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Press release from Marketwire

Lundin Mining Third Quarter Results

Wednesday, October 30, 2013

Lundin Mining Third Quarter Results

17:56 EDT Wednesday, October 30, 2013

TORONTO, ONTARIO--(Marketwired - Oct. 30, 2013) - Lundin Mining Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company") today reported net earnings of $27.9 million ($0.05 per share) for the quarter ended September 30, 2013. Cash flows of $27.4 million were generated from operations, not including the Company's attributable cash flows of $42.2 million from Tenke Fungurume.

Paul Conibear, President and CEO commented, "Our European operations continued to perform generally in-line with expectations and as we enter into the fourth quarter we are pleased to be able to modestly increase production guidance for copper, zinc and nickel.

Tenke experienced another excellent quarter, despite power interruptions in September, which highlights the excellent operating performance of the asset. Year-to-date cash distributions received from Tenke now total over $110 million.

At Eagle, construction has ramped up very well, with commissioning expected in the fourth quarter of 2014. We look forward to ending the year with a strong operating performance, well positioned for the future with our conservative balance sheet further improved by capital cost constraint measures and the recent completion of a flexible, low cost debt financing package."

Summary financial results for the quarter and year-to-date:
Three months ended Nine months ended
September 30 September 30
US$ Millions (except per share amounts) 2013 2012 2013 2012
Sales 176.4 159.6 540.9 544.6
Operating earnings1 58.9 71.1 176.1 256.9
Net earnings 27.9 37.9 94.6 140.3
Basic earnings per share 0.05 0.07 0.16 0.24
Cash flow from operations 27.4 (25.7) 99.7 144.6
Ending cash position 137.1 255.9 137.1 255.9
1 Operating earnings is a non-GAAP measure defined as sales, less operating costs (excluding depreciation) and general and administrative costs.

Operational Highlights

Wholly-owned operations : Copper, zinc, and lead production were largely in-line with expectations for the quarter, with total zinc production at its highest levels in years. Production costs at Neves-Corvo were higher than planned. At Zinkgruvan, excellent cash costs in the quarter brought year-to-date results back in line with expectations. At Aguablanca, both metal production and costs continued to be better than expectations. As a result, production guidance has been updated to increase nickel and copper production at Aguablanca. As well, guidance for copper production at Zinkgruvan and zinc production at Neves-Corvo have also been increased. Cash cost guidance for Neves-Corvo has been increased to $1.90/lb1 of copper (from $1.80/lb) and for Aguablanca, it has been reduced to $4.50/lb of nickel (from $5.00/lb).

  • Neves-Corvo produced 12,629 tonnes of copper and a record 14,723 tonnes of zinc in the third quarter of 2013. While operational improvements continue to drive high throughput levels, copper cash costs of $2.23/lb for the quarter were higher than guidance of $1.80/lb. The increase is a result of lower copper grades and recoveries, costs associated with the increased production of zinc, a higher number of contractors, shaft and mill maintenance costs in the quarter related to the annual shutdown, and the continued low zinc price significantly affecting by-product credits.
  • At Zinkgruvan, zinc production for the quarter improved to 18,743 tonnes with better head grades and recoveries when compared to the prior quarter. Cash costs for zinc were $0.06/lb, well below guidance of $0.30/lb and the lowest since 2007, primarily as a result of higher by-product credits.
  • Aguablanca continued to have strong production results in the third quarter, as ore milled, grades and plant recoveries for both nickel and copper continued to exceed expectations. Year-to-date, 5,461 tonnes of nickel and 4,557 tonnes of copper in concentrate have been produced. Cash costs of $3.67/lb nickel for the quarter were lower than guidance of $5.00/lb.

Tenke: Tenke continued to perform well, achieving the second best quarter on record for milling volumes, despite experiencing power interruptions in September which impacted operating rates. While the situation has improved, Freeport-McMoRan Copper & Gold Inc. ("Freeport") is working closely with its power provider and DRC authorities to address the situation.

