TORONTO, ONTARIO -- (Marketwire) -- 02/26/09 -- Lundin Mining Corporation (TSX: LUN)(NYSE: LMC)(OMX: LUMI) ("Lundin" or the "Company") today reported a net loss, before discontinued operations and impairment charges, of $131.9 million for the fourth quarter of 2008. Cash flow of $46.5 million was generated from operations during the quarter. Fourth quarter earnings were affected by after-tax, non-cash impairment charges of $576.0 million, a net loss from discontinued operations of $20.6 million and negative pricing adjustments relating to prior quarters of $94.3 million, a result of the sharp fall in metal prices. The net loss for the quarter was $728.5 million, or $1.77 per share.
Mr. Phil Wright, President and CEO commented, "The magnitude and speed of the fall in base metal prices since September resulted in a very difficult fourth quarter. Like all base metals miners, Lundin has been greatly affected by the low metal price environment. However, we have taken the necessary measures to re-align our operations and a clear focus has emerged that is centered on our three core assets: Neves-Corvo, Zinkgruvan and Tenke.
"Neves-Corvo and Zinkgruvan continue to deliver good operational results with steady, low-cost production. We have reduced capital and operating costs, taking care not to impair future production capacity, and expect Neves-Corvo, Zinkgruvan and Aguablanca to be free cash flow(1) positive at today's prices.
"At the same time, Tenke is ramping up and will begin producing in the second quarter of 2009, generating cash from operations and only requiring limited capital contributions in 2009".
Commenting on the Company's financial position Mr. Wright said "We are in discussions with our banking syndicate to establish a suitable restructured credit facility and believe that once this is established, and with a clear focus on optimizing returns from our key assets, the Company will be well placed to weather the current conditions and respond when the inevitable upturn eventuates".
Highlights
- All operations performed in line with or ahead of internal expectations and production guidance for 2008 was met. Neves-Corvo, Zinkgruvan and Aguablanca achieved record tonnage, mined and processed, and metal production exceeded 2007 levels.
- Sales during the quarter were heavily impacted by the decline in metal prices for all of the Company's products. Sales for the quarter were $43.5 million, which included $94.3 million of negative adjustments related to the settlement of provisional sales and mark-to-market adjustments on outstanding provisional sales of $18.1 million.
- Cash flow from operations for the quarter was $46.5 million, compared to $80.3 million for the corresponding quarter in 2007.
- During the quarter, the Company satisfied its final obligations for Phase I capital funding of the Tenke copper/cobalt project.
- In November, the Company announced that it had entered into a plan of arrangement with HudBay Minerals Inc. (HudBay). In connection with the proposed business combination, HudBay subscribed for 96,997,492 common shares in the capital of Lundin through a private placement for proceeds of $111.4 million. The shares represent approximately 19.9% of Lundin Mining's outstanding common shares after issuance.
On February 23, 2009, the Company announced that it has agreed to terminate the arrangement on agreed terms.
Financial Position
- Net debt(2) at December 31, 2008 was $145.5 million, down from a net debt of $194.8 at September 30, 2008 and compared to a net cash position of $35.8 million at December 31, 2007. The increase in net debt during the year was primarily attributable to the Company's funding obligations for the Tenke project. These cash outflows amounted to $264.1 million. The outflows in respect of Tenke were partially offset by inflows of $111.4 million from the private placement transaction with HudBay.
- As at December 31, 2008, the Company was not in compliance with the tangible net worth covenant under its $575 million revolving line of credit facility, however, this requirement has been temporarily waived by the banking syndicate. The Company has obtained a waiver for a period up to June 5, 2009 during which it will work with the banking syndicate to establish a permanent and restructured facility. The intention is to complete this restructure well before June 5, 2009.
- The Company's intention is to restructure the revolving credit facility, in conjunction with whatever other measures are required, to ensure adequate liquidity in the event that the present market volatility and depressed demand continue for the next two years.
- The Company drew down on its credit facility by $86.8 million in the fourth quarter bringing the total outstanding amount on the facility to $266.7 million. A site-remediation guarantee of $10.2 million brings the total committed under the facility to $276.9 million.
- Cash on hand at December 31, 2008 was $169.7 million.
Outlook
---------------------------------
(contained metal Production
in tonnes) Outlook 2009
---------------------------------
Copper(i) 90,000
Zinc 98,000
Lead 40,000
Nickel 6,800
---------------------------------
(i) No tonnage included for Tenke
- Production for 2009 is expected to be lower than 2008 taking into account: Storliden and Galmoy (May 2009) mine closures; increased throughput at Zinkgruvan and slightly lower copper head-grade at Neves-Corvo.
- First copper production from Tenke copper/cobalt project is expected in the second quarter of 2009.
