Toronto, May 7, 2009 (TSX: LUN; OMX: LUMI) Lundin Mining Corporation (“Lundin Mining” or the “Company”) today reported an unaudited net loss for the quarter of $8.6 million, or $0.02 per share. Operating earnings were $38.2 million, down from $182.9 million in the first quarter of 2008. Cash flow from operations for the quarter was a cash outflow of $63.3 million, compared to a small inflow of $3.5 million in the first quarter of 2008.
(For table see attached file.)
Commenting on the quarter, Mr. Phil Wright, President and CEO said “This quarter has probably represented the bottom for us in terms of cash flow and earnings. We paid out $68.1 million in customer settlements that related to last quarter’s severe price falls and, post this, all our mining operations are now cash flow positive.
“The recent equity raising, coupled with a limited-term copper hedge, has removed the liquidity concerns we had at the start of the quarter and we are now in a position to be able to finalize a suitable debt facility in the near future. We expect this new facility to be in the order of $225 million, an amount that we judge to be more than adequate to meet our needs over the next few years.
“On the operating front, our wholly-owned operations continue to perform well with a lower cost base and it is with a great deal of satisfaction that we have seen the Tenke copper/cobalt project start-up and finalize its first shipment of copper to market.
“This quarter has been a real watershed for us and strategically we are now looking for new opportunities to create value knowing that we have a very sound platform comprising long-life, low-cost assets off which to work” Mr. Wright said.
Highlights
• Sales for the quarter were $123.4 million, down 60% compared to sales in the first quarter of 2008 of $305.7 million. The decline is entirely related to lower metal prices.
• Operating cost performance improved primarily due to decrease in treatment and refining charges of $22.8 million and cost control initiatives which involved a reduced number of contractors and lower materials costs. Total operating costs decreased by $28.2 million to $76.8 million from $105.0 million in the first quarter of 2008. The US dollar‐denominated cash cost per pound of metal produced was aided by a weakening of the Euro and Swedish krona.
• Operating earnings reduced by $144.7 million from $182.9 million in the first quarter of 2008 to $38.2 million in 2009. Price and price adjustments on previous concentrate sales accounted for a reduction of approximately $191 million, and this was partially offset by cost improvements at the operations and more favourable exchange rates.
• Cash flow from operations for the quarter was a cash outflow of $63.3 million, compared to a small inflow of $3.5 million in the first quarter of 2008. The Company paid $68.1 million to customers during the quarter for settlement of sales that occurred in previous periods.
• The Company announced the production of first copper was achieved during the quarter at the Tenke Fungurume copper‐cobalt project in which the Company holds a 24.75% interest. This was followed shortly thereafter by the first shipment of copper cathode from the operation. The project is still expected to reach commercial production in the second half of 2009, targeting full production for Phase I of 115,000 tonnes per annum (“tpa”) copper and at least 8,000 tpa cobalt.
• In March, the Company reported its Mineral Reserve and Resource estimates as at December 31, 2008. Notable items were: the replacement of mined reserves at the Company’s two key operations of Neves‐Corvo and Zinkgruvan; an initial copper reserve at Zinkgruvan; large copper reserves at Tenke Fungurume.
• The updated estimates also include a large increase in zinc reserves and resources at Neves-Corvo. Neves-Corvo is now not only a major copper producer but also a world-class zinc deposit and overall remains under-explored.
• In February, the Company agreed to terminate the plan of arrangement with HudBay Minerals Inc. that had been entered into in November of 2008.
Financial Position
• Net debt1) at March 31, 2009 was $259.5 million, as compared to a net debt of $145.5 at December 31, 2008. The increase in net debt during the quarter was primarily attributable to the cash outflow on the settlement of sales for which provisional payments had been previously received, as well as cash outlays on disposal of Aljustrel and capital expenditures.
• On April 27th the Company closed a bought‐deal public offering for total net proceeds of C$180.6 million ($149.2 million). The Company issued 92 million common shares of the Company at a price of C$2.05 per share.
• During April, the Company entered into multiple option collar arrangements to protect against near‐term decreases in the price of copper. The contracts establish a weighted average floor price of $1.87 per pound and a weighted average maximum price cap of $2.39 per pound. The contracts, which come due over the next 12 months, are for approximately 40,000 tonnes of copper.
• Cash on hand at March 31, 2009 was $51.3 million. Cash on hand at May 4, 2009 was approximately $135.1 million.
Outlook
• Production outlook for 2009 is unchanged:
(For table see attached file.)
• Market outlook remains uncertain. Although prices have recovered somewhat since December’s lows, the physical metal markets lack transparency and the Company remains prepared for any directional changes in near-term metal prices. Operating plans for Neves‐Corvo have been secured by the hedging arrangements for 40,000 tonnes of copper which ensures positive cash flow even if copper prices fall back to December’s lows of $1.30 per pound.
• Cash costs per pound are still expected to be in the region of 10% below 2008 but are dependent on exchange rates.
• Neves‐Corvo and Zinkgruvan will continue to be free cash flow2) positive and large amounts payable to customers at year end which drained cash balances have now been settled. Aguablanca is cash flow positive at current prices and will continue to be monitored to ensure it remains viable.
• Capital expenditures for the year are expected to be around $130 million which includes: $50 million of sustaining capital; $30 million of new investment in existing operations relating to the Zinkgruvan copper project and the Neves‐Corvo zinc expansion; and in the range of $40 – $50 million for Tenke (covering pro rata working capital, exploration drilling, expansion studies and other minor costs).
• The Company expects that its consistent operational performance and the completion of the bought deal financing for net proceeds of C$180.6 million ($149.2) should assist in the satisfactory restructuring of the credit facility during the second quarter.
1) Net debt/(surplus) is a Non-GAAP measure defined as available unrestricted cash less financial debt, including capital leases and other debt related obligations.
2) Free cash flow is a Non-GAAP measure defined as cash flows from operations, less sustaining capital expenditures.
All amounts are expressed in US dollars unless otherwise noted.
(For full report see attached file.)
