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Lundin Mining Third Quarter Results

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Lundin Mining Third Quarter Results

 

 

 

 

 

Lundin Mining Corporation (TSX: LUN) (Nasdaq Stockholm: LUMI) reported cash flows of $523.1 million generated from operations in its third quarter. Adjusted operating cash flow2 was $294.1 million ($0.40 per share) and free cash flow2 was $407.0 million for the quarter ended September 30, 2021. Net earnings attributable to Lundin Mining shareholders for the quarter was $173.7 million ($0.24 per share). Adjusted earnings2 were $168.4 million ($0.23 per share) and adjusted EBITDA2 were $411.3 million for the quarter.

 

Marie Inkster, President and CEO commented, “We continued to take advantage of the favourable base metal prices setting a second consecutive quarterly free cash flow record with generation of over $400 million. This was underpinned by strong operational performance, most notably with quarter-over-quarter production increases and cash cost improvements at Chapada and Zinkgruvan. Importantly, the Zinc Expansion Project shaft upgrades and major maintenance at both at Neves-Corvo and Candelaria were successfully completed, positioning the fourth quarter to be the strongest of the year.”

 

 

Summary Financial Results

Three months ended Nine months ended
September 30, September 30,
US$ Millions (except per share amounts) 2021 2020 2021 2020
Revenue 756.4 600.7 2,310.2 1,512.0
Gross profit 303.9 199.3 936.6 318.8
Attributable net earnings1 173.7 122.4 551.6 49.6
Net earnings (loss) 190.6 133.6 613.2 68.3
Adjusted earnings 1,2 168.4 106.4 539.1 120.0
Adjusted EBITDA2 411.3 300.3 1,246.5 622.1
Basic and diluted net earnings per share1 0.24 0.17 0.75 0.07
Adjusted basic and diluted earnings per share1,2 0.23 0.14 0.73 0.16
Cash flow from operations 523.1 272.2 1,100.8 393.2
Adjusted operating cash flow2 294.1 262.0 1,005.6 468.9
Adjusted operating cash flow per share2 0.40 0.36 1.36 0.64
Free cash flow2 407.0 194.5 762.0 120.4
Cash and cash equivalents 428.3 222.0 428.3 222.0
Net cash (debt)2 390.7 (124.0) 390.7 (124.0)
1 Attributable to shareholders of Lundin Mining Corporation.
                 2 These are non-GAAP measures. Please refer to the Company’s discussion of non-GAAP measures in its Management’s Discussion and Analysis for the three and nine months ended September 30, 2021.

 

Highlights

 

Operational Performance

 

Total copper, zinc and gold production for the third quarter of 2021 were higher than the prior year quarter and previous quarter while nickel production declined as expected, due to lower grades. Chapada set a new record for throughput in the quarter, approximately 5% higher than the previous quarter and 34% higher than the third quarter of 2020. Production and cash costs1 for the quarter for all sites are on track to meet annual guidance.

 

Candelaria (80% owned): Candelaria produced 35,929 tonnes of copper, and approximately 20,000 ounces of gold in concentrate on a 100% basis in the quarter. Copper and gold production was comparable to the prior year quarter. Copper cash costs of $1.62/lb for the current quarter were higher than the prior year quarter largely owing to the impact of higher mining costs.

 

Chapada (100% owned): Chapada produced 16,050 tonnes of copper and approximately 26,000 ounces of gold in concentrate in the quarter. Copper and gold production increased compared to the prior year quarter and also over the previous quarter primarily due to record quarterly throughput. Copper cash costs of $0.62/lb for the quarter were higher than the prior year quarter due mainly to higher mining costs resulting from inflationary pressures though were better than plan and the previous quarter.

 

Eagle (100% owned): Eagle produced 4,124 tonnes of nickel and 4,165 tonnes of copper during the quarter, which was lower than the prior year quarter due to lower throughput, grades and recoveries. By-product credits, aided by favourable copper prices, exceeded gross cash costs in the quarter resulting in nickel cash costs of negative $0.80/lb.

 

Neves-Corvo (100% owned): Neves-Corvo produced 8,083 tonnes of copper for the quarter and 15,909 tonnes of zinc with production of both metals exceeding the prior year comparable period. Higher copper production resulted from higher head grades, while zinc production was higher primarily due to improved throughput and recoveries. Copper cash costs of $2.05/lb for the quarter were higher than the prior year quarter primarily due to inflationary increases in consumables, as well as unfavourable foreign exchange.

