Our operations are set for an improved second half of the year. While we have reduced Candelaria's full year production guidance, Eagle's copper production has been increased, and cash cost guidance for both Chapada and Eagle have been improved. The 2020 capital expenditure guidance for ZEP has increased slightly as minor project works are continuing that will help facilitate a smooth restart and ramp-up of construction activities when that occurs.
Lastly, we are proud to announce the issuance of our 2019 Sustainability Report. We believe you will find the report once again provides a comprehensive disclosure of our ESG performance, commitments and strategies for the future."
Summary Financial Results
Three months ended | Six months ended | |||||||||
US$ Millions (except per share amounts) | 2020 | 2019 | 2020 | 2019 | ||||||
Revenue | 533.3 | 369.3 | 911.3 | 785.6 | ||||||
Gross profit | 142.1 | 25.1 | 119.4 | 166.3 | ||||||
Attributable net earnings (loss)1 | 38.7 | (7.8) | (72.7) | 43.9 | ||||||
Net earnings (loss) | 48.3 | (8.6) | (65.3) | 52.3 | ||||||
Adjusted earnings (loss)1,2 | 52.8 | (11.1) | 11.7 | 51.9 | ||||||
Adjusted EBITDA2 | 231.5 | 75.6 | 321.8 | 252.6 | ||||||
Basic and diluted net earnings (loss) per share1 | 0.05 | (0.01) | (0.10) | 0.06 | ||||||
Adjusted basic and diluted earnings (loss) per share1,2 | 0.07 | (0.02) | 0.02 | 0.07 | ||||||
Cash flow from operations | 37.6 | 204.5 | 121.0 | 266.6 | ||||||
Adjusted operating cash flow2 | 179.0 | 49.9 | 206.9 | 189.1 | ||||||
Adjusted operating cash flow per share2 | 0.24 | 0.07 | 0.28 | 0.26 | ||||||
Cash and cash equivalents | 283.9 | 735.1 | 283.9 | 735.1 | ||||||
Net (debt) cash2 | (220.0) | 661.1 | (220.0) | 661.1 | ||||||
1 Attributable to shareholders of | ||||||||||
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 six months ended |
Highlights
Operational Performance
Operations performed well in the quarter with copper production at all operations higher than the prior year comparable quarter and record combined throughput of over 1.0 million tonnes at Neves-Corvo. With the exception of Candelaria, production at all mines remain on target to achieve previously disclosed annual guidance, despite challenges of the COVID-19 pandemic. Furthermore, cash costs at all operations were in-line or better than expected. For Chapada and Eagle, annual cash cost guidance is improving by 24% and 15%, respectively.
As the Company adapts to a new way of operating under COVID-19,
During the second quarter of 2020, the fast-growing infection rates in
To date, production disruptions have been minimal and there has been no significant disruption in the delivery or receipt of goods at our operations as a result of COVID-19.
Candelaria (80% owned): Candelaria produced 35,060 tonnes of copper, and approximately 21 thousand ounces of gold in concentrate on a 100% basis. Copper production for the quarter was higher than the prior year quarter primarily due to higher copper head grades and recoveries as more higher-grade open pit and underground ore was mined. However, throughput was lower than planned due to ore hardness, operational issues and an unplanned maintenance stop. In addition, COVID-19 has further delayed the
Chapada (100% owned): Chapada produced 13,799 tonnes of copper and approximately 23 thousand ounces of gold in-line with plan. Copper cash costs of
Eagle (100% owned): Eagle produced 3,380 tonnes of nickel and 4,102 tonnes of copper during the quarter. Nickel production was comparable to the prior year comparable quarter. Copper production was higher than the prior year quarter as a result of higher grades. Nickel cash costs of
Neves-Corvo (100% owned): Neves-Corvo produced 10,559 tonnes of copper and 18,986 tonnes of zinc for the quarter. Copper production was higher than the prior year quarter benefitting from record throughput and better recoveries, while zinc production was higher due to higher grades. Copper cash costs of
Major construction and commissioning of ZEP continues to be temporarily suspended to reduce the risk of the spread of COVID-19 to employees, contractors and local communities.
Zinkgruvan (100% owned): Zinc production of 12,596 tonnes and lead production of 3,799 tonnes was lower than the prior year quarter due to grades and lower throughput as a result of the sequencing of copper production. Zinc cash costs of
Total Production
(Contained metal in concentrate) | 2020 | 2019 | ||||||
YTD | Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | |
Copper (t)ab | 127,452 | 65,285 | 62,167 | 235,498 | 67,131 | 74,560 | 47,685 | 46,122 |
Zinc (t) | 68,529 | 31,582 | 36,947 | 151,515 | 38,925 | 35,028 | 37,116 | 40,446 |
Gold (koz)ab | 83 | 44 | 39 | 142 | 43 | 58 | 21 | 20 |
Nickel (t) | 6,955 | 3,380 | 3,575 | 13,494 | 2,651 | 3,232 | 3,398 | 4,213 |
a - Candelaria's production is on a 100% basis. | ||||||||
b - Chapada results included are for the Company's ownership period. |
Corporate Highlights
- On
June 30, 2020 , the Company published its annual Sustainability Report which provides updates on the economic, safety, environmental and social issues that are of greatest interest to communities near the Company's operations, employees, investors, and other stakeholders. A copy of the Company's Sustainability Report is available on the Company's website (www.lundinmining.com).
