Toronto, July 29, 2011 (TSX: LUN; OMX: LUMI) Lundin Mining Corporation (“Lundin
Mining” or the “Company”) today reported net income of $57.7 million ($0.10 per
share) for the second quarter of 2011, an increase of $15.4 million from the
$42.3 million ($0.07 per share) for the second quarter of 2010.
The prior year comparative figures have been restated in accordance with the
transition to IFRS.
Paul Conibear, President and CEO commented, “While results for the quarter are
below our expectations, as a result of lower than expected metal production and
higher unit costs, the monthly mine plans going forward particularly at
Neves-Corvo, provide for a significantly improved second half. Towards the end
of the third quarter we should also expect our first cash returns from Tenke,
contributing significantly to our operating cash flows.
At Neves-Corvo, lower grades in the quarter resulted in less metal produced and
consequently higher cash costs on a per pound basis. As well, our mid-year
plant maintenance shut-down was brought forward to the end of June to coincide
with other tie-in activities necessary for the start of commissioning of the
new zinc circuit and this also affected Q2 production.The new zinc plant
started up on time and on budget;however, given the strong copper prices as
compared to zinc, we will utilize the new zinc circuit to process copper ore as
soon as commissioning is complete in order to maximize copper production and
revenues for the balance of the year. We were pleased with the fact that we
mined and milled record tonnes during this quarter and this will assist us in
production recovery for the balance of the year.
At Zinkgruvan we treated a high volume of low-grade overflow material that had
accumulated over the past year and while this detracted somewhat from planned
production we did build up our ore stockpiles on surface to record levels which
will allow us to maximize mill throughput through the summer holiday season. We
also removed significant amounts of waste stored underground, providing
additional in-mine flexibility for mining and ore handling activities going
forward. As a result of the added haulage capacity from the recently completed
daylight ramp, for the first time in many years, the mine is able to produce at
a rate greater than the mill. We are now working on de-bottlenecking the front
end of the plant to pursue great capacity from the entire operation. ”
Summary financial results for the quarter are as follows:
US $ millions (except per share Three Months Ended June 301
amounts)
2011 2010
Sales 184.0 183.1
Operating earnings2 82.2 82.1
Net income 57.7 42.3
Basic & diluted income per share 0.10 0.07
Cash flow from operations 102.5 68.9
Highlights
Operational and Financial Highlights
• Copper production was below expectations as a result of low head grades at
Neves-Corvo coupled with annual plant maintenance brought forward to the
month of June 2011. Zinc production was in line with expectations;
shortfall in production at Zinkgruvan due to treatment of accumulated
material from the floatation overflow facility was compensated by higher
production at Galmoy.
• Challenging ground conditions surrounding important high grade massive
sulphide stopes continued to hamper production at Neves-Corvo and
necessitated mining in lower grade stockwork zones. In addition, economic
cutoff grades were lowered given continuing high metal prices and it is
noted that the higher proportion of lower grade, out-of-reserve ore which
accounted for 25% of tonnage milled, contributed approximately 15% of
copper production for the quarter. Overall copper grade of ore processed
during the quarter was 2.2%.
• Operating earnings1 of $82.2 million is consistent with the $82.1 million
reported in the second quarter of 2010. Favourable price and price
adjustments ($59.9 million effect) were offset by lower volume ($25.8
million effect), higher per unit costs ($22.5 million effect) and foreign
exchange ($14.2 million effect).
□ Sales for the quarter were $184.0 million compared to $183.1 million
for the second quarter of 2010.Higher metal prices ($59.9 million
effect) and recommencement of mining operations at Galmoy ($8.5 million
effect) more than offset lower sales volume from Neves-Corvo and
Zinkgruvan ($46.8 million effect) and suspended mining operations at
Aguablanca ($20.7 million effect). Average copper price was 30% higher
than the same quarter in 2010; lead and zinc were also up 31% and 12%,
respectively.
□ Net income of $57.7 million ($0.10 per share) was $15.4 million ahead
of the $42.3 million ($0.07 per share) reported for the second quarter
of 2010.The increase is largely the result of increased equity earnings
from Tenke of $23.7 million and lower taxes of $31.6 million from the
reversal of a valuation allowance and from the one time Portuguese tax
increase in the second quarter of 2010, partially offset by gains on
derivative contracts and marketable securities reported in 2010.
□ Cash flow from operations for the current quarter was $102.5 million,
compared to $68.9 million for the corresponding period in 2010.The
increase of $33.6 million relates mainly to:changes in working capital
associated with higher collection of receivables in the current quarter
and the payment of $9.1 million to settle derivative contracts in the
second quarter of 2010.
Cash flow from operations does not include cash flow related to Tenke which is
referred to on page 3.
