Toronto, October 26, 2011 (TSX: LUN; OMX: LUMI) Lundin Mining Corporation
(“Lundin Mining” or the “Company”) today reported net income of $12.4 million
($0.02 per share) for the third quarter of 2011 and year-to-date net income of
$141.3 million ($0.24 per share).
Paul Conibear, President and CEO commented, “At Neves-Corvo, mining and milling
volumes continued at high levels, but lower overall grades in the quarter
resulted in reduced metal production and consequently higher cash costs on a
per pound basis. These higher costs as well as declining metal prices
significantly impacted our operating earnings.During late September we moved
into higher grade stopes and this contributed to improved production compared
to the previous period. Significant increases in production are expected in the
fourth quarter as we continue mining in high grade areas.
Zinkgruvan incurred operating issues with both its zinc and copper grinding
mills which affected production. The copper mill gearbox was repaired and was
back on line in September and a zinc mill vibration issue is expected to be
resolved by the end of October to get back up to full production.
Our investment in Tenke achieved new important milestones during the quarter,
with the Phase 2 expansion feasibility study being completed by Freeport. The
project paid off the remaining $32.0 million on the Excess Overrun Cost
facility and Lundin Mining also received its first cash distribution of $7.8
million for total benefit of $39.8 million during the quarter. Both these
milestones illustrate the important contribution that Tenke is making to the
Company's future."
(For table, see attached file)
Highlights
• Copper and zinc production improved over the previous quarter; however,
production at both Neves-Corvo and Zinkgruvan was curtailed due to a number
of issues. We continued to mine low grade stockwork ores at Neves-Corvo and
consequently plant recoveries were lower than planned. At Zinkgruvan,
production shortfalls were experienced due to grinding mill related issues
in both circuits. Action has been taken to resolve these issues to enhance
fourth quarter production.
(For table, see attached file)
• Operating earnings1 for the current quarter of $48.7 million was lower than
the $121.5 million reported in the third quarter of 2010. Unfavourable
price and price adjustments ($22.9 million effect), lower volume ($11.4
million effect), higher per unit costs ($18.7 million effect), suspension
of mining activities at Aguablanca ($19.2 million effect) and foreign
exchange ($7.6 million effect) all contributed to the negative variance.
□ Net income of $12.4 million ($0.02 per share) was $53.6 million lower
than the $66.0 million ($0.11 per share) reported for the third quarter
of 2010.The decrease was largely the result of lower operating earnings
($72.8 million), losses on marketable securities of $11.8 million and
an unfavourable tax assessment in Spain for the 2004 to 2006 taxation
years ($12.5 million tax plus $2.7 million interest).This was partially
offset by foreign exchange gains of $36.5 million.
□ Cash flow from operations, before changes in non-cash working capital
items, for the current quarter was an inflow of $23.7 million, compared
to an inflow of $94.2 million for the corresponding period in 2010.The
decrease of $70.5 million relates mainly to lower earnings.Cash flow
from operations does not include cash flow related to Tenke. During the
quarter, our share of available cash from Tenke contributed to a $32.0
million final repayment, discharging the Excess Overrun Cost (“EOC”)
facility for the completed Phase 1 project, and we received an
additional $7.8 million cash distribution.
☆ The Neves-Corvo Zinc Expansion plant was started up on time and on
budget in July. Given the continued high ratio between copper and
zinc price, in August this new circuit was converted to copper ore
processing and the Company plans to run the new circuit on copper
ore until year-end to achieve higher margins.
☆ In August, a new mine contractor was mobilized to the Aguablanca
nickel/copper mine to commence pit push-backs and reinstatement of
the pit haul ramp. The restart of Aguablanca concentrate production
remains on schedule for the third quarter of 2012. An underground
mining study was also initiated, intended to define potential high
grade underground feed to supplement open pit production.
☆ In September, the Company released the results of a Feasibility
Study on the Lombador Phase I development demonstrating that the
exploitation of the upper portions of the Lombador zinc/copper ore
bodies could extend the mine life to at least 2026 and create a
platform for further extensions. The optimal development plan for
Lombador is being examined further in conjunction with assessing
exploitation concepts for the Semblana copper discovery. The
Company has initiated the Neves-Corvo Future Underground Materials
Handling Study to assess medium and long-term underground deposit
access and extraction infrastructure, including potential benefits
of a second deeper shaft.
☆ During the quarter, the analysis of an extensive 3D seismic
geophysics survey across the Neves-Corvo concessions yielded the
identification of 19 new drill targets all within the depth horizon
of existing mine workings, and at similar elevations to Semblana
and Lombador. Exploration budgets were increased and these targets
will be progressively tested over the year ahead.
☆ Exploration programs on the Company's own assets are being
increased in response to drilling success at all current programs
including our Irish exploration projects.
1 Operating earnings is a non-IFRS measure defined as sales, less operating
costs and general and administration costs.
Financial Position and Financing
• Net cash1 at September 30, 2011 was $208.7 million compared to $125.7
million at September 30, 2010 and $308.2 million at June 30, 2011.
The decrease in net cash during the quarter is primarily attributable to income
tax payments ($57.5 million), royalty payments ($18.6 million), investment in
mineral property, plant and equipment ($35.1 million), the acquisition of
Belmore Resources (Holdings) plc ($9.5 million) and net investment costs in
Tenke Fungurume expansion and sustaining capital works ($6.4 million).
• Cash on hand at September 30, 2011 was $256.2 million.
1 Net cash is a Non-IFRS measure defined as available unrestricted cash less
financial debt, including capital leases and other debt-related obligations.
(For full report, see attached file)
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.
