Vancouver, August 7, 2008 (TSX: LUN; OMX: LUMI; NYSE: LMC) Lundin Mining Corporation (“Lundin Mining” or the “Company”) today reported unaudited net earnings, before impairment charges and related taxes, of $56.2 million ($0.14 per share) for the second quarter 2008. Operating earnings* for the first six months were $320 million ($0.82 per share), exceeding internal expectations by 8%.
Production of all metals was in-line with, or ahead of, internal expectations with the exception of a shortfall in zinc production from Aljustrel which is under-going start-up. Copper and nickel production forecasts for 2008 are being revised upwards to 96,000 tonnes contained copper and 7,000 contained nickel. Contained lead production is forecast at 45,000 tonnes and contained zinc at 181,000 tonnes. The zinc forecast is down owing to a revised forecast for Aljustrel of 30,000 tonnes compared to 51,000 tonnes previously.
Aljustrel is in the pre-production stage and is a high-cost zinc mine in a current low-zinc price environment. Accordingly, the Company has written down the Aljustrel mining assets to their estimated fair value. This non-cash impairment charge of $164.6 million ($152.8 million plus a future income tax expense of $11.8 million) results in an unaudited net loss of $108.4 million for the quarter. The Company is reviewing its options for the Aljustrel mine including a potentially earlier extraction of known copper resources.
A major new zinc/copper deposit was discovered at Neves-Corvo which has the potential to be the largest combined zinc/copper deposit yet discovered at the mine. A key objective is internal, organic growth and significant investment is being made in exploration, both near-mine and regionally in targeted areas. Neves-Corvo remains underexplored with significant upside potential. In addition, the Company has enjoyed considerable encouraging exploration results at Aguablanca and Aljustrel.
The Tenke copper/cobalt project continues to make excellent progress. Tenke will be one of the largest and lowest cost copper mines in the world. Production remains on track for the second half of 2009. First phase production is scheduled at 115,000 tpa copper and 8,000 tpa cobalt and the objective is to reach 500,000 tpa copper. Lundin Mining is part of a consortium of mining companies led by Freeport McMoRan Copper and Gold Inc. to provide national highway upgrading assistance between the cities of Likasi and Kolwezi. Social investment programs also continued to expand including project supported local micro enterprise businesses, agricultural capacity building initiatives, malarial abatement, new medical facilities, school upgrades and additional regional village fresh water supply.
The Company’s payable metal sold increased substantially during the quarter. However, sales revenue decreased 4% from the first quarter to $294.1 million as a result of lower metal prices and was affected by the difference in price and price adjustments in the quarters of $69 million. Copper sales were 25,600 tonnes, 32% higher than the previous quarter, with a consequent reduction in inventory on hand. Copper accounted for 70% of revenues for the quarter. Zinc sales were 39,300 tonnes, 1.9% lower; lead sales were 12,400 tonnes, 29% higher; and nickel sales were 1,850 tonnes, 15% higher than the previous quarter. Zinc, lead and nickel prices decreased by 13%, 19% and 11%, respectively, and copper increased by 9%, compared to the first quarter 2008. Compared to the second quarter of 2007, the zinc and nickel prices were down 42% and 47%, respectively, while lead and copper prices were up 7% and 11%, respectively.
Net earnings, excluding impairment charges, decreased $22.6 million from the first quarter to $56.2 million despite a pre-tax contribution of $42 million from increased sales volume and lower income taxes of $16 million. The reduction reflects the pre-tax effect of lower metal prices, including differences in price adjustments between the quarters of $69 million, estimated increases in costs of $11 million and estimated foreign exchange difference of $4 million.
Mr. Phil Wright, the President and CEO of Lundin Mining commented, “We are pleased with the operating performance, the operating earnings for the six months to June 2008 of $320 million were ahead of our own expectations.
“Excluding Aljustrel, which is in a pre-production phase, production of metal contained in concentrate was better than expected and we have accordingly increased our full year production forecast for copper and nickel.
“Aljustrel has always been identified as a low grade/high cost mine and it is not viable at current zinc prices. Management is studying alternative scenarios for the Aljustrel mine, which may include an earlier extraction of the known copper resources; however, we consider it prudent to reduce our carrying value in line with the residual value of the assets. A decision on the future of Aljustrel is likely before the end of the third quarter. The situation remains uncertain and there may be further impairment charges arising from additional capital and pre-production operating expenditures at Aljustrel.” Mr. Wright said.
*Operating earnings are earnings before general exploration, amortization, derivatives, foreign exchange, impairment charges, interest and other items, investments and taxes.
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 Neves-Corvo zinc expansion and the Lombador zinc/copper deposit developments in southern Portugal, the Ozernoe Project in Russia and the Tenke Fungurume copper-cobalt project in the Democratic Republic of Congo. 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
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.
(for complete report see attached file)
