- Published: 30 April 2015
- Written by Editor
Lundin Mining First Quarter Results
TORONTO, ONTARIO--( Apr 29, 2015) - Lundin Mining Corporation ("Lundin Mining" or the "Company") (LUN.TO)(OMX:LUMI) today reported net earnings of $83.3 million or net earnings attributable to Lundin shareholders (after deducting non-controlling interests) of $71.8 million ($0.10 per share) for the quarter ended March 31, 2015. Cash flows of $224.0 million were generated from operations in the quarter, not including the Company's attributable cash flows from Tenke Fungurume.
Earnings for the three month period included a full quarter of operating and financial results from Candelaria, which was acquired in the fourth quarter of 2014 and Eagle, which was commissioned in the same period. Candelaria and Eagle generated operating earnings of $163.7 million and $56.1 million, respectively, in the current quarter.
Paul Conibear, President and CEO commented, "Our focus on delivering operational and cost efficiencies has resulted in very strong quarterly performance across the Company, and marks an excellent start to the year. During the first quarter, we achieved record copper and nickel production as well as record levels of operating cash flow, which reflects the positive contributions now being attained from our recent acquisitions."
"Eagle performed at or above full design capacities for the entire quarter. Our focus now remains on the efficient transition of Candelaria into Lundin Mining and optimization of its production profile and continuing to deliver robust production, cash flow and earnings from our other operations to further contribute to our healthy balance sheet."
Summary financial results for the quarter ended March 31, 2015:
| Three months ended | ||
| March 31 | ||
| US$ Millions (except per share amounts) | 2015 | 2014 |
| Sales | 531.5 | 149.9 |
| Operating earnings(1) | 274.0 | 43.1 |
| Net earnings | 83.3 | 13.3 |
| Net earnings attributable to Lundin shareholders | 71.8 | 13.3 |
| Basic and diluted earnings per share | 0.10 | 0.02 |
| Cash flow from operations | 224.0 | 27.6 |
| Ending net debt position(2) | 649.2 | 155.0 |
Highlights
Operational Performance
For the first quarter of 2015, all of the Company's operations performed well, substantially meeting and in a number of cases performing better than guidance for production and cash costs.
Candelaria (80%): The Candelaria operations produced, on a 100% basis, 49,350 tonnes of copper, 583,000 ounces of silver, and 27,600 ounces of gold in concentrate, better than expectations as a result of higher throughputs and good metallurgical recoveries. Copper cash costs(1) of $1.20/lb for the quarter were particularly low due to lower diesel prices, mine and mill costs and favourable foreign exchange rates.
On March 24, 2015, abnormally heavy rainfall and flooding occurred in the Atacama Region, affecting power and access to the mine. There was a temporary suspension of mining and milling activities at the mine following the heavy rainfall, but no significant impact to the overall operations. There were no injuries to personnel nor significant damage at the mine site, but the surrounding communities were seriously affected by the floods. The Company has spent over $5 million to-date on relief efforts to help the communities and is expecting to continue to contribute to local relief and regional rebuilding efforts in a multi-year phased program of community investment.
Eagle (100%): Eagle's operations continued to perform better than expected. Production of both nickel (7,306 tonnes) and copper (6,418 tonnes) exceeded expectations for the quarter with higher than expected throughput, grades and recoveries. Nickel cash costs of $1.45/lb were lower than full year guidance of $2.00/lb due to the strong production performance as well as lower ocean freight charges and targeted cost savings in response to nickel market conditions.
Neves-Corvo (100%): Neves-Corvo had an outstanding first quarter producing 15,488 tonnes of copper and 17,340 tonnes of zinc. Zinc and copper production exceeded the prior year comparable period by 21% and 22%, respectively. Higher head grades and recently implemented bulk mining in selective stockworks stopes contributed to the increase in copper production, while additional production from the Lombador orebody resulted in the increased zinc production. Copper cash costs of $1.39/lb for the quarter were lower than full year guidance ($1.80/lb) due to lower per unit mine costs and favourable foreign exchange rates.
