Lundin Mining Second Quarter 2023 Results

2023-08-02

NYSE - New York Stock Exchange · Copper · Gold · Silver · Zinc · Lead · Nickel · Cobalt · Platinum · Palladium · Vanadium · United States

Canada NewsWire

[](https://mma.prnewswire.com/media/2168378/Lundin_Mining_Corporation_Lundin_Mining_Second_Quarter_2023_Resu.html)

TORONTO , Aug. 2, 2023 /CNW/ - (TSX: LUN) (Nasdaq Stockholm: LUMI) Lundin Mining Corporation ("Lundin Mining" or the "Company") today reported net earnings attributable to Lundin Mining shareholders of $59.1 million ( $0.08 per share) and $205.7 million ( $0.27 per share) for the three and six months ended June 30, 2023 , respectively. The Company also generated adjusted earnings 1 of $16.0 million ( $0.02 per share) and adjusted EBITDA 1 of $162.2 million in the second quarter. Adjusted earnings were $141.7 million ( $0.18 per share) and adjusted EBITDA were $499.1 million for the six months ended June 30, 2023 . Adjusted operating cash flow 1 were $110.6 million ( $0.14 per share) and $345.7 million ( $0.45 per share) for the three and six months ended June 30, 2023 .

"Overall, we are pleased with the performance of our operations during the second quarter. We are currently tracking at the midpoint or higher for copper, gold and nickel guidance and the lower end for zinc. We generated adjusted EBITDA of over $160 million despite a decline in metal prices early in the second quarter and resulting provisional pricing adjustments. Lundin Mining's earnings and cash-generation potential has further increased with the addition of Caserones which closed early in the third quarter. On a 100% proforma basis, including Caserones, Lundin Mining's operations produced approximately 280,000 tonnes of copper-equivalent metal in the first half of this year. Caserones produced approximately 70,000 tonnes of copper in the first half of the year and is off to a strong start in the third quarter," commented Peter Rockandel , CEO.

Mr. Rockandel added, "With the free cash flow from operations, the new $800 million Term Loan, and the existing $1.75 billion revolving credit facility, Lundin Mining retains a strong balance sheet and significant liquidity to progress growth projects."

Summary Financial Results

| | Three months ended

June 30, | | Six months ended

June 30, | | | | US$ Millions (except per share amounts) | 2023 | 2022 | | 2023 | 2022 | | Revenue | 588.5 | 590.2 | | 1,339.9 | 1,581.3 | | Gross profit | 52.8 | 46.0 | | 266.2 | 524.8 | | Attributable net earnings (loss) 2 | 59.1 | (52.6) | | 205.7 | 292.5 | | Net earnings (loss) | 61.3 | (48.6) | | 226.6 | 329.5 | | Adjusted earnings 1,2 | 16.0 | (35.3) | | 141.7 | 260.3 | | Adjusted EBITDA 1 | 162.2 | 148.6 | | 499.1 | 736.4 | | Basic and diluted earnings per share ("EPS") 2 | 0.08 | (0.07) | | 0.27 | 0.39 | | Adjusted EPS 1,2 | 0.02 | (0.05) | | 0.18 | 0.35 | | Cash flow from operations | 194.8 | 366.4 | | 406.7 | 683.7 | | Adjusted operating cash flow 1 | 110.6 | 49.7 | | 345.7 | 522.6 | | Adjusted operating cash flow per share 1 | 0.14 | 0.06 | | 0.45 | 0.70 | | Free cash flow from operations 1 | 20.7 | 266.3 | | 91.8 | 461.1 | | Free cash flow 1 | (84.6) | 149.1 | | (118.8) | 321.5 | | Cash and cash equivalents | 190.2 | 498.2 | | 190.2 | 498.2 | | Net debt 1 | (229.8) | 469.9 | | (229.8) | 469.9 | | | | | | | |

| 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, 2023 and the Reconciliation of Non-GAAP Measures section at the end of this news release. | | 2 Attributable to shareholders of Lundin Mining Corporation. |

Highlights

For the quarter ended June 30, 2023 the Company generated revenue of $588.5 million (Q2 2022 - $590.2 million ), gross profit of $52.8 million (Q2 2022 - $46.0 million ) and adjusted EBITDA of $162.2 million (Q2 2022 - $148.6 million ).