 

The Zinc Expansion Project (“ZEP”) continues to progress on schedule and on budget. Upgrades to the shaft were completed during the annual maintenance shutdown which impacted production in the quarter as planned. Production ramp up to full production rates is scheduled for the first half of 2022.

 

Zinkgruvan (100% owned): Zinc production of 22,860 tonnes and lead production of 6,952 tonnes were both higher than the prior year comparable period as well as the previous quarter due to higher grades and recoveries. Zinc cash costs of $0.32/lb were better than the prior year quarter largely due to higher sales volumes.

 

Total Production

 

(Contained metal in
concentrate)
2021 2020
YTD Q3 Q2 Q1 Total Q4 Q3 Q2 Q1
Copper (t)a 185,888 65,077 63,457 57,354 230,781 41,885 61,444 65,285 62,167
Zinc (t) 106,967 38,769 34,833 33,365 142,744 41,428 32,787 31,582 36,947
Gold (koz)a 121 46 41 34 163 35 45 44 39
Nickel (t) 14,252 4,124 4,774 5,354 16,718 4,909 4,854 3,380 3,575
a – Candelaria’s production is on a 100% basis.

 

 

                 1 This is a non-GAAP measure. Please refer to the Company’s discussion of non-GAAP measures in its Management’s Discussion and Analysis for the three and nine months ended September 30, 2021.Corporate Highlights

 

Corporate Highlights

  • On September 9, 2021, the Company announced that the Company’s President and Chief Executive Officer, Ms. Marie Inkster, will be stepping down and that Mr. Peter Rockandel, currently Senior Vice President, Corporate Development and Investor Relations, will assume the role. The transition has progressed extremely well and the Board of Directors, management and Ms. Inkster have agreed the process will be successfully complete at the end of October. Mr. Rockandel will assume the role of President and Chief Executive Officer as of November 1, 2021. Ms. Inkster will remain on the Company’s Board of Directors until December 31, 2021.
  • On September 13, 2021, the Company reported its Mineral Resource and Mineral Reserve estimates as at June 30, 2021. On a consolidated and attributable basis, estimated contained metal in the Proven and Probable Mineral Reserve categories totalled 5,302 kt of copper, 2,813 kt of zinc, 77 kt of nickel, 913 kt of lead and 6.6 million ounces of gold.

 

Financial Performance

  • Gross profit for the quarter ended September 30, 2021 was $303.9 million, an increase of $104.6 million compared to the prior year quarter. On a year-to-date basis, gross profit was $936.6 million, an increase of $617.8 million over the prior year comparative period. The increases were primarily due to higher realized metal prices net of price adjustments (Q3 – $119.6 million, YTD – $761.8 million), partially offset by higher production costs and, on a year-to-date basis, the unfavourable effects of foreign exchange ($29.7 million). Total production costs were in line with expectations.
  • Net earnings for the quarter ended September 30, 2021 were $190.6 million, an increase of $57.0 million compared to the prior year quarter. On a year-to-date basis, net earnings were $613.2 million, an increase of $544.9 million from the prior year comparative period. The increases were attributable to higher gross profit partially offset by higher income tax expense.
  • Adjusted earnings for the quarter were $168.4 million, an increase of $62.0 million over the prior year quarter. On a year-to-date basis, adjusted earnings were $539.1 million, $419.1 million higher than the prior year. The increases were primarily due to higher gross profit partially offset by higher income taxes and higher net earnings attributable to non-controlling interests.

 

Financial Position  and Financing

  • Cash and cash equivalents of $428.3 million as at September 30, 2021 represents an increase of $133.4 million during the quarter. Cash flow from operations of $523.1 million was used to invest in capital expenditures ($133.8 million), pay shareholder dividends of $104.7 million (including an inaugural performance dividend) and for distributions to non-controlling interests ($20.0 million). The Company also repaid $100.7 million in debt on a net basis.
  • On a year-to-date basis, cash and cash equivalents increased by $286.9 million. Cash flow from operations of $1,100.8 million was used to invest in capital expenditure ($378.2 million), to repay debt ($162.0 million), pay shareholder dividends ($175.9 million) and for distributions to non-controlling interests ($36.0 million).
  • Free cash flow for the three and the nine months ended September 30, 2021 has increased (Q3 – $212.6 million, YTD – $641.6 million) over the prior year comparative periods due to higher cash provided by operating activities.
  • As at September 30, 2021, the Company had a net cash balance of $390.7 million. As at October 27, 2021, the Company had a cash and net cash balance of approximately $445.0 million and $405.0 million, respectively.

