News
Lundin Mining Corporation: Second Quarter Report
August 13, 2004
NEWS RELEASE TRANSMITTED BY CCNMatthews
FOR: LUNDIN MINING CORPORATION
TSX SYMBOL: LUN
AUGUST 13, 2004 - 05:19 ET
Lundin Mining Corporation: Second Quarter Report
VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 13, 2004) -
/T/
Lundin Mining Corporation (formerly South Atlantic Ventures Ltd.)
Interim Report
Six Month Period Ended June 30, 2004
Operating and Financial Highlights
(Amounts in Canadian Dollars unless otherwise indicated)
Acquisition of Zinkgruvan Zinc/Lead/Silver Mine Completed
- Zinkgruvan mine is the largest zinc producer in Sweden.
- Lundin Mining Corporation transformed into mid-tier base metals
mining company.
- Acquisition financed by issuance of 20 million shares at $8 per
share for net proceeds of approximately $152 million.
- First six months production from Zinkgruvan mine totaled 33,600
tonnes of zinc metal, 12,900 tonnes of lead and 0.8 million ounces
of silver.
- Ore treated 390,000 tonnes, average grade 9.3% zinc, 3.9% lead and
84 grams per ton silver.
Strong Cash Flow
- Cash as at June 30, 2004 was $31 million, an increase of $22
million from the beginning of the period.
- Cash flow from operating activities for the three and six months
ended June 30, 2004 was $3 million and $2 million, respectively.
This includes only one month of operating activities from the
Zinkgruvan mine.
- The Company has no long term debt as at June 30, 2004.
- A production problem in the mine during June delayed shipments of
concentrate and reduced the revenue in the quarter by
approximately $ 3 million. Actions have been taken to reduce the
risk of any similar problems going forward.
Name Change to Lundin Mining Corporation
- Listing on Toronto Stock Exchange ("TSX") effective on August 12,
2004 concurrent with the name change to Lundin Mining Corporation.
New trading symbol is "LUN" on TSX and "LUMI" on Nya Marknaden at
the Stockholm Stock Exchange (Stockholmsborsen).
- Listing of Swedish Depository Receipts at Stockholm Stock Exchange
to be upgraded to "O List".
Selected Financial Information
--------------------------------------------------------------------
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PRO- PRO-
FORMA FORMA
THREE THREE SIX SIX SIX THREE
MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
ITEM 2004 2003 2004 2003 2004(i) 2004(i)
--------------------------------------------------------------------
Sales ($'000) 2,968 - 2,968 - 41,413 19,819
--------------------------------------------------------------------
Cost of Sales
($'000) (2,989) - (2,989) - (22,703) (13,530)
--------------------------------------------------------------------
Depreciation and
amortization
($'000) (1,693) - (1,693) - (11,233) (4,452)
--------------------------------------------------------------------
Gross margin
($'000) (1,714) - (1,714) - 7,477 1,838
--------------------------------------------------------------------
General
exploration
and project
investigation
($'000) (529) (441) (1,468) (572) (2,391) (1,248)
--------------------------------------------------------------------
Net income
(loss) for the
period ($'000) 202 78 62 287 4,535 1,073
--------------------------------------------------------------------
Operating Cash
Flow ($'000) 3,089 (558) 2,186 (616) 23,251 11,962
--------------------------------------------------------------------
--------------------------------------------------------------------
/T/
The acquisition of Zinkgruvan mine was completed on June 2, 2004
and the Company's income statement includes Zinkgruvan operations
from this date.
(i) Pro-forma information including the Zinkgruvan mine, which
assumes that the mine was acquired on January 1, 2004.
Zinkgruvan Mine
The acquisition of Zinkgruvan mine, located in south-central
Sweden, has transformed Lundin Mining Corporation from a junior
exploration company to a mid-tier base metals producing mining
company, creating a new base metal investment vehicle in Canada
and Europe with strong, steady cash flow.
The acquisition was completed on June 2, 2004 and the Company's
income statement reflects Zinkgruvan mine operations from this
date, representing only 29 days of the financial results of
Zinkgruvan mine. The Company's third quarter report will be the
first to include the mine's operation for a full quarter.
