Published: thu, May 15 2008 16:30 CEST På svenska Lundin Mining: LUNDIN MINING RELEASES FIRST QUARTER 2008 RESULTS
Vancouver, May 15, 2008 (TSX: LUN; OMX: LUMI; NYSE: LMC) Lundin Mining Corporation (“Lundin Mining” or the “Company”) today reported a net earnings of $78.8 million for the first quarter 2008, representing an increase of 51% compared with the first quarter 2007. Earnings per share were up 11%, on the expanded capital, to $0.20 for the quarter.
Sales revenue for the quarter of US$305.7 million is an increase of 58% over the previous corresponding period. Copper and lead prices have risen year-on-year while zinc and nickel prices have fallen. A large part of the increase is related to the inclusion of Aguablanca sales (acquired in July 2007).
Production of all metals was in-line with, or ahead of, internal expectations with the exception of a small shortfall in zinc, stemming from delays in circuit installation at the Aljustrel mine. Metal sales were generally lower than expected owing to timing of shipments at quarter end. This should correct over the balance of the year.
Net earnings increased by $26.7 million owing primarily to increases in copper and lead prices more than offsetting the sharp fall in the price of zinc. In addition, price adjustments on unsettled sales at December 31, 2007 were all positive. Costs, in US dollar terms continue to rise as the dollar weakens.
Mr. Phil Wright, the President and CEO of Lundin Mining commented, “The first quarter was stronger than we expected owing primarily to higher settlement prices on provisionally priced 2007 sales.
“We continue to see a strong operating performance at each of the mines with production running at near record levels and we remain comfortable with our previous production guidance.
“Aljustrel has started later than expected and there remains some downside risk if start-up parameters are not met. This may reduce zinc forecasts by up to 7,000 tonnes however we are working to offset this elsewhere” Mr. Wright said.
About Lundin Mining
Lundin Mining Corporation is a rapidly growing, diversified base metals mining company with operations in Portugal, Spain, Sweden and Ireland. The Company currently has six mines in operation producing copper, nickel, lead and zinc. In addition, Lundin Mining holds a development project pipeline which includes the world class Tenke Fungurume copper-cobalt project in the Democratic Republic of Congo and the Ozernoe zinc project in Russia. The Company holds an extensive exploration portfolio and interests in international mining and exploration ventures.
For further information, please contact:
Anders Haker, Vice President and CFO: +46-708-10 85 59
Catarina Ihre, Manager, Investor Relations: +46-706-07 92 63
Sophia Shane, Investor Relations North America: +1-604-689-7842
Certain of the statements made and information contained herein is “forward-looking information” within the meaning of the Ontario Securities Act or “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 of the United States. 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 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, lead and zinc; 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.
FIRST QUARTER 2008 RESULTS
Unaudited Financial and Operational Highlights
(For table see attached file.)
Unaudited Results
The results contained in this release are unaudited.
Significant Highlights
• The net earnings for the first quarter of 2008 was $78.8 million compared to net earnings of $52.1 million for the same period in 2007 representing an increase of 51%. Sales in the period was $305.7 million or 58% greater compared with the first quarter 2007. The significant increase is partly a result of the acquisition of Rio Narcea in July 2007 and higher copper and lead prices.
• During the first quarter 2008, the average prices for zinc, lead and nickel decreased by 8%, 11% and 2%, respectively, and copper increased by 7%, compared to the fourth quarter 2007. Compared to the first quarter of 2007, the zinc price was down 30% while lead and copper prices were up 62% and 31%, respectively. The inventory levels of zinc, lead and nickel on the LME all increased during the first quarter 2008 compared to the fourth quarter 2007.
• Unit costs declined at Zinkgruvan, Aguablanca, Galmoy and Storliden despite an increase in the value of the European currencies, in which most of the Company’s costs are incurred. Neves-Corvo’s unit costs increased 15% from the same quarter last year owing to the strength of the Euro, lower by-product credits and an increase in quarter-end inventories.
• The Company has announced its updated Mineral Reserve and Resource estimate as of December 31, 2007. The 2007 Reserve and Resource estimate represents a significant increase over 2006 due to exploration success in: expanding reserves and replacing production; a reassessment of cut-off grades; and the acquisition of Rio Narcea which added nickel to the Company’s portfolio.
• Considerable investment is being made in near-mine exploration and encouraging results are emerging at Aguablanca, Neves-Corvo and Aljustrel
First Quarter 2008 Operational Summary
• First quarter production was generally in-line with the Company’s expectations.