 

Outlook

 

Production guidance and full year cash cost guidance remains unchanged for all operations.

 

While the Company has not experienced significant disruptions to production, shipments of concentrate, or its supply chain due to COVID-19, we continue to caution that a localized outbreak at the operations may require the need to implement increased isolation and containment measures which could impact production, delay maintenance activities or disrupt supply chains. Given the uncertainty of the duration and magnitude of the impact of COVID-19, production and cash cost estimates are subject to a higher than normal degree of uncertainty. The guidance below does not reflect any potential for additional suspensions or other significant disruption to operations due to COVID-19.

 

2021 Production and Cash Cost Guidancea

 

Production Cash Costsb
Copper (t) Candelaria (100%) 150,000 155,000 $1.55/lbc
Chapada 48,000 50,000 $1.10/lbd
Eagle 18,000 20,000
Neves-Corvo 36,000 38,000 $2.10/lbc
Zinkgruvan 3,000 4,000
Total 255,000 267,000
Zinc (t) Neves-Corvo 67,000 70,000
Zinkgruvan 73,000 76,000 $0.65/lbc
Total 140,000 146,000
Gold (oz) Candelaria (100%) 85,000 90,000
Chapada 73,000 76,000
Total 158,000 166,000
Nickel (t) Eagle 18,000 20,000 $(1.00)/lb

 

            a. Guidance as outlined in the Management’s Discussion and Analysis for the three and six months ended June 30, 2021 in the Outlook section.
b. Cash costs are based on various assumptions and estimates, including but not limited to: production volumes, as noted above, commodity prices (Cu: $4.30/lb, Zn: $1.25/lb, Pb: $0.95/lb, Au: $1,800/oz), foreign exchange rates (€/USD:1.20, USD/SEK:8.50, USD/CLP:730, USD/BRL:5.10) and production costs for the remainder of 2021.
c.  68% of Candelaria’s total gold and silver production are subject to a streaming agreement and silver production at Zinkgruvan and Neves-Corvo are also subject to streaming agreements. Cash costs are calculated based on receipt of approximately $416/oz gold and $4.16/oz to $4.48/oz silver.
d. Chapada cash costs are calculated on a by-product basis and do not include the effects of its copper stream agreements. Effects of copper stream agreements are reflected in copper revenue and will impact realized revenue per pound.

 

2021 Capital Expenditure Guidance

 

Total capital expenditure guidance has been decreased by $40.0 million after taking into account current spend to date.

 

 

($ millions) Previous Guidancea Revisions Revised Guidance
Candelaria (100% basis) 345 (20) 325
Chapada 65 (10) 55
Eagle 20 20
Neves-Corvo 65 (5) 60
Zinkgruvan 50 (5) 45
Total Sustaining Capital 545 (40) 505
Zinc Expansion Project (Neves-Corvo) 70 70
Total Capital Expenditures 615 (40) 575
a. Guidance as outlined in the Management’s Discussion and Analysis for the three and six months ended June 30, 2021.2021 Exploration Investment Guidance

 

2021 Exploration Investment Guidance

 

Total planned exploration expenditures are expected to be $40.0 million in 2021, unchanged from previous guidance. Approximately $36.0 million will be spent supporting significant in-mine and near-mine targets at our operations ($16.0 million at Chapada, $11.0 million at Candelaria, $6.0 million at Zinkgruvan and $3.0 million at Neves-Corvo). The remaining amount supports Corporate Exploration Initiatives and new business development projects.

 

About Lundin Mining

 

Lundin Mining is a diversified Canadian base metals mining company with operations in Brazil, Chile, Portugal, Sweden and the United States of America, primarily producing copper, zinc, gold and nickel.

 

Posted October 28, 2021

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