Ms. Marie Inkster reports
LUNDIN MINING FOURTH QUARTER AND FULL YEAR 2020 RESULTS
Lundin Mining Corp. had cash flows of $172.7-million generated from operations in its fourth quarter 2020 and $565.9-million for the year. Adjusted operating cash flow for the quarter was $175.7-million (24 cents per share) and $644.6-million (88 cents per share) for the year. Attributable net earnings for the quarter was $119.2-million (16 cents per share) and $168.8-million (23 cents per share) for the year. Adjusted earnings for the quarter was $106.7-million (15 cents per share) and $225.2-million (31 cents per share) for the year. Adjusted EBITDA was $234.8-million for the quarter and $856.9-million for the year.
Marie Inkster, president and chief executive officer, commented: "We expect
2021 to be an exciting and rewarding year for Lundin Mining. We responded decisively with clear action plans to overcome our fourth quarter challenges and as a result we ended the year in a strong position. Candelaria and Chapada both returned to full production capacity in the fourth quarter of 2020, and the Zinc expansion project at Neves-Corvo officially restarted in January, 2021. Eagle set a new record for annual throughput and achieved impressive cash costs to generate significant free cash flow and margins. Lastly, in its 164th year of continuous production Zinkgruvan set new annual records for both tonnes hoisted from the mine and tonnes milled.
"We expect to benefit significantly in 2021 from the investments made in our operations the last several years, taking advantage of the favourable metal price environment, to generate meaningful free cash flow and returns for our shareholders."
Summary financial results
Annual production of all metals met or exceeded the company's most recent annual production guidance despite the operational challenges of the latter part of the year. The company continued to effectively manage costs and all operations reported cash costs that were better than the most recent annual guidance. Annual capital expenditures of $431.2-million were modestly lower than the most recent guidance of $445.0-million.
In March, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The company has adapted to a new way of operating and continues to manage and respond to the COVID-19 pandemic. Preventative measures have been implemented across the organization to ensure the safety of its work force, local communities and other key stakeholders. To date, production disruptions have been minimal and there has been no significant disruption in the delivery of concentrate or receipt of goods at the company's operations as a result of COVID-19.
Candelaria (80 per cent owned): Candelaria produced, on a 100-per-cent basis, 126,702 tonnes of copper, approximately 76,000 ounces of gold and 1.1 million ounces of silver in concentrate during the year. Copper and gold production exceeded guidance for the current year but was lower than the prior year as a result of lower throughput in the fourth quarter of 2020 due to union strike work stoppages and ore hardness in the first half of 2020. Copper cash costs of $1.45/pound were better than annual guidance and the prior year, largely due to the impact of favourable foreign exchange. The Candelaria mill optimization project is now complete after the final ball mill motor installation in the fourth quarter.
Chapada (100 per cent owned): Chapada produced 50,038 tonnes of copper and approximately 87,000 ounces of gold, both exceeding guidance due to a faster than anticipated recovery from the mill interruption at the end of the third quarter, resulting in higher than expected throughput in the fourth quarter. Full year copper cash costs 29 cents/lb were also better than guidance, benefiting from higher mill throughput and favourable foreign exchange.
Eagle (100 per cent owned): Eagle production for the year met guidance and exceeded the prior year, producing 16,718 tonnes of nickel and 18,663 tonnes of copper. A new annual mill throughput record was set at 761,000 tonnes. Nickel cash costs of 10 cents/lb for the year were better than guidance and the prior year due primarily to higher copper byproduct prices.
Neves-Corvo (100 per cent owned): Neves-Corvo produced 32,032 tonnes of copper for the year, meeting guidance. Zinc production of 69,143 tonnes was marginally below guidance resulting from lower than planned grades in the fourth quarter. Overall metal production was lower than the prior year due to reduced throughput and grades. Copper cash costs of $2.09/lb for the year were in line with guidance, but were higher than the prior year due to lower copper sales volumes.
Official restart of the Zinc expansion project began in January, 2021. During 2020, work continued to prepare the surface and underground construction sites for the restart including ventilation raise work, activities on the surface conveyor installations and SAG mill including commissioning with waste rock.