Zinkgruvan (100%): Zinc and lead production at Zinkgruvan of 18,417 tonnes and 7,399 tonnes, respectively, largely met expectations but fell short of the comparable period in 2014 due to lower head grades. Cash costs for zinc of $0.42/lb were slightly higher than guidance ($0.38/lb) as higher per unit mine costs and lower by-product credit prices (lead and copper) were only partially offset by favourable foreign exchange rates.
Aguablanca (100%): Aguablanca had yet another strong quarter of operational performance with both nickel and copper production setting quarterly records as mining of the open pit neared completion and underground development continued. Current quarter production of 2,746 tonnes of nickel and 2,122 tonnes of copper exceeded both expectations and the prior year comparable period. Cash costs of $0.91/lb of nickel for the quarter were significantly below expectations and the prior year comparable period as mining of the open pit was extended much later into the first quarter than originally planned, and the operations benefited from favourable foreign exchange rates and lower maintenance costs.
Tenke (24%): Tenke operations continue to perform well. Lundin's attributable share of first quarter production included 12,648 tonnes of copper cathode and 797 tonnes of cobalt in hydroxide. The Company's attributable share of sales included 14,475 tonnes of copper at an average realized price of $2.66/lb and 901 tonnes of cobalt at an average realized price of $8.72/lb. Attributable operating cash flow from Tenke for the first quarter of 2015 was $41.1 million. Tenke operating cash costs for the first quarter of 2015 were $1.26/lb of copper sold, in-line with full year guidance. Cash distributions received by Lundin Mining in the quarter were $8.3 million, in-line with expectations. An additional $2.1 million was received from the Freeport Cobalt operations for total Tenke related cash distributions to the Company of $10.4 million.
| (1) | Operating earnings is a non-GAAP measure defined as sales, less operating costs (excluding depreciation) and general and administrative costs. |
| (2) | Net debt is a non-GAAP measure defined as cash and cash equivalents, less long-term debt and finance leases, before deferred financing fees. |
Total production, including attributable share of Candelaria (80%) and Tenke (24%):
| 2015 | 2014 | |||||
| (tonnes) | Q1 | Total | Q4 | Q3 | Q2 | Q1 |
| Copper | 76,746 | 137,636 | 55,374 | 26,360 | 28,631 | 27,271 |
| Zinc | 35,757 | 145,091 | 36,464 | 37,958 | 37,202 | 33,467 |
| Nickel | 10,052 | 12,931 | 6,574 | 2,165 | 2,212 | 1,980 |
| Lead | 8,719 | 35,555 | 7,970 | 7,397 | 10,250 | 9,938 |
Financial Performance
- Operating earnings for the quarter ended March 31, 2015 were $274.0 million, an increase of $230.9 million in comparison to the first quarter of the prior year ($43.1 million). The increase was primarily due to the inclusion of Candelaria's ($163.7 million) and Eagle's ($56.1 million) operating results. Operating earnings were also positively impacted by favourable foreign exchange rates ($19.8 million), lower per unit operating costs ($17.9 million) and higher sales volumes ($12.1 million), partially offset by lower realized metal prices and price adjustments ($32.9 million) from our European operations.
- Sales for the quarter ended March 31, 2015 were $531.5 million, an increase of $381.6 million in comparison to the first quarter of the prior year ($149.9 million). The increase was due to incremental sales from Candelaria and Eagle of $292.2 million and $88.4 million, respectively, and higher sales volumes ($39.4 million), partially offset by lower realized metal prices and price adjustments ($32.9 million).
- Average London Metal Exchange ("LME") metal prices for copper, nickel and lead for the quarter ended March 31, 2015 were lower (17%, 2% and 14%, respectively) than that of the comparable quarter in the prior year, while zinc prices were 2% higher.
- Operating costs (excluding depreciation) for the quarter ended March 31, 2015 were $250.6 million, an increase of $150.4 in comparison to the first quarter of the prior year ($100.2 million). The increase was largely due to the incremental costs from Candelaria and Eagle of $128.5 million and $32.3 million, respectively.
-
Net earnings for the quarter ended March 31, 2015 were $83.3 million, an increase of $70.0 million in comparison to the first quarter of the prior year ($13.3 million). Net earnings were positively impacted by:
- addition of Candelaria ($59.5 million) and Eagle's first full quarter of operations ($13.4 million); and
- foreign exchange gains of $17.3 million in the current year; partially offset by
- interest expense associated with the senior secured notes ($19.1 million); and
- higher tax expenses at the European operations.