Corporate Highlights
• On July 12, 2011, the Company acquired Belmore Resources Ltd. for cash
consideration of approximately £6.2 million ($9.9 million). Belmore has a
100% interest in eleven licenses in County Clare, Ireland which are
currently being explored in joint venture with Lundin Mining.
Tenke Fungurume
• Freeport-McMoRan Copper & Gold Inc. stated they are expecting copper
production of 126,500 tonnes in 2011.
For the quarter ended June 30, 2011, Tenke production was 29,891 tonnes of
copper; 34,138 tonnes of copper were sold at an average realized price of $4.08
per pound.
• As at June 30, 2011, the amount outstanding for the Excess Overrun Cost
facility (“EOC facility”) related to the Company's proportionate share of
the Phase I development at Tenke was $32.0 million, a reduction of $38.6
million during the quarter.At present metal prices, and given contemplated
partner capital and tax funding, it is expected that the EOC will be repaid
towards the end of the third quarter of 2011.
Attributable cash flow from Tenke, including repayments of the EOC facility,
was as follows:
┌──────────────────────────┬─┬──────────────────────────────┐
│ │ │Three months ended June 30 │
├──────────────────────────┼─┼──────────────┬───────────────┤
│(US$ millions) │ │ 2011│ 2010│
├──────────────────────────┼─┼──────────────┼───────────────┤
│Cash advances to Tenke │ │(10.5) │(6.8) │
├──────────────────────────┼─┼──────────────┼───────────────┤
│Repayments on EOC facility│ │38.6 │26.8 │
├──────────────────────────┼─┼──────────────┼───────────────┤
│Attributable net cash flow│ │ 28.1│20.0 │
└──────────────────────────┴─┴──────────────┴───────────────┘
Financial Position and Financing
• Net cash1 at June 30, 2011 was $308.2 million compared to $107.8 million at
June 30, 2010 and $262.0 million at March 31, 2011.
The increase in net cash during the quarter is primarily attributable to cash
flow from operations ($102.5 million) offset by investment in mineral property,
plant and equipment ($47.3 million) and Tenke Fungurume ($10.5 million).
• Cash on hand at June 30, 2011 was $342.2 million.
□ As at July 25, 2011, cash on hand is approximately $328.6 million.
Outlook
2011 production and cost guidance was released on July 21, 2011 in a news
release entitled Lundin Mining Provides Corporate Update and Revised Outlook.
2011 Capital Expenditure Guidance
Guidance for total capital expenditures for the year ($US290 million) is
unchanged from that outlined in the Company's Q1 report.Final decisions on
capital investment levels for Tenke Fungurume are ultimately made by Freeport
McMoRan, the mine's operator, and are not yet in place until the expansion
feasibility study is complete, althoughcritical path work is already well
advanced with early funding. The expansion study is expected to be complete in
the third quarter of 2011.
Selected Quarterly Financial Information
┌───────────────────────────┬───────────────────────┬───────────────────────┬─┐
│ │Three months ended June│Six months ended June │ │
│ │30 │30 │ │
├───────────────────────────┼───────────┬───────────┼─────────────┬─────────┴─┤
│(USD millions, except per │2011 │2010 │2011 │2010 │
│share amounts) │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Sales │184.0 │183.1 │395.4 │324.8 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Operating earnings1 │82.2 │82.1 │195.7 │148.0 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Depreciation, depletion and│(37.6) │(32.2) │(73.1) │(67.9) │
│amortization │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│General exploration and │(12.5) │(5.6) │(21.4) │(10.3) │
│project investigation │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Finance (costs) income │(3.7) │10.5 │(2.0) │22.8 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Income from equity │32.0 │8.3 │56.9 │22.8 │
│investment in Tenke │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Other income and expenses │(2.8) │10.7 │(19.3) │20.3 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Income before income taxes │57.6 │73.8 │136.8 │135.7 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Income tax recovery │0.1 │(31.5) │(7.9) │(41.6) │
│(expense) │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Net income │57.7 │42.3 │128.9 │94.1 │
├──────────────────────────┬┴──┬───┬────┼───────────┼─────────────┼───────────┤
│ │ │ │ │ │ │ │
├──────────────────────────┴┬──┴───┴────┼───────────┼─────────────┼───────────┤
