Toronto, April 29, 2010 (TSX: LUN; OMX: LUMI) Lundin Mining Corporation (“Lundin” or the “Company”) today reported an unaudited net income of $38.0 million ($0.07 per share) for the first quarter of 2010, up from a loss of $8.6 million (loss of $0.02 per share) in the first quarter of 2009.
Mr. Phil Wright, President and CEO commented, “Net income improved markedly from the loss this time last year thanks to the doubling of metal prices and the inclusion of $17.2 million income from Tenke.
“As foreshadowed earlier this year, production for the quarter from our European business was below trend and consequently lower sales volumes and higher unit costs partially offset the gain from stronger metal prices. Measures have been taken to reduce the effect on the full year’s results of this quarter’s lower production and, with the exception of Neves-Corvo where industrial action makes it difficult to forecast, we expect to meet our 2010 production and cost targets.
“I remain very pleased with the performance of the European operations and, in particular, the way in which the operational teams have addressed the various challenges during the quarter” Mr. Wright said.
Tenke produced at nameplate capacity for the quarter despite the rainy season, which hampers mining and milling operations, and earnings were ahead of expectations owing to the stronger metal prices.
At quarter-end, cash on hand was $98.0 million and net cash , after deducting all outstanding debt, was $10.2 million.
Highlights
- As expected, production for the quarter was below trend owing to a number of factors including: industrial action at Neves-Corvo; abnormal weather conditions in Europe hampering ore processing; and restrictions at Zinkgruvan owing to a blocked orepass.
Industrial action at Neves-Corvo is estimated to have reduced production by approximately 7,000 tonnes of copper in the quarter. Mitigating actions taken, or planned, should allow some or all of this lower production in the first quarter to be recovered. However, as notice has been received of further possible action in May 2010, and the impossibility of predicting future events, annual production guidance for Neves-Corvo has been lowered by 5,000 tonnes of copper in total.
Zinkgruvan was affected by a blocked orepass and weather related milling issues. Zinc production was down by approximately 3,000 tonnes as a result. It is expected that this will be recovered in the remaining three quarters of the year.
Aguablanca’s production of nickel was in-line with original expectations despite record high rainfall resulting in repeated flooding of the open pit restricting access to high-grade ore.
Production Summary
- Sales for the quarter were $141.7 million compared to sales of $123.4 million in the first quarter of 2009. Lower volume from continuing operations ($43.6 million) and the closure of Galmoy ($9.1 million) were offset by metal price improvements and price adjustments related to previous quarters’ sales ($70.2 million). Average prices in the first quarter of 2010 were around 100% higher than the same quarter in 2009. As foreshadowed in the guidance given for this quarter, closing inventories were higher than December 31, 2009 levels. The closing levels are considered ‘normal’.
- On February 16, 2010, underground mining employees at Neves-Corvo commenced a program of two-hour strikes at the beginning of each shift accounting for approximately 40% – 45% of effective production time, once transit times and meal breaks are taken into account. This action terminated on April 1, 2010 with a full return to work.
This issue remains unresolved despite the return to work. Subsequent to quarter end the Company has received notice of possible further industrial action (see news release dated April 20, 2010).
- Cash inflow from operations for the current quarter was $84.9 million, compared to outflows of $63.3 million for the corresponding period in 2009. This increase relates primarily to higher operating earnings in the current quarter; in addition, cash outflows in the first quarter of 2009 included payments to customers of $68.1 million for settlement of provisional sales.
- The Tenke Fungurume mine produced approximately 28,800 tonnes of copper. The operation is continuing to address start-up and quality issues in the cobalt circuit and sustained targeted cobalt production rates are expected to be reached during 2010.
The principal balance resulting from the Excess Over-run Costs facility related to the Company’s proportionate share of Phase I development at March 31, 2010 was $215.7 million.
Financial Position and Financing
- Net cash at March 31, 2010 was $10.2 million compared to a net debt position of $49.3 million at December 31, 2009. The increase in liquidity during the quarter was attributable to net cashflow from operations; $12 million sales proceeds from sale of investments; offset by a contribution to Tenke of $7.6 million.
(For full report, including tables, see attached file)
