Lundin Mining Reports First Quarter Results
TORONTO, ONTARIO -- (Marketwire) -- 04/25/12 -- Lundin Mining Corporation (TSX: LUN)(OMX: LUMI) ("Lundin Mining" or the "Company") today reported net income of $58.3 million ($0.10 per share) for the three months ended March 31, 2012 compared to $71.2 million ($0.12 per share) for the first quarter of 2011 and $36.1 million ($0.06 per share) for the fourth quarter of 2011.
Paul Conibear, President and CEO commented, "We followed up our strong production results from the fourth quarter of 2011 with another quarter of solid performance. Operational improvement programs led by new site management are producing good results, with our operations meeting or exceeding our targets."
Neves-Corvo produced 16,609 tonnes of copper at a cash cost of $1.63 per pound during the quarter, which was better than expected primarily due to more tonnes milled and higher plant recoveries than planned. The zinc plant at Neves-Corvo produced 7,020 tonnes of zinc which is expected to be an increasing by-product credit as the year progresses.
Zinkgruvan produced 20,431 tonnes of zinc and 10,348 tonnes of lead. This strong result was achieved through record milling performance and excellent recoveries of zinc on lower grade ores. Cash costs were $0.22 per pound.
Mr. Conibear commented, "Bengt Sundelin, who joined as our new General Manager of Zinkgruvan in September, has recently improved his operating team. The results have been exceptional with Zinkgruvan setting a new record for milling performance, the best in its 155 year history."
Tenke recorded another strong quarter of production, with the Company's share of attributable copper production for the quarter amounting to 8,924 tonnes. The Company's attributable cash flow from operations from Tenke was $31 million, with all cash being retained at the mine to fund the Phase II Expansion Project, which continues to track on schedule and on budget.
The Company continued the pursuit of new growth opportunities most notably signing an option agreement on the Touro copper project located in northern Spain (see news release April 11, 2012, entitled Lundin Mining Enters into Option Agreement to Acquire Copper Project in Spain).
Summary financial results for the quarter and year:
US $ millions (except per share amounts) Three Months Ended March 31
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2012 2011
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Sales 212.8 211.5
Operating earnings(1) 105.4 118.4
Net income 58.3 71.2
Basic & diluted income per share 0.10 0.12
Cash provided by operations 51.3 132.2
Cash position at March 31 274.2 293.8
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(1) Operating earnings is a non-GAAP measure defined as sales, less
operating costs (excluding depreciation) and general and administrative
costs.
Corporate Highlights
At the corporate level, Mr. Joao Carrelo will be stepping down from his role as Executive Vice-President and Chief Operating Officer effective June 30, 2012 to pursue other personal interests. Mr. Carrelo has been instrumental in the growth and development of the Company's operations for many years and his significant contributions are much appreciated.
Mr. Michael Hulmes has joined the Company as General Manager at Neves-Corvo. Mr. Hulmes is a Mining Engineer with substantial underground and open pit experience. He has worked in a number of international base metals and gold companies. Most recently he served as General Manager - Operations at the Ok Tedi copper mine in Papua New Guinea. He spent 17 years with Homestake/Barrick where he ultimately served as General Manager - Operations, responsible for a group of three Barrick mines and their interest in the Kalgoorlie Consolidated Gold Mines JV.
Operational Highlights
Wholly-owned operations: Outstanding operational performance generated higher than expected copper, zinc and lead production. Sales volumes were higher and operating costs were lower than expectations.
-- With better than expected tonnages processed and record copper plant recovery rates, Neves-Corvo had a solid three months of copper production. Copper plant recoveries averaged 91% over the quarter as compared to the 2011 average of 85%.
-- Zinkgruvan achieved record milled tonnage levels. Total zinc metal produced was 20,431 tonnes over the quarter compared to the average of 18,790 tonnes per quarter achieved in 2011.
-- At Aguablanca, significant progress has been made in re-establishing the pit ramp and restart of production is on track for the second half of 2012.
-- Galmoy outperformed production expectations and this has resulted in the Company increasing its zinc and lead production guidance for the year.
Tenke: The mine and mill continue to perform well and the $850 million Phase II expansion is on track.
