Lundin Mining Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company")
today reported net earnings of $50.1 million ($0.09 per share) for the quarter
ended March 31, 2013. Cash flows of $45.8 million were generated from
operations, not including the Company's attributable cash flows of $43.6 million
from Tenke Fungurume.
Paul Conibear, President and CEO commented, "Our focus on operational execution
continues in 2013. We remain on track to meet our annual production guidance
targets and are well positioned to continue to improve our strong balance sheet
throughout the year.
Tenke was clearly the highlight of the quarter, as copper production set another
quarterly record and we received cash returns of $45 million from the operation.
Based on current metal prices and operating conditions, we expect to continue to
receive meaningful amounts of cash distributions from Tenke throughout the
remainder of the year.
We are also pleased to announce the closing of the acquisition of the Kokkola
cobalt refinery during the quarter. The acquisition will enable immediate entry
and value-added vertical integration to the refined cobalt market and will help
maximize the value of the cobalt resources at Tenke."
Summary financial results for the quarter:
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Three months ended
March 31
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US$ Millions (except per share amounts) 2013 2012
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Sales 188.2 212.8
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Operating earnings(1) 68.1 105.4
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Net earnings 50.1 58.3
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Basic earnings per share 0.09 0.10
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Cash flow from operations 45.8 51.3
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Ending cash position 292.1 274.2
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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.
Operational Highlights
Wholly-owned operations: Production and costs were in line with expectations for
copper and nickel for the quarter. Zinc and lead production were lower than
expected and Zinkgruvan's cash costs were higher than expected for the quarter;
however, the Company expects to make up for this shortfall in the balance of the
year.
-- Neves-Corvo produced 14,314 tonnes of copper and 10,263 tonnes of zinc
in the first quarter of 2013. This was record production for zinc in the
quarter. Copper production was on target and excellent plant recoveries
were achieved. Cash costs per pound of copper sold were $1.83/lb for the
quarter, largely in-line with guidance despite the lower than expected
zinc by-product credits.
-- At Zinkgruvan, backfill system problems necessitated a change to
underground mine sequencing which impacted both the volume of ore mined
and head grades for zinc and lead. Backfill system issues have since
been resolved. Copper production hit a new quarterly record of 1,146
tonnes. Cash costs per pound of zinc sold were $0.42/lb for the quarter,
largely impacted by lower by-product credits and the lower volume of
zinc produced and sold.
-- At Aguablanca, ore milled, grades and plant recoveries for both nickel
and copper were slightly better than expectations. Cash costs per pound
of nickel sold were better than guidance, at $4.66/lb.
Tenke: Tenke achieved a quarterly record in mining, milling and copper production.
-- First quarter production amounted to 54,462 tonnes of copper cathode
aided by record throughput, excellent copper mill feed grades and high
plant recoveries.
-- Attributable operating cash flow from Tenke for the first quarter of
2013 was $43.6 million.
-- Excess operating cash flows of $45.0 million were distributed to the
Company in the first quarter of 2013.
-- Operating cash costs were $1.23/lb of copper sold.
-- Phase II expansion, which included optimizing the current plant and
increasing mine, mill and processing capacity, was completed,
highlighted by the commissioning of the balance of the expanded
electrowinning tankhouse. A second sulphuric acid plant is under
development and is expected to be operational by 2015.
Total production from the Company's assets including attributable share of
Tenke:
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2013 2012
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(tonnes) Q1 FY Q4 Q3 Q2 Q1
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Copper 17,016 63,878 14,224 15,573 16,936 17,145
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Zinc 25,947 122,204 29,161 28,452 31,972 32,619
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Lead 6,591 38,464 8,353 9,365 9,780 10,966
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Nickel 1,797 2,398 1,705 693 - -
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Tenke attributable
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Copper 13,071 38,105 10,602 9,947 8,632 8,924
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Financial Highlights
-- Operating earnings for the first quarter of 2013 were $68.1 million, a
decrease of $37.3 million from the $105.4 million reported in the
comparable quarter of 2012. The decrease was primarily attributable to
lower sales volume at Neves-Corvo and Zinkgruvan ($18.3 million) and
lower metal prices and price adjustments from prior period sales ($27.0
million), partially offset by earnings at Aguablanca following the
restart of operations ($15.1 million).
-- For the quarter ended March 31, 2013, sales of $188.2 million decreased
$24.6 million from the first quarter of prior year ($212.8 million)
mainly due to lower sales volumes at Neves-Corvo and Zinkgruvan, as well
as lower realized copper and zinc prices.
-- Average London Metal Exchange ("LME") metal prices for copper and nickel
for the quarter ended March 31, 2013 were lower (5% and 12%,
respectively) than that of the comparable quarter in the prior year,
while lead prices increased 10% and zinc prices remained flat.
-- Operating costs (excluding depreciation) of $113.5 million in the
current quarter were higher than the prior year comparative quarter
($99.8 million) reflecting a full quarter of production at Aguablanca.
This was partially offset by lower volumes sold at Neves-Corvo,
Zinkgruvan and Galmoy.
