Lundin Mining Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company")
today reported net earnings before impairment charges of $45.0 million ($0.08
per share) for the quarter ended December 31, 2012. Cash flows of $49.4 million
were generated from operations during the quarter, not including the Company's
attributable cash flows of $39.2 million from Tenke Fungurume.
Paul Conibear, President and CEO, commented, "Our operations continue to
consistently perform. Especially pleasing this last quarter was the performance
of Zinkgruvan, with record production of zinc, lead and copper in concentrate
and maintaining a cash cost of 12 cents per pound of zinc for the quarter and 13
cents per pound for the year.
With the staged commissioning and substantial completion of Tenke's Phase II
expansion achieved by year end 2012, we also saw record copper production at
Tenke and continue to be very pleased with how this operation is running and the
cash flow being generated.
Looking forward, we expect our own mine's aggregate 2013 production and
operating costs to be substantially in line with that achieved in 2012, and
surplus cash flows from Tenke contributing materially to our balance sheet."
Summary financial results for the quarter and full year:
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Three months ended Twelve months ended
December 31 December 31
US$ Millions (except per share ------------------ -------------------
amounts) 2012 2011 2012 2011
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Sales 176.4 242.1 721.1 783.8
Operating earnings(1) 51.8 124.3 308.7 381.9
Net (loss) earnings (17.1) 36.1 123.2 183.8
Net earnings, before impairment(2) 45.0 71.9 185.3 219.5
Basic (loss) earnings per share (0.03) 0.06 0.21 0.32
Cash flow from operations 49.4 113.9 194.0 308.7
Ending cash position 275.1 265.4 275.1 265.4
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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.
(2) Add back of asset impairment expense is net of tax.
Fourth quarter earnings were affected by a non-cash impairment charge of $67.3
million ($62.1 million after-tax) from a write down of mineral properties, plant
and equipment and goodwill at the Aguablanca mine. Although the decision
regarding the future configuration of the pit is not anticipated until the
second quarter of 2013, the Company revalued the assets reflecting a reduction
in the mineable reserve to only those areas not affected by pit wall instability
and for the time being we assume no additional investment to attempt to recover
reserves in the affected area.
Operational Highlights
Wholly-owned operations: The Company's strong and steady performance
throughout the year is reflected in the production results which are at the
high end of guidance targets.
-- Neves-Corvo met its production goals for both zinc and copper. A
significant amount of incremental lower grade, but profitable, copper
ore was mined, compared to the reserve models, as additional volumes of
mineralization on the periphery of stopes was encountered. Near record
copper recoveries in the plant were achieved. Cash costs per pound of
copper sold were $2.17 for the quarter as a result of the processing of
more tonnes of ore at lower grades, and $1.79 for the year.
-- Zinkgruvan finished the year with record production of zinc, lead and
copper in concentrate and continued to report high recovery performance
in the process plant. Zinc, copper and lead grades and plant recoveries
met, and in some cases exceeded expectations. Cash costs per pound of
zinc sold were $0.12 for the quarter and $0.13 for the year.
-- Aguablanca's processing operations were restarted in August, with full
production achieved earlier than planned, resulting in higher than
expected nickel and copper metal production. Grades mined and plant
recoveries for both nickel and copper were slightly better than
expected. Cash costs per pound of nickel sold were $6.19 for the
quarter, which was the first quarter of full production since mining was
suspended in the fourth quarter of 2010.
-- Galmoy's mining production from remnant ores exceeded expectations for
the year. Although mining ceased in the fourth quarter of 2012,
processing of stockpiled ore by a third party processing facility will
continue into 2013.
Tenke: Tenke achieved record mining, milling and production rates in 2012
facilitated by the staged commissioning of Phase II expansion facilities.
The Phase II expansion is substantially complete, on schedule and on budget.
-- By the end of 2012, the expanded facilities were operating near full
Phase II design capacity. Fourth quarter production of 44,130 tonnes of
copper cathode is 91% of the expanded annual design capacity of 195,000
tonnes per annum copper cathode, on a prorated basis.
-- During the year, the Phase II expansion and sustaining capital funding
was met almost entirely with cash available from Tenke operations with
the exception of a cash call for $15.0 million funded by the Company.
-- Attributable operating cash flow related to Tenke for 2012 was $145.9
million.
Financial Highlights
-- Operating earnings for the year ended December 31, 2012 were $308.7
million, a decrease of $73.2 million from the $381.9 million reported in
2011. The decrease was primarily attributable to a change in sales mix,
as less profitable zinc replaced copper sales in 2012 ($48.0 million),
lower realized prices and price adjustments from prior period sales
($39.7 million), higher costs ($10.4 million) and lower overall sales
volume ($3.2 million) which more than offset the impact of the
favourable exchange rates ($22.3 million) and restart of the Aguablanca
operation ($5.8 million).