Overall, the operations performed well during the second quarter of 2023 and the Company remains on track to achieve production guidance.

Operational Performance

_Candelaria (80% owned): _Candelaria produced 36,952 tonnes of copper, and approximately 21,000 ounces of gold in concentrate on a 100% basis in the quarter. Copper production was lower than the prior year quarter due to grades partially offset by higher throughput. Gold production was lower than the prior year quarter due to recoveries. Current quarter production costs and copper cash cost 1 of $2.14 /lb were higher than the prior year quarter largely owing to higher contractor and maintenance costs. Cash cost was further impacted by lower sales volumes.

_Chapada (100% owned): _Chapada produced 10,697 tonnes of copper and approximately 13,000 ounces of gold in concentrate in the quarter. Copper production was higher than the prior year quarter primarily due to higher recoveries in the quarter. Current quarter production for both metals was better than the first quarter of 2023, due to higher grades and recoveries. In aggregate, production costs were higher than the prior year comparable quarter due to higher sales volumes achieved, while the higher sales volumes also led to improvement on a unit basis with a copper cash cost of$2.69/lb for the quarter.

_Eagle (100% owned): _During the quarter Eagle produced 4,686 tonnes of nickel and 3,881 tonnes of copper which were lower than the prior year quarter due to lower grades and lower throughput. Production costs were lower than the comparable prior year quarter due to lower consumable costs. Nickel cash cost in the quarter of $1.88 /lb was higher than the prior year quarter due primarily to lower by-product copper price and lower sales volumes.

_Neves-Corvo (100% owned): _Neves-Corvo produced 7,610 tonnes of copper for the quarter and 24,177 tonnes of zinc. Copper production was lower than the prior year comparable quarter, due to lower grades, while zinc production was higher primarily due to increased throughput and recoveries driven by the ramp-up of the Zinc Expansion Project ("ZEP"). Production costs were comparable to the prior year quarter. Copper cash cost of $3.99 /lb was higher than the prior year quarter due primarily to lower copper sales volumes.

_Zinkgruvan (100% owned): _Zinc production of 11,938 tonnes and lead production of 3,816 tonnes were lower than the prior year quarter due to lower throughput due to a shut-down of the mill to perform the planned implementation of the sequential flotation circuit. Copper production of 917 tonnes was higher than the prior year quarter due to higher grades. Production costs were lower than the prior year quarter due to lower mine and mill costs. Zinc cash cost of $0.24 /lb was lower than the prior year quarter due to lower production costs.

Total Production

| (contained metal) a | 2023 | | 2022 | | | | | | | | | | | | | | YTD | | Q2 | | Q1 | | Total | | Q4 | | Q3 | | Q2 | | Q1 | | | Copper (t) b | 121,519 | | 60,057 | | 61,462 | | 249,659 | | 56,552 | | 63,930 | | 64,096 | | 65,081 | | Zinc (t) | 84,668 | | 36,115 | | 48,553 | | 158,938 | | 44,308 | | 40,327 | | 41,912 | | 32,391 | | Gold (koz) b | 70 | | 34 | | 36 | | 154 | | 36 | | 45 | | 39 | | 34 | | Nickel (t) | 8,410 | | 4,686 | | 3,724 | | 17,475 | | 4,096 | | 4,379 | | 4,719 | | 4,281 | | a. Tonnes (t) and thousands of ounces (koz) | | | | | | | | | | | | | | | | | b. Candelaria's production is on a 100% basis. | | | | | | | | | | | | | | | |

| | | | | 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, 2023 and the Reconciliation of Non-GAAP Measures section at the end of this news release. | | |

Corporate Updates

On July 10, 2023 , the Company published its 2022 Sustainability Report.