- Cash flow from operations for the quarter ended March 31, 2015 was $224.0 million, an increase of $196.4 million in comparison to the first quarter of the prior year ($27.6 million). The increase in cash flow is almost entirely attributable to the operating earnings from Candelaria ($163.7 million) and Eagle ($56.1 million), partially offset by higher income taxes paid ($36.4 million).
Corporate Highlights
- On March 25, 2015, the Company reported that mining and milling operations at its Candelaria and Ojos del Salado Mines had been temporarily suspended due to heavy rainfall and flooding that affected power and access to the site. Abnormal rains occurred in central and northern Chile, with the Copiapó region being particularly affected. Mining and milling operations re-commenced at the Candelaria mine the following day at half capacity, with ramp up to full production, and re-opening of the underground mines in the following days as regional roads and access to site were restored. The Company is pleased to report that there were neither injuries to personnel nor significant damage to operations, though many employees and their homes were seriously affected by the floods. The Company has been, and will continue to be, making substantial contributions to local relief and ongoing regional rebuilding efforts.
- On April 7, 2015, the Company announced that maiden mineral reserves had been estimated on two recently discovered orebodies at Candelaria, known as Susana and Damiana, located to the immediate south and below the current open pit. The Company also re-estimated the total Candelaria open pit mineral reserves with refined economic parameters. Open pit reserves now include portions of the Susana and Damiana mineralization that are contained within the new open pit shell. Refer to the news release entitled "Lundin Mining Announces Maiden Mineral Reserve Estimates for Two New Orebodies at Candelaria" on the Company's website (www.lundinmining.com).
Financial Position and Financing
- Net debt position at March 31, 2015 was $649.2 million compared to $829.2 million at December 31, 2014.
- The $180.0 million decrease in net debt during the quarter was attributable to operating cash flows of $224.0 million, distributions from Tenke of $8.3 million, and a $12.8 million withdrawal from restricted funds; this was partially offset by investments in mineral properties, plant and equipment of $63.9 million.
- The Company has a revolving credit facility available for borrowing up to $350 million. As at March 31, 2015, the Company had no amount drawn on the credit facility. A letter of credit in the amount of $28.1 million (SEK 242 million) is outstanding.
- Net debt at April 29, 2015 is approximately $630 million.
Outlook
2015 Production and Cost Guidance
- Production and cash cost guidance for 2015 have been adjusted to account for extended open pit production performance at Aguablanca, lower copper grades at Zinkgruvan, beneficial foreign exchange rates and lower by-product metal prices.
- While Eagle and Candelaria first quarter cash costs were better than guided, Eagle has only been operating at full run rates for one quarter and Candelaria is in the process of a revision to the current mine plan. Therefore, re-assessment of cost guidance will occur later in the year once cost trends are better understood.
- Guidance on Tenke's copper production and cash costs have been updated to reflect the most recent guidance provided by Freeport.