-- For the year ended December 31, 2012, sales of $721.1 million decreased
$62.7 million from the prior year ($783.8 million) which was mainly as a
result of lower net sales volume ($24.8 million) and lower realized
metal prices and prior period price adjustments ($39.7 million).
Increased volume of metal concentrate sales at Zinkgruvan and the
restart of the Aguablanca mine were more than offset by lower copper
sales at Neves-Corvo and overall reduced sales at Galmoy.
-- Average London Metal Exchange ("LME") metal prices for copper, zinc,
lead and nickel for the year ended December 31, 2012 were significantly
lower (10% - 23%) than that of the prior year.
-- Operating costs (excluding depreciation) of $385.0 million in the
current year were slightly higher than the prior year of $382.0 million.
Excluding increased costs from Aguablanca ($18.2 million) associated
with restart of production, costs decreased by $15.2 million which is
primarily attributable to:
-- Neves-Corvo ($11.5 million): Favourable foreign exchange rate and
lower royalty charge, partially offset by higher per unit costs; and
-- Galmoy ($4.4 million): Lower production and cessation of mining
operations.
-- Net earnings of $123.2 million ($0.21 per share) for the current year
were $60.6 million lower than the $183.8 million ($0.32 per share)
reported in 2011. Earnings were impacted by:
-- lower operating earnings primarily due to lower sales and lower
realized metal prices ($73.2 million)
-- higher impairment loss on write-down of Aguablanca's mineral
properties, plant and equipment and goodwill in 2012 compared to
2011 ($31.6 million);
-- higher exploration and business development expenditures ($15.4
million); offset by
-- lower depreciation, depletion and amortization expense ($31.4
million) as a result of lower production at Neves-Corvo and foreign
exchange rates; and
-- lower tax expense of $27.6 million, reflecting lower operating
earnings and a decrease in Sweden's future tax rate from 26.3% to
22% effective January 1, 2013.
-- Cash flow from operations for the year was $194.0 million compared to
$308.7 million for 2011. The comparative decrease in the cash flow is
mostly attributable to lower operating earnings and changes in working
capital.
-- Shortly after the restart of production at Aguablanca, the mine
encountered pit stability issues on the south wall which restricted
access to certain areas of the pit. As the Company continues to assess
its options, the mine is operating on a modified mine plan with a mine
life of only two years due to restricted access to its ore. This has
resulted in a decrease in the value of certain of Aguablanca's assets
below their carrying values. Accordingly, the Company has recognized an
impairment loss of $39.2 million ($34.0 million after-tax) on mineral
properties, plant and equipment and $28.1 million on goodwill.
Tenke Fungurume
-- Milling facilities continued to produce above rated capacity, with
throughput averaging approximately 13,000 metric tonnes of ore per day
during 2012, an estimated 1,900 metric tonnes of ore per day higher than
the previous year.
-- For the year ended December 31, 2012, Tenke produced 157,671 tonnes of
copper and sold 152,355 tonnes at an average realized price of $3.51/lb.
In addition, 11,669 tonnes of cobalt in hydroxide was produced and
11,259 tonnes were sold at an average realized price of $7.83/lb of
cobalt.
-- Cash costs(1) of $1.23/lb of copper for the year were higher than the
$1.07/lb reported in the prior year, primarily resulting from lower
cobalt credits.
-- During the year, $158.9 million was spent on the Company's attributable
share of Tenke's capital requirements which was funded by a cash advance
of $15.0 million and excess cash flow from operations.
(1) Cash cost/lb of copper are non-GAAP measures defined as all cash costs
directly attributable to mining operating, less royalties and by-product
credits.
Corporate Highlights
-- On September 4, 2012, the Company reported its Mineral Reserve and
Resource estimates as at June 30, 2012. The Company also filed
independent NI 43-101 compliant technical reports on the Neves-Corvo
mine (including the Semblana deposit) and the Zinkgruvan mine in January
2013.
-- In December 2012, the Company executed an amendment to its revolving
credit agreement that increases the amount of its credit facility to
$350 million from $300 million, reducing the costs of borrowing and
extending the term of the facility to December 2015.
-- In January 2013, the Company, together with its partners in Tenke
Fungurume, entered into a definitive agreement to acquire a large scale
cobalt chemical refinery in Finland to provide direct end-market access
for Tenke's cobalt hydroxide production. See press release entitled,
"Lundin Mining, together with Tenke partners, to acquire Kokkola cobalt
operations in Finland", dated January 21, 2013.
