Lundin Mining Second Quarter Results
Lundin Mining Second Quarter Results
TORONTO, July 25, 2018 -- (TSX:LUN) (Nasdaq Stockholm:LUMI) Lundin Mining Corporation (“Lundin Mining” or the
“Company”) today reported cash flows of $118.3 million generated from operations in its second quarter of the year. Net
earnings from continuing operations attributable to Lundin Mining shareholders were $78.8 million ($0.11 per share) for the
quarter.
Mr. Paul Conibear, President and CEO commented, “All operations are on track to achieve annual production and cash cost
guidance. Neves-Corvo delivered another excellent quarter, setting a new zinc production record in June, and full-year
production and cash cost guidance for Neves-Corvo has been improved.
All growth projects at Eagle, Neves-Corvo and Candelaria progressed well in the quarter and remain on schedule. The dual
decline stretch of the Eagle East ramp was completed significantly ahead of schedule and infill drilling on Eagle East is now in
progress from underground.
After a comprehensive review of the Neves-Corvo Zinc Expansion Project, capital costs are expected to be €270 million,
approximately 5% higher than originally forecast. The project remains on track to commence production ramp-up prior to the
end of 2019, as originally guided, with the mill foundation successfully poured earlier this month.
Our Candelaria South underground mine expansion, mill optimization and open pit and underground equipment fleet
replacement programs are progressing well. Latest generation major mine equipment deliveries are on track and production
capacity increases both in-pit and underground are now ramping up with new equipment in operation to contribute to an
expected strong second half 2018 mine production.”
Summary financial results for the quarter and year-to-date:
Three months ended Six months ended
June 30, June 30,
US$ Millions (except per share amounts) 2018 2017 2018 2017
Revenue 467.7 454.7 938.1 942.5
Gross profit 155.1 143.3 305.0 307.3
Continuing, attributable net earnings 1 78.8 49.0 160.1 106.6
Attributable net earnings / (loss) 1 78.8 70.0 160.1 161.7
Net earnings / (loss) 87.5 85.0 174.6 191.5
Basic and diluted earnings / (loss) per share 2 0.11 0.10 0.22 0.22
Cash flow from operations 118.3 179.2 291.2 423.9
Cash and cash equivalents 1,512.5 1,567.0 1,512.5 1,567.0
Net cash 3 1,063.5 1,045.1 1,063.5 1,045.1
1 Attributable to shareholders of Lundin Mining Corporation.
2 Basic and diluted earnings per share attributable to shareholders of Lundin Mining Corporation.
3 Net cash 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
Production and cash costs 1 across all operations and for all metals are on target to achieve or better the Company’s annual
guidance. Planned lower throughput and grades at Candelaria led to lower copper production in the quarter compared to the
second quarter of 2017. Neves-Corvo performed very well in the quarter with excellent grades and throughput, and significant
progress was made on projects at Candelaria, Eagle and Neves-Corvo.
Candelaria (80% owned): The Candelaria operations produced, on a 100% basis, 34,397 tonnes of copper, and approximately
20,000 ounces of gold and 295,000 ounces of silver in concentrate during the quarter. Copper production in the quarter was
lower than the prior year comparable period due to planned mining and processing of lower grade materials and lower mill
throughput. Copper cash costs of $1.71/lb for the quarter were in line with full year guidance ($1.70/lb), but higher than the
prior year quarter. Lower metal production and unfavourable foreign exchange, combined with higher diesel, maintenance and
labour costs all contributed to the higher per unit production costs experienced in the current quarter.
The Candelaria Mill Optimization Project progressed according to plan during the quarter with construction now underway.
Ramp-up of the Candelaria Underground North Sector achieved excellent results to-date, mining approximately 9,000 tonnes
per day on average throughout the second quarter.
Eagle (100% owned): Eagle produced 4,234 tonnes of nickel and 4,115 tonnes of copper during the quarter, on track to
achieve full year guidance. Quantities were lower than the prior year as a result of planned mine sequencing. Nickel cash
costs of $1.09/lb for the quarter were in line with full year guidance and modestly higher than the prior year comparable period.
Development of the Eagle East access ramp continues ahead of schedule, with the stretch of dual decline completed during
the quarter. Underground definition drilling commenced in Eagle East.