- Accordingly, our revised production and cash cost guidance for 2015 is as follows:
| 2015 Guidance | Guidance(a) | Revised Guidance | |||
| (contained tonnes) | Tonnes |
C1 Cost |
Tonnes |
C1 Cost(b) |
|
| Copper | Candelaria (80%) | 130,000 - 135,000 | $1.55/lb | 130,000 - 135,000 | $1.55/lb |
| Eagle | 20,000 - 23,000 | 20,000 - 23,000 | |||
| Neves-Corvo | 50,000 - 55,000 | $1.80/lb | 50,000 - 55,000 | $1.60/lb | |
| Zinkgruvan | 3,500 - 4,000 | 2,000 - 3,000 | |||
| Aguablanca | 4,500 - 5,000 | 5,500 - 6,000 | |||
| Tenke (@24%)(c) | 48,400 | $1.31/lb | 49,500 | $1.26/lb | |
| Total attributable | 256,400 - 270,400 | 257,000 - 271,500 | |||
| Zinc | Neves-Corvo | 68,000 - 73,000 | 68,000 - 73,000 | ||
| Zinkgruvan | 78,000 - 82,000 | $0.38/lb | 78,000 - 82,000 | $0.35/lb | |
| Total | 146,000 - 155,000 | 146,000 - 155,000 | |||
| Nickel | Eagle | 25,000 - 28,000 | $2.00/lb | 25,000 - 28,000 | $2.00/lb |
| Aguablanca | 5,800 - 6,500 | $5.00/lb | 7,000 - 7,500 | $3.75/lb | |
| Total | 30,800 - 34,500 | 32,000 - 35,500 | |||
| Lead | Neves-Corvo | 4,000 - 5,000 | 4,000 - 5,000 | ||
| Zinkgruvan | 27,000 - 30,000 | 27,000 - 30,000 | |||
| Total | 31,000 - 35,000 | 31,000 - 35,000 | |||
| (a) | Guidance as outlined in our Management's Discussion and Analysis for the year ended December 31, 2014. |
| (b) | Cash costs remain dependent upon exchange rates (forecast at EUR/USD:1.10, USD/SEK:8.25, USD/CLP:625) and metal prices (forecast at Cu: $2.70/lb, Zn: $0.95/lb, Pb: $0.80/lb, Ni: $6.25/lb, Co: $13.00/lb). Prior guidance forecast EUR/USD at 1.30, USD/SEK at 7.00, USD/CLP at 575, Cu at $3.00/lb, Zn at $1.05/lb, Pb at $1.00/lb and Ni at $8.00/lb. |
| (c) | Freeport has provided 2015 sales and cash costs guidance. Tenke's 2015 production is assumed to approximate sales guidance. |
2015 Capital Expenditure Guidance
Capital expenditures for 2015 are expected to be $400 million (excluding Tenke), $390 million for sustaining capital and $10 million for expansionary capital. This is unchanged from the previous reduced guidance provided in the December 31, 2014 MD&A, as press released on February 18, 2015.
The Company estimates its share of expansion related initiatives and sustaining capital funding for 2015 at Tenke to be $90 million. All of the capital expenditures are expected to be self-funded by cash flow from Tenke operations.
Given lower metal prices, the Company is expecting lower cash distributions from Tenke in 2015 than originally guided ($30 - $40 million). Approximately $20 million is currently forecast to be received.
2015 Exploration Guidance
Total exploration expense for 2015 (excluding Tenke) is estimated to be $60 million, consistent with prior guidance. These expenditures will be principally directed towards near mine targets at Candelaria, with the remainder being invested to advance exploration activities at our existing mines and for existing South American and Eastern European exploration projects.
Annual Meeting
The Company reports that it will hold its annual meeting of shareholders at the St. Andrew's Club & Conference Centre, 150 King Street West, 27th Floor (King Street/University Avenue) Toronto, Ontario, on Friday, May 8, 2015 at 10:00 a.m. Toronto time.
About Lundin Mining
Lundin Mining Corporation ("Lundin", "Lundin Mining" or the "Company") is a diversified Canadian base metals mining company with operations in Chile, Portugal, Sweden, Spain, and the USA, producing copper, zinc, nickel and lead. In addition, Lundin Mining holds a 24% equity stake in the world-class Tenke Fungurume ("Tenke") copper/cobalt mine in the Democratic Republic of Congo ("DRC") and in the Freeport Cobalt Oy business, which includes a cobalt refinery located in Kokkola, Finland.
On Behalf of the Board,
Paul Conibear, President and CEO
Cautionary Statement on Forward-Looking Information
Certain of the statements made and information contained herein is "forward-looking information" within the meaning of the Ontario Securities Act. This report includes, but is not limited to, forward looking statements with respect to the Company's estimated annual metal production, cash costs, exploration expenditures, and capital expenditures, as noted in the Outlook section and elsewhere in this document. These estimates and other forward-looking statements are based on a number of assumptions and 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 estimated operating and cash costs, foreign currency fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological formations, ground control problems and flooding; including 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; inability to successfully integrate the Candelaria operations or realize its anticipated benefits; 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. 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.
Sophia Shane
Investor Relations North America
+1-604-689-7842
John Miniotis
Senior Manager, Corporate Development and Investor Relations
+1-416-342-5565
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50
