Safety stand downs across our organization have given us time to honour our colleague at Neves-Corvo and reflect on our shared commitment to our goal of Zero Harm. Both our Alcaparrosa mine at Candelaria and Eagle mine were recognized by national governing bodies for their outstanding safety records, and our Company is on-track for our lowest injury rate year.
Operationally, noticeable progress has been made at Candelaria to improve overall mill throughput. The operation is well positioned for a return to full production rates once fair and sustainable labour agreements are reached. Chapada's strong performance continued until late in the quarter. The team has done an excellent job to minimize the expected impact and to take advantage of the downtime, as seen by reinstated 2020 guidance. Official restart of the
Summary Financial Results
Three months ended | Nine months ended | ||||
US$ Millions (except per share amounts) | 2020 | 2019 | 2020 | 2019 | |
Revenue | 600.7 | 538.7 | 1,512.0 | 1,324.4 | |
Gross profit | 199.3 | 128.6 | 318.8 | 294.9 | |
Attributable net earnings1 | 122.4 | 26.4 | 49.6 | 70.2 | |
Net earnings | 133.6 | 32.1 | 68.3 | 84.4 | |
Adjusted earnings 1,2 | 106.4 | 25.6 | 120.0 | 77.5 | |
Adjusted EBITDA2 | 300.3 | 224.3 | 622.1 | 476.9 | |
Basic and diluted net earnings per share1 | 0.17 | 0.04 | 0.07 | 0.10 | |
Adjusted basic and diluted earnings per share1,2 | 0.14 | 0.03 | 0.16 | 0.11 | |
Cash flow from operations | 272.2 | 111.6 | 393.2 | 378.2 | |
Adjusted operating cash flow2 | 262.0 | 155.0 | 468.9 | 344.1 | |
Adjusted operating cash flow per share2 | 0.36 | 0.21 | 0.64 | 0.47 | |
Cash and cash equivalents | 220.0 | 184.6 | 220.0 | 184.6 | |
Net debt2 | 124.0 | 185.0 | 124.0 | 185.0 |
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 nine months ended |
Highlights
Operational Performance
All operations continued to effectively manage costs, but metal production was impacted by lower grades and throughput. In addition, while there was no significant impact to production, the Company had two unplanned operational suspensions in the last week of the quarter.
The Company continues to manage and respond to the COVID-19 pandemic and has implemented preventative measures to ensure the safety of its workforce, local communities and other key stakeholders. To date, production disruptions as a result of COVID-19 have been minimal and there has been no significant disruption in the delivery or receipt of goods at our operations.
Candelaria (80% owned): Candelaria produced 35,836 tonnes of copper, and approximately 21 thousand ounces of gold in concentrate on a 100% basis in the quarter. Copper production for the quarter was lower than the prior year quarter primarily due to lower grades. Ore milled during the third quarter of 2020 significantly improved over that achieved in the first two quarters of the year as measures to address variability in ore hardness and mill circuit availabilities began to take hold. Mining is advancing through the areas of Phase 10 which were in proximity to where pit wall displacement issues occurred in Phase 9, without issue. Copper cash costs1 of
Chapada (100% owned): Chapada produced 12,990 tonnes of copper and approximately 24 thousand ounces of gold which were lower than the prior year quarter due primarily to lower throughput as a result of expected increase in ore hardness as well as the mill interruption at quarter-end. Processing activities were interrupted on
Eagle (100% owned): Eagle produced 4,854 tonnes of nickel and 5,055 tonnes of copper during the quarter. Nickel and copper production was higher than the prior year quarter due to higher grades from
Neves-Corvo (100% owned): Neves-Corvo produced 6,518 tonnes of copper and 15,459 tonnes of zinc for the quarter. Copper and zinc production were lower than the prior year quarter due to lower throughput. A voluntary 5-day suspension of mining and milling operations took place following a fatal accident on
Restart of the
Zinkgruvan (100% owned): Zinc production of 17,328 tonnes was higher than the prior year quarter due to higher achieved throughput. Lead production of 5,571 tonnes was lower than the prior year quarter due to lower feed grades. Zinc cash costs of
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 |
Total Production
(Contained metal in concentrate) | 2020 | 2019 | ||||||||
YTD | Q3 | Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | ||
Copper (t)a,b | 188,896 | 61,444 | 65,285 | 62,167 | 235,498 | 67,131 | 74,560 | 47,685 | 46,122 | |
Zinc (t) | 101,316 | 32,787 | 31,582 | 36,947 | 151,515 | 38,925 | 35,028 | 37,116 | 40,446 | |
Gold (koz)a,b | 128 | 45 | 44 | 39 | 142 | 43 | 58 | 21 | 20 | |
Nickel (t) | 11,809 | 4,854 | 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 Updates
- On
September 8, 2020 , the Company reported its Mineral Resource and Mineral Reserve estimates as atJune 30, 2020 . On a consolidated and attributable basis, estimated contained metal in the Proven and Probable Mineral Reserve categories totalled 5,518 kt of copper, 3,123 kt of zinc, 100 kt of nickel, 936 kt of lead and 6.9 million ounces of gold. - On
September 25, 2020 , the Company reported that a fatal accident occurred at its Neves-Corvo mine inPortugal . The incident occurred during underground mining operations. No other personnel were injured in the incident and the scene has been secured. Operations were temporarily suspended. - On
September 27, 2020 , the Company announced that processing activities have been interrupted at the Chapada mine inBrazil . The operation suffered a power outage in the morning ofSeptember 27, 2020 and when power was restored, the protection system at the operation's main electrical substation failed, resulting in significant damage to all four SAG and ball mill motors. In addition to assessing a staged resumption of processing, the Company will be bringing forward planned maintenance and refocusing mining on waste removal and development activities. - On
October 7, 2020 , the Company reported that mediation with Candelaria'sMine Workers Union , which represents approximately 350 workers, ended without an agreement thereby putting the Union in a legal position to strike.
