15,151 31,962 34,277
Lead(i) 40,000 43,852 10,393 8,111 12,478 12,870
Nickel 7,200 8,029 2,324 1,784 1,960 1,961
-----------------------------------------------------------
(i) 2009 includes payable metal in sales of ore (50% attributable
to Galmoy)
-----------------------------------------------------------
Copper
Tenke attributable 17,325 7,227 6,018 4,079 -
-----------------------------------------------------------
-------------------------------------------------------------
Total Q4 Q3 Q2 Q1
tonnes 2008 2008 2008 2008 2008
-------------------------------------------------------------
Copper 97,944 25,093 24,433 23,478 24,940
Zinc 151,157 32,406 37,067 41,622 40,062
Lead 44,799 9,917 9,908 12,397 12,577
Nickel 8,136 2,179 2,155 1,954 1,848
-------------------------------------------------------------
Copper
Tenke attributable - - - - -
-------------------------------------------------------------
Financial Position
- Net debt(2) at December 31, 2009 was $49.3 million compared to a net debt
position of $145.5 million at the end of 2008. Cash flow from operations covered
all sustaining capital expenditures and all new investment related to the
European operations.
The decrease in net debt during the year was attributable to the April 2009
bought-deal public offering for total gross proceeds of $155.8 million, offset
by Tenke funding obligations of $56.7 million.
- Cash on hand at December 31, 2009 was $141.6 million.
- Net debt to equity at December 31, 2009 is 1.7%.
- As at February 22, 2010, cash on hand is approximately $141.7 million and net
debt is $9.2 million.
First Quarter 2010 Guidance
Specific issues that may affect earnings in the first quarter of 2010 when
considered on a quarter-to-quarter basis are as follows:
- Production for the quarter is expected to be below trend owing to a number of
factors including: abnormal weather conditions in Europe hampering ore
processing; flooding of the Aguablanca pit, early January and again
mid-February, restricting access to higher-grade ore zones; Zinkgruvan has been
restricted by a blocked orepass.
Annual guidance is reaffirmed; however no allowance has been made for the
industrial action at Neves-Corvo.
- Average prices in the quarter to date are lower than those used to
provisionally value outstanding receivables at December 31, 2009. Depending on
price changes and the timing of settlements, the first quarter may see the
effect of negative price adjustments.
- Timing of sales during the fourth quarter of 2009 resulted in unusually low
concentrate inventory levels at December 31, 2009. It is expected that sales in
the first quarter of 2010 will reflect the return to normal inventory levels.
Outlook
- Production targets for 2010 are as follows:
---------------------------------------------------------------
2010 Target
(contained tonnes) Tonnes C1 Cost(1)
---------------------------------------------------------------
Neves-Corvo(2) Cu 82,000 1.20
Zn 3,000
---------------------------------------------------------------
Zinkgruvan Zn 75,000 0.30
Pb 36,000
Cu 1,000
---------------------------------------------------------------
Aguablanca Ni 7,500 5.80
Cu 7,000
---------------------------------------------------------------
Galmoy Zn 14,000 0.30
(in ore) Pb 4,000
---------------------------------------------------------------
Total: Wholly-owned operations(2) Cu 90,000
Zn 92,000
Pb 40,000
Ni 7,500
---------------------------------------------------------------
Tenke: 24.75% attributable share(3) Cu 28,500
---------------------------------------------------------------
1 Cash costs remain dependent upon exchange rates (2010 EUR /USD:
1.42). Cash cost of nickel is highly leveraged to metal price
owing to the price participation formula in smelter terms.
2 No allowance has been made for the limited industrial action
currently underway. Production that may be lost is currently being
assessed and will depend upon a number of factors, including the
duration of the action.
3 At design capacity production of copper and cobalt and assuming
average cobalt prices of $10 per pound, average unit net cash costs
are targeted to be $0.50 per pound of copper. Each $2 per pound
change in average prices of cobalt would impact net cash costs by
approximately $0.12 lb/copper.
- Zinc production at Neves-Corvo is expected to resume in 2011 at the rate of
50,000 tpa. An earlier start, at a nominal rate of 25,000 tpa, is under
evaluation.
- Studies continue separately on the feasibility of developing the Lombador
zinc/copper deposit adjacent to the Neves-Corvo mine. Progress to date is
positive and a feasibility study is targeted for completion in early 2011. A
preliminary target of 2013 has been set for commencement of full-scale
operations from Lombador.
- Capital expenditure for 2010 is expected to be between $190 and $250 million.
This includes:
-- Sustaining capital in European operations of $90 million (2009 - $80 million)
-- New investment in European operations of $60 million (2009 - $35 million)
-- Investment in Tenke of $100 million (2009 - $56.7 million). The Company
estimates this could vary between $40 million and $100 million depending on
development plans. Final decisions on capital investment levels are made by the
operator.