The Company acquired a 100% interest in the Zinkgruvan mine from
Rio Tinto Plc ("Rio Tinto"). The purchase price was US$100
million in cash plus payments of Swedish Kronor ("SEK")
39,699,129 for working capital and a US$1 million non-refundable
deposit. The acquisition was financed through a public equity
offering in Canada and Sweden. The Company issued 20 million
common shares at a price of $8 per common share for net proceeds
of approximately $152 million.
Currently, approximately 800,000 tonnes of ore is mined per year
from Zinkgruvan with grades averaging 8.9% zinc, 4.6% lead and
115 grams per tonne silver. The production plan for 2004 is
approximately 66,000 tonnes zinc metal in concentrate and 34,000
tonnes lead metal in concentrate which contains 2 million oz. of
silver.
Zinkgruvan mine is an underground mining operation located in
south-central Sweden and is one of the largest underground mines
in Europe. It has been producing zinc, lead and silver on a
continuous basis since 1857. The mine's production costs have
been in the lowest quartile of zinc producers globally for nine
out of the last ten years.
Mining is conducted at depths ranging from 350 metre to
approximately 1,000 meters. The current mine plan is based on
proven and probable reserves sufficient for supporting an 11 year
mine life. Conversion of estimated resources to reserves by
continued definition drilling is expected to add another 9-10
years mine life at the current mining rate.
The Zinkgruvan mine and concentrator have significant
opportunities to increase production. The concentrator has a
900,000 tonnes per annum ("tpa") capacity with considerable room
for expansion. The main hoisting shaft has a 1.4 million tonnes
per annum ("mtpa") capacity compared to current utilization of
700,000 to 800,000 tpa.
In addition to zinc, lead and silver reserves and resources,
there is a copper resource of approximately 3.5 million tonnes
("mt") at 3.1% copper adjacent to the existing main zinc orebody
from the 650 metre level to the 950 metre level.
Management of the Company are giving high priority to a
feasibility study for determining the viability of exploiting
this new copper deposit. If viable, it is anticipated the copper
project would include mining and milling of about 300,000 to
500,000 tonnes of ore per year for a period of ten years. An
existing scoping study by the previous owner will be used as the
basis for the feasibility study.
There are a number of highly prospective exploration targets in
the area surrounding the Zinkgruvan mine. Applications for
exploration permits covering these targets are currently being
made.
The Norrbotten Gold-Copper Project
By an agreement formally executed on March 31, 2004, the Company
acquired an option on certain gold-copper properties located in
the Kiruna mining district of northern Sweden from Anglo American
Exploration BV ("Anglo") and Rio Tinto Mining and Exploration
Limited ("Rio"). The properties cover approximately 22,000
hectares and include the copper-gold mineralization found by
Anglo-Rio in the Discovery Zone at Rakkurijarvi.
These properties form part of the Company's Norrbotten
copper/gold exploration project which now encompasses an area of
approximately 117,000 hectares making the Company the largest
landholder in a district which is seeing considerable recent
activity by major companies in search of gold-copper
mineralization hosted in iron-oxide rocks ("IOCG" deposits").
During the year to date, the Company has focused exploration on
the Rakkurijarvi Discovery Zone. The Company has completed a
successful 3,920 metre drilling program which expanded the known
Rakkurijarvi copper/gold zone. Mineralized intercepts include
40.5 meters grading 1.4% copper and 0.3 g/t gold and 19.8 meters
grading 1.6% copper and 0.4 g/t gold. A second drill program is
scheduled to commence later this year to further delineate the
deposit. This program will begin as soon as weather and ground
conditions permit.
The mineralization at Rakkurijarvi is characterized by massive,
sometimes brecciated, magnetite, with stockworks and veins of
chalcopyrite and pyrite. The objective of the drilling is to
define a mineral resource amenable to open-pit mining methods.
The Company is highly encouraged by results obtained to date. A
total of 26 drill holes have been completed, the results of which
are available on the Company's website www.lundinmining.com and
reported in news releases dated April 5, 2004 and June 1, 2004.
