"Despite challenging inflationary conditions in the second quarter,
"Our operations continue to perform well with Candelaria, Eagle and Zinkgruvan all on-track to deliver annual production guidance. We have revised production guidance for Chapada given impacts of the very wet start to the year, and for Neves-Corvo zinc as we progress ramping the
Summary Financial Results
Three months ended | Six months ended | ||||
US$ Millions (except per share amounts) | 2022 | 2021 | 2022 | 2021 | |
Revenue | 590.2 | 872.3 | 1,581.3 | 1,553.8 | |
Gross profit | 46.0 | 380.2 | 524.8 | 632.6 | |
Attributable net (loss) earnings2 | (52.6) | 242.6 | 292.5 | 377.8 | |
Net (loss) earnings | (48.6) | 268.4 | 329.5 | 422.7 | |
Adjusted (loss) earnings 1,2 | (35.3) | 226.3 | 260.3 | 370.7 | |
Adjusted EBITDA1 | 148.6 | 480.7 | 736.4 | 835.2 | |
Basic and diluted earnings per share ("EPS")2 | (0.07) | 0.33 | 0.39 | 0.51 | |
Adjusted EPS1,2 | (0.05) | 0.31 | 0.35 | 0.50 | |
Cash flow from operations | 366.4 | 419.0 | 683.7 | 577.7 | |
Adjusted operating cash flow1 | 49.7 | 431.6 | 522.6 | 711.5 | |
Adjusted operating cash flow per share1 | 0.06 | 0.58 | 0.70 | 0.96 | |
Free cash flow1 | 214.7 | 298.9 | 401.2 | 354.9 | |
Cash and cash equivalents | 498.2 | 294.9 | 498.2 | 294.9 | |
Net cash1 | 469.9 | 153.4 | 469.9 | 153.4 |
1 These are non-GAAP measures. Please refer to the Company's discussion of non-GAAP and other performance measures in its Management's Discussion and Analysis for the three and six months ended June 30, 2022 and the Reconciliation of Non-GAAP Measures section at the end of this news release. | |
2 Attributable to shareholders of |
Highlights
Operational Performance
Copper and zinc production during the current quarter was higher than the prior year quarter. Production cost and cash cost were higher this quarter than the comparable prior year quarter primarily due to the inflationary impacts on consumables, particularly diesel and electricity, as well as on contractor and maintenance costs.
Candelaria (80% owned): Candelaria produced 40,949 tonnes of copper, and approximately 23,000 ounces of gold in concentrate on a 100% basis in the quarter. Copper production was higher than the comparable prior year quarter due to grades, while gold production was lower primarily due to lower gold recoveries. Production costs were higher in the current quarter reflecting higher consumable costs, partially offset by favourable foreign exchange. Copper cash cost of
Chapada (100% owned): Chapada produced 10,345 tonnes of copper and approximately 16,000 ounces of gold in concentrate in the quarter. Copper and gold production was lower than the prior year quarter primarily due to processed ore types impacting throughput and metal recoveries. Production costs were higher due to higher consumable costs. Copper cash cost of
Eagle (100% owned): Eagle produced 4,719 tonnes of nickel and 4,400 tonnes of copper during the quarter, which was lower than the prior year quarter due to lower grades. Production costs were higher due to higher consumable costs. Nickel cash cost in the quarter of
Neves-Corvo (100% owned): Neves-Corvo produced 7,867 tonnes of copper for the quarter and 20,647 tonnes of zinc. Copper production was lower than the prior year comparable period, due to throughput. Zinc production was higher primarily due to increased throughput driven by the ramp-up of the
Zinkgruvan (100% owned): Zinc production of 21,265 tonnes and lead production of 9,124 tonnes were both higher than the prior year comparable period due to higher throughput. Production costs were higher due to higher sales volumes, partially offset by favourable foreign exchange. Zinc cash cost of
Total Production
(Contained metal in concentrate)a | 2022 | 2021 | ||||||
YTD | Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | |
Copper (t)b | 129,177 | 64,096 | 65,081 | 262,884 | 76,996 | 65,077 | 63,457 | 57,354 |
Zinc (t) | 74,303 | 41,912 | 32,391 | 143,797 | 36,830 | 38,769 | 34,833 | 33,365 |
Gold (koz)b | 73 | 39 | 34 | 167 | 46 | 46 | 41 | 34 |
Nickel (t) | 9,000 | 4,719 | 4,281 | 18,353 | 4,101 | 4,124 | 4,774 | 5,354 |
