(all amounts are in US Dollars unless otherwise stated)
Financial Highlights
Third quarter 2007 (2006):
- Sales $292.8 million ($98.9 million)
- EBITDA (i) $142.2 million ($59.2 million)
- EBITDA, excl. one-off charge (i) (ii) $152.9 million ($59.2 million)
- Net earnings (iii) $123.1 million ($30.7 million)
- Basic earnings per share (iv) $0.32 ($0.25)
- Diluted earnings per share (iv) $0.32 ($0.25)
- Cash provided by operations $155.6 million ($59.4 million)
January 1–September 30, 2007 (2006):
- Sales $806.6 million ($303.7 million)
- EBITDA (i) $464.8 million ($178.3 million)
- EBITDA, excl. one-off charge (i) (ii) $475.5 million ($178.3 million)
- Net earnings (iii) $336.7 million ($89.4 million)
- Basic earnings per share (iv) $1.05 ($0.73)
- Diluted earnings per share (iv) $1.05 ($0.72)
- Cash provided by operations $316.3 million ($136.5 million)
(i) Non GAAP measure. See Non-GAAP Performance Measures.
(ii) On the acquisition of Rio Narcea Gold Mines, Ltd. by Lundin Mining, the Aguablanca concentrate inventory as of July 17, 2007 was recorded at fair value. This resulted in the Company recording a one-time charge of $10.7 million during the third quarter related to the fair value adjustment on this inventory as this inventory was sold.
(iii) Net earnings include $77.9 million of gains from the sale of investments in the second and third quarters of 2007.
(iv) All figures related to shares and per share data are calculated as if the three-for-one stock split, effective February 5, 2007, occurred at the beginning of the first period presented.
Company Comments
“The Company’s potential for volume growth in the future is significant with major expansion programs in two core assets of the Company. Zinc production will be quadrupled at the Neves-Corvo mine from 2011 onward and production of copper concentrates will begin at the Zinkgruvan mine in 2010. In addition, our interest in the Tenke Fungurume project was consolidated into our assets during the period as well as the Aguablanca nickel-copper mine. We will continue to optimize the performance of operations while also focusing on the development of internal projects and unlocking their value. During the quarter the European vacation periods as well as planned maintenance were completed at the various operations. Nonetheless, processed tonnes of ore at both Neves-Corvo and Zinkgruvan for the nine-month period ended September 30, 2007 were greater than in the comparable period in 2006 and reflects productivity improvements being achieved operationally. Additionally, Aljustrel will start up zinc production during December of this year and will substantially contribute to the Company’s production profile next year. In a step to reduce cost and increase the efficiency of the management team it has been decided to close six of our present offices and relocate our Head Office to Geneva with business development activities remaining in Vancouver.”
Highlights
· The acquisition of Tenke Mining Corp. (“Tenke”) was completed July 3, 2007 following the approval by the shareholders’ of both companies and the Superior Court of Justice of the Province of Ontario. Tenke’s main asset is a 24.75% holding in the Tenke Fungurume project in the Democratic Republic of Congo (“DRC”), which is one of the largest and highest grade, undeveloped copper-cobalt deposits in the world. Work is in progress to develop the deposit into a low-cost open-pit mine and start-up is planned for in 2009. Freeport McMoRan Copper & Gold Inc., through one of its Phelps Dodge subsidiaries, holds a 57.75% interest in Tenke Fungurume and is the operator of the project.
· On July 17, 2007, the Company acquired control of Rio Narcea Gold Mines, Ltd. (“Rio Narcea”). As at August 20, 2007, the final day of Lundin Mining’s amended offer to acquire all the shares and share purchase warrants of Rio Narcea, a total of 158,018,283 shares and 20,099,020 warrants had been tendered, representing 92.9% of the fully diluted shares outstanding. Subsequent to the expiration of the final amended tender offer, the Company undertook a compulsory acquisition transaction under the Canada Business Corporations Act to take up the balance of the shares. The Company, as a majority holder of the share purchase warrants, also approved an amendment to the terms of the indenture governing the warrants, allowing Rio Narcea to redeem all, but not less than all, of those securities. To finance these two transactions, a final payment was made to Computershare Investor Services in mid-October, thereby completing the redemption, by Rio Narcea, of 100% of the share purchase warrants and the acquisition, by the Company, of 100% of the issued and outstanding shares in Rio Narcea.