- Expenditure on exploration and resource acquisition is expected to be similar
to 2009 levels at $20 million of which approximately $10.0 million will be spent
on exploration drilling to delineate further copper resources at Neves-Corvo.
The market outlook remains volatile and in our view 2010 remains a year of slow
recovery prior to a resumption of growth in 2011.
Selected Quarterly and Annual Financial Information
-----------------------------------------------
Three months
Year Ended ended December 31
(USD millions, December 31 (unaudited)
except per -----------------------------------------------
share amounts) 2009 2008 2009 2008
----------------------- ----------------------
Sales 746.0 835.3 256.7 43.5
Operating
earnings(1) 373.2 323.2 152.2 (65.8)
Depletion, depreciation &
amortization (170.0) (202.3) (41.4) (40.1)
General exploration and
project investigation (22.6) (38.9) (6.7) (12.3)
Other income and expenses 5.1 (24.6) 3.7 (18.4)
Loss on derivative contracts (61.5) (0.1) (27.4) (0.8)
Loss (income) from equity
investment in Tenke 0.3 (2.2) 5.6 (2.2)
Gain (loss) on sale of
investments (6.7) (1.3) 12.0 -
-----------------------------------------------
Income (loss) from
continuing operations
before impairment charges
and income taxes 117.8 53.8 98.0 (139.6)
Income tax (expense)
recovery on above (12.6) (4.8) (25.8) 7.7
-----------------------------------------------
Income (loss) from
continuing operations
before impairment charges 105.2 49.0 72.2 (131.9)
Impairment charges and
income (loss) from
discontinued operations (31.5) (1,006.1) (37.1) (596.6)
-----------------------------------------------
Net income (loss) 73.7 (957.1) 35.1 (728.5)
-----------------------------------------------
-----------------------------------------------
Shareholders' Equity 2,915.2 2,603.7
Cash flow from operations 137.4 215.0 97.0 46.5
Capital expenditures
(incl. Tenke) 185.0 538.5 39.0 105.7
Total assets 3,740.1 3,704.5
Net debt(2) 49.3 145.5
Key Financial Data:
Shareholders' equity per
share(3) 5.03 5.34
Basic and diluted income
(loss) per share 0.13 (2.41) 0.06 (1.77)
Basic and diluted (loss)
income per share from
continuing operations
excluding impairments 0.19 0.12 0.12 (0.32)
Dividends - - - -
Equity ratio(4) 78% 70%
Shares outstanding:
Basic weighted
average 550,000,833 396,416,414 579,585,417 412,476,706
Diluted weighted
average 550,045,231 396,416,414 579,969,414 412,476,706
End of period 579,592,464 487,433,771 579,952,464 487,433,771
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($ millions,
except per
share data) Q4-09 Q3-09 Q2-09 Q1-09 Q4-08 Q3-08 Q2-08 Q1-08
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Sales 256.7 171.1 194.8 123.4 43.5 191.9 294.1 305.7
Operating
earnings 152.2 91.8 91.0 38.2 (65.8) 68.9 137.2 182.9
Impairment
charges
(after
tax)(5) (37.1) - - - (651.5) (201.1) (152.8) -
Income
(loss)
from
continuing
operations 35.1 3.7 43.5 (14.1) (707.7) (190.2) 96.9 81.3
Net income
(loss) 35.1 3.7 43.5 (8.6) (728.5) (199.0) (108.4) 78.8
Income
(loss)
per share
from
continuing
operations,
basic and
diluted 0.06 0.01 0.08 (0.03) (1.72) (0.49) 0.25 0.21
Income
(loss)
per share(6),
basic and
diluted 0.06 0.01 0.08 (0.02) (1.77) (0.51) (0.28) 0.20
Cash flow
from
operations 97.0 40.0 63.7 (63.3) 46.5 46.8 118.3 3.5
Capital
expenditure
(incl.
Tenke) 39.0 54.7 57.8 33.6 105.7 146.8 164.7 121.3
Net debt(2) 49.3 132.2 110.7 259.5 145.5 194.8 95.7 104.2
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1 Operating earnings is a Non-GAAP measure defined as sales, less operating
costs, accretion of asset retirement obligation ("ARO") and other
provisions, selling, general and administration costs and stock-based
compensation.
2 Net debt is a Non-GAAP measure defined as available unrestricted cash
less financial debt, including capital leases and other debt-related
obligations.
3 Shareholders' equity per share is a Non-GAAP measure defined as
shareholders' equity divided by total number of shares outstanding at end
of period.