  • Third quarter production included 49,541 tonnes of copper cathode and 3,659 tonnes of cobalt in hydroxide. Tenke sold 53,104 tonnes of copper at an average realized price of $3.19/lb and 2,803 tonnes of cobalt were sold at an average realized price of $8.57/lb.
  • Attributable operating cash flow from Tenke for the third quarter of 2013 was $42.2 million ($118.3 million year-to- date). Cash distributions of $38.4 million were received by Lundin Mining in the third quarter of 2013 ($110.7 million year-to-date).
  • Operating cash costs for the third quarter of 2013 were $1.23/lb of copper sold, the same as reported in the prior year comparable quarter.

Total production from the Company's assets including attributable share of Tenke:

YTD Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
(tonnes) 2013 2013 2013 2013 2012 2012 2012 2012 2012
Copper 48,168 15,087 16,065 17,016 63,878 14,224 15,573 16,936 17,145
Zinc 91,952 33,466 32,539 25,947 122,204 29,161 28,452 31,972 32,619
Lead 26,402 9,119 10,692 6,591 38,464 8,353 9,365 9,780 10,966
Nickel 5,461 1,788 1,876 1,797 2,398 1,705 693 - -
Tenke attributable
Copper 38,191 11,890 13,230 13,071 38,105 10,602 9,947 8,632 8,924
1 Cash cost/lb of copper are non-GAAP measures defined as all cash costs directly attributable to mining operating, less royalties and by-product credits.

Financial Highlights

Financial Performance

  • Operating earnings for the third quarter of 2013 were $58.9 million, a decrease of $12.2 million from the $71.1 million reported in the comparable quarter of 2012. The decrease was largely attributable to lower realized metal prices ($11.8 million), higher per unit production costs ($8.5 million), and unfavourable exchange rates ($3.7 million), partially offset by higher operating earnings at Aguablanca ($9.4 million).

    On a year-to-date basis, operating earnings of $176.1 million were lower than the $256.9 million reported for the first nine months of 2012. The decrease was mainly attributable to lower realized metal prices and prior period price adjustments ($47.5 million), higher per unit production costs ($24.8 million), lower sales volumes ($16.4 million), and a change in sales mix ($14.9 million), partially offset by higher operating earnings at Aguablanca ($27.7 million).
  • For the quarter ended September 30, 2013, sales of $176.4 million increased $16.8 million over the prior year ($159.6 million) largely as a result of the restart of operations at Aguablanca ($14.7 million) and higher net sales volume ($12.9 million), partially offset by lower realized metal prices ($11.8 million).

    Sales of $540.9 million for the nine months ended September 30, 2013 were $3.7 million lower than the comparable period in 2012 ($544.6 million). Lower realized metal prices and prior period price adjustments ($47.5 million), a change in sales mix ($17.4 million), and lower net sales volume ($16.1 million) were largely offset by the restart of operations at Aguablanca ($77.3 million).
  • Cash flow from operations for the current quarter was $27.4 million compared to cash outflow of $25.7 million for the same period in 2012. The increase in the cash flow of $53.1 million is mostly attributable to changes in non-cash working capital.

    For the nine months ended September 30, 2013, cash flow from operations was $99.7 million compared to $144.6 million for same period in 2012. Lower earnings and changes in non-cash working capital were the primary contributors to the decrease.
  • Average metal prices for copper, zinc and nickel for the three and nine months ended September 30, 2013 were lower (1% - 15%) than the same periods in the prior year, while lead prices improved slightly over the prior comparable periods (6% - 7%).
  • Operating costs (excluding depreciation) of $111.7 million in the current quarter were higher than the prior year comparative quarter of $82.3 million primarily as a result of increased zinc production at Neves-Corvo, the restart of operations at Aguablanca, and higher per unit production costs.

