Lundin Mining Fourth Quarter and Full Year Results
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E-mailTORONTO, ONTARIO -- (Marketwired) -- 02/22/17 -- Lundin Mining Corporation (TSX: LUN)(OMX: LUMI) ("Lundin Mining" or the "Company") today reported cash flows of $107.9 million generated from operations in the quarter and $363.2 million for the year, not including the Company's attributable cash flows from Tenke Fungurume. Helped by higher metal prices at the end of the year and asset impairment reversals, net earnings attributable to Lundin Mining shareholders were $162.9 million ($0.23 per share) for the quarter ended December 31, 2016. For the year ended 2016, a net loss of $661.7 million ($0.92 per share) was attributable to shareholders, inclusive of a $772.1 million impairment taken on our investment in Tenke.
Mr. Paul Conibear, President and CEO commented, "We are extremely proud of the performance achieved in 2016 in a very tough part of the metals cycle. We achieved the best ever safety performance across the Company. Delivery on production optimization initiatives and discretionary spending restraint measures enabled the Company to generate more than $360 million of operating cash flow resulting in a lower net debt position by year end. We enter 2017 in excellent shape in all regards. We have exploration upside and growth projects at each of our mine sites. Our financial strength and disciplined capital allocation enable us to continue to deliver superior shareholder returns through advancement of internal growth projects, rejuvenated exploration programs, and potential external growth opportunities."
Summary financial results for the quarter and year-to -date:
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Three months ended Twelve months ended
December 31, December 31,
US$ Millions (except per share
amounts) 2016 2015 2016 2015
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Sales 459.2 316.0 1,545.6 1,701.9
Operating costs (226.4) (208.2) (864.4) (962.7)
Operating earnings(1) 225.3 101.0 654.2 712.1
Impairment reversals / (impairment) 95.9 (293.3) 95.9 (293.3)
Continuing, attributable net
earnings / (loss) (2) 148.7 (375.5) 92.4 (318.7)
Attributable net earnings / (loss)
(2) 162.9 (377.7) (661.7) (294.1)
Net earnings / (loss) 180.2 (383.5) (630.2) (281.8)
Basic and diluted earnings / (loss)
per share(3) 0.23 (0.52) (0.92) (0.41)
Cash flow from operations 107.9 107.1 363.2 713.9
Cash and cash equivalents 715.3 556.5 715.3 556.5
Net debt(4) (284.1) (441.3) (284.1) (441.3)
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(1) Operating earnings is a non-GAAP measure defined as sales, less
operating costs (excluding depreciation) and general and administrative
costs.
(2) Attributable to shareholders of Lundin Mining Corporation.
(3) Basic and diluted earnings / (loss) per share attributable to
shareholders of Lundin Mining Corporation.
(4) Net debt is a non-GAAP measure defined as cash and cash equivalents,
less long-term debt and finance leases, before deferred financing fees.
Highlights
Operational Performance
2016 cash costs(1) at all our operations and total copper and nickel production met our most recent guidance with a marginal shortfall in zinc production for the year. Cash costs benefited from on-going spending restraint programs and higher by-product metal prices. Capital spending for the year was also in-line with most recent guidance, with actual spend of $187.6 million.
Candelaria (80%): The Candelaria operations produced, on a 100% basis, 166,592 tonnes of copper, approximately 1,700,000 ounces of silver and 97,000 ounces of gold in concentrate. Copper production exceeded expectations on strong mill throughput and increased head grades. Copper cash costs of $1.31/lb for the year were lower than full year guidance of $1.35/lb.
Construction of the Los Diques tailings dam facility continues on schedule and on budget. Of the total project forecast of $295 million, $130 million has been spent to date. All key construction permits are in place and main dam embankment construction is proceeding well.
Eagle (100%): Eagle continued its robust performance, with both nickel (24,114 tonnes) and copper (23,417 tonnes) production meeting guidance. Nickel cash costs of $1.75/lb for the year were lower than guidance of $1.90/lb, benefiting from higher by-product sales and metal prices.
The Eagle East Project advanced as planned, with Feasibility Study work proceeding in parallel with exploration ramp advancement and overall Eagle East mine permitting.
Neves-Corvo (100%): Neves-Corvo produced 46,557 tonnes of copper and 69,527 tonnes of zinc for the year ended December 31, 2016. Zinc production marginally missed most recent production targets while copper production was impacted by variations in ore grade and characteristics in the fourth quarter. Copper cash costs of $1.54/lb for the year met the latest full-year guidance ($1.55/lb).