a. Tonnes (t) and thousands of ounces (koz) | ||||||||
b. Candelaria's production is on a 100% basis. |
Corporate Updates
- On
April 26, 2022 , the Company executed a fourth amended and restated credit agreement that increased its revolving credit facility ("the Credit Facility") to$1,750.0 million (previously$800.0 million with a$200.0 million accordion option), reduced the cost of borrowing, and extended the term toApril 2027 , fromAugust 2023 . The amended Credit Facility bears interest on drawn funds at rates of Term Secured Overnight Financing Rate ("Term SOFR") + Credit Spread Adjustment ("CSA") + 1.45% to Term SOFR+CSA+2.50% depending upon the Company's net leverage ratio, reduced from LIBOR+1.75% to LIBOR+2.75%, previously. The amendment and restatement provides the Company with more favourable covenants, reduced security on assets and included other customary revisions. - On
April 28, 2022 , the Company completed the previously announced plan of arrangement (the "Arrangement") to acquire all of the issued and outstanding shares ofJosemaria Resources Inc. ("Josemaria Resources"). Under the terms of the Arrangement, Josemaria Resources shareholders were provided with the right to elect to receive 0.1487 of a common share ofLundin Mining ("Lundin Mining Share") per Josemaria Resources common share ("Josemaria Resources Share") plusC$0.11 for each whole Lundin Mining Share issued to such shareholder orC$1.60 in cash for each Josemaria Resources Share or any combination thereof, subject to pro-ration of a total maximum number ofLundin Mining Shares and cash consideration. - On
May 12, 2022 , at the Annual Meeting, the Company announced the appointment of Mr.Adam Lundin as the Chair of the Board of Directors following the retirement of Mr.Lukas Lundin .
Financial Performance
- Gross profit for the quarter ended
June 30, 2022 was$46.0 million , a decrease of$334.2 million in comparison to the prior year quarter due to lower metal prices net of price adjustments ($256.7 million ) and higher production costs due to inflationary price increases. On a year-to-date basis, gross profit was also lower than the prior year comparative period due to the same impacts. - For the three and six months ended
June 30, 2022 , net loss of$48.6 million and net earnings of$329.5 million were$317.1 million and$93.2 million lower than the prior year comparable periods, respectively. Lower net earnings were attributable to lower gross profit, partially offset by favourable foreign exchange. - Adjusted loss of
$35.3 million and adjusted earnings of$260.3 millionfor the three and six months endedJune 30, 2022 , respectively, and were lower than the prior year comparable periods due to lower net earnings.
Financial Position and Financing
- Cash and cash equivalents as at
June 30, 2022 were$498.2 million , a decrease during the quarter of$235.6 million . Cash flow from operations of$366.4 million was used to fund investing activities of$333.0 million which includes the Josemaria Resources acquisition. In addition, financing activities included shareholder dividends of$171.2 million , distributions of$20.0 million to non-controlling interests and$47.0 million in Josemaria debentures which were paid in the quarter. - On a year-to-date basis, cash and cash equivalents decreased by
$95.8 million . Cash flow from operations of$683.7 million was used to fund investing activities of$505.5 million , and financing activities described above. - As at
June 30, 2022 , the Company had a net cash balance of$469.9 million . As atJuly 27, 2022 , the Company had cash and net cash balances of approximately$485.0 million and$460.0 million , respectively.
Outlook
The Company continues to experience continuing risks associated with global inflation as well as supply chain delivery. To date, there have been no significant impacts on our operations relating to supply chain availability; however, inflationary impacts on diesel, electricity and contractor costs are expected to continue to increase operating costs for the remainder of the year. The Company has implemented procurement strategies to try to mitigate the impact and continues to monitor these risks.