In addition to the Rakkurijarvi deposit, the Company has several
other targets in the district which are being examined by an
ongoing mapping and surveying program designed to define targets
for drilling.
Storliden Zinc/Copper Mine
The Company owns 37% of North Atlantic Natural Resources AB
("NAN"), a publicly traded Swedish company, which holds a 100%
interest in the producing Storliden zinc-copper mine located in
northern Sweden.
Production from the Storliden Mine during the first six months of
the year totaled 4,035 tonnes of copper and 10,502 tonnes of
zinc. NAN's revenue for the period was $23 million (SEK 128.1
million) and operating cash flow was $6.8 million (SEK 38.1
million). Net income to NAN was $2.9 million (SEK 16.1 million)
or $0.09 per share (SEK 0.52 per share).
The Storliden mine is a volcanogenic massive sulphide copper zinc
deposit located eight kilometres northeast of the town of Mala in
Vasterbotten County, Sweden. It was discovered by NAN in 1998 and
has been in production in April 2002. As of January 1, 2004
remaining reserves were calculated at 1.1 mt of ore grading 9.8%
Zinc and 3.5% copper.
The deposit is being developed pursuant to a joint venture
agreement whereby Boliden Mineral AB is acting as main contractor
and operator. Ore is being processed at the Boliden Area
Operations (BAO) mill, some ninety kilometres from the mine.
Metal Prices
Metal prices improved significantly during the first half of
2004. It is generally anticipated that metal prices will continue
to improve as global demand increases, especially in China.
/T/
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-------------------------------------------
SECOND SIX SECOND
QUARTER MONTHS QUARTER
PRICES 2004 2004 2003
-------------------------------------------
Zinc US$/lb 0.47 0.48 0.35
-------------------------------------------
Lead US$/lb 0.38 0.37 0.21
-------------------------------------------
Silver US$/oz 6.25 6.47 4.63
-------------------------------------------
-------------------------------------------
/T/
Hedging
The Company currently has no hedging in place for either metal
production or currency variations.
Strengthened Management team
The management team of the Company has been strengthened by the
addition of Karl-Axel Waplan as Executive VP Operations in May of
this year. Mr. Waplan has considerable expertise in the Swedish,
as well as international, mining and marketing. In addition, Mr.
Lars-Gunnar Huldt joined the Company in August as Finance Manager
of the Company and Chief Financial Officer of the Swedish
subsidiary, Lundin Mining AB. Mr. Huldt has considerable
experience in accounting and financial management of
international companies in Sweden. Both men are based in the
Company's offices in Stockholm.
/T/
LUNDIN MINING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Amounts in Canadian Dollars unless otherwise indicated)
SIX MONTHS ENDED JUNE 30, 2004
/T/
The following discussion and analysis of the results of
operations and financial condition ("MD&A") for Lundin Mining
Corporation (which, together with its subsidiaries, is
collectively referred to as the "Company") should be read in
conjunction with the unaudited interim consolidated financial
statements for the six months ended June 30, 2004 and related
notes thereto.
The financial information in this MD&A is derived from the
Company's consolidated financial statements prepared in
accordance with Canadian generally accepted accounting
principles. The effective date of this MD&A is August 12, 2004.
The acquisition of Zinkgruvan mine was completed on June 2, 2004
and the Company's income statement includes Zinkgruvan operations
from this date. The Company's third quarter report will be the
first to include the mine's operation for a full quarter.
Additional information about the Company and its business
activities is available on SEDAR at www.sedar.com.
Name Change and Listing on the Toronto Stock Exchange ("TSX")
At the Annual General Meeting held in Vancouver on June 11, 2004,
the shareholders approved to change the name of the Company from
South Atlantic Ventures Ltd. to Lundin Mining Corporation. The
name change is effective August 12, 2004.
The Company's application for listing on the TSX has been
approved by the TSX and is effective August 12, 2004. The
securities of the Company will be delisted from the TSX Venture
Exchange at the close of business on August 11, 2004.
