TORONTO, ONTARIO -- (Marketwire) -- 07/29/11 -- Lundin Mining Corporation (TSX: LUN)(OMX: LUMI) ('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)(1) for the second quarter of 2010.
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:
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Three Months Ended June 30(1)
US $ millions (except per share amounts) 2011 2010
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Sales 184.0 183.1
Operating earnings(2) 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
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(1) The prior year comparative figures have been restated in accordance with
the transition to IFRS.
(2) Operating earnings is a non-IFRS measure defined as sales, less
operating costs and general and administration costs.
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%.
Total production was as follows:
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Wholly-owned
operations
(tonnes) YTD2011 Q2 2011 Q1 2011 FY 2010 Q4 2010 Q3 2010 Q2 2010 Q1 2010
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Copper 32,970 13,831 19,139 80,035 24,908 20,509 21,774 12,844
Zinc 55,601 27,404 28,197 90,129 23,482 22,571 24,458 19,618
Lead 21,780 10,367 11,413 39,568 9,470 10,902 10,953 8,243
Nickel - - - 6,296 1,062 1,363 1,715 2,156
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Tenke attributable (24.75%)
Copper 14,906 7,398 7,508 29,767 7,908 7,701 7,038 7,120
Cobalt 1,378 687 691 2,283 723 599 409 552
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-- Operating earnings(1) 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.
(1) Operating earnings is a Non-IFRS measure defined as sales, less
operating costs and general and administration costs.
Corporate Highlights
-- On July 12, 2011, the Company acquired Belmore Resources Ltd. for cash
consideration of approximately GBP 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
$38.6 million during the quarter. At present metal prices, and given
contemplated partner capital and tax funding, it is expected that the
EOC will be repaid towards the end of the third quarter of 2011.
Attributable cash flow from Tenke, including repayments of the EOC facility, was as follows:
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Three months ended June 30
(US$ millions) 2011 2010
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Cash advances to Tenke (10.5) (6.8)
Repayments on EOC facility 38.6 26.8
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Attributable net cash flow 28.1 20.0
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Financial Position and Financing
-- Net cash(1) 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 $328.6 million.
(1) Net cash is a Non-IFRS measure defined as available unrestricted cash
less financial debt, including capital leases and other debt-related
obligations.
Outlook
2011 production and cost guidance was released on July 21, 2011 in a news release entitled Lundin Mining Provides Corporate Update and Revised Outlook.
2011 Capital Expenditure Guidance
Guidance for total capital expenditures for the year ($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, although critical 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 30 Six months ended June 30
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(USD millions, except
per share amounts) 2011 2010 2011 2010
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Sales 184.0 183.1 395.4 324.8
Operating earnings(1) 82.2 82.1 195.7 148.0
Depreciation,
depletion and
amortization (37.6) (32.2) (73.1) (67.9)
General exploration
and project
investigation (12.5) (5.6) (21.4) (10.3)
Finance (costs) income (3.7) 10.5 (2.0) 22.8
Income from equity
investment in Tenke 32.0 8.3 56.9 22.8
Other income and
expenses (2.8) 10.7 (19.3) 20.3
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Income before income
taxes 57.6 73.8 136.8 135.7
Income tax recovery
(expense) 0.1 (31.5) (7.9) (41.6)
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Net income 57.7 42.3 128.9 94.1
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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. Tenke) 57.7 39.1 103.6 77.2
Total assets 4,084.5 3,431.7 4,084.5 3,431.7
Net cash(2) 308.2 107.8 308.2 107.8
Key Financial Data:
Shareholders' equity
per share(3) 5.83 4.88 5.83 4.88
Basic and diluted
income per share 0.10 0.07 0.22 0.16
Dividends - - - -
Equity ratio(4) 83% 83% 83% 83%
Shares outstanding:
Basic weighted
average 582,040,278 579,864,628 581,746,484 579,771,573
Diluted weighted
average 583,410,167 580,261,614 583,187,790 580,203,254
End of period 582,180,287 579,899,803 582,180,287 579,899,803
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Canadian GAAP
IFRS basis basis(5)
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($ millions, except per
share data) Q2-11 Q1-11 Q4-10 Q3-10 Q2-10 Q1-10 Q4-09 Q3-09
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Sales 184.0 211.5 309.3 215.1 183.1 141.7 256.7 171.1
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Operating earnings(1) 82.2 113.6 192.2 121.5 82.1 65.8 152.2 91.8
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Impairment charges (after
tax) - - - - - - (37.1) -
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Net income 57.7 71.2 146.1 66.0 42.3 51.9 35.1 3.7
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Income per share(6),
basic and diluted 0.10 0.12 0.25 0.11 0.07 0.09 0.06 0.01
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Cash flow from operations 102.5 129.3 71.1 49.0 68.9 88.4 97.0 40.0
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Capital expenditure
(incl. Tenke) 57.7 45.9 42.9 40.2 39.1 38.1 39.0 54.7
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Net cash (debt)(2) 308.2 262.0 159.2 125.7 107.8 10.2 (49.3) (132.2)
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(1) Operating earnings is a Non-IFRS measure defined as sales, less
operating costs and general and administrative costs.
(2) Net cash is a Non-IFRS measure defined as available unrestricted cash
less financial debt, including capital leases and other debt-related
obligations.
(3) Shareholders' equity per share is a Non-IFRS measure defined as
shareholders' equity divided by total number of shares outstanding at end of
period.
(4) Equity ratio is a Non-IFRS measure defined as shareholders' equity
divided by total assets at the end of period.
(5) Conversion to IFRS on January 1, 2011 requires the completion of IFRS
compliant financial statements on a comparative basis for 2010. Financial
results prior to 2010 remain unchanged and are reported in accordance with
Canadian GAAP.
(6) Income per share is determined for each quarter. As a result of using a
different weighted average number of shares outstanding, the sum of the
quarterly amounts may differ from the year-to-date amount.
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
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.
Contacts:
Lundin Mining Corporation
Sophia Shane
Investor Relations North America
+1-604-689-7842
Lundin Mining Corporation
John Miniotis
Senior Business Analyst
+1-416-342-5565
Lundin Mining Corporation
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50
www.lundinmining.com
