Lundin Mining Fourth Quarter and Full Year 2011 Results
TORONTO, ONTARIO -- (Marketwire) -- 02/22/12 -- Lundin Mining Corporation (TSX: LUN)(OMX: LUMI) ('Lundin Mining' or the 'Company') today reported net earnings of $183.8 million ($0.32 per share) for the fiscal year ended December 31, 2011 and $42.5 million for the fourth quarter of 2011 ($0.07 per share).
Paul Conibear, President and CEO commented, 'We ended the year with a strong quarter of production, achieving record tonnages of ore mined and milled at both our Neves-Corvo and Zinkgruvan mines. These production records occurred in parallel to achieving the best annual safety record in the Company's history, attesting to improvements made in operations company wide.
The successful start up of the expanded zinc plant at Neves-Corvo in mid-2011 has positioned the mine to become a significant by-product producer of zinc. In parallel we advanced other internal growth studies to develop strategies to access deeper Lombador mineralization and the exploitation of Semblana. We also have committed to our largest exploration program ever for 2012 to extract value from the multiple new high potential exploration targets in and around Neves-Corvo.
Internally we have staffed up in our corporate development, technical and project execution capabilities and have begun to evaluate new growth opportunities.
Tenke finished the year with strong production results and we are very excited about construction progress being made on the Phase II expansion. The significant contribution this outstanding copper operation makes to the Company is becoming quite evident and several catalysts for increasing asset value in the year ahead are expected as expanded production milestones are achieved.
As the year progressed the Company achieved improved operating cashflow, and we ended the year with a healthy balance sheet and a strong net cash position.'
Summary financial results for the quarter and year are as follows:
US $ millions (except per Three Months Ended Year Ended
share amounts) December 31(1) December 31(1)
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2011 2010 2011 2010
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Sales 242.1 309.3 783.8 849.2
Operating earnings(2) 129.3 192.3 373.8 461.7
Net earnings 42.5 146.1 183.8 306.3
Basic & diluted earnings per
share 0.07 0.25 0.32 0.53
Cash provided by operations 120.3 67.9 308.7 276.1
Net cash position at
December 31 236.1 159.2 236.1 159.2
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(1) The prior year comparative figures have been restated in accordance with
the transition to IFRS.
(2) Operating earnings is a non-IFRS measure defined as sales, less
operating costs (excluding depreciation) and general and administrative
costs.
Highlights
A strong fourth quarter of production generated higher than guided copper production while zinc and lead production ended the year essentially in line with expectations.
-- At Neves-Corvo, ore mined and milled reached record levels. For five
consecutive years, Neves-Corvo has exceeded the previous year's volume
of copper ore mined.
-- Zinkgruvan also reached new record levels of ore mined and milled and it
ended the year with its best quarter of zinc and copper production.
-- At Aguablanca, significant progress has been made in re-establishing the
pit ramp ahead of restart of nickel/copper mining operations scheduled
for the second half 2012.
-- Mining of remnant high grade ore and associated profits from Galmoy
continued throughout the year and this provided a better than expected
contribution to the Company's cash position.
-- Regarding safety performance, in 2011, Total Recordable Incident
Frequency was the lowest in the Company's history at 1.61. A similar
reduction was achieved in the frequency of Lost Time Incidents for the
year.
-- The Company also achieved successful environmental performance with no
significant incidents during the year.
Total production, compared to the latest guidance and prior years, was as
follows:
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Years ended December 31
2011 2011 2010 2009 2008
Actual Guidance Actual Actual Actual
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Copper (tonnes) 75,877 71,500 80,035 93,451 97,944
Zinc (tonnes) 111,445 111,500 90,129 101,401 151,157
Lead (tonnes) 41,130 42,000 39,568 43,852 44,799
Nickel (tonnes) nil nil 6,296 8,029 8,136
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Copper
(tonnes)Tenke
attributable
(24.75%) 31,523 30,400 29,767 17,325 -
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-- Operating earnings(1) decreased by $87.9 million from $461.7 million in
2010 to $373.8 million in 2011 and sales decreased from $849.2 million
in 2010 to $783.8 million in 2011. Both the decreases in sales and
operating earnings(1) were largely attributable to the suspension of
operations at Aguablanca which had a negative impact of $60.8 million on
comparative operating earnings and $131.7 million on sales.