-- Net earnings of $50.1 million ($0.09 per share) for the current quarter
were $8.2 million lower than the $58.3 million ($0.10 per share)
reported for the quarter ended March 31, 2012. Earnings were impacted
by:
-- lower operating earnings primarily due to lower realized metal
prices and prior period price adjustments ($37.3 million); and
-- higher depreciation, depletion and amortization expense ($10.7
million), reflecting restart of production at Aguablanca; offset by
-- higher net other income ($25.7 million) representing an increase in
foreign exchange gain ($10.8 million) and proceeds from an insurance
claim relating to Aguablanca's ramp failure in 2010 ($15.1 million);
and
-- higher income from equity investment in Tenke Fungurume ($6.3
million).
-- Cash flow from operations for the current quarter was $45.8 million
compared to $51.3 million in the first quarter of 2012. The comparative
decrease is attributable to lower net earnings in the current quarter.
Tenke Fungurume
-- The expanded milling facility increased average daily production, with
throughput averaging approximately 14,600 metric tonnes of ore per day
during the first quarter of 2013, exceeding the 14,000 metric tonnes of
ore per day expanded design capacity. Average throughput for the first
quarter was approximately 2,400 metric tonnes of ore per day higher than
the comparable quarter from the previous year.
-- For the quarter ended March 31, 2013, Tenke produced 54,462 tonnes of
copper and sold 53,583 tonnes at an average realized price of $3.40/lb.
During the current quarter, 2,540 tonnes of cobalt in hydroxide were
produced and 2,555 tonnes were sold at an average realized price of
$7.28/lb.
-- Cash cost(1) of $1.23/lb of copper for the quarter was slightly lower
than the $1.25/lb reported in the prior year comparable quarter,
primarily reflecting the benefit of higher sales volumes, partly offset
by lower cobalt credits. For 2013, Freeport-McMoRan Copper & Gold Inc.
("Freeport") has revised cash cost guidance to $1.18/lb, from $1.03/lb,
due primarily to reduced cobalt by-product credits.
-- During the quarter, $17.0 million was spent on the Company's
attributable share of Tenke's capital requirements which was funded by
the excess cash flow from operations.
-- Cash distributions of $45.0 million were received from Tenke during the
quarter ended March 31, 2013 (Q1-2012: nil).
(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 March 29, 2013, the Company announced completion of the acquisition
of 24% of the Kokkola cobalt refinery located in Finland and the related
sales and marketing business ("Kokkola" or "joint venture"), which will
provide direct-end market access for the cobalt hydroxide production
from Tenke.
The Company holds an effective 24% ownership interest in the joint venture, with
Freeport holding a 56% ownership interest and being the operator of the joint
venture, and La Generale des Carrieres et des Mines, the Congolese state mining
company, holding a 20% interest in Kokkola.
The initial consideration paid was $355 million, which included $34 million of
acquired cash. Under the terms of the agreement, there is the potential for
additional consideration of up to $110 million over a period of three years,
contingent upon the achievement of revenue-based performance targets. Lundin
Mining's share of initial acquisition costs, including acquired cash, was $116.3
million based on a 30%/70% split with Freeport, which amounts will be repaid
prior to any shareholder advances.
Financial Position and Financing
-- Net cash(1) position at March 31, 2013 was $199.4 million compared to
$265.1 million at December 31, 2012 and $242.3 million at March 31,
2012.
-- The $65.7 million decrease in net cash during the quarter was primarily
attributable to the acquisition of Kokkola ($116.3 million) and
investments in mineral properties, plant and equipment ($36.6 million),
partially offset by cash flow from operations of $45.8 million and
distributions from Tenke of $45.0 million.
-- Net cash balance at April 24, 2013 is approximately $214 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 and cash cost guidance for 2013 for the Company's wholly-
owned operations remains unchanged. Freeport forecasts increased copper
production at Tenke, up from 44,650 to 47,300 tonnes of cathode (Lundin
Mining's attributable share), along with increased unit costs, as noted
herein.
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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
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Zinkgruvan 2,500 - 3,500
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Aguablanca 4,500 - 5,000
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Wholly-owned 57,000 - 63,500
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Tenke(@24%)(b) 47,300 $1.18
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Total attributable 104,300 - 110,800
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Zinc Neves-Corvo 45,000 - 50,000
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Zinkgruvan 73,000 - 78,000 $0.20
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Total 118,000 - 128,000
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Lead Zinkgruvan 33,000 - 36,000
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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:6.50) and metal prices (forecast at Cu: $3.50, Zn:
$0.90, Pb: $1.00,Ni: $7.50, 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 (unchanged from
previous guidance), as described below:
-- Sustaining capital in European operations - $110 million, consisting of
approximately $70 million for Neves-Corvo and $40 million for
Zinkgruvan.
-- New investment capital in European operations - $60 million, consisting
of approximately $30 million for Lombador Phase I, $9 million for an
industrial dam at Neves-Corvo, $13 million for Zinkgruvan's ore dressing
plant and other improvement initiatives.
-- New investment in Tenke - $115 million, estimated by the Company as its
share of the remaining Phase II expansion costs, exploration and Phase
III and IV expansion related initiatives and sustaining capital funding
for 2013. All of the capital expenditures are expected to be self-funded
by cash flow from Tenke operations. Assuming current metal prices and
operating conditions prevail, the Company expects to continue to receive
regular distributions from Tenke for the remainder of 2013.
About Lundin Mining
Lundin Mining Corporation is a diversified base metals mining company with
operations in Portugal, Sweden and Spain, 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 and in
the Kokkola cobalt refinery located in Finland.
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
www.lundinmining.com
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