On July 13, 2023 , the Company announced the closing of the acquisition of 51% of the issued and outstanding equity of SCM Minera Lumina Copper Chile ("Lumina Copper"), which owns the Caserones copper-molybdenum mine ("Caserones") located in Chile . The Company paid an aggregate of approximately $800 million in cash consideration at closing. Remaining deferred cash consideration of $150 million will be payable in installments over the six‑year period following the closing date. Lundin Mining also has the right to acquire up to an additional 19% interest in Lumina Copper for $350 million over a five-year period commencing on the first anniversary of the date of closing. A technical report for the Caserones mine titled "Caserones Mining Operation, Chile , NI 43-101 Technical Report on the Caserones Mining Operation" was filed under the Company's profile.

On July 27, 2023 , the Company announced it had obtained a three-year term loan ("Term Loan") in a principal amount of $800 million with an additional $400 million accordion and closing of up to an additional 19% interest in Lumina Copper.

Financial Performance

Gross profit for the quarter ended June 30, 2023 was $52.8 million , an increase of $6.8 million and largely comparable to the prior year quarter. On a year-to-date basis, gross profit for the period ended June 30, 2023 was $266.2 million and was lower than the prior year period due to lower sales volumes and lower metal prices.

For the three months ended June 30, 2023 , net earnings of $61.3 million were $109.9 million higher than the prior year quarter due primarily to lower general exploration and business development costs and lower income taxes. On a year-to-date basis net earnings of $226.6 million were lower than the prior year period due to lower gross profit resulting from lower realized prices, partially offset by lower taxes.

Adjusted earnings for the three months ended June 30, 2023 , of $16.0 million were $51.3 million higher than the adjusted loss of the prior year quarter due to the same factors as the change in net earnings described above. On a year-to-date basis adjusted earnings of $141.7 million were lower than the prior year period due to lower gross profit partially offset by lower income taxes.

Financial Position and Financing

Cash and cash equivalents as at June 30, 2023 was $190.2 million . Cash flow from operations of $194.8 million was used to fund investing activities of $283.5 million . Cash from financing activities was $99.9 million , which was comprised primarily of the proceeds from debt on a net basis partially offset by dividends paid to shareholders. Cash and cash equivalents remained relatively unchanged during the six months ended June 30, 2023 .

As at June 30, 2023 , the Company had a net debt balance of $229.8 million .

As at August 2, 2023 , the Company had cash and net debt balances of approximately $270.0 million and $930.0 million , respectively. The net debt increase was attributable to debt financing of the acquisition of Caserones.

Outlook

Overall, the operations performed well during the second quarter of 2023. The Company is currently tracking to the midpoint or higher for copper, gold and nickel guidance and the lower end for zinc. Production continues to be weighted to the second half of the year. Candelaria and Eagle production is forecast to be modestly weighted to the second half of the year, primarily owing to mine sequencing and the resultant grade profiles. Chapada production is forecast to be weighted to the second half of the year due to first half seasonal operating considerations, and forecast grade and recovery profiles.

Expected cash costs remain consistent with reported guidance for Candelaria, Caserones and Neves-Corvo. Chapada's cash cost guidance range has been improved to $2.35 - $2.55 /lb of copper, reflecting lower pricing of consumables. Eagle's forecast nickel cash cost guidance has been increased to $2.30 - $2.45 /lb of nickel. While Eagle's overall operating costs remain consistent with the Company's previous expectations, nickel cash cost guidance has been increased primarily driven by lower by-product credits, mainly pricing. Zinkgruvan's cash cost guidance has been improved to $0.45 - $0.50 /lb of zinc, reflecting greater by-product credits.