Financial Position and Financing
-- Net cash(1) position at December 31, 2012 was $265.1 million compared to
a net cash position of $236.1 million at December 31, 2011.
-- The $29.0 million increase in net cash during the year was primarily
attributable to cash inflow from operations of $194.0 million, offset by
investment in mineral properties, plant and equipment of $159.4 million,
a $15.0 million cash advance to Tenke and a full repayment of the
Company's commercial paper program ($19.7 million).
(1) Net cash is a Non-GAAP measure defined as available unrestricted cash
less long-term debt and finance leases.
Outlook
2013 Production and Cost Guidance
-- Production guidance for the three-year period of 2013 through 2015 for
wholly-owned operations remains unchanged from the guidance provided on
December 6, 2012 (see news release entitled "Lundin Mining Provides
Operating Outlook for 2013-2015"). Production and cash cost guidance for
2013 are as follows:
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2013 Guidance
(contained tonnes) Tonnes C1 Cost(a)
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Copper Neves-Corvo 50,000 - 55,000 $ 1.80
Zinkgruvan 2,500 - 3,500
Aguablanca 4,500 - 5,000
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Wholly-owned 57,000 - 63,500
Tenke(@24%)(b) 44,650 $ 1.03
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Total attributable 101,650 - 108,150
Zinc Neves-Corvo 45,000 - 50,000
Zinkgruvan 73,000 - 78,000 $ 0.20
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Total 118,000 - 128,000
Lead Zinkgruvan 33,000 - 36,000
Nickel Aguablanca 5,000 - 5,500 $ 5.00
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(a) Cash costs remain dependent upon exchange rates (forecast at
EUR/USD:1.30, USD/SEK:6.75) and metal prices (forecast at Cu: $3.50,
Zn: $0.95, Pb: $1.00,Ni: $8.00, Co: $12.00).
(b) Freeport has provided 2013 sales and C1 cash cost guidance. The sales
guidance is assumed to approximate Tenke's production.
2013 Capital Expenditure Guidance
Capital expenditures for 2013 are expected to be $285 million (2012: $318.3
million), an increase of $15 million from our previously released estimate
of $270 million on December 6, 2012. This increase is primarily attributable
to revised forecasts for 2013 capital investments at Tenke. Major capital
investments for 2013 are as follows:
-- Sustaining capital in European operations - $110 million (2012: $129.5
million), consisting of approximately $70 million for Neves-Corvo and
$40 million for Zinkgruvan.
-- New investment capital in European operations - $60 million (2012: $29.9
million), consisting of:
-- Lombador Phase I ($30 million) - For underground development,
improvements to the main surface substation, installation of surface
power cables, and other items related to positioning for increased
copper and zinc production from the Lombador ore bodies over the
next several years.
-- Neves-Corvo industrial water dam ($9 million) - Work was to have
commenced in 2012 on this dam but was delayed until 2013 due to
drilling on the Monte Branco copper discovery which lies beneath.
-- Zinkgruvan ore dressing plant ($13 million) - During 2012, a pre-
feasibility study was completed showing that with an estimated $52
million investment over a 24 month period, replacement of the
current crushing, screening and grinding circuits would result in
higher plant availability, lower operating costs, improved noise and
dust emissions and an increase in mine production. A feasibility
study is advancing with expected completion in the first half of
2013. Permitting of the plant modernization and tailings facility
expansion is in progress and, subject to positive results,
investment in the zinc plant modernization will be fast tracked.
-- Other improvement initiatives ($8 million).
-- New investment in Tenke - $115 million (2012: $158.9 million), estimated
by the Company as its share of the remaining Phase II expansion costs
and sustaining capital funding for 2013. All of the capital expenditures
are expected to be self-funded by cash flow from Tenke operations. If
current metal prices and operating conditions prevail, it is reasonable
to expect meaningful amounts of excess operating cash flows from Tenke
to come back to the funding partners to repay initial capital
investments on a 70/30 basis.
Exploration Investment
-- Exploration expenditures are expected to be in the range of $40 million
in 2013 (2012: $50.9 million). Approximately $18 million of this will be
spent at Neves-Corvo where a large drilling program will advance
exploration on various targets including the new copper discovery at
Monte Branco. An additional $5 million will be spent on several other
copper targets in the Iberian Region.
-- The Company continues to seek exploration investment opportunities. In
November 2012, Lundin Mining signed an Option Agreement with Southern
Hemisphere Mining (ASX:SUH) to earn up to a 75% interest in the Llahuin
Project in Chile by investing $35 million in development over a period
of 6 years; approximately $7 million is expected to be spent in 2013.
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 24% equity stake in the
world-class Tenke Fungurume copper/cobalt mine in the Democratic Republic of
Congo.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
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
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