Neves-Corvo (100% owned): Neves-Corvo produced 11,899 tonnes of copper and 20,230 tonnes of zinc for the quarter, with
production of all metals exceeding the prior year comparable period. Higher copper production resulted from higher head
grades, improved mine productivity and higher mill throughput driven by improvements in mine plan execution. A new monthly
production record of 7,574 tonnes of zinc in concentrate was achieved in June. There is a positive production trend year-to-date
for all metals and accordingly, full year guidance targets for copper and zinc production have been revised upwards. Copper
cash costs of $0.96/lb for the quarter were lower than the prior year comparable period, positively impacted by lower per unit
mine, mill, and administration costs associated with higher sales volumes. Given the higher production forecast, full year cash
cost guidance has been revised downward to $1.20/lb (from $1.30/lb).
The Zinc Expansion Project (“ZEP”) advanced on track to commence production ramp-up prior to the end of 2019, as originally
guided. Capital costs are now expected to be €270 million, approximately 5% higher than the original project estimate.
Zinkgruvan (100% owned): Zinc production of 16,845 tonnes and lead production of 3,914 tonnes were lower than the prior
year quarter driven by lower head grades as a result of mine sequencing and higher than planned dilution and ore loss. The top
of the range for full year zinc production guidance was moderately reduced but the Company remains on track to meet
guidance within the original range. Zinc cash costs of $0.41/lb for the quarter were better than full year guidance, but higher
than the prior year comparable quarter due primarily to higher per unit mine, mill and administration costs stemming from lower
sales volumes.
Financial Performance
• Revenue for the quarter ended June 30, 2018 was $467.7 million, an increase of $13.0 million in comparison to the
second quarter of the prior year ($454.7 million). The increase was mainly due to higher realized metal prices, net of
price adjustments ($84.0 million) and lower treatment and refining charges ($8.4 million), partially offset by lower sales
volumes ($85.6 million).
On a year-to-date basis, revenue was $938.1 million, in line with the $942.5 million for the six months ended June 30,
2017. Higher realized metal prices, net of price adjustments ($128.0 million) and lower treatment and refining charges
($22.9 million) were offset by lower sales volumes ($164.6 million).
• Cost of goods sold for the quarter ended June 30, 2018 was $312.6 million, in line with the second quarter of the prior
year ($311.4 million). Higher per unit production costs ($60.9 million) were offset by lower sales volumes ($57.2 million).
On a year-to-date basis, cost of goods sold was $633.2 million, in line with the six months ended June 30, 2017
($635.2 million). Higher per unit production costs ($105.7 million) were offset by lower sales volumes ($103.3 million).
• Gross profit for the quarter ended June 30, 2018 was $155.1 million, an increase of $11.8 million in comparison to the
second quarter of the prior year ($143.3 million). The increase was primarily due to higher realized metal prices, net of
price adjustments ($84.0 million) and lower depreciation rates ($12.9 million), partially offset by higher per unit
production costs ($60.9 million) and lower sales volumes ($28.3 million).
On a year-to-date basis, gross profit was $305.0 million, in line with the six months ended June 30, 2017 ($307.3
million). Higher realized metal prices, net of price adjustments ($128.0 million) and lower depreciation rates ($31.2
million) were offset by higher per unit production costs ($105.7 million) and lower sales volumes ($61.3 million).
• Net earnings for the quarter ended June 30, 2018 were $87.5 million, in line with the $85.0 million reported for the three
months ended June 30, 2017:
◦ lower interest expense resulting from the early redemption of the 7.50% Senior Secured Notes due 2020 on
November 20, 2017 ($13.1 million);
◦ a foreign exchange gain of $8.0 million in the current quarter (Q2 2017 – loss of $5.1 million); and
◦ higher gross profit ($11.8 million); were offset by
◦ lower earnings from discontinued operations ($21.0 million); and
◦ higher net tax expense ($15.1 million).
On a year-to-date basis, the Company reported net earnings of $174.6 million, a decrease of $16.9 million in comparison to
the six months ended June 30, 2017 ($191.5 million). Comparative earnings in the current year were lower due to:
• lower earnings from discontinued operations ($55.1 million); partially offset by
• a foreign exchange gain of $6.0 million in the current year (YTD 2017 – loss of $12.8 million); and
• lower interest expense resulting from the early redemption of the 7.50% Senior Secured Notes due 2020 on November
20, 2017 ($25.2 million).