-- Production in the current quarter was above expectations due to higher throughput, grade and improved tank-house operation. Tenke's operator, Freeport, has increased copper production guidance slightly for 2012.
-- No cash calls were made to the Company to fund the Phase II Expansion Project due to surplus cash from Tenke operations being greater than budgeted year to date.
-- On March 26, 2012, the President and Prime Minister of DRC signed the decree approving the bylaw changes for Tenke Fungurume Mining SARL ("TFM") which were previously agreed after the conclusion of the mining contract review in October 2010.
Total Q1 production was as follows:
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Q1 Total Q4 Q3 Q2 Q1
2012 2011 2011 2011 2011 2011
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Copper (tonnes) 17,145 75,877 27,488 15,419 13,831 19,139
Zinc (tonnes) 33,743 111,445 27,053 28,791 27,404 28,197
Lead (tonnes) 11,766 41,130 9,273 10,077 10,367 11,413
Nickel (tonnes) - - - - - -
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Tenke attributable(a)
Copper (tonnes) 8,924 31,523 8,635 7,982 7,398 7,508
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(a) Lundin Mining's attributable share of Tenke's production was reduced
from 24.75% to 24.0% effective March 26, 2012, when changes to bylaws of TFM
were signed.
-- Operating earnings(1) decreased by $13.0 million from $118.4 million in the first quarter of 2011 to $105.4 million in the first quarter of 2012. This was largely attributable to lower metal prices, partially offset by the comparative impact of prior period price adjustments.
-- Sales were largely unchanged, Q1-2012 over Q1-2011. For the quarter ended March 31, 2012, sales of $212.8 million were slightly higher than the $211.5 million in the comparable period in 2011. Increase in sales volume ($14.8 million) and prior period price adjustments ($20.1 million) were offset by lower metal prices ($33.6 million).
-- Average metal prices for copper, zinc and lead in the first quarter of 2012 were 14%-20% lower than the quarter ended March 31, 2011.
-- Operating costs (excluding depreciation) for the quarter ended March 31, 2012 increased by $11.9 million over the prior year comparative quarter and this is primarily attributable to:
---- Neves-Corvo ($9.0 million): higher operating costs are attributable to the higher sales volume and changes in per unit production costs ($11.8 million) experienced during the quarter, offset partially by a weakness in the Euro against the US dollar ($2.8 million);
---- Zinkgruvan ($3.2 million): higher operating costs are primarily the result of increased metal sales and changes in per unit production costs ($4.4 million), offset partially by a weakness in the SEK against the US dollar ($1.2 million).
-- Net earnings of $58.3 million ($0.10 per share) were $12.9 million below the $71.2 million ($0.12 per share) reported in the first quarter of 2011. In addition to lower operating earnings(1) of $13.0 million, deferred taxes were higher in the current quarter ($11.3 million) due to higher taxable losses at Aguablanca and prior period adjustments in 2011.
-- Excluding the impact of changes in non-cash working capital, cash flow from operations in the current quarter was $63.6 million, compared to $68.5 million in the first quarter of 2011, with the decrease primarily attributable to reduced operating earnings(1) of $13.0 million. Total cash flow from operations for the current quarter was $51.3 million compared to $132.2 million for the corresponding period in 2011.
Tenke Fungurume
-- Milling facilities continued to perform well, with throughput averaging 12,200 metric tonnes of ore per day in the first quarter of 2012.
-- For the quarter ended March 31, 2012, Tenke produced 36,130 tonnes of copper and sold 31,195 tonnes at an average realized price of $3.74/lb. During the current quarter, 2,727 tonnes of cobalt in hydroxide was produced and 2,287 tonnes were sold at an average realized price of $8.46/lb.
-- No cash advances were made to or distributions received from Tenke in the quarter ended March 31, 2012. $37.5 million in surplus cash from operations was utilized in the quarter to fund Lundin Mining's share of sustaining capital and expansion initiatives.
-- Attributable operating cash flow related to Tenke for the first quarter of 2012 was $31.0 million.
-- On February 28, 2012, the Company reported the Mineral Reserve and Resource update on Tenke Fungurume as at December 31, 2011. The full release can be found on the Company's website at www.lundinmining.com.