Concurrent with the offer to purchase Rio Narcea, the Company signed an option agreement with Red Back Mining Inc. for the sale of the Tasiast gold mine for cash consideration of $225 million and the assumption of $53.1 million of debt and hedging contracts. The sale was completed on August 2, 2007.
· Common shares of Lundin Mining commenced trading on the New York Stock Exchange (“NYSE”) on September 20, 2007. With the commencement of trading on the NYSE, the Company’s shares no longer trade on the American Stock Exchange. Lundin’s common shares continue to trade on the Toronto Stock Exchange and in the form of Swedish Depository Receipts on the OMX Nordic Exchange.
· The Company completed its proposed sale of silver contained in concentrate from the Neves-Corvo and Aljustrel mines to Silverstone Resources Corp. (“Silverstone”) on September 28, 2007. Under the terms of the agreement, Lundin received an up-front cash payment from Silverstone of $42.5 million together with 19,656,250 Silverstone common shares, the latter of which are subject to a four-month hold period. Over the life of the agreement, Lundin will also receive cash payments upon delivery of its silver in concentrate to Silverstone in an amount equal to the lesser of (a) $3.90 per ounce of silver contained in concentrate (subject to a 1% annual inflationary adjustment after three years and yearly thereafter) and (b) the then prevailing market price per ounce of silver.
· In early October, the Company announced major expansion plans at the Neves-Corvo mine in Portugal. Production of zinc in concentrate from the Lombador massive sulphide deposit at the Neves-Corvo mine is scheduled to start in 2011 following a feasibility study estimated to be completed in the second half of 2008. Production from this deposit is expected to increase zinc ore production at Neves-Corvo from 400,000 tonnes per annum (“tpa”) to 2.4 million tpa, significantly increasing the Company’s overall annual zinc and lead production.
· In early October, the Company also announced major expansion plans at the Zinkgruvan mine in Sweden. A capital investment is underway to exploit a high grade copper deposit lying adjacent to one of Zinkgruvan’s zinc deposits. By 2010, ore production is expected to increase 33% to 1.2 million tpa with the commencement of copper concentrate production.
· Significant activity took place during the quarter on the Ozernoe Project in southeastern Siberia in preparation for construction work and final feasibility. A compilation of all technical data for final work on the bankable feasibility study for engaging all independent contract services was completed; ongoing drilling during the quarter continues to favourably support the original geological determinations; a supply of potable water was established and the construction camp and power line installation, now underway, is expected to be completed by the end of the fourth quarter. The Kholoy River bridge, critical to accommodating the delivery of materials and supplies to the site, was also completed during the quarter.
· Construction of the second copper grinding and flotation line at the Neves-Corvo mine was completed and the circuit commissioned in October. This new circuit can now treat copper slag or copper ores at a rate of up to 100 tonnes per hour.
· Total ore mined at the Company’s operations was 11% greater in the third quarter of 2007 as compared with the same period in 2006. Excluding the Storliden production, copper production was up 11% over the same period a year earlier while zinc, lead and nickel production were relatively stable.
· Both the SIPTU and TEEU unions at Galmoy reached labour agreements with management, and it is expected that production output will return to higher levels.
· Production start-up at the Aljustrel zinc-lead-silver mine, delayed due to the late delivery of some equipment for the ore processing facilities, is scheduled to commence in the latter half of the fourth quarter 2007.
· Lundin Mining Corp. is pleased to announce the appointment of John Andreatidis as Managing Director of Somincor S.A., with immediate effect. John, 41 and an Australian citizen, graduated in Metallurgy from the University of Queensland, Australia in 1987 and subsequently completed an MSc in Engineering Science from the same university in 2001. John joined Somincor as Principal Metallurgist in October of 2006 and brings 20 years of experience within the base metals industry having played key roles in a number of operations with his previous employers, the BHP Billiton Group and Mount Isa Mines Limited.
(For full report see attached file.)