• Cash flow from operations for the quarter ended June 30, 2018 was $118.3 million, a decrease of $60.9 million in
comparison to the second quarter of the prior year ($179.2 million). The decrease was primarily due to higher production
costs ($34.2 million) and a comparative change in non-cash working capital ($16.3 million).
On a year-to-date basis, cash flow from operations was $291.2 million, a decrease of $132.7 million in comparison to
the six months ended June 30, 2017 ($423.9 million). The decrease was attributable to a comparative change in non-
cash working capital ($86.1 million) and higher production costs ($59.9 million).
Financial Position and Financing
• Cash and cash equivalents decreased $126.6 million during the quarter from $1,639.1 million at March 31, 2018 to
$1,512.5 million at June 30, 2018. The decrease is primarily a reflection of investments in mineral properties, plant and
equipment of $193.2 million and shareholder dividends of $33.6 million, partially offset by cash generated from operating
activities of $118.3 million.
For the six months ended June 30, 2018, cash decreased by $54.5 million due primarily to investments in mineral
properties, plant and equipment of $343.9 million and shareholder dividends of $33.6 million, partially offset by cash
generated from operating activities of $291.2 million and proceeds from the sale of marketable securities of $35.4
million.
• Net cash position at June 30, 2018 was $1,063.5 million compared to $1,183.2 million at March 31, 2018 and $1,110.5
million at December 31, 2017.
• The Company has a revolving credit facility available for borrowing up to $350 million. As at June 30, 2018, the
Company had no amount drawn on the credit facility, only letters of credit in the amount of $25.0 million.
• As at July 25, 2018, cash and net cash were approximately $1.5 billion and $1.1 billion, respectively.
Outlook
2018 Production and Cost Guidance
Production and cash cost guidance for 2018 has been revised from that disclosed in our Management’s Discussion and
Analysis for the three months ended March 31, 2018 to reflect improvements in mine productivity and mill throughput at Neves-
Corvo, and to reflect a tighter zinc production range for Zinkgruvan based on results to date.
2018 Guidance Previous Guidance a Revised Guidance b
(contained tonnes) Tonnes C1 Cost Tonnes C1 Cost
Copper Candelaria (80%) 104,000 - 109,000 $1.70/lb 104,000 - 109,000 $1.70/lb
Eagle 15,000 - 18,000 15,000 - 18,000
Neves-Corvo 39,000 - 44,000 $1.30/lb 42,000 - 45,000 $1.20/lb
Zinkgruvan 1,000 - 2,000 1,000 - 2,000
Total attributable 159,000 - 173,000 162,000 - 174,000
Zinc Neves-Corvo 68,000 - 73,000 72,000 - 75,000
Zinkgruvan 76,000 - 81,000 $0.45/lb 76,000 - 79,000 $0.45/lb
Total 144,000 - 154,000 148,000 - 154,000
Nickel Eagle 14,000 - 17,000 $1.10/lb 14,000 - 17,000 $1.10/lb
a. Guidance as outlined in our Management's Discussion and Analysis for the three months ended March 31, 2018.
b. Cash costs are dependent upon exchange rates (forecast at €/USD:1.25, USD/SEK:8.50, USD/CLP:600) and metal prices
(forecast at Cu: $3.00/lb, Ni: $6.00/lb, Zn: $1.40/lb, Pb: $1.00/lb, Au: $1,300/oz, Ag: $16.50/oz).
2018 Capital Expenditure and Exploration Guidance
Total capital expenditures, excluding capitalized interest, are forecast to be $795 million, $55 million lower than previously
disclosed. Candelaria’s capitalized stripping program has been increased by $15 million, largely driven by higher fuel cost and
the negative impact of foreign exchange, with changes in estimated equipment deliveries and the timing of other sustaining
expenditures. A comprehensive project cost review of ZEP has confirmed lower spending requirements in 2018, as costs are
deferred to later in the project.
