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2021-10-28

Lundin Mining Corporation: Lundin Mining Third Quarter Results

Toronto, October 27, 2021 /CNW/ (TSX: LUN; Nasdaq Stockholm: LUMI) Lundin Mining Corporation ("Lundin Mining" or the "Company") today reported cash flows of $523.1 million generated from operations in its third quarter. Adjusted operating cash flow[2] was $294.1 million ($0.40 per share) and free cash flow[2] 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 earnings[2] were $168.4 million ($0.23 per share) and adjusted EBITDA[2] 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 Nine
months months
ended ended
September September
30, 30,
US$ Millions (except per 2021   2020 2021   2020
share amounts)
Revenue 756.4 600.7 2,310.2 1,512.0
Gross profit 303.9 199.3 936.6 318.8
Attributable net 173.7 122.4 551.6 49.6
earnings[1]
Net earnings (loss) 190.6 133.6 613.2 68.3
Adjusted earnings [1,2] 168.4 106.4 539.1 120.0
Adjusted EBITDA[2] 411.3 300.3 1,246.5 622.1
Basic and diluted net 0.24 0.17 0.75 0.07
earnings per share[1]
Adjusted basic and 0.23 0.14 0.73 0.16
diluted earnings per
share[1,2]
Cash flow from operations 523.1 272.2 1,100.8 393.2
Adjusted operating cash 294.1 262.0 1,005.6 468.9
flow[2]
Adjusted operating cash 0.40 0.36 1.36 0.64
flow per share[2]
Free cash flow[2] 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 costs[1] 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 2021 2020
in concentrate)
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

  • 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 Guidance[a]

[][][][][]

Production Cash Costs[b]
Copper (t) Candelaria 150,000 - 155,000 $1.55/lb[c]
(100%)
Chapada 48,000 - 50,000 $1.10/lb[d]

Eagle 18,000 - 20,000

Neves 36,000 - 38,000 $2.10/lb[c]
-Corvo
Zinkgruvan 3,000 - 4,000

Total 255,000 - 267,000

Zinc (t) Neves 67,000 - 70,000
-Corvo
Zinkgruvan 73,000 - 76,000 $0.65/lb[c]

Total 140,000 - 146,000

Gold (oz) Candelaria 85...

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