Overview
The Company has interests in gold, silver and base metals
properties located in Sweden. Some of these properties are held
by North Atlantic Natural Resources AB ("NAN"), a publicly traded
company on the O-list at Stockholmsborsen, in which the Company
currently has a 37 percent interest or 11,580,000 shares.
The Zinkgruvan Mine
On June 2, 2004, the Company acquired the Zinkgruvan mining
operation by purchasing a 100 percent interest in North Mining
Svenska AB ("NMS") and a 100 percent indirect interest in
Zinkgruvan Mining AB ("ZM") from Rio Tinto Plc ("Rio Tinto").
This 100% interest comprises all of the outstanding shares of NMS
and a loan payable by NMS to Rio Tinto. ZM owns the Zinkgruvan
mine ("Zinkgruvan") located in Southern Sweden. The purchase
price for NMS and ZM was US$100 million in cash plus payments of
approximately Swedish Kronor ("SEK") 39.7 million for working
capital and a US$1 million non-refundable deposit. In addition,
the Company will pay Rio Tinto a maximum of US$5 million in price
participation payments based on the performance of zinc, lead and
silver prices for a period up to two years.
The acquisition of Zinkgruvan was financed through a public
equity offering in Canada and Sweden. The Company issued 20
million common shares at a price of $8 per common share for net
proceeds of approximately $152 million. The acquisition of
Zinkgruvan establishes the Company as a mid-tier zinc producer,
creating a new base metal investment vehicle in Canada and
Europe.
Pro-forma results of operations and cash flow
The following is a summary of selected condensed pro-forma
information which assumes that the acquisition of Zinkgruvan had
been made on January 1, 2004.
/T/
Three months Six months
ended ended
June 30, 2004 June 30, 2004
------------- -------------
Sales $ 19,819,997 $ 41,413,746
Cost of sales (13,530,020) (22,702,771)
Depreciation and amortization (4,452,429) (11,233,498)
------------- -------------
Gross margin $ 1,837,458 $ 7,477,477
------------- -------------
------------- -------------
General exploration and
project investigation $ 1,248,426 $ 2,390,837
------------- -------------
------------- -------------
Net (loss) income for the period $ (1,073,106) $ 4,534,679
------------- -------------
------------- -------------
Cash flow from operating
activities $ 11,962,185 $ 23,251,408
------------- -------------
------------- -------------
/T/
The Norrbotten Gold-Copper Project
By agreement dated March 31, 2004, the Company acquired a
copper-gold property located in the Kiruna mining district in
northern Sweden from Anglo American Exploration BV ("Anglo") and
Rio Tinto Mining and Exploration Limited ("Rio") (collectively,
"Anglo-Rio"). The Company can earn a 100 percent interest in the
property by expending a minimum of US$1 million in the first year
and a total of US$6 million over a period of three years, and
issuing 187,214 shares in the Company with a fair value of
US$500,000 to Anglo-Rio. The shares have been issued. The Company
has granted a four-year buy back right to Anglo-Rio for the
purchase of 60 percent of any proven copper-gold deposit which
meets a threshold equivalent to three million tonnes of contained
copper (for example, 300 million tonnes at 1 percent Cu). The
buy-back right will be at a price equal to three times the
expenditures incurred by the Company. Any deposit developed that
does not meet this threshold will carry a 2.25 percent NSR
royalty to be paid to Anglo-Rio by the Company.
Results of operations
The Company's net income for the second quarter and the six
months ended June 30, 2004 was $202,000 and $62,000,
respectively, as compared to an income of $78,000 and $287,000
for the same periods of 2003. Results for the three months and
six months ended June 30, 2004 were primarily affected by the
acquisition of Zinkgruvan. The Company's consolidated results of
operations included revenues and expenses from Zinkgruvan from
June 2, the date of acquisition, to June 30, 2004.