-- Excluding Aguablanca, operating earnings for the year were $390.5
million, only $27.1 million lower than the $417.6 million attributable
to 2010. Favourable price and price adjustments ($40.8 million) and
higher sales volume ($18.8 million) were more than offset by the effect
of higher costs of $61.3 million. In addition, the EUR and SEK both
strengthened against the US dollar in 2011 compared to 2010, resulting
in a further increase in operating costs of $25.4 million.
-- Sales, excluding Aguablanca, increased by $66.3 million from $719.4
million in 2010 to $785.7 million in 2011. Higher metal prices ($40.8
million) and an increase in sales volume ($25.5 million), particularly
at Galmoy, contributed to the overall increase.
Average 2011 metal prices for copper and lead were higher by 17% and
12%, respectively, while the average price for zinc remained relatively
unchanged compared to 2010.
-- Operating costs (excluding depreciation) increased by $14.7 million year
on year; excluding Aguablanca, the increase was $85.5 million and is
primarily attributable to:
-- Neves-Corvo ($53.4 million): higher production cost in 2011
associated with the mining of lower grade ore and the increased use
of contractors, partially offset by a one-time prior period royalty
charge in 2010 of $8.1 million;
-- Zinkgruvan ($25.4 million): higher unit costs and the strengthening
of the SEK against the US dollar; and
-- Galmoy ($6.7 million): more than doubling of ore mined and metal
produced.
-- General and administrative expenses increased by $7.8 million. Corporate
development costs of $6.8 million were incurred in 2011 associated with
the planned merger with Inmet Mining Corporation ('Inmet'), responding
to Equinox Mineral Limited's ('Equinox') unsolicited take-over bid and
the Company's subsequent strategic review.
-- Net earnings of $183.8 million ($0.32 per share) were $122.5 million
less than the $306.3 million ($0.53 per share) reported in 2010. In
addition to lower operating earnings(1) of $87.9 million, the decrease
in net earnings was related to:
-- higher depreciation ($31.9 million) as a result of increase in ore
mined, commissioning of the new zinc expansion at Neves-Corvo and
the new copper mill at Zinkgruvan;
-- lower net finance income ($49.2 million) due to higher revaluation
gain on marketable securities of $39.9 million and gain on
derivatives contracts of $10.2 million recorded in 2010; and
-- goodwill impairment of $35.7 million related to Aguablanca;
partially offset by
-- increase in equity earnings from investment in Tenke Fungurume
($18.8 million), and lower income taxes.
-- Cash flow from operations for the year was $308.7 million compared to
$276.1 million for 2010. The decrease in operating earnings(1) of $87.9
million is offset by the net increase in non-cash working capital change
of $89.1 million. Also, included in 2010 is the cash outflow of $30.6
million that the Company paid to settle its derivative contracts.
-- An impairment analysis on the Aguablanca operation concluded that the
recoverable value of the mine's net assets were lower than their
carrying value. Accordingly, a $35.7 million impairment loss was
measured and was allocated to goodwill during the fourth quarter of
2011.
-- In August, a new mine contractor was mobilized at Aguablanca to commence
pit push-backs and reinstatement of the pit haul ramp. The restart of
Aguablanca concentrate production is expected in the second half of
2012. An underground mining study was also initiated intended to define
potential high grade underground feed to supplement open pit production.
-- The Neves-Corvo Zinc Expansion project was completed in July 2011 on
budget and on schedule. Given the continued high price ratio of copper
to zinc, this new circuit was converted to processing copper ore until
the end of the year for better margins.
-- In September 2011, the Company released the results of a Feasibility
Study on the Lombador Phase I development demonstrating that the
exploitation of the upper portions of the Lombador zinc/copper ore
bodies could extend the mine life to at least 2026 and create a platform
for further extensions. The optimal development plan for Lombador is
being further examined in conjunction with assessing exploitation
concepts for the Semblana copper discovery.