Corporate Development
-- On April 11, 2012, the Company announced it had entered into a purchase option agreement to acquire an 80% interest in the Touro copper project located in northern Spain. The agreement gives the Company an exclusive option until October 1, 2012, subject to extension, to purchase an 80% interest in the project by paying EUR60 million in stages based on milestones. Details of the option agreement are more fully discussed in a press release entitled "Lundin Mining enters into option agreement to acquire Copper project in Spain".
Financial Position and Financing
-- Net cash(2) at March 31, 2012 was $242.3 million compared to a net cash(2) position of $236.1 million at December 31, 2011 and $262.0 million at March 31, 2011.
-- The $6.2 million increase in net cash during the quarter is primarily attributable to cash generated from operations ($51.3 million) partially offset by investment in mineral property, plant and equipment ($45.5 million).
-- Cash balance at April 23, 2012 was $285.4 million.
Outlook
2012 Production and Cost Guidance
-- Except for Galmoy, full year 2012 production targets for wholly-owned operations remain unchanged from the guidance provided on December 12, 2011 (see news release entitled "Lundin Mining Provides Operating Outlook for 2012-2014"). Updated zinc and lead production guidance for Galmoy has been reflected below.
-- Revised guidance from Freeport-McMoRan Copper & Gold Inc. ("Freeport") on Tenke's copper sales, from 131,500 to 136,000 tonnes, has been reflected below and is based on the assumption that production volume will approximate sales.
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2012 Guidance
(contained tonnes) Tonnes C1 Cost(a,b,)
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Neves-Corvo Cu 52,500 - 57,000 $ 1.80
Zn 30,000 - 40,000
Zinkgruvan Zn 75,000 - 81,000 $ 0.25
Pb 34,000 - 39,000
Cu 2,000 - 3,000
Galmoy(c) Zn 7,000 - 8,000
(in ore) Pb 1,500 - 2,000
Aguablanca Ni 500 - 1,000
Cu 500 - 1,000
Total: Wholly-owned operations Cu 55,000 - 61,000
Zn 112,000 - 129,000
Pb 35,500 - 41,000
Ni 500 - 1,000
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Tenke: 24.0% attributable
share(d) Cu 32,600 $ 1.13
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(a) Cash costs remain dependent on exchange rates (EUR/USD: 1.35, USD/SEK:
6.50) and metal prices (Cu: $3.50, Zn: $0.95).
(b) Cash cost is a non-GAAP measure reflecting the sum of direct costs less
by-product credits.
(c) Production tonnage is based on a 50% attributable-share to Lundin
Mining.
(d) Lundin Mining's production from Tenke's attributable share was reduced
from 24.75% to 24.0%, after approval of changes to TFM's bylaws.
2012 Capital Expenditure Guidance
Capital expenditures for 2012 are expected to be $410 million, an increase of $40 million over previous guidance primarily as a result of a revision in accounting policy, as described below:
-- Sustaining capital in European operations: $130 million (2011 - $127 million): Sustaining capital has increased $35 million over previous guidance to account for Aguablanca's pre-stripping costs which, as a result of changes in accounting standards (IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine), are now being capitalized. The guidance provided on December 12, 2011 assumed these costs would be expensed as incurred, based on accounting policy at that time. The net cash effect to the Company compared to the previous forecast is nil.
-- New investment capital expenditures in European operations: $65 million (2011 - $52 million)
-- Zambujal (Neves-Corvo) - Semblana Internal Ramp: $5 million. An internal ramp from existing workings in the Zambujal deposit down towards the Semblana copper deposit has commenced to facilitate underground exploration of Semblana. This ramp is sized to enable haulage of Semblana material if exploration success and subsequent economic studies prove this is viable.
-- New investment in Tenke ($210 million): 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. Year to date, no cash calls have been made by TFM from Lundin as surplus cash from operations, benefiting from higher than expected copper prices, has covered all Phase II expansion costs incurred during the period.
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; 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.
(1) Operating earnings is a non-GAAP measure defined as sales, less operating costs (excluding depreciation) and general and administrative costs.
(2) Net cash is a non-GAAP measure defined as available unrestricted cash less long-term debt and finance leases.
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
Lundin Mining Corporation
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50
www.lundinmining.com