Zinkgruvan (100 per cent owned): Zinc production of 73,601 tonnes and copper production of 3,346 tonnes both met guidance, and new annual production records were set for both tonnes hoisted from the mine and milled tonnes. Zinc and lead production (24,128 tonnes) were lower than the prior year, impacted by lower head grades resulting from a change in mine sequencing early in the year. Zinc cash costs of 52 cents/lb for the year were better than guidance.
On Feb. 20, 2020, the company declared a 33-per-cent increase in the quarterly cash dividend, to four cents per share, compared with the dividend paid in 2019.
On March 15, 2020, major construction and commissioning activities for ZEP were suspended in order to reduce the COVID-19 risks on the local communities, employees and contractors. Zinc production and capital cost guidance was withdrawn. The official restart of ZEP commenced in January, 2021.
On June 30, 2020, the company published its annual sustainability report which is available on the company's website.
On Sept. 8, 2020, the company reported its mineral resource and mineral reserve estimates as at June 30, 2020. On a consolidated and attributable basis, estimated contained metal in the proven and probable mineral reserve categories totalled 5,518,000 tonnes (t) of copper, 3,123,000 t of zinc, 100,000 t of nickel, 936,000 t of lead and 6.9 million oz of gold.
On Sept. 25, 2020, the company reported a fatal accident at its Neves-Corvo mine. The incident occurred during underground mining operations. No other personnel were injured in the incident.
On Sept. 27, 2020, the company announced that processing activities had been interrupted at the Chapada mine due to a power outage which damaged all four mill motors; full year production, cash costs and capital expenditure guidance were withdrawn. Operations resumed at a reduced capacity in early October, and returned to full production in December, 2020.
On Oct. 7, 2020, the company reported that mediation with Candelaria's Mine Workers Union ended without an agreement and the workers commenced strike action. Subsequently, on Oct. 20, 2020, negotiations with the Candelaria AOS Union failed to reach an agreement and this union also commenced strike action. With both unions on strike, the company undertook an orderly shutdown of operations and withdrew its production and cash cost guidance for 2020 pending resolution of the labour actions.
In late November, 2020, the company announced ratifications of new collective agreements with the striking unions as well as two additional unions that had collective agreements with approaching expiry dates.
On Dec. 4, 2020, the company renewed its normal course issuer bid (NCIB), which allows the company to purchase up to 63,682,170 common shares over a period of 12 months commencing on Dec. 9, 2020.
Gross profit for the year ended Dec. 31, 2020, was $498.1-million, an increase of $57.7-million in comparison with the prior year due primarily to a full year of operating results from Chapada which was acquired in July, 2019 ($81.2-million). The increase was partially offset by lower overall copper sales volumes at the other operations, particularly at Candelaria due to the strike action in the fourth quarter, as well as higher depreciation expense.
For the year ended Dec. 31, 2020, net earnings of $189.1-million were generally in line with the prior year as higher gross profit and lower general exploration costs were offset by higher deferred tax expense.
Adjusted earnings for the year were higher than the prior year primarily due to higher gross profit and reduced general exploration costs.
Financial position and financing
Cash and cash equivalents decreased by $109.1-million during 2020, ending the year at $141.4-million. Cash flow from operations of $565.9-million was used to financed capital expenditures of $431.2-million and financing activities of $236.9-million, including debt repayment on a net basis, distributions to shareholders ($88.0-million) and to non-controlling interests ($26.0-million), as well as the negative effect of foreign exchange ($17.1-million).
Net debt position at Dec. 31, 2020, was $63.2-million, relatively unchanged from the $60.2-million at the prior year-end.
As of Feb. 18, 2021, the company had a cash and net debt balance of approximately $165.0-million and $50.0-million, respectively.
Production, cash cost and capital expenditure guidance for 2021 remains unchanged from that provided on Nov. 30, 2020.
2021 exploration investment guidance
Planned exploration expenditures are expected to be $40.0-million in 2021. Approximately $32.0-million will be spent supporting significant in-mine and near-mine targets at the company's operations ($14.0-million at Candelaria, $6.0-million at Zinkgruvan, $8.0-million at Chapada and $4.0 million at Neves-Corvo). The remaining amount is planned to advance activities on exploration stage 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, primarily producing copper, zinc, gold and nickel.
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