Financial Performance
- Gross profit for the quarter ended
June 30, 2020 increased by$117.0 million compared to the prior year quarter. The increase was primarily due to the addition of the Chapada mine ($59.3 million ), higher realized metal prices and price adjustments ($40.0 million ) and favourable foreign exchange ($19.0 million ), partially offset by higher depreciation expense at Candelaria ($22.1 million ). - On a year-to-date basis, gross profit decreased by
$46.9 million from the prior year comparative period. The decrease was primarily due to lower metal prices and price adjustments ($154.4 million ) and higher depreciation ($59.4 million ). These decreases were partially offset by the addition of Chapada mine which contributed$81.2 million to gross profit, favourable foreign exchange ($36.7 million ) and higher net sales volumes ($19.9 million ). - Net earnings for the quarter ended
June 30, 2020 increased by$56.9 million from the prior year quarter. The increase was attributable to higher gross profit, partially offset by higher income taxes ($55.9 million ). - On a year-to-date basis, net earnings decreased by
$117.6 million from the prior year comparative period. The decrease was attributable to lower gross profit, higher income taxes ($103.6 million ) and higher finance costs, partially offset by lower general exploration and business development expenses and higher foreign exchange gains. - Adjusted earnings for the quarter were
$63.8 million higher than the prior year quarter due mainly to higher gross profit offset by higher income taxes. On a year-to-date basis, adjusted earnings were$40.2 million lower than the prior year due to lower gross profit.
Financial Position and Financing
- Cash and cash equivalents of
$283.9 million as atJune 30, 2020 decreased by$83.0 million during the quarter including cash flow from operations of$37.6 million , which included an outflow of$141.4 million for changes in working capital.$100.2 million was invested in capital expenditures. - On a year-to-date basis, cash and cash equivalents increased by
$33.4 million . In addition to$121.0 million in operating cash flow, the Company drew down approximately$200.0 million in debt, invested$241.2 million in capital expenditures and returned$42.6 million to shareholders in dividend payments. - Net debt of
$220.0 million as atJune 30, 2020 reflects an increase of$159.7 million sinceDecember 31, 2019 . Operating cash flow of$121.0 million was more than offset by capital investment ($241.2 million ) and dividend payments to shareholders ($42.6 million ). - As of
July 29, 2020 , the Company had a cash and net debt balance of approximately$225.0 million and$190.0 million , respectively.
Outlook
All operations had a good quarter and, other than Candelaria, are on track to meet previously disclosed production guidance. Candelaria continued to experience lower throughput than planned due to ore hardness, operational issues and unplanned maintenance stops. Production guidance for Candelaria has been reduced to reflect the lower production to date, as well as a further delay in CMOP due to COVID-19. Cash costs at Chapada and Eagle have been better than expected due to favourable by-product metal prices and, at Chapada, favourable foreign exchange; accordingly, cash cost guidance for these two operations has been reduced.
While the Company has not experienced significant disruptions to production, shipments of concentrate, or its supply chain due to COVID-19, we caution that the global effects of COVID-19 are continuing to evolve. The number of new cases in
2020 Production and Cash Cost Guidance
Previous Guidancea | Revised Guidance | ||||||||||
(contained metal in concentrate) | Tonnes | Cash Costs | Tonnes | Cash Costsb | |||||||
Copper (t) | Candelaria (100%) | 160,000 - 175,000 | 145,000 - 155,000 | ||||||||
Chapada | 51,000 - 56,000 | 51,000 - 56,000 | |||||||||
Eagle | 15,000 - 18,000 | 17,000 - 19,000 | |||||||||
Neves-Corvo | 35,000 - 40,000 | 35,000 - 40,000 | |||||||||
Zinkgruvan | 3,000 - 4,000 | 3,000 - 4,000 | |||||||||
Total | 264,000 - 293,000 | 251,000 - 274,000 | |||||||||
Zinc (t) | Neves-Corvo | 70,000 - 75,000 | 70,000 - 75,000 | ||||||||
Zinkgruvan | 72,000 - 77,000 | 72,000 - 77,000 | |||||||||
Total | 142,000 - 152,000 | 142,000 - 152,000 | |||||||||
Gold (oz) | Candelaria (100%) | 90,000 - 100,000 | 80,000 - 90,000 | ||||||||
Chapada | 85,000 - 90,000 | 85,000 - 90,000 | |||||||||
Total | 175,000 - 190,000 | 165,000 - 180,000 | |||||||||
Nickel (t) | Eagle | 15,000 - 18,000 | 15,000 - 18,000 | ||||||||
a. Guidance as outlined in the Management's Discussion and Analysis for the three months ended b. Cash costs are based on various assumptions and estimates, including but not limited to: production volumes, as noted above, commodity prices (Cu: c. 68% of Candelaria's total gold and silver production are subject to a streaming agreement and as such costs are calculated based on receipt of d. Chapada cash costs are calculated on a by-product basis and do not include the effects of copper stream agreements. Effects of copper stream agreements are reflected in copper revenue and will impact realized revenue per pound. |
2020 Capital Expenditure Guidance
Sustaining capital expenditure guidance remains the same as the prior quarter. ZEP capital expenditure guidance has been updated to include a limited number of critical path items that can be undertaken without introducing additional risk to the operation. Total pre-production cost for ZEP remains unchanged from previous guidance at €360 million.
($ millions) | Previous Guidancea | Revisions | Revised Guidance | |||
Candelaria (100% basis) | 230 | - | 230 | |||
Chapada | 40 | - | 40 | |||
Eagle | 15 | - | 15 | |||
Neves-Corvo | 55 | - | 55 | |||
Zinkgruvan | 45 | - | 45 | |||
385 | - | 385 | ||||
55 | 10 | 65 | ||||
Total Capital Expenditures | 440 | 10 | 450 | |||
a. Guidance as outlined in the Management's Discussion and Analysis for the three months ended |
2020 Exploration Investment Guidance
Planned exploration expenditures of
About
The information in this release is subject to the disclosure requirements of
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 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; and the Company's integration of acquisitions and any anticipated benefits thereof. 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 labour; 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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