Chapada production guidance has been revised to reflect delayed access to planned ore types primarily as a result of above average rainfall experienced in the first half of the year which impacted planned waste stripping activities. Neves-Corvo zinc production guidance has been revised to reflect ZEP ramp-up progress achieved to date and expected underground mining rates.
Cash cost guidance for Candelaria and Chapada has been updated to reflect anticipated inflationary impacts.
2022 Production and Cash Cost Guidance
Previous Guidancea | Revised Guidance | |||||
(contained metal in concentrate) | Production | Cash Cost ($/lb) | Production | Cash Cost ($/lb)b | ||
Copper (t) | Candelaria (100%) | 155,000 - 165,000 | 1.55 | 155,000 - 165,000 | 1.75c | |
Chapada | 53,000 - 58,000 | 1.60 | 45,000 - 50,000 | 2.25d | ||
Eagle | 15,000 - 18,000 | 15,000 - 18,000 | ||||
Neves-Corvo | 33,000 - 38,000 | 1.80 | 33,000 - 38,000 | 1.80c | ||
Zinkgruvan | 2,000 - 3,000 | 2,000 - 3,000 | ||||
Total | 258,000 - 282,000 | 250,000 - 274,000 | ||||
Zinc (t) | Neves-Corvo | 110,000 - 120,000 | 90,000 - 100,000 | |||
Zinkgruvan | 78,000 - 83,000 | 0.55 | 78,000 - 83,000 | 0.55c | ||
Total | 188,000 - 203,000 | 168,000 - 183,000 | ||||
Gold (koz) | Candelaria (100%) | 83 - 88 | 83 - 88 | |||
Chapada | 70 - 75 | 62 - 67 | ||||
Total | 153 - 163 | 145 - 155 | ||||
Nickel (t) | Eagle | 15,000 - 18,000 | (0.25) | 15,000 - 18,000 | (0.25) |
a. Guidance as outlined in the MD&A for the year ended |
b. Cash costs are based on various assumptions and estimates, including but not limited to: production volumes, commodity prices (Cu: |
c. 68% of Candelaria's total gold and silver production are subject to a streaming agreement and silver production at Zinkgruvan and Neves-Corvo are also subject to streaming agreements. Cash costs are calculated based on receipt of approximately |
d. Chapada cash cost is calculated on a by-product basis and does not include the effects of its copper stream agreements. Effects of the copper stream agreements are reflected in copper revenue and will impact realized price per pound. |
2022 Capital Expenditure
Capital expenditure guidance has been updated for Candelaria and Chapada and reflects higher expected capitalized deferred stripping costs due to inflationary impacts on energy and other mining consumables.
($ millions) | Previous Guidancea | Revisions | Revised Guidance | |
Candelaria (100% basis) | 370 | 30 | 400 | |
Chapada | 65 | 15 | 80 | |
Eagle | 10 | — | 10 | |
Neves-Corvo | 95 | — | 95 | |
Zinkgruvan | 60 | — | 60 | |
Other | 25 | — | 25 | |
625 | 45 | 670 | ||
30 | — | 30 | ||
Total Capital Expenditures | 655 | 45 | 700 | |
a. | Guidance as outlined in MD&A for the year ended |
Josemaria Project Guidance
The large scale copper-gold Josemaria project ("
2022 Exploration Investment Guidance
Total planned exploration expenditures are expected to be
About
The information in this release is subject to the disclosure requirements of
Technical Information
The scientific and technical information in this press release has been prepared in accordance with the disclosure standards of National Instrument 43-101 ("NI 43-101") and has been reviewed and approved by
Reconciliation on Non-GAAP Measures
The Company uses certain performance measures in its analysis. These performance measures have no standardized meaning within generally accepted accounting principles under International Financial Reporting Standards and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. For additional details please refer to the Company's discussion of non-GAAP and other performance measures in its Management's Discussion and Analysis for the three and six months ended