A reduction in capital expenditure guidance is expected for the remainder of the year as the timing of several projects at Candelaria has been deferred into next year. At Josemaria, foreign exchange, a delay in planned equipment deliveries and reduced activities have lowered capital spend guidance.

2023 Production and Cash Cost Guidance

| | | | Previous Guidance a | Revised Guidance | | | | | (contained metal) | Production | Cash Cost ($/lb) | Production | Cash Cost ($/lb) b | | | | Copper (t) | Candelaria (100%) | 145,000 - 155,000 | 1.80 – 1.95 c | 145,000 - 155,000 | 1.80 – 1.95 c | | | | Caserones (100%) e | 60,000 - 65,000 | 2.30 - 2.45 | 60,000 - 65,000 | 2.30 - 2.45 | | | | Chapada | 43,000 - 48,000 | 2.55 – 2.75 d | 43,000 - 48,000 | 2.35 – 2.55 d | | | | Eagle | 12,000 - 15,000 | | 12,000 - 15,000 | | | | | Neves-Corvo | 33,000 - 38,000 | 2.10 – 2.30 c | 33,000 - 38,000 | 2.10 – 2.30 c | | | | Zinkgruvan | 3,000 - 4,000 | | 3,000 - 4,000 | | | | | Total | 296,000 - 325,000 | | 296,000 - 325,000 | | | | Zinc (t) | Neves-Corvo | 100,000 - 110,000 | | 100,000 - 110,000 | | | | | Zinkgruvan | 80,000 - 85,000 | 0.60 – 0.65 c | 80,000 - 85,000 | 0.45 – 0.50 c | | | | Total | 180,000 - 195,000 | | 180,000 - 195,000 | | | | Molybdenum (t) | Caserones (100%) e | 1,500 - 2,000 | | 1,500 - 2,000 | | | | Gold (koz) | Candelaria (100%) | 85 - 90 | | 85 - 90 | | | | | Chapada | 55 - 60 | | 55 - 60 | | | | | Total | 140 - 150 | | 140 - 150 | | | | Nickel (t) | Eagle | 13,000 - 16,000 | 1.50 – 1.65 | 13,000 - 16,000 | 2.30 – 2.45 | | a. Guidance as outlined in the MD&A for the year ended December 31, 2022 and for Caserones as outlined in the news release "Lundin Mining Announces Closing of the Acquisition of Majority Interest in Caserones Copper-Molybdenum Mine in Chile and Commitments for New $800 Million Term Loan" provided on July 13, 2023.

b. Cash costs are based on various assumptions and estimates, including but not limited to: production volumes, commodity prices (Cu: $3.75/lb, Zn: $1.30/lb, Mo: $20.00/lb Pb: $0.90/lb, Au: $1,850/oz), foreign exchange rates (€/USD:1.00, USD/SEK:10.50, USD/CLP:800, USD/BRL:5.00) and production costs for the remainder of 2023.

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 $425/oz gold and $4.25/oz to $4.57/oz silver.

d. Chapada's 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.

e. Caserones guidance is for the second half of 2023. Closing of the Caserones Acquisition occurred on July 13, 2023. | | | | | | |

2023 Capital Expenditure b

| | ($ millions) | Previous Guidance a | Revisions | Revised Guidance | | | Candelaria (100% basis) | 400 | (25) | 375 | | | Caserones (100% basis) c | 110 | — | 110 | | | Chapada | 70 | — | 70 | | | Eagle | 20 | — | 20 | | | Neves-Corvo | 130 | — | 130 | | | Zinkgruvan | 70 | — | 70 | | | Other | 10 | — | 10 | | | Total Sustaining | 810 | (25) | 785 | | | Josemaria | 400 | (50) | 350 | | | Total Capital Expenditures | 1,210 | (75) | 1,135 | | | a. Guidance as outlined in the MD&A for the year ended December 31, 2022 and for Caserones as outlined in the news release "Lundin Mining Announces Closing of the Acquisition of Majority Interest in Caserones Copper-Molybdenum Mine in Chile and Commitments for New $800 Million Term Loan" provided on July 13, 2023. b. Sustaining capital expenditure is a supplementary financial measure, and expansionary capital expenditure is a non-GAAP measure - see the Company's Management Discussion and Analysis for the three and six months ended June 30, 2023 and the Reconciliation of Non-GAAP Measures at the end of this news release. c. Caserones guidance is for the second half of 2023. Closing of the Caserones Acquisition occurred on July 13, 2023. | | | |