Zinkgruvan (100%): Zinc production of 78,523 tonnes at Zinkgruvan was negatively impacted by lower than expected head grades in the fourth quarter and was slightly below the latest guidance. Cash costs for zinc of $0.37/lb were better than guidance ($0.40/lb).
Tenke (24%): Tenke operations continue to perform well, with new records being set for copper and cobalt production. Lundin's attributable share of annual production included 51,826 tonnes of copper cathode and 3,853 tonnes of cobalt in hydroxide. The Company's attributable share of sales included 52,789 tonnes of copper at an average realized price of $2.15/lb and 3,998 tonnes of cobalt at an average realized price of $7.99/lb. Tenke operating cash costs for the year ended December 31, 2016 were $1.23/lb of copper sold, better than the latest guidance ($1.26/lb). Cash distributions received during the year from Tenke were $60.4 million, with an additional $9.3 million received from the Freeport Cobalt operations. Total Tenke related distributions to the Company of $69.7 million were received for the year, exceeding our most recent guidance range of $50 million to $60 million.
(1) Cash cost/lb of copper, zinc and nickel are non-GAAP measures defined as all cash costs directly attributable to mining operations, less royalties and by-product credits.
Financial Performance
-- Sales for the year ended December 31, 2016 were $1,545.6 million, a
decrease of $156.3 million in comparison to the $1,701.9 million
reported in 2015. The decrease was mainly due to lower sales volumes
($135.3 million) and the shutdown and subsequent sale of the Aguablanca
operation ($64.6 million), partially offset by higher realized metal
prices and price adjustments ($45.2 million).
-- Operating costs (excluding depreciation) for the year ended December 31,
2016 were $864.4 million, a decrease of $98.3 million in comparison to
the $962.7 million reported in 2015. The decrease was largely due to
lower sales volume ($68.4 million) and the shutdown of Aguablanca
operations ($46.5 million) and favourable changes in foreign exchange
rates ($13.3 million), partially offset by higher per unit costs ($42.1
million).
-- Operating earnings for the year ended December 31, 2016 were $654.2
million, a decrease of $57.9 million in comparison to the $712.1 million
reported in 2015. The decrease was primarily due to lower sales volumes
($66.9 million) and the shutdown of Aguablanca ($18.1 million) and
higher per unit operating costs ($42.1 million), partially offset by
higher realized metal prices and price adjustments ($45.2 million),
favourable foreign exchange movements ($13.3 million) and lower
treatment and refining charges ($9.9 million).
-- Net loss for the year ended December 31, 2016 was $630.2 million, an
increase of $348.4 million over the net loss of $281.8 million reported
in 2015. Net losses in both years were primarily a result of impairment
related adjustments, as cost and production performance at mine
operations met or exceeded expectations. Net loss was impacted by:
-- higher net impairment ($389.2 million);
-- lower operating earnings ($57.9 million);
-- effect of foreign exchange ($39.5 million); and
-- loss on disposal of Aguablanca assets ($22.3 million); partially
offset by
-- lower depreciation, depletion and amortization ($120.1 million); and
-- lower income taxes ($21.9 million).
-- Cash flow from operations for the year ended December 31, 2016 was
$363.2 million, a decrease of $350.7 million in comparison to the $713.9
million reported in 2015. The decrease was primarily attributable to a
comparative change in non-cash working capital, namely with the timing
of sales and changes in metal prices having a significant impact on
trade receivables.
Corporate Highlights
-- On June 29, 2016, the Company announced a maiden Eagle East Inferred
Mineral Resource estimate. Eagle East is located 2 km east and 650
metres below the Eagle mine deposit. The Company also announced the
results of a Preliminary Economic Assessment that indicate that these
Inferred Mineral Resources can potentially be mined with no significant
changes to the current mine, ore transport, mill and tailings disposal
infrastructure.
Similar mining methods to Eagle are proposed and the potential mine
production will significantly increase nickel and copper production.
Subject to permitting, formal Board investment approval and project
progress, the intent is to develop Eagle East such that it starts
contributing to mill feed in 2020 and extends the mine life to at least
the end of 2023.
Given the robust results of the Preliminary Economic Assessment, the
Company initiated a Feasibility Study which is expected to be completed
in the first half of 2017. Permitting with Michigan authorities is in
progress.
-- On October 20, 2016, the Company announced it had executed an amending
agreement to its $350 million revolving credit facility that reduces
costs of borrowing and extends the term to June 2020, from October 2017.