Initial results of the Future Underground Materials Handling Study
indicated two preferred options to pursue the exploitation of the deeper
portions of the Lombador copper/zinc resource and the Semblana copper
deposit (see news release dated January 23, 2012 entitled 'Lundin Mining
Reports on Neves-Corvo Future Underground Materials Handling Study').
Additional review is underway, taking into account ongoing exploration
results, to further assess the two options.
(1) Operating earnings is a non-IFRS measure defined as sales, less
operating costs (excluding depreciation) and general and administrative
costs.
Tenke Fungurume
-- Another milestone at Tenke Fungurume was achieved through the formal
announcement of the advancement of the $850 million Phase II Expansion
which will bring total production capability to 195,000 tonnes per annum
('tpa') of copper cathode with associated cobalt. The expansion includes
the completion of mill upgrades, acquisition of additional mining
equipment and construction of a new tankhouse. Construction on this
major expansion was well advanced by 2011 year end and is tracking on
schedule and on budget, targeting completion in first quarter 2013.
-- Milling facilities at the Tenke Fungurume mine continued to perform well
with throughput averaging 11,100 metric tons of ore per day in 2011.
-- For the year ended December 31, 2011, Tenke produced 127,367 tonnes of
copper and sold 128,284 tonnes at an average realized price of $3.74 per
pound. During the year, 11,182 tonnes of cobalt in hydroxide was
produced and 11,515 tonnes were sold at an average realized price of
$9.99 per pound.
-- Attributable operating cash flow at Tenke Fungurume for 2011 was $149.4
million.
-- During the third quarter of 2011, the Excess Overrun Cost facility ('EOC
facility'), related to the Company's proportionate share of the Phase I
development at Tenke, was fully repaid enabling the Company's share of
ongoing surplus cash from operations to be utilized to fund the Phase II
Expansion.
Attributable net cash flow from Tenke, including repayments of the EOC
facility, was as follows:
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Three months ended Dec 31 Year ended Dec 31
(US$ millions) 2011 2010 2011 2010
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Cash advances to Tenke (34.5) (7.6) (64.5) (30.5)
Distributions from Tenke - - 7.8 -
Repayments on EOC
facility - 40.4 108.4 118.7
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Attributable net cash
(outflow) inflow (34.5) 32.8 51.7 88.2
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Financial Position and Financing
-- Net cash(1) at December 31, 2011 was $236.1 million compared to a net
cash(1) position $159.2 million at the end of 2010.
-- The $76.9 million increase in net cash during the year was primarily
attributable to cash flow from operations ($308.7 million), including
$54.8 million generated from working capital offset by: investment in
mineral property, plant and equipment ($179.1 million), investment in
Tenke Fungurume expansion and sustaining capital works ($64.5 million)
and net repayment of debt ($10.5 million). Cash on hand at December 31,
2011 was $265.4 million.
(1) Net cash/debt is a non-IFRS measure defined as available unrestricted
cash less long-term debt and finance leases.
Outlook
2012 Production and Cost Guidance
-- 2012 production targets and a three year production look ahead for
wholly-owned operations remains unchanged from the guidance provided on
December 12, 2011 (see news release entitled 'Lundin Mining Provides
Operating Outlook for 2012-2014'). 2012 guidance is as follows:
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2012 Guidance
(contained tonnes) Tonnes C1 Cost(1)(2)
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Neves-Corvo Cu 52,500 - 57,000 1.80
Zn 30,000 - 40,000
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Zinkgruvan Zn 75,000 - 81,000 0.25
Pb 34,000 - 39,000
Cu 2,000 - 3,000
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Galmoy(3) Zn 4,000 - 4,500
(in ore) Pb 500 - 1,000
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Aguablanca Ni 500 - 1,000
Cu 500 - 1,000
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Total: Wholly-owned operations Cu 55,000 - 61,000
Zn 109,000 - 125,500
Pb 34,500 - 40,000
Ni 500 - 1,000
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Tenke: 24.0% attributable share(4) Cu 31,560 1.13
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(1) Cash costs remain dependent upon exchange rates (EUR/USD: 1.35, USD/SEK:
6.50) and metal prices (Cu: $3.50, Zn: $0.95).