2023 Exploration Investment Guidance

Total exploration expenditures are on target to be $45.0 million in 2023, unchanged from previous guidance.

Senior Leadership Appointments

The Company would also like to announce the executive appointments of Cara Allaway as Vice President, Finance, Steve Little as Vice President, Technology and Innovation, Tim Walmsley as Vice President, Exploration and Stephen Williams as Vice President, Investor Relations.

Cara Allaway Ms. Allaway has joined Lundin Mining's Senior Leadership Team as Vice President, Finance. In her previous role with Eldorado Gold, Cara was Vice President, Finance, where she was responsible for overseeing accounting, financial reporting and planning and analysis functions. Previous to Eldorado Gold, she held similar roles at Nevsun Resources Ltd. and Dominion Diamond Mines, and spent 12 years at PwC in the Assurance groups in Halifax and Toronto , and in the Capital Markets Group in Russia . Cara is a Chartered Professional Accountant and holds a Bachelor of Science in Chemistry from Mount Allison University and a Master of Management and Professional Accounting from the University of Toronto .

Steve Little Mr. Little has joined Lundin Mining's Senior Leadership Team as Vice President, Technology and Innovation. He has over 30 years of experience in providing technology leadership within asset intensive industries such as power generation and heavy manufacturing, as well as high tech. Prior to joining Lundin Mining, he was most recently Vice President, Business Technology Solutions for Seaspan Shipyards and Seaspan Marine Transportation. A registered Professional Engineer, Mr. Little holds a Bachelor of Engineering (Electrical) from the Royal Military College of Canada and an MBA from Queen's University.

Tim Walmsley Mr. Walmsley is the Vice President, Exploration for Lundin Mining and has more than 30 years of international experience in all stages of mineral exploration. Prior to his VP position, he held the role of Senior Director, Exploration. Timothy joined Lundin Mining as Chile Exploration Manager in 2013. Before joining Lundin Mining, Timothy held progressively more senior technical roles with Xstrata plc, Falconbridge Limited, and Noranda Inc., based initially in Canada and then primarily in Chile .

During his career Mr. Walmsley has been responsible for various aspects of exploration and new business development throughout much of North and South America and has contributed to numerous mineral deposit discoveries.

Timothy holds a Bachelor of Applied Science (Honours) in Geological Engineering from Queen's University in Canada .

Stephen Williams Mr. Williams has joined Lundin Mining's Senior Leadership Team as Vice President, Investor Relations. Stephen is joining from Bluestone Resources, where he was the Vice President, Corporate Development & Investor Relations. Previously he was a member of the Metals & Mining investment banking team at Canaccord Genuity Corp, where he provided strategic advice to clients on acquisitions, mergers, and equity financings.

Stephen is a professional engineer by background having worked for Freeport-McMoRan in an operational and process development capacity. He holds a B.A.Sc. in Metallurgical Engineering from the University of British Columbia and an MBA from the W. P. Carey School of Business, Arizona State University .

About Lundin Mining

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

The information in this release is subject to the disclosure requirements of Lundin Mining under the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out below on August 2, 2023 at 5:30 pm Eastern Time .

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 by Arman Barha , P.Eng., Vice President, Technical Services, a "Qualified Person" under NI 43-101. Mr. Barha has verified the data disclosed in this release and no limitations were imposed on his verification process.