• Production of contained zinc and lead increased 14% and 14%, respectively, in the quarter compared to the previous corresponding period in 2007. The first quarter of 2007 was significantly affected by industrial actions at the Galmoy mine. Higher zinc and lead grades at the Zinkgruvan mine in the period further contributed to the increased zinc and lead production. Production of contained copper was 1% higher in the first quarter 2008 compared with the same period in 2007. Higher ore production was partially off-set by lower recoveries and head grades at the Neves-Corvo and Storliden mines. Production of nickel metal contained in concentrate amounted to 1,848 tonnes. There was no nickel production prior to the acquisition of Aguablanca.
• In the Aljustrel mine, commercial production is expected to begin in the third quarter of 2008. The Moinho and Feitais operations are scheduled to reach full production during the first quarter of 2009.
• The Company drew a further $95.9 million on the $575 million committed revolving credit facility. Cash flow for the quarter was lower than expected owing to the purchase of $18 million of treasury shares in the open market, payments of current taxes and higher accounts receivable and product inventories reflecting the timing of shipments. Cash flow expectations for the year remain unchanged. At quarter-end, net debt stood at $104 million.
Project Summary
• Feasibility study work on the Ozernoe project in Eastern Siberia, Russia progressed during the first quarter 2008. A new Project Director was retained and commenced work in February to lead the project forward. There are a number of challenging issues being addressed on the project including renegotiation of certain milestones contained within the original mineral license. New “strategic sector investment policy” affecting natural resource development in Russia has now passed through the 2nd reading of 3 stages. This new policy has potentially far reaching affects on mining project developments for deposits of the scale of Ozernoe. The Company is following this issue closely.
• Construction progress improved during the first quarter 2008 for the Tenke Fungurume project. The Company’s partner, Freeport McMoRan Copper and Gold Inc. (“Freeport”), performed an overall review of project costs and have advised Lundin Mining that the expected capital costs of the project are now forecast to be materially above their November 2007 forecast of $900 million, with the updated estimate at $1.75 billion. Estimated cost of the project continues to be tracked closely by Freeport to mitigate risks of further increase; however, these can not be ruled out. On February 19, 2008, the Company received a letter from the Ministry of Mines, Government of the Democratic Republic of Congo pertaining to the review of mining contracts in the country. The letter was addressed to Tenke Fungurume Mining S.A.R.L. (“TFM”) the entity which is developing the mine and in which the Company has an equity investment of 24.75%. Meetings have been held with DRC Government officials and TFM are cooperating fully with requisite authorities respecting the need for transparency and constructive dialogue to aid in the completion of the contract review process in a successful, timely manner.
• Studies continue on the Lombador zinc mineralised bodies with a target of commencing zinc production in late 2011 or early 2012.
• In the Zinkgruvan Copper Project, ramp construction and underground drifting is progressing on schedule. During the quarter, a process plant package was negotiated and long delivery equipment is on order.
Outlook
• The outlook for 2008 production remains unchanged and is expected to be 92,000 tonnes of contained copper, 202,000 tonnes of contained zinc, 6,800 tonnes of contained nickel and 47,000 tonnes of contained lead. Ramp-up of the Aljustrel mine continues and we should have a better guide as to its likely full-year production by the end of second quarter. In the forecast, Aljustrel accounts for 51,000 tonnes of contained zinc. It has only produced 2,932 tonnes of contained zinc in the first quarter owing to a later than anticipated installation of the zinc circuit. Aljustrel remains the most difficult part of our production to forecast at this stage. A more accurate full year production forecast will be given at the end of the second quarter.
• Treatment charges for zinc concentrates are yet to be settled; however, they are expected to increase in favour of the smelters.
• Development continues with respect to the Tenke Fungurume Copper Project in the DRC and the Zinkgruvan Copper Project. Feasibility studies continue with respect to the Neves-Corvo Lombador Zinc Project and Ozernoe Zinc Project.
• Capital expenditures are still expected to be in the region of $350 million to $400 million in 2008 despite an expected increase of $30 million for the Tenke Project. Tenke expenditures are expected to be between $180 million to $210 million and sustaining capital is expected to be $90 million. The balance is other new investment expenditure. Exploration is expected to remain near or slightly above 2007 levels.
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Expressed in United States dollars, unless otherwise indicated)
THREE MONTH PERIOD ENDED MARCH 31, 2008
This Management Discussion and Analysis (“MD&A”) of Lundin Mining Corporation (“Lundin Mining” or the “Company”) has been prepared as of May 14, 2008. The MD&A is intended to supplement and complement the accompanying unaudited interim consolidated financial statements of the Company and the notes thereto for the three months ended March 31, 2008 and should also be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto for the year ended December 31, 2007.
