Vancouver, March 19, 2008 (TSX: LUN; OMX: LUMI; NYSE: LMC) Lundin Mining Corporation (“Lundin Mining” or the “Company”) today reported an unaudited net loss of $436.6 million for the fourth quarter 2007. The unaudited net loss is after non-cash impairment charges of $491.9 million ($543.1 million less income tax recovery of $51.2 million) relating to its merger with EuroZinc and the acquisition of Rio Narcea.
Unaudited earnings, before impairment charges and income taxes, remain unchanged from the recent preliminary release. Excluding one-time non-cash impairment charges, unaudited earnings after income taxes were $55.3 million or $0.14 per share for the fourth quarter 2007.
Management has completed its tests of impairment for goodwill and other long lived assets in accordance with the policies set out in the Company’s annual financial statements. Consensus metal price forecasts and independent estimates of foreign exchange rates and inflation available have been used in calculating these charges. The impairment charges were foreshadowed in the recent preliminary results release.
As previously reported, sales revenue in the fourth quarter of 2007 was US$253.1 million, an increase of 7.2% over the same period in 2006 as increased copper and nickel sales from the Neves-Corvo and the Aguablanca mines were partially offset by lower zinc volumes and prices. Included in the current quarter was US$56.9 million of pricing adjustments relating to final pricing of third quarter sales as well as year-end price adjustments based on the forward metal price curve. Sales of copper now represent over fifty percent of the Company’s revenue.
Net earnings after income taxes but before impairment charges for the fourth quarter 2007 were $6.9 million below the corresponding period in 2006 as a result of higher income tax expense in 2007. Increased sales were offset by the effect of lower zinc prices and higher costs resulting from the strength of the Euro. Approximately 75% of operating costs are based in Euro.
Commenting on the impairment charges, Mr. Phil Wright, the President and CEO of Lundin Mining said, “These are large one-off adjustments and relate primarily to changes in metal prices and exchange rates that have occurred since the EuroZinc and Rio Narcea transactions were undertaken.
“These items are non-cash and will have the effect of marginally increasing future earnings as a result of reducing future amortization”, Mr. Wright said.
The Company expects to file its audited results later this month.
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.
FOURTH QUARTER 2007 RESULTS
Unaudited Financial and Operational Highlights
(For table see attached file.)
Unaudited Results
The results contained in this release are unaudited and subject to change as a result of any adjustments that may arise as a result of the audit process.
Significant Highlights
· The net loss for the fourth quarter of 2007 was $436.6 million compared to net earnings of $62.2 million for the same period in 2006. Excluding the impairment charges and related income taxes, fourth quarter earnings were $6.9 million below the corresponding period in 2006 as a result of higher income tax expenses.
· Earnings for the year before impairment charges and income taxes increased 123% to $337.8 million following significant growth as a result of the merger with EuroZinc in October 2006 and the acquisition of Rio Narcea in July 2007.
· Significant increase in copper production with copper revenue representing greater than 50% of sales in 2007.
· Construction commenced on the Zinkgruvan Copper Project.
· Aljustrel mine achieved first zinc production in December 2007 in accordance with plan.
Fourth Quarter 2007 Operational Summary
· Production of contained copper increased 76% to 27,487 tonnes in the period. Production of contained zinc was 13% lower in the fourth quarter 2007 compared with the previous corresponding quarter and contained lead was 9% lower. These reductions arose from lower head grades at Zinkgruvan, lower recoveries at Galmoy and scheduled reductions at Storliden which is planned to close in 2008. Production of nickel metal contained in concentrate amounted to 1,690 tonnes. There was no nickel production prior to the acquisition of Aguablanca.
· Production of zinc concentrates from the Aljustrel mine started according to plan in December. Commercial production is expected to begin early in the second quarter. Ore is currently produced from the Moinho ore body. Production of ore from the richer Feitas ore body is expected to start during the second half of 2008.
Project Summary
· The Ozernoe Zinc Project in eastern Russia is undergoing a feasibility study where the main focus during the fourth quarter 2007 was the commencement of size throughput studies considering as a minimum a 6 million tonne per annum initial mill feed rate. Certain of the milestones contained within the mineral license are under negotiation. These milestones need to be extended and while there is no indication that such extensions will not be given, there is also no guarantee that these extensions will be granted.
· At the Tenke Fungurume Copper Project in DRC, concrete installation started during the fourth quarter 2007. Lundin Mining’s partner Freeport McMoRan Copper and Gold Inc. (“Freeport McMoRan”) announced updated capital costs with the latest estimated direct capital cost rising to $900 million. First copper production is now expected in 2009. On February 19, 2008 the Company received a copy of 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. the entity which is developing the mine and in which the Company has an equity investment of 24.75%. An appropriate response has been made to the Ministry of Mines.
· Study commenced on the Lombador Zinc Project. If this project is approved, it will significantly increase the Company’s zinc production.
Impairment Charges
After tax impairment charges of $491.9 million ($543.1 million less a future income tax recovery of $51.2 million) were recorded in the fourth quarter of 2007. Goodwill impairment charges of $350.0 million from the merger with EuroZinc and the acquisition of Rio Narcea and asset impairment charges of $193.1 million ($141.9 million after-tax) on the carrying value of the Aljustrel mine. These impairment charges were due primarily to the decline in the US dollar against the Euro and nickel prices. The Company’s operations in Europe incur operating and capital costs in Euro while revenue from concentrate sales is denominated in US dollars.
Restatement of financial statements
The Company was informed by its tax advisors that a lower tax rate than allowed had been used in Portugal resulting in an under declaration of past tax contributions. The Company has restated and refiled its financial statements for each of the interim periods in 2007 and restated the 2006 annual financial statements presented in the comparative information in the financial statements for the year ended December 31, 2007.
The restatement primarily affected the original allocation of the purchase price for the acquisition of EuroZinc Mining Corporation, the tax rate applied to the Portuguese operations since the date of their acquisition and the reversal of a future income tax benefit recorded in the third quarter. The effect on the earnings of the Company for the year ended December 31, 2006 is not significant.
A summary of the effect of the changes on previously reported net earnings of the Company is as follows:
(For table see attached file.)
(For full report see attached file.)