Revised Capital Expenditure Guidance
($ millions) Previous Guidancea Revisions Revised Guidance
Candelaria (100% basis)
Capitalized Stripping 200 15 215
Los Diques TSF 60 - 60
New Mine Fleet Investment 75 45 120
Candelaria Mill Optimization Project 50 (20) 30
Candelaria Underground Development 20 (5) 15
Other Sustaining 105 (25) 80
Candelaria Sustaining 510 10 520
Eagle Sustaining 20 - 20
Neves-Corvo Sustaining 60 (5) 55
Zinkgruvan Sustaining 40 - 40
Total Sustaining Capital 630 5 635
Eagle East 30 - 30
ZEP (Neves-Corvo) 190 (60) 130
Total Expansionary Capital 220 (60) 160
Total Capital Expenditures 850 (55) 795
a. Guidance as outlined in our Management's Discussion and Analysis for the three months ended March 31, 2018.
2018 Exploration Investment Guidance
Exploration expenditures are expected to remain unchanged at $83 million in 2018.
The information in this release is subject to the disclosure requirements of Lundin Mining under the EU Market Abuse
Regulation. This information was publicly communicated on July 25, 2018 at 5:30 p.m. Eastern Time.
For further information, please contact:
Mark Turner, Director, Business Valuations and Investor Relations: +1-416-342-5565
Sonia Tercas, Senior Associate, Investor Relations: +1-416-342-5583
Robert Eriksson, Investor Relations Sweden: +46 8 545 015 50
Cautionary Statement in Forward-Looking Information and Non-GAAP performance measures
Certain of the statements made and information contained or incorporated by reference herein is "forward-looking information"
within the meaning of applicable Canadian securities laws. All statements other than statements of historical facts in this
document constitute forward-looking information based on current expectations, estimates, forecasts and projections as well
as beliefs and assumptions made by the Company’s management. Such forward-looking statements include but are not
limited to those regarding the Company’s outlook and guidance on metal production, costs and capital expenditures;
exploration; the Zinc Expansion Project (or ZEP) at Neves-Corvo, Eagle East and the Los Diques Tailings Storage Facility
(TSF) at Candelaria; and life-of-mine estimates and plans. Words such as “advancing”, “anticipate”, “assumption”, “believe”,
“estimate”, “expectation”, “exploration”, “further”, “forecast”, “guidance”, “initiative”, “outlook”, “phase”, “plan”, “potential”,
“progress”, “project”, “schedule”, “target” or “track”, or variations of or similar such terms, or statements that certain actions,
events or results could, may, might or will be taken or occur or be achieved, identify forward-looking information. Although the
Company believes that the expectations reflected in the forward-looking information herein are reasonable, these statements
by their nature involve risks and uncertainties and are not guarantees of future performance. These estimates, expectations
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 materially from those reflected in the forward-looking
statements. Such risks and uncertainties include, without limitation, risks and uncertainties inherent in and/or relating to:
estimates of future production and operations, cash and all-in sustaining costs; metal and commodity price fluctuations;
foreign currency fluctuations; mining operations including but not limited to environmental hazards, industrial accidents,
ground control problems and flooding; geology including, but not limited to, unusual or unexpected geological formations and
events (including but not limited to rock slides and falls of ground), estimation and modelling of grade, tonnes, metallurgy
continuity of mineral deposits, dilution, and Mineral Resources and Mineral Reserves, and actual ore mined and/or metal
recoveries varying from such estimates; mine life and life-of-mine plans and estimates; the possibility that future exploration,
development or mining results will not be consistent with expectations; the potential for and effects of labour actions, disputes
or shortages (including but not limited to at Neves-Corvo), community or other civil protests or demonstrations or other
unanticipated difficulties with or interruptions to operations; potential for unexpected costs and expenses including, without
limitation, for mine closure and reclamation at current and historical operations; uncertain political and economic
environments; changes in laws or policies, foreign taxation, delays or the inability to obtain and maintain necessary
governmental approvals and/or permits; regulatory investigations, enforcement, sanctions and/or related or other litigation; and
other risks and uncertainties, including but not limited to those described in the “Managing Risks” section of the Company’s
full-year 2017 and subsequent Management’s Discussion and Analysis, and the “Risks and Uncertainties” section of the
Company’s most recently filed Annual Information Form. In addition, forward-looking information is based on various
assumptions including, without limitation, the expectations and beliefs of management; assumed prices of copper, zinc,
nickel 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, there can be no assurance that
forward-looking information will prove to be accurate, and readers should not place undue reliance on forward-looking
statements. The Company disclaims any intention or obligation to update or revise forward‐looking statements or to explain
any material difference between such and subsequent actual events, except as required by applicable law.
Certain financial measures contained herein, such as net cash 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.