Please also refer to the cautionary statement of forward-looking in formation at the end of this MD&A. Additional information relating to the Company is available on the SEDAR website at www.sedar.com. All financial information in this MD&A is prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), and all dollar amounts, including comparatives, are expressed in US dollars unless otherwise indicated.
Overview
Lundin Mining is a Canadian-based international mining company that owns and operates the Neves-Corvo copper/zinc mine and the Aljustrel zinc mine in Portugal, the Zinkgruvan zinc/lead/silver mine in Sweden, the Galmoy zinc/lead mine in Ireland and the Aguablanca nickel/copper mine in Spain. Additionally, the Company owns the Storliden copper/zinc mine in Sweden, which is operated by Boliden AB. The Company also holds a 24.75% equity interest in the Tenke Fungurume Project, a major copper-cobalt project under development in the Democratic Republic of Congo (“DRC”) and a 49% interest in the Ozernoe zinc project in eastern Russia.
Recent Developments and Highlights
Phil Wright appointed President and CEO of Lundin Mining Corporation
On January 16, 2008, Mr. Phil Wright was appointed President and Chief Executive Officer of Lundin Mining Corporation and joined the Board of Directors of the Company. Mr. Wright is an experienced Chief Executive with expertise in operations, large-scale feasibility studies and project management. He has post-graduate finance qualifications, is a graduate of Harvard’s School of Business (PMD) and is a Fellow of the Australian Institute of Company Directors and the Financial Services Institute of Australasia.
Developments in the Tenke Fungurume Copper Project
Under the direction of operating partner, Freeport McMoRan Copper and Gold Inc. (“Freeport”), construction progress advanced during the first quarter 2008 for the Tenke Fungurume copper-cobalt deposit in southern Katanga Province, DRC. The first phase of production facilities is designed to produce 115,000 tonnes of copper cathode per year and a minimum 8,000 tonnes of cobalt in hydroxide and cathode metal per year.
As previously announced on April 23, 2008, Freeport advised the Company of further capital cost increases on the Tenke Project. Capital cost estimates for the project were estimated in October 2007 to be $900 million ($1 billion including advances to a third party for the refurbishment of provincial power facilities). A recent capital cost review prepared in April 2008 indicates estimated capital costs of approximately $1.75 billion (approximately $1.9 billion including loans to a third party for power development). These estimates include substantial amounts for infrastructure to support a larger scale operation than the initial phase of the project.
On February 19, 2008, the Company received a copy of a letter from the Ministry of Mines, Government of the Democratic Republic of Congo (“the Government”) pertaining to the review of mining contracts in the country. The letter was addressed to Tenke Fungurume Mining S.A.R.L. (“TFM”), the entity which is developing the mine and in which the Company has an equity investment of 24.75%.
In the letter, the Ministry of Mines requests that further discussions take place regarding the TFM mining partnership with Gecamines, the DRC state-owned mining company. Discussions have been requested in respect of such matters as the quantum of transfer payments; Gecamines percentage share ownership in TFM; Gecamines involvement in the management of TFM; regularization of certain issues under Congolese law; and the implementation of social plans.
The Company believes that its agreements with Freeport and TFM’s agreements with the Government are legally binding, that all associated issues have been dealt with fully under Congolese law and that the overall fiscal terms previously negotiated and incorporated into the Amended and Restated Mining Convention exceed the requirements of the Congolese Mining Code. An appropriate response has been made to the Ministry of Mines.
Updated Mineral Reserves and Resources
On March 28, 2008, the Company announced its updated Mineral Reserve and Resource estimate at December 31, 2007. The 2007 Reserve and Resource estimate represents a significant increase over 2006 resulting from: exploration success in expanding reserves and replacing production; a reassessment of cut-off grades; and the acquisition of Rio Narcea which added nickel to the Company’s portfolio.
For further information on the Company’s Mineral Reserves and Resources, see the March 28, 2008 news release or the Company’s web site: www.lundiningmining.com.
Plant Expansion at Neves-Corvo
On May 5, 2008, the Company announced the construction of an additional circuit within the existing copper plant at the Neves-Corvo mine in Portugal to recover copper and zinc currently lost to tailings. The new circuit will facilitate recovery of a proportion of the zinc and copper bearing minerals from the tailings stream as well as provide overall improved management of the mainstream concentrate. Over the life of the mine this project is expected to produce 9,500 tonnes of payable copper, 29,000 tonnes of payable zinc and 370,000 ounces of payable silver.
For further information on the Company’s new zinc circuit at the Neves-Corvo mine, see the May 5, 2008 news release or the Company’s web site: www.lundiningmining.com.
(For full report see attached file.)