Adjusted EBITDA can be reconciled to the Company's Consolidated Statement of Earnings as follows:
Three months ended | Six months ended | ||||
($thousands) | 2022 | 2021 | 2022 | 2021 | |
Net (loss) earnings | (48,626) | 268,432 | 329,483 | 422,651 | |
Add back: | |||||
Depreciation, depletion and amortization | 142,042 | 130,850 | 271,879 | 256,760 | |
Finance income and costs | 17,309 | 9,078 | 32,281 | 20,174 | |
Income taxes | 49,003 | 62,614 | 126,209 | 132,516 | |
159,728 | 470,974 | 759,852 | 832,101 | ||
Unrealized foreign exchange | 2,721 | 5,296 | 10,574 | 6,258 | |
Unrealized foreign exchange and trading gains on equity investments | (18,848) | — | (18,848) | — | |
Revaluation of derivative liability | (745) | 5,084 | 2,548 | (2,019) | |
Revaluation of marketable securities | 1,626 | (3,513) | (2,266) | (4,062) | |
Income from investment in associates | 1,321 | (773) | (3,375) | (1,146) | |
Gain on disposal of subsidiary | — | — | (16,828) | — | |
Other | 2,840 | 3,659 | 4,760 | 4,034 | |
Total adjustments - EBITDA | (11,085) | 9,753 | (23,435) | 3,065 | |
Adjusted EBITDA | 148,643 | 480,727 | 736,417 | 835,166 |
Adjusted earnings and adjusted earnings per share can be reconciled to the Company's Consolidated Statement of Earnings as follows:
Three months ended | Six months ended | ||||
($thousands, except share and per share amounts) | 2022 | 2021 | 2022 | 2021 | |
Net (loss) earnings attributable to | (52,577) | 242,643 | 292,501 | 377,828 | |
Add back: | |||||
Total adjustments - EBITDA | (11,085) | 9,753 | (23,435) | 3,065 | |
Tax effect on adjustments | 5,035 | (2,302) | 3,001 | 827 | |
Deferred tax arising from foreign exchange translation | 23,091 | (24,133) | (11,863) | (11,225) | |
Other | 260 | 320 | 128 | 155 | |
Total | 17,301 | (16,362) | (32,169) | (7,178) | |
Adjusted (loss) earnings | (35,276) | 226,281 | 260,332 | 370,650 | |
Basic weighted average number of shares outstanding | 766,775,032 | 738,612,506 | 751,676,764 | 737,756,508 | |
Net (loss) earnings attributable to shareholders | (0.07) | 0.33 | 0.39 | 0.51 | |
Total adjustments | 0.02 | (0.02) | (0.04) | (0.01) | |
Adjusted earnings per share | (0.05) | 0.31 | 0.35 | 0.50 |
Adjusted operating cash flow and adjusted operating cash flow per share can be reconciled to cash provided by operating activities as follows:
Three months ended | Six months ended | ||||
($thousands, except share and per share amounts) | 2022 | 2021 | 2022 | 2021 | |
Cash provided by operating activities | 366,411 | 418,998 | 683,668 | 577,673 | |
Changes in non-cash working capital items | (316,665) | 12,629 | (161,117) | 133,799 | |
Adjusted operating cash flow | 49,746 | 431,627 | 522,551 | 711,472 | |
Basic weighted average number of shares outstanding | 766,775,032 | 738,612,506 | 751,676,764 | 737,756,508 | |
Adjusted operating cash flow per share | $ 0.06 | 0.58 | 0.70 | 0.96 |
Free cash flow can be reconciled to cash provided by operating activities as follows:
Three months ended | Six months ended | ||||
($thousands) | 2022 | 2021 | 2022 | 2021 | |
Cash provided by operating activities | 366,411 | 418,998 | 683,668 | 577,673 | |
Sustaining capital expenditures | (151,665) | (120,100) | (282,423) | (222,744) | |
Free cash flow | 214,746 | 298,898 | 401,245 | 354,929 |
Net cash can be reconciled as follows:
($thousands) | ||
Cash and cash equivalents | 498,243 | 294,914 |
Current portion of total debt and lease liabilities | (14,344) | (119,780) |
Debt and lease liabilities | (13,959) | (21,752) |
(28,303) | (141,532) | |
Net cash | 469,940 | 153,382 |
Cash and All-in Sustaining Costs can be reconciled to the Company's operating costs as follows:
Three months ended | ||||||
Operations | Candelaria | Chapada | Eagle | Neves-Corvo | Zinkgruvan | |
($000s, unless otherwise noted) | (Cu) | (Cu) | (Ni) | (Cu) | (Zn) | Total |
Sales volumes (Contained metal in concentrate): | ||||||
Tonnes | 39,655 | 7,905 | 4,206 | 8,183 | 18,525 | |
Pounds (000s) | 87,424 | 17,427 | 9,273 | 18,040 | 40,841 | |
Production costs | 402,190 | |||||
Less: Royalties and other | (13,657) | |||||
388,533 | ||||||
Deduct: By-product credits | (134,728) | |||||
Add: Treatment and refining | 29,960 | |||||
Cash cost | 162,240 | 51,872 | 8,341 | 43,198 | 18,114 | 283,765 |
Cash cost per pound ($/lb) | 1.86 | 2.98 | 0.90 | 2.39 | 0.44 | |
Add: Sustaining capital | 86,107 | 29,760 | 2,923 | 13,760 | 14,083 | |
Royalties | — | 2,442 | 10,633 | (616) | — | |
Interest expense | 1,348 | 1,720 | 401 | 35 | 21 | |
Leases & other | 3,392 | 1,254 | 4,913 | 279 | 1,095 | |
All-in sustaining cost | 253,087 | 87,048 | 27,211 | 56,656 | 33,313 | |
AISC per pound ($/lb) | 2.89 | 5.00 | 2.93 | 3.14 | 0.82 |
Three months ended | ||||||
Operations | Candelaria | Chapada | Eagle | Neves-Corvo | Zinkgruvan | |
($000s, unless otherwise noted) | (Cu) | (Cu) | (Ni) | (Cu) | (Zn) | Total |
Sales volumes (Contained metal in concentrate): | ||||||
Tonnes | 35,537 | 12,247 | 4,258 | 10,314 | 14,305 | |
Pounds (000s) | 78,346 | 27,000 | 9,387 | 22,738 | 31,537 | |
Production costs | 361,317 | |||||
Less: Royalties and other | (22,564) | |||||
338,753 | ||||||
Deduct: By-product credits | (180,782) | |||||
Add: Treatment and refining | 28,915 | |||||
Cash cost | 119,000 | 35,731 | (18,827) | 37,611 | 13,371 | 186,886 |
Cash cost per pound ($/lb) | 1.52 | 1.32 | (2.01) | 1.65 | 0.42 | |
Add: Sustaining capital | 81,573 | 12,461 | 5,346 | 11,211 | 9,415 | |
Royalties | — | 3,567 | 8,629 | 3,033 | — | |
Interest expense | 1,165 | 859 | 177 | 19 | 18 | |
Leases & other | 3,096 | 827 | 2,470 | 1,417 | 1,175 | |
All-in sustaining cost | 204,834 | 53,445 | (2,205) | 53,291 | 23,979 | |
AISC per pound ($/lb) | 2.61 | 1.98 | (0.23) | 2.34 | 0.76 |
Six months ended | ||||||
Operations | Candelaria | Chapada | Eagle | Neves-Corvo | Zinkgruvan | |
($000s, unless otherwise noted) | (Cu) | (Cu) | (Ni) | (Cu) | (Zn) | Total |
Sales volumes (Contained metal in concentrate): | ||||||
Tonnes | 78,103 | 20,709 | 7,473 | 16,667 | 34,327 | |
Pounds (000s) | 172,187 | 45,655 | 16,475 | 36,744 | 75,678 | |
Production costs | 784,617 | |||||
Less: Royalties and other | (29,528) | |||||
755,089 | ||||||
Deduct: By-product credits | (315,735) | |||||
Add: Treatment and refining | 62,115 | |||||
Cash cost | 296,225 | 103,309 | (638) | 75,001 | 27,572 | 501,469 |
Cash cost per pound ($/lb) | 1.72 | 2.26 | (0.04) | 2.04 | 0.36 | |
Add: Sustaining capital | 169,071 | 44,215 | 7,383 | 33,276 | 23,122 | |
Royalties | — | 6,106 | 18,424 | 2,197 | — | |
Interest expense | 2,781 | 3,441 | 802 | 71 | 43 | |
Leases & other | 5,896 | 2,346 | 9,780 | 776 | 2,428 | |
All-in sustaining cost | 473,973 | 159,417 | 35,751 | 111,321 | 53,165 | |
AISC per pound ($/lb) | 2.75 | 3.49 | 2.17 | 3.03 | 0.70 | |
($000s, unless otherwise noted) | 2022 Revised Guidance | |||||