4 Equity ratio is a Non-GAAP measure defined as shareholders' equity divided
by total assets at the end of period.
5 Includes impairment from discontinued operations.
6 Income (loss) per share is determined for each quarter. As a result of
using different weighted average number of shares outstanding, the sum of
the quarterly amounts may differ from the year-to-date amount.
See MD&A for a discussion of Non-GAAP measures.
The complete 2009 annual financial statements, management's discussion and
analysis and notes to the financial statements are available on Sedar
(www.sedar.com) or the Company's website (www.lundinmining.com).
About Lundin Mining
Lundin Mining Corporation is a diversified Canadian base metals mining company
with operations in Portugal, Sweden, Spain and Ireland, producing copper, zinc,
lead and nickel. In addition, Lundin Mining holds a development project pipeline
which includes expansion projects at its Zinkgruvan and Neves-Corvo mines along
with its equity stake in the world class Tenke Fungurume copper/cobalt project
in the Democratic Republic of Congo.
On Behalf of the Board,
Phil Wright, President and CEO
Forward Looking Statements
Certain of the statements made and information contained herein is
"forward-looking information" within the meaning of the Ontario Securities Act
or "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934 of the United States. Forward-looking statements
are subject to a variety of risks and uncertainties which could cause actual
events or results to differ from those reflected in the forward-looking
statements, including, without limitation, risks and uncertainties relating to
foreign currency fluctuations; risks inherent in mining including environmental
hazards, industrial accidents, unusual or unexpected geological formations,
ground control problems and flooding; risks associated with the estimation of
mineral resources and reserves and the geology, grade and continuity of mineral
deposits; the possibility that future exploration, development or mining results
will not be consistent with the Company's expectations; the potential for and
effects of labour disputes or other unanticipated difficulties with or shortages
of labour or interruptions in production; actual ore mined varying from
estimates of grade, tonnage, dilution and metallurgical and other
characteristics; the inherent uncertainty of production and cost estimates and
the potential for unexpected costs and expenses, commodity price fluctuations;
uncertain political and economic environments; changes in laws or policies,
foreign taxation, delays or the inability to obtain necessary governmental
permits; and other risks and uncertainties, including those described under Risk
Factors Relating to the Company's Business in the Company's Annual Information
Form and in each management discussion and analysis. Forward-looking information
is in addition based on various assumptions including, without limitation, the
expectations and beliefs of management, the assumed long term price of copper,
nickel, lead and zinc; that the Company can access financing, appropriate
equipment and sufficient labour and that the political environment where the
Company operates will continue to support the development and operation of
mining projects. 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 statements.
Accordingly, readers are advised not to place undue reliance on forward-looking
statements.
Cautionary Notes to Investors - Reserve and Resource Estimates
In accordance with applicable Canadian securities regulatory requirements, all
mineral reserve and mineral resource estimates of the Company disclosed or
incorporated by reference in this Annual Information Form have been prepared in
accordance with Canadian National Instrument 43-101 - Standards of Disclosure
for Mineral Projects ("NI 43-101"), classified in accordance with Canadian
Institute of Mining Metallurgy and Petroleum's "CIM Standards on Mineral
Resources and Reserves Definitions and Guidelines" (the "CIM Guidelines"). The
definitions of mineral reserves and mineral resources are set out in our
disclosure of our mineral reserve and mineral resource estimates that are
disclosed or incorporated by reference in this Annual Information Form.
The Company uses the terms "mineral resources", "measured mineral resources",
"indicated mineral resources" and "inferred mineral resources". While those
terms are recognized by Canadian securities regulatory authorities, they are not
recognized by the United States Securities and Exchange Commission (the "SEC")
and the SEC does not permit U.S. companies to disclose resources in their
filings with the SEC.
Pursuant to the CIM Guidelines, mineral resources have a higher degree of
uncertainty than mineral reserves as to their existence as well as their
economic and legal feasibility. Inferred mineral resources, when compared with
measured or indicated mineral resources, have the least certainty as to their
existence, and it cannot be assumed that all or any part of an inferred mineral
resource will be upgraded to an indicated or measured mineral resource as a
result of continued exploration. Pursuant to NI 43-101, inferred mineral
resources may not form the basis of any economic analysis, including any
feasibility study. Accordingly, readers are cautioned not to assume that all or
any part of a mineral resource exists, will ever be converted into a mineral
reserve, or is or will ever be economically or legally mineable or recovered.
(1) Operating earnings is a non-GAAP measure defined as sales, less operating
costs, accretion of ARO and other provisions, selling, general and
administration costs and stock-based compensation.
(2) Net debt is a Non-GAAP measure defined as available unrestricted cash less
financial debt, including capital leases and other debt-related obligations.
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