    On a year-to-date basis, operating costs (excluding depreciation) for the nine months ended September 30, 2013 of $347.8 million were $80.1 million higher than the $267.7 million reported for the same period in 2012 largely as a result of the restart of operations at Aguablanca, and higher per unit production costs at Neves-Corvo and Zinkgruvan.
  • Net earnings of $27.9 million ($0.05 per share) in the current quarter were $10.0 million lower than the $37.9 million ($0.07 per share) reported in 2012. Net earnings were impacted by:
    • lower operating earnings ($12.2 million); and
    • higher depreciation, depletion and amortization expense ($7.2 million); offset by
    • lower general exploration and business development expenditures ($9.7 million).
  • Net earnings of $94.6 million ($0.16 per share) year-to-date were $45.7 million lower than the $140.3 million ($0.24 per share) reported in 2012. Earnings were impacted by:
    • lower operating earnings ($80.8 million); and
    • higher depreciation, depletion and amortization expense ($25.0 million); offset by
    • lower general exploration and business development expenditures ($17.9 million); and
    • lower tax expense of $40.0 million.
Corporate Highlights
  • On September 10, 2013, the Company reported its Mineral Reserve and Resource estimates as at June 30, 2013, and filed an independent National Instrument 43-101 Technical Report for its Eagle nickel/copper project on SEDAR (www.sedar.com) on July 26, 2013. The Neves-Corvo and Zinkgruvan mines had increases in total reserves from prior year's estimates. The full press releases can be found on the Company's website at www.lundinmining.com.
  • Subsequent to quarter-end, the Company completed amendments to its credit agreement to provide for a new term loan of $250 million and an extension on the maturity of the existing $350 million revolving credit facility to October 2017. This arrangement is expected to provide a very flexible, cost effective funding package to support completion of construction of the Eagle Project. See press releases entitled "Lundin Mining Secures Commitments for Eagle Project Funding", dated September 16, 2013 and "Lundin Mining Completes $600 Million Debt Facilities for Eagle Project Funding", dated October 7, 2013.
  • The Company is pleased to welcome the appointment of Mr. Peter C. Jones to the Company's Board of Directors. Mr. Jones brings to the Company's Board a great depth of experience in operations at a senior management level gained through previous positions as Interim President and Chief Executive Officer of IAMGOLD Corp., President and Chief Operating Officer of Inco Ltd., and President and Chief Executive Officer of Hudson Bay Mining & Smelting Co.
Financial Position and Financing
  • Net debt1 position at September 30, 2013 was $71.2 million compared to net cash positions of $265.1 million at December 31, 2012 and $221.1 million at June 30, 2013.
  • The $292.3 million decrease in net cash during the quarter was attributable to the acquisition of Eagle ($315.3 million) and investments in mineral properties, plant and equipment ($53.6 million), partially offset by operating cash flows of $27.4 million and distributions from Tenke of $38.4 million.
  • The $336.3 million decrease in net cash during the first nine months of the year was primarily attributable to the acquisitions of Eagle and Freeport Cobalt (formerly "Kokkola") for $315.3 million and $116.3 million, respectively, and investments in mineral properties, plant and equipment of $127.2 million. These uses of cash were offset by cash flow from operations of $99.7 million and distributions from Tenke of $110.7 million.
1 Net debt is a non-GAAP measure defined as available unrestricted cash less long-term debt and finance leases.
Outlook
2013 Production and Cost Guidance
  • Production and cash costs guidance for 2013 for the Company's wholly -owned operations have been adjusted to reflect continuing outperformance and improved outlook at Aguablanca. As well, guidance for copper production at Zinkgruvan and zinc production at Neves -Corvo have also been increased. Cash cost guidance for Neves-Corvo has been increased to $1.90/lb of copper (from $1.80/lb) and for Aguablanca, it has been reduced to $4.50/lb of nickel (from $5.00/lb).
  • Guidance on Tenke's production has been updated to reflect the most recent guidance provided by Freeport.
2013 Guidance
(contained tonnes)