(2) Cash cost is a non-IFRS measure reflecting the sum of direct costs less
by-product credits.
(3) Production tonnage is based on a 50% attributable-share to Lundin
Mining.
(4) Freeport-McMoRan Copper & Gold Inc. ('Freeport')has provided 2012 sales
guidance which is assumed to approximate Tenke's production. Lundin Mining
anticipates production from Tenke's attributable share will be reduced to
24.0% from 24.75% after obtaining approval of the modifications to the
bylaws.
-- Neves-Corvo: Copper production is expected to be reduced from previous
years as remaining reserves are lower grade stockworks which provide for
less predictable ore characteristics, lower recoveries and higher costs.
Zinc production is expected to be at least 30,000 tonnes.
-- Zinkgruvan: Zinc, lead and copper production are expected to see modest
increases compared to 2011 with further upside potential depending on
plant de-bottlenecking initiatives.
-- Aguablanca: Production is expected to resume in the second half of 2012.
Reserves represent approximately five years of production, averaging
7,500 tonnes of nickel and 6,500 tonnes of copper per annum.
-- Galmoy: High grade mining is expected to conclude in the first half of
2012, with sales continuing to be recognized into early 2013 as
stockpiled ore is milled at a third party processing facility.
-- Tenke: Freeport, the mine's operator, expects sales of copper to
increase to 131,500 tonnes with sales volumes of cobalt comparable to
2011. The Phase II expansion project to 195,000 tpa of copper cathode
(production on a 100% basis) is expected to be completed in first
quarter 2013.
2012 Capital Expenditure Guidance
Capital expenditures for 2012 are now expected to be $370 million. This represents a $40 million reduction from our previously released estimate of December 12, 2011. The change is a result of updated figures for new investment in Tenke, and our guidance now includes:
-- Sustaining capital in European operations: $95 million (2011 - $127
million). The decrease is related to slightly lower sustaining capital
expenditures at Neves-Corvo for the year ahead.
-- New investment capex in European operations: $65 million (2011 - $52
million), consisting of:
-- Lombador Phase I ($40 million) including underground development,
final SAG mill delivery payments and other critical path items.
-- Neves-Corvo dam ($13 million) related to tailings and water storage
capacity increases.
-- Other plant improvements and debottlenecking initiatives ($12
million) at both Neves-Corvo and Zinkgruvan.
-- New investment in Tenke: Freeport expects the Phase II expansion at
Tenke will be completed by the first quarter of 2013. Lundin Mining's
share of expansion funding and sustaining capital funding may be up to
$210 million for 2012. As guided by Freeport, total capital expenditure
for the Phase II Expansion is expected to be $850 million. If metal
prices remain strong, the capital spend is expected to be cash neutral
to the Company, as Tenke's operating cash flows should be sufficient to
meet this capital funding requirement.
Exploration Investment
Exploration expenditures are expected to increase from $42.6 million in 2011 to $50 million in 2012. Approximately $34 million of this will be spent at Neves-Corvo, where a 90,000 metre surface drilling program is planned for 2012 which will continue to test resource expansion targets at Semblana in addition to drill-testing the multiple high priority targets recently identified within the Neves-Corvo near mine area. In addition, the 2012 exploration program is expected to test several greenfield targets in the Iberian region, as well as continued resource definition drilling at the Company's Clare and Lakelands exploration projects in Ireland.