-- On November 15, 2016, the Company announced that it had entered into a
definitive agreement to sell its indirect interest in TF Holdings
Limited ("TF Holdings") to an affiliate of BHR Partners, a Chinese
private equity firm, for $1.136 billion in cash and up to $51.4 million
in contingent consideration. Lundin Mining's effective 24% interest in
Tenke is held through its 30% indirect interest in TF Holdings.
-- In the fourth quarter of 2016, the Company disposed of Aguablanca and
other exploration licenses in Spain to Valoriza Mineria, a subsidiary of
Grupo Sacyr. As part of the transaction, the Company provided funding of
approximately EUR30 million to support environmental, employee and other
liabilities.
Financial Position and Financing
-- Cash and cash equivalents increased $158.8 million, over the year ended
December 31, 2016, from $556.5 million to $715.3 million. The increase
is primarily as a result of cash generated from operating cash flows of
$363.2 million and production cash flow distributions from Tenke and
Freeport Cobalt of $69.7 million, partially offset by investments in
mineral properties, plant and equipment of $187.6 million and total
interest paid of $74.7 million.
-- Net debt position at December 31, 2016 was $284.1 million compared to
$441.3 million at December 31, 2015.
-- The Company has a revolving credit facility available for borrowing up
to $350 million. As at December 31, 2016, the Company had no amount
drawn on the credit facility. Letters of credit totalling approximately
$24.0 million are outstanding.
-- As of February 20, 2017, cash and net debt balances were approximately
$850 million and $150 million, respectively.
Outlook
Production, cash cost, capital expenditures and exploration guidance for 2017 remains unchanged from that provided on November 30, 2016 (see news release entitled "Lundin Mining Provides Operating Outlook").
Annual guidance has not been provided for Tenke, given the agreement to sell Lundin Mining's indirect interest.
2017 Production and Cost Guidance
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(contained tonnes) Tonnes Cash Costs(a)
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Copper Candelaria (80%) 145,000 - 150,000 $1.20/lb
Eagle 15,000 - 18,000
Neves-Corvo 41,000 - 46,000 $1.35/lb
Zinkgruvan 1,000 - 2,000
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Total attributable 202,000 - 216,000
Nickel Eagle 17,000 - 20,000 $2.45/lb
Zinc Neves-Corvo 72,000 - 77,000
Zinkgruvan 80,000 - 85,000 $0.40/lb
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Total 152,000 - 162,000
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a. Cash costs remain dependent upon exchange rates (forecast at
EUR/USD:1.15, USD/SEK:8.40, USD/CLP:650) and metal prices (forecast at Cu:
$2.25/lb, Ni: $5.00/lb, Zn: $1.00/lb, Pb: $0.90/lb, Au: $1,250/oz, Ag:
$16.50/oz).
2017 Capital Expenditure Guidance
Capital expenditures, excluding capitalized interest, are expected to be $405 million, as outlined below.
-------------------------------------------------- -------------------------------------------------- 2017 Guidance $millions -------------------------------------------------- -------------------------------------------------- Capitalized Stripping 105 Los Diques Tailings 135 Other Sustaining 25 -------------------------------------------------- Candelaria (100% basis) 265 Eagle 10 Neves-Corvo 50 Zinkgruvan 40 -------------------------------------------------- Total Sustaining Capital 365 Eagle East 35 Zinkgruvan Expansion (1350) 5 -------------------------------------------------- Total Expansionary Capital 40 -------------------------------------------------- Total Capital Expenditures 405 --------------------------------------------------
Exploration Investment
Exploration expenditures are expected to approximate $65 million in 2017.
On Behalf of the Board,
Paul Conibear
President and CEO
The information in this release is subject to the disclosure requirements of Lundin Mining under the EU Market Abuse Regulation. This information was publically communicated on February 22, 2017 at 7:00 p.m. Eastern Time.
Cautionary Statement in Forward-Looking Information and Non-GAAP performance measures
Certain of the statements made and information contained herein is "forward-looking information" within the meaning of applicable Canadian securities legislation. 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, and 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. In addition, forward-looking information is based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed price of copper, nickel, zinc and other metals; 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.
Certain financial measures contained herein, such as operating earnings, net debt and cash costs, have no meaning within generally accepted accounting principles under IFRS and therefore amounts presented may not be comparable to similar data presented by other mining companies. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures or performance prepared in accordance with IFRS.
Contacts: Mark Turner Business Valuations and Investor Relations +1-416-342-5565 Sonia Tercas Senior Associate, Investor Relations North America +1-416-342-5583 Robert Eriksson Investor Relations Sweden +46 8 545 015 50
Source: Lundin Mining Corporation
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