Prior Guidance
Tonnes

C1
Cost
Revised Guidance
Tonnes a

C1
Cost
b
Copper Neves-Corvo 50,000 - 55,000 $ 1.80 50,000 - 55,000 $ 1.90
Zinkgruvan 2,500 - 3,500 3,500 - 4,000
Aguablanca 5,000 - 5,500 5,500 - 6,000
Wholly-owned 57,500 - 64,000 59,000 - 65,000
Tenke(@24%) c 49,000 $ 1.24 50,000 $ 1.24
Total attributable 106,500 - 113,000 109,000 - 115,000
Zinc Neves-Corvo 45,000 - 50,000 50,000 - 55,000
Zinkgruvan 73,000 - 78,000 $ 0.30 73,000 - 78,000 $ 0.30
Total 118,000 - 128,000 123,000 - 133,000
Lead Zinkgruvan 33,000 - 36,000 33,000 - 36,000
Nickel Aguablanca 6,000 - 6,500 $ 5.00 6,500 - 7,000 $ 4.50
  1. Changes in estimated metal production from the prior guidance are explained as follows:
    • Neves-Corvo's revised zinc production guidance reflects improved throughput and recovery on Lombador ore.
    • Zinkgruvan copper production is expected to increase over prior guidance due to higher mill throughput.
    • Aguablanca nickel and copper production is expected to be higher than previously guided largely as a result of higher head grades and recoveries.
  2. Cash costs remain dependent upon exchange rates (forecast at EUR/USD:1.30, USD/SEK:6.50) and metal prices (forecast at Cu: $3.30, Zn: $0.85, Pb: $0.95, Ni: $6.50, Co: $12.00).
    • Neves-Corvo's C1 cash cost per pound of copper has increased due to higher operational costs from use of more contractors and lower forecasted by-product metal prices.
    • Aguablanca's C1 cash cost per pound of nickel has been lowered largely as a result of higher expected nickel and copper production.
  3. Freeport has provided 2013 sales and cash costs guidance. The sales guidance is assumed to approximate Tenke's production.

2013 Capital Expenditure Guidance

Capital expenditures for 2013, excluding Eagle, are expected to be $210 million, a $75 million reduction from original guidance. The Company and Freeport have implemented initiatives to reduce or defer capital investments until metal markets improve. Capital expenditures for the Eagle Project in 2013 are expected to be $110 million (from date of acquisition). Details of the total estimated capital expenditures of $320 million for 2013 are described below:

  • Sustaining capital in European operations - $100 million (original guidance - $110 million), consisting of approximately $65 million for Neves-Corvo and $35 million for Zinkgruvan.
  • New investment capital in European operations - $45 million (original guidance - $60 million), including approximately $25 million for Lombador Phase I and $5 million for an industrial water dam at Neves-Corvo. In addition, approximately $15 million will be invested in additional wall stability measures and pushbacks at Aguablanca to allow for future mining of ore rendered inaccessible by pit stability issues. This will enable on-going production to continue from Aguablanca until the first quarter of 2015. The capital investment in Zinkgruvan's ore dressing plant ($13 million) has been deferred.
  • New investment in Eagle Project - $110 million (from date of acquisition), in support of engineering and major equipment additions in the year. Total capital cost of the project from the date of acquisition (excluding capitalized interest) is estimated at $400 million1.
  • New investment in Tenke - $65 million (original guidance - $115 million), estimated by the Company as its share of the remaining Phase II expansion costs, exploration and other expansion related initiatives and sustaining capital funding for 2013. All of the capital expenditures are expected to be self-funded by cash flow from Tenke operations. Assuming current metal prices and operating conditions prevail, the Company expects to continue to receive regular significant distributions from Tenke for the remainder of 2013.

2013 Exploration Guidance

Total exploration expenditures for 2013 (excluding Tenke) are estimated to be $33 million, including Eagle exploration expenditures of $3 million (original guidance, without Eagle - $38 million).

About Lundin Mining

Lundin Mining Corporation is a diversified Canadian base metals mining company with operations in Portugal, Sweden and Spain and an advanced development project in the US, producing copper, zinc, lead and nickel. In addition, Lundin Mining holds a 24% equity stake in the world-class Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo 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

Forward Looking Statements

Certain of the statements made and information contained herein is "forward-looking information" within the meaning of the Ontario Securities Act. This document includes, but is not limited to, forward looking statements with respect to the Company's estimated full year metal production, C1 cash costs and capital expenditures. 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 the estimated cash costs, the timing and amount of production from the Eagle Project, the cost estimates for the Eagle Project, 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's discussion and analysis. Forward-looking information may also be based on other various assumptions including, without limitation, the expectations and beliefs of management, the assumed long term price of copper, zinc, lead and nickel; 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.

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
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
+1 416 348 0303 (FAX)


Lundin Mining Corporation
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50

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