Toronto, February 25, 2010 (TSX: LUN; OMX: LUMI) Lundin Mining Corporation (“Lundin” or the “Company”) today reported net income, before discontinued operations and impairment charges, of $105.2 million ($0.19 per share) for the year and $72.2 million ($0.12 per share) in the fourth quarter of 2009, up from a loss of $131.9 million (loss of $0.32 per share) in the fourth quarter of 2008.
Mr. Phil Wright, President and CEO commented, “The large turnaround in profit in the fourth quarter reflects the effect of stronger metal prices and the continued good performance of our European operations.
“Tenke’s ramp up to commercial production has gone extremely well and the mine produced 70,000 tonnes of copper cathode during 2009.
“At year-end we had $141.6 million of cash on hand and net debt to equity stood at only 1.7%. This puts us in a strong position to pursue our growth ambitions for 2010” Mr. Wright said.
(For full report, see attached file)
Highlights
- Sales revenue for the quarter was significantly higher than the prior year corresponding quarter owing to improved metal prices.
- Operating earnings of $152.2 million for the quarter represents an increase of $218.0 million from a loss of $65.8 million in the fourth quarter 2008. Virtually all of the improvement in operating earnings was related to improved metal prices and the difference in price adjustments between quarters.
- Net income for the quarter included losses on derivative contracts of $27.4 million ($0.05 per share), of which $13.4 million was unrealized. Also included was $37.1 million ($0.06 per share) related to impairment on the Salave gold project in northern Spain (See news release dated February 11, 2010).
- Cash flow from operations for the quarter was $97.0 million, compared to $46.5 million for the corresponding quarter in 2008.
- Investment in in-mine and near-mine exploration has seen the growth of mineral reserves to replace record ore tonnages mined during the year at both Neves-Corvo and Zinkgruvan.
In addition, at Neves-Corvo there has been an increase of 11 million tonnes (+44%) in measured and indicated copper resources (approximately 160,000 tonnes of contained copper) and 20 million tonnes have been added in inferred copper resources (See news release dated February 22, 2010).
- Production of all metals exceeded market guidance for the full year. Total production was as follows:
(for table, see attached file)
Financial Position
- Net debt1 at December 31, 2009 was $49.3 million compared to a net debt position of $145.5 million at the end of 2008. Cash flow from operations covered all sustaining capital expenditures and all new investment related to the European operations.
The decrease in net debt during the year was attributable to the April 2009 bought-deal public offering for total gross proceeds of $155.8 million, offset by Tenke funding obligations of $56.7 million.
- Cash on hand at December 31, 2009 was $141.6 million.
- Net debt to equity at December 31, 2009 is 1.7%.
- As at February 22, 2010, cash on hand is approximately $141.7 million and net debt is $9.2 million.
First Quarter 2010 Guidance
Specific issues that may affect earnings in the first quarter of 2010 when considered on a quarter-to-quarter basis are as follows:
- Production for the quarter is expected to be below trend owing to a number of factors including: abnormal weather conditions in Europe hampering ore processing; flooding of the Aguablanca pit, early January and again mid-February, restricting access to higher-grade ore zones; Zinkgruvan has been restricted by a blocked orepass.
Annual guidance is reaffirmed; however no allowance has been made for the industrial action at Neves-Corvo.
- Average prices in the quarter to date are lower than those used to provisionally value outstanding receivables at December 31, 2009. Depending on price changes and the timing of settlements, the first quarter may see the effect of negative price adjustments.
- Timing of sales during the fourth quarter of 2009 resulted in unusually low concentrate inventory levels at December 31, 2009. It is expected that sales in the first quarter of 2010 will reflect the return to normal inventory levels.
Outlook
- Production targets for 2010 are as follows:
(for table, see attached file)
1 Cash costs remain dependent upon exchange rates (2010 €/USD: 1.42). Cash cost of nickel is highly leveraged to metal price owing to the price participation formula in smelter terms.
2 No allowance has been made for the limited industrial action currently underway. Production that may be lost is currently being assessed and will depend upon a number of factors, including the duration of the action.
3 At design capacity production of copper and cobalt and assuming average cobalt prices of $10 per pound, average unit net cash costs are targeted to be $0.50 per pound of copper. Each $2 per pound change in average prices of cobalt would impact net cash costs by approximately $0.12 lb/copper.
- Zinc production at Neves-Corvo is expected to resume in 2011 at the rate of 50,000 tpa. An earlier start, at a nominal rate of 25,000 tpa, is under evaluation.
- Studies continue separately on the feasibility of developing the Lombador zinc/copper deposit adjacent to the Neves-Corvo mine. Progress to date is positive and a feasibility study is targeted for completion in early 2011. A preliminary target of 2013 has been set for commencement of full-scale operations from Lombador.
- Capital expenditure for 2010 is expected to be between $190 and $250 million. This includes:
- Sustaining capital in European operations of $90 million (2009 - $80 million)
- New investment in European operations of $60 million (2009 - $35 million)
- Investment in Tenke of $100 million (2009 - $56.7 million). The Company estimates this could vary between $40 million and $100 million depending on development plans. Final decisions on capital investment levels are made by the operator.
- Expenditure on exploration and resource acquisition is expected to be similar to 2009 levels at $20 million of which approximately $10.0 million will be spent on exploration drilling to delineate further copper resources at Neves-Corvo.
The market outlook remains volatile and in our view 2010 remains a year of slow recovery prior to a resumption of growth in 2011.
(For full report, see attached file)