Cash cost | 620,000 | 230,000 | (10,000) | 140,000 | 80,000 | |
Cash cost per pound($/lb) | 1.75 | 2.25 | (0.25) | 1.80 | 0.55 |
Six months ended | ||||||
Operations | Candelaria | Chapada | Eagle | Neves- | Zinkgruvan | |
($000s, unless otherwise noted) | (Cu) | (Cu) | (Ni) | (Cu) | (Zn) | Total |
Sales volumes (Contained metal in concentrate): | ||||||
Tonnes | 71,053 | 19,626 | 8,376 | 16,879 | 30,008 | |
Pounds (000s) | 156,645 | 43,268 | 18,466 | 37,212 | 66,156 | |
Production costs | 664,430 | |||||
Less: Royalties and other | (29,069) | |||||
635,361 | ||||||
Deduct: By-product credits | (306,162) | |||||
Add: Treatment and refining | 57,908 | |||||
Cash cost | 248,071 | 57,430 | (33,557) | 75,364 | 39,799 | 387,107 |
Cash cost per pound ($/lb) | 1.58 | 1.33 | (1.82) | 2.03 | 0.60 | |
Add: Sustaining capital | 152,315 | 21,431 | 8,875 | 20,157 | 19,826 | |
Royalties | — | 5,640 | 15,475 | 3,737 | — | |
Interest expense | 2,284 | 1,718 | 354 | 39 | 36 | |
Leases & other | 5,152 | 1,496 | 5,061 | 2,963 | 2,556 | |
All-in sustaining cost | 407,822 | 87,715 | (3,792) | 102,260 | 62,217 | |
AISC per pound ($/lb) | 2.60 | 2.03 | (0.21) | 2.75 | 0.94 |
Cautionary Statement on Forward-Looking Information
Certain of the statements made and information contained herein is "forward-looking information" within the meaning of applicable Canadian securities laws. All statements other than statements of historical facts included in this document constitute forward-looking information, including but not limited to statements regarding the Company's plans, prospects and business strategies; the Company's guidance on the timing and amount of future production and its expectations regarding the results of operations; expected costs; permitting requirements and timelines; timing and possible outcome of pending litigation; the results of any Preliminary Economic Assessment, Feasibility Study, or Mineral Resource and Mineral Reserve estimations, life of mine estimates, and mine and mine closure plans; anticipated market prices of metals, currency exchange rates, and interest rates; the development and implementation of the Company's Responsible Mining Management System; the Company's ability to comply with contractual and permitting or other regulatory requirements; anticipated exploration and development activities at the Company's projects; the Company's integration of acquisitions and any anticipated benefits thereof; and expectations for other economic, business, and/or competitive factors. Words such as "believe", "expect", "anticipate", "contemplate", "target", "plan", "goal", "aim", "intend", "continue", "budget", "estimate", "may", "will", "can", "could", "should", "schedule" and similar expressions identify forward-looking statements.
Forward-looking information is necessarily based upon various estimates and assumptions including, without limitation, the expectations and beliefs of management, including that the Company can access financing, appropriate equipment and sufficient labor; assumed and future price of copper, nickel, zinc, gold and other metals; anticipated costs; ability to achieve goals; the prompt and effective integration of acquisitions; that the political environment in which the Company operates will continue to support the development and operation of mining projects; and assumptions related to the factors set forth below. While these factors and assumptions are considered reasonable by
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