Toronto, August 6, 2009 (TSX: LUN; OMX: LUMI) Lundin Mining Corporation (“Lundin Mining” or the “Company”) today reported unaudited net income for the quarter of $43.5 million, or $0.08 per share. Operating earnings were $91.0 million, down from $137.2 million in the second quarter of 2008. Cash flow from operations during the quarter was $63.7 million, compared to $118.3 million in the second quarter of 2008.
(For table see attached file)
Commenting on the quarter, Mr. Phil Wright, President and CEO said, “We have seen a strong rebound from the low point last quarter with measures taken to improve performance and reduce cost paying off.
“Net income and cash flow are substantially improved from last quarter and our wholly-owned operations are well ahead of our internal expectations.
“Tenke reached another important milestone, with first sales recorded during the quarter. Sales of 12,000 tonnes of copper were recorded with production of approximately 16,000 tonnes. Our partner, and Tenke operator, Freeport McMoRan Copper and Gold, continues to deliver on the project timelines and we expect full production in the second half, providing substantial cash flows from operations at current copper and cobalt prices.”
Commenting on the outlook Mr. Wright said, “We remain cautious in the short-term with a continued focus on tight expenditure controls. In the medium to longer term, supply constraints are expected to emerge with the potential for base metal prices to move significantly higher.”
Highlights
• Sales for the quarter were $194.8 million, down 34% compared to sales in the second quarter of 2008 of $294.1 million. The decline is related to lower metal prices.
• Operating cost performance reflected reductions in contractor and materials costs, the modified operating plan at Aguablanca and the progressive closure at Galmoy. Total operating costs decreased by $43.2 million to $93.5 million from $136.7 million in the second quarter of 2008.
• Operating earnings of $91.0 million for the quarter were well ahead of internal expectations.
• Cash flow from operations for the quarter was an inflow of $63.7 million. This was down from $118.3 million in the second quarter of 2008 as a result of lower metal prices.
• First copper sales were recorded at the Tenke Fungurume copper‐cobalt project in which the Company holds a 24.75% interest. A total of 12,000 tonnes were sold during the quarter. Cash payments to fund Tenke Project activities during the quarter were $29.4 million.
• Subsequent to the end of the quarter, the Company finalized a revised plan for the Aguablanca nickel mine based on a newly optimized pit design. Aguablanca is currently net cash flow positive and has run at a cash cost of $4.20 per pound of nickel, year to date. It is expected to remain cash flow positive over the life of the mine at an average price of $4.50 per pound of nickel1. High initial strip ratios in the next 2 ½ years (11.5:1) equate to an initial higher cost requiring an average price around $5.50 per pound1 to achieve net cash flow break even over that period.
• The Galmoy mine achieved a well-controlled closure of mining operations while at the same time exceeding expectations by generating positive operating earnings and net cash flow.
Financial Position
• On July 6, 2009, the Company completed the restructuring of its credit facility. The revised terms incorporated in the Third Amending Agreement provide for a three year fully-revolving credit facility of US$225 million, and:
• Interest at LIBOR plus 4.5% until March 2010 and from April 2010 at LIBOR plus 3.5% to 4.5% depending upon the leverage ratio at the Company; and
• Financial covenants customarily required for a revolving–term facility, including minimum tangible net worth, interest coverage ratio and leverage ratio.
The Third Amending Agreement removes the prohibitions on acquisitions and disposals that were imposed by the Second Amending Agreement and Waiver. Instead, it establishes that security will be extended to material assets acquired and specifies that reductions in the facility if the Company’s principal mining assets are disposed or in whole or in part.
• Operating cash inflow of $63.7 million covered all capital expenditures and the funding of Tenke. Net proceeds of $148.8 million from the bought deal financing in April 2009 reduced the net debt2 to $110.7 million from $259.5 million at the end of the previous quarter. Cash on hand at June 30, 2009 was $148.1 million.
• On April 27th the Company closed a bought‐deal public offering for total net proceeds of $148.8 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 expire over 12 months, were for approximately 40,000 tonnes of copper.
1) Based on a copper price of $2.30/lb and a €/$ of 1.40.
2) Net debt is a Non-GAAP measure defined as available unrestricted cash less financial debt, including capital leases and other debt related obligations.
(For full report see attached files.)