OnOctober 18, 2020 , the Company announced that despite mediation with theCandelaria AOS Union , the parties had failed to reach an agreement andCandelaria AOS Union could legally be on strike commencingOctober 20, 2020 .
Both theMine Workers Union and theAOS Union are currently on strike and, as a result, Candelaria operations are temporarily suspended. Critical works continue to be executed to protect required onsite personnel, the operation and the environment.
Financial Performance
- Gross profit for the quarter ended
September 30, 2020 was$199.3 million , an increase of$70.7 million compared to the prior year quarter. The increase was primarily due to higher realized metal prices and price adjustments ($81.0 million ), partially offset by lower sales volumes ($9.1 million ). - On a year-to-date basis, gross profit was
$318.8 million , an increase of$23.8 million over the prior year comparative period due to the acquisition of Chapada inJuly 2019 ($81.2 million ) and favourable foreign exchange ($51.5 million ), partially offset by lower metal prices and price adjustments ($46.6 million ) and higher depreciation ($67.6 million ). - Net earnings for the quarter ended
September 30, 2020 were$133.6 million , an increase of$101.5 million compared to the prior year quarter. The increase was attributable to higher gross profit, lower finance costs and lower income taxes.
On a year-to-date basis, net earnings were$68.3 million , a decrease of$16.1 million from the prior year comparative period as lower general exploration and business development expenses, higher foreign exchange gains of$38.9 million and lower finance costs were more than offset by higher income taxes from the inclusion of Chapada mine - Adjusted earnings for the quarter were
$106.4 million , an increase of$80.8 million over the prior year quarter due mainly to higher gross profit. On a year-to-date basis, adjusted earnings were$120.0 million ,$42.5 million higher than the prior year primarily due to higher gross profit, foreign exchange gains and lower finance and general exploration and business development costs.
Financial Position and Financing
- Cash and cash equivalents of
$222.0 million as atSeptember 30, 2020 decreased by$62.0 million during the quarter. Cash flow from operations of$272.2 million was used to invest in capital expenditures ($89.8 million ), pay shareholder dividends ($22.3 million ) and the derivative liability related to the Chapada acquisition ($25.0 million ), as well as make distributions to non-controlling interests ($26.0 million ). The Company also repaid approximately$160.0 million in debt on a net basis, including$145.0 million on its revolving credit facility. - On a year-to-date basis, cash and cash equivalents decreased by
$28.6 million as cash flow from operations of$393.2 million was more than offset by capital expenditure of$331.0 million and cash flow used in financing activities of$80.7 million . - Net debt of
$124.0 million as atSeptember 30, 2020 reflects an increase of$63.8 million sinceDecember 31, 2019 . Operating cash flow of$393.2 million for the first nine months of 2020 was offset by capital investment ($331.0 million ), dividend payments to shareholders ($64.9 million ), distributions paid to non-controlling interests of$26.0 million and the negative effect of foreign exchange on cash of$23.0 million . - As of
October 28, 2020 , the Company had a cash and net debt balance of approximately$280.0 million and$65.0 million , respectively.
Outlook
Candelaria's guidance was withdrawn on
Cash costs at Chapada and Eagle have been better than expected due to continued 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 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.
2020 Production and Cash Cost Guidance
Previous Guidancea | Revised Guidance | ||||
(contained metal in concentrate) | Tonnes | Cash Costs | Tonnes | Cash Costsb | |
Copper (t) | Candelaria (100%) | 145,000 - 155,000 | N/A | N/A | |
Chapada | 51,000 - 56,000 | 45,000 - 50,000 | |||
Eagle | 17,000 - 19,000 | 17,000 - 19,000 | |||
Neves-Corvo | 35,000 - 40,000 | 32,000 - 34,000 | |||
Zinkgruvan | 3,000 - 4,000 | 3,000 - 4,000 | |||
Total | 251,000 - 274,000 | ||||
Zinc (t) | Neves-Corvo | 70,000 - 75,000 | 70,000 - 75,000 | ||
Zinkgruvan | 72,000 - 77,000 | 72,000 - 74,000 | |||
Total | 142,000 - 152,000 | ||||
Gold (oz) | Candelaria (100%) | 90,000 - 100,000 | N/A | ||
Chapada | 85,000 - 90,000 | 80,000 - 85,000 | |||
Total | 175,000 - 190,000 | ||||
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 and six 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. Silver production at Zinkgruvan and Neves-Corvo is subject to streaming agreements, and cash costs are calculated based on receipt of approximately | |
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
Candelaria's guidance for capital expenditures has been withdrawn reflecting the temporary suspension of operations due to the current labour action. Guidance for the other operations remains unchanged from previous guidance.
($millions) | Guidance |
Sustaining Capital | |
Candelaria (100% basis) | N/A |
Chapada | 40 |
Eagle | 15 |
Neves-Corvo | 55 |
Zinkgruvan | 45 |
65 |
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 or labour disputes; timing for any required repairs and resumption of any interrupted operations; 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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