Revenues from Zinkgruvan from June 2, 2004 to June 30, 2004 were
$ 3 million. Operating expenses were $ 5.4 million. Depreciation
and amortization expenses were $ 1.7 million. The revenue from
Zinkgruvan was impacted by a technical problem in the mine and
delays of two planned shipments of concentrate during the month
of June 2004. The problem in the mine was the result of a hang up
in ore passes and a resultant rock fall. As a consequence, the
Company was uncertain as to when material would be available for
shipment and two shipments of concentrate were therefore
postponed until July. The incident in the mine will also have
some influence on the earnings in the 3rd quarter as the total
ore production will also be reduced in the early part of the 3rd
quarter as a result of the incident. Actions have been taken and
continue to be taken to reduce the risk for this kind of incident
and any resultant production problems going forward. Operating
expenses increased also to some extent during the month of June
2004 due to above mentioned incident. The net negative impact of
the incident on the revenues for June are estimated to be
approximately $ 3 million out of which approximately $ 1.7
million is due to the delayed shipments which will be recovered
in the month of July.
/T/
----------------------------------------------------------------
One month Six months Twelve months
Metal ended ended ended
Production June 30, 2004 June 30, 2004 December 31, 2003
----------------------------------------------------------------
Zinc (tonnes) 3,900 33,600 66,000
Lead (tonnes) 1,700 12,900 32,000
Silver (oz.) 97,000 749,000 1,800,000
----------------------------------------------------------------
/T/
The Company's equity in the net income of NAN for the second
quarter and six months of 2004 was $13,000 and $1.1 million
respectively, as compared to equity income of $875,000 and $1.4
million for the same period in 2003. NAN generated revenues for
the second quarter and six months of 2004 of $9.2 million (SEK
51.4 million) and $23 million (SEK 128.1 million) respectively as
compared to $12.7 million (SEK 70.6 million) and $24.4 million
(SEK 135.9 million) respectively for 2003.
NAN's net earnings were $36,000 (SEK 0.2 million) for the quarter
ended June 30, 2004 as compared to $2.4 million (SEK 13.1
million) for 2003. For the six months ended June 30, 2004, NAN's
net earnings were $2.9 million (SEK 16.1 million) as compared to
$3.8 million (SEK 20.9 million) for 2003.
NAN's net earnings for the second quarter ended June 30, 2004
were less than expected due to a delay in the development of the
Eastern Zone at the Storliden Mine, resulting in lower
concentrate production than planned due to less tonnes processed
and lower feed grades. The shortfall from the Eastern Zone has to
an extent been compensated with tonnage from the Lower Western
Zone which has lower head grades and is also harder to grind.
This, coupled with lower metal prices than realized in the first
quarter of 2004, has had a comparatively negative affect on
revenue for the second quarter and the initial part of the third
quarter. It is anticipated results will improve in the fourth
quarter when measures now being taken are in effect and higher
grade portions of the orebody are mined and processed.
/T/
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Three months Six months Three months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
NAN's Production 2004 2004 2003 2003
--------------------------------------------------------------------
Copper metal in
concentrates (tonnes) 1,619 4,035 3,620 6,359
Zinc metal in
concentrates (tonnes) 4,748 10,502 9,461 18,096
--------------------------------------------------------------------
/T/
Included in the net income for the three months ended June 30,
2004 was a gain of $873,020 on the sale of 400,000 shares of NAN.
The reason for the sale was to comply with the Stockholmsborsen
ownership concentration requirement. According to the
requirement, at least 25% of the shares and 10% of the votes
shall be publicly owned.
General and administrative expenses for the second quarter and
six months ended June 30, 2004 were $960,000 and $1.18 million
respectively, as compared to $110,000 and $279,000 for 2003,
representing an increase of $850,000 and $904,000 respectively.
The increase is primarily due to the increased in the level of
corporate activities and the acquisition of Zinkgruvan. In
particular, wages and benefits increased by $415,000 and $459,000
respectively and office and general increased by $208,000 and
$189,000 respectively compared to the second quarter and six
month ended June 30, 2003. General exploration and project
investigation expenses were $529,000 and $1.468 million
respectively, as compared to $441,000 and $572,000 for 2003,
representing an increase of $88,000 and $896,000 respectively.
Interest income for the second quarter and six months ended June
30, 2004 was $239,000 and $291,000 respectively as compared to
$38,000 and $