│Shareholders' equity │3,394.6 │2,831.2 │3,394.6 │2,831.2 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Cash flow from operations │102.5 │68.9 │231.9 │157.2 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Capital expenditures (incl.│57.7 │39.1 │103.6 │77.2 │
│Tenke) │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Total assets │4,084.5 │3,431.7 │4,084.5 │3,431.7 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Net cash2 │308.2 │107.8 │308.2 │107.8 │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Key Financial Data: │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Shareholders' equity per │5.83 │4.88 │5.83 │4.88 │
│share3 │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Basic and diluted income │0.10 │0.07 │0.22 │0.16 │
│per share │ │ │ │ │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Dividends │- │- │- │- │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Equity ratio4 │83% │83% │83% │83% │
├───────────────────────────┼───────────┼───────────┼─────────────┼───────────┤
│Shares outstanding: │ │ │ │ │
├─────────────────────────┬─┼───────────┼───────────┼─────────────┼───────────┤
│ Basic weighted │ │582,040,278│579,864,628│581,746,484 │579,771,573│
│average │ │ │ │ │ │
├─────────────────────────┼─┼───────────┼───────────┼─────────────┼───────────┤
│ Diluted weighted│ │583,410,167│580,261,614│583,187,790 │580,203,254│
│average │ │ │ │ │ │
├─────────────────────────┼─┼───────────┼───────────┼─────────────┼───────────┤
│ │ │ │ │ │579,899,803│
│ End of period │ │582,180,287│579,899,803│582,180,287 │ │
│ │ │ │ │ │ │
└─────────────────────────┴─┴───────────┴───────────┴─────────────┴───────────┘
┌───────────┬────────────────────────────────────────────────────────────┬──────
─────────────┐
│ │IFRS basis
│Canadian GAAP basis│
│ │ │5
│
├───────────┼─────────┬─────────┬─────────┬─────────┬──────────┬─────────┼──────
┬────────────┤
│($ │ │ │ │ │ │ │
│ │
│millions, │ Q2-11 │ Q1-11 │ Q4-10 │ Q3-10 │ Q2-10 │ Q1-10 │
│Q3-09 │
│except per │ │ │ │ │ │ │Q4-09
│ │
│share data)│ │ │ │ │ │ │
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Sales │ 184.0 │ 211.5 │ 309.3 │ 215.1 │ 183.1 │ 141.7 │
│ 171.1 │
│ │ │ │ │ │ │ │256.7
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Operating │ 82.2│ 113.6 │ 192.2 │ 121.5 │ 82.1 │ 65.8│
│ 91.8 │
│earnings1 │ │ │ │ │ │ │152.2
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Impairment │ │ │ │ │ │ │
│ │
│charges │- │- │- │- │- │-
│(37.1)│- │
│(after tax)│ │ │ │ │ │ │
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Net income │ 57.7│ 71.2│ 146.1 │ 66.0│ 42.3 │
51.9│ │ 3.7│
│ │ │ │ │ │ │ │35.1
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Income per │ │ │ │ │ │ │
│ │
│share6, │ 0.10│ 0.12│ 0.25│ 0.11│ 0.07 │
0.09│ │ 0.01 │
│basic and │ │ │ │ │ │ │0.06
│ │
│diluted │ │ │ │ │ │ │
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Cash flow │ │ │ │ │ │
│ │ │
│from │ 102.5 │ 129.3 │ 71.1│ 49.0│ 68.9 │ 88.4│97.0
│ 40.0 │
│operations │ │ │ │ │ │ │
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Capital │ │ │ │ │ │ │
│ │
│expenditure│ 57.7│ 45.9│ 42.9│ 40.2│ 39.1 │
38.1│ │ 54.7 │
│(incl. │ │ │ │ │ │ │39.0
│ │
│Tenke) │ │ │ │ │ │ │
│ │
├───────────┼─────────┼─────────┼─────────┼─────────┼──────────┼─────────┼──────
┼────────────┤
│Net cash │ 308.2 │ 262.0 │ 159.2 │ 125.7 │ 107.8 │ 10.2│
│ (132.2) │
│(debt)2 │ │ │ │ │ │
│(49.3)│ │
└───────────┴─────────┴─────────┴─────────┴─────────┴──────────┴─────────┴──────
┴────────────┘
(For full report including tables and footnotes, see attached file)
The Q2 2011 unaudited financial statements and management's discussion and
analysis are available on SEDAR (www.sedar.com) or the Company's website (
www.lundinmining.com).
About Lundin Mining
Lundin Mining Corporation is a diversified base metals mining company with
operations in Portugal, Sweden, Spain and Ireland, producing copper, zinc, lead
and nickel. In addition, Lundin Mining holds a development project pipeline
which includes an expansion project at its Neves‐Corvo mine along with its
equity stake in the world class Tenke Fungurume copper/cobalt project in the
Democratic Republic of Congo.
On Behalf of the Board,
Paul Conibear
President and CEO
For further information, please contact:
Sophia Shane, Investor Relations North America: +1-604-689-7842
John Miniotis, Senior Business Analyst: +1-416-342-5565
Robert Eriksson, Investor Relations Sweden: +46 8 545 015 50
Forward Looking Statements
Certain of the statements made and information contained herein is
“forward-looking information” within the meaning of the Ontario Securities Act.
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, nickel, 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.