Selected Quarterly and Annual Financial Information
Years ended December 31
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(USD millions, except per share
amounts) 2011 2010 2009(5)
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Sales 783.8 849.2 746.0
Operating costs (382.0) (367.3) (347.2)
General and administrative (28.0) (20.2) (25.6)
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Operating earnings(1) 373.8 461.7 373.2
Depreciation, depletion and
amortization (153.8) (121.9) (170.0)
General exploration and project
investigation (42.6) (23.6) (22.6)
Income from equity investment in
Tenke 94.7 75.9 0.3
Finance (costs) income, net (13.1) 36.1 (74.3)
Other income (expenses), net 11.5 (2.0) 11.2
Impairment charges (35.7) - (53.0)
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Earnings from continuing operations
before income taxes 234.8 426.2 64.8
Income tax (expense) recovery (51.0) (119.9) 3.3
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Earnings from continuing operations 183.8 306.3 68.1
Gain from discontinued operations - - 5.6
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Net earnings 183.8 306.3 73.7
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Shareholders' equity 3,297.9 3,153.6 2,915.2
Cash flow from operations 308.7 276.1 137.4
Capital expenditures (incl. Tenke) 253.1 160.3 185.0
Total assets 3,864.3 3,826.3 3,740.1
Net cash (debt)(2) 236.1 159.2 (49.3)
Key Financial Data:
Shareholders' equity per share(3) 5.66 5.43 5.03
Basic and diluted earnings per
share 0.32 0.53 0.13
Basic and diluted earnings per
share from continuing operations 0.32 0.53 0.12
Dividends - - -
Equity ratio(4) 85% 82% 78%
Shares outstanding:
Basic weighted average 582,074,865 579,924,538 550,000,833
Diluted weighted average 582,964,608 580,539,367 550,045,231
End of period 582,475,287 580,575,355 579,592,464
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($ millions, except per
share data) Q4-11 Q3-11 Q2-11 Q1-11 Q4-10 Q3-10 Q2-10 Q1-10
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Sales 242.1 146.2 184.0 211.5 309.3 215.1 183.1 141.7
Operating earnings(1) 129.3 48.7 82.2 113.6 192.3 121.5 82.1 65.8
Net earnings 42.5 12.4 57.7 71.2 146.1 66.0 42.3 51.9
Earnings per share(6),
basic and diluted 0.07 0.02 0.10 0.12 0.25 0.11 0.07 0.09
Cash flow from operations 120.3 (40.6) 96.8 132.2 67.9 51.1 70.8 86.3
Capital expenditure (incl.
Tenke) 90.7 58.8 57.7 45.9 42.9 40.2 39.1 38.1
Net cash(2) 236.1 208.7 308.2 262.0 159.2 125.7 107.8 10.2
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The 2011 annual consolidated financial statements and management's discussion and analysis are available on SEDAR (www.sedar.com) and the Company's website (www.lundinmining.com).
(1) Operating earnings is a non-IFRS measure defined as sales, less
operating costs (excluding depreciation) and general and administration
costs.
(2) Net cash is a non-IFRS measure defined as available unrestricted cash
less long-term debt and finance leases.
(3) Shareholders' equity per share is a non-IFRS measure defined as
shareholders' equity divided by total number of shares outstanding at end of
period.
(4) Equity ratio is a non-IFRS measure defined as shareholders' equity
divided by total assets at the end of period.
(5) Conversion to IFRS on January 1, 2011 requires the completion of IFRS
compliant financial statements on a comparative basis with 2010. Financial
results prior to 2010 remain unchanged and are reported in accordance with
Canadian GAAP.
(6) Earnings 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.
About Lundin Mining
Lundin Mining Corporation is a diversified 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 Neves-Corvo mine, along with an equity stake in the world-class Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo, which is undergoing expansion to 195,000 tpa copper cathode production.
On Behalf of the Board,
Paul Conibear, 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. 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; receipt of final detailed documentation on by-law changes resulting from the contract review process and resolution of administrative disputes in the DRC; 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's 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, zinc, lead and nickel; 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.
Contacts:
Lundin Mining Corporation
Sophia Shane
Investor Relations North America
+1-604-689-7842
Lundin Mining Corporation
John Miniotis
Senior Business Analyst
+1-416-342-5565
+1 416 348 0303 (FAX)
Lundin Mining Corporation
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50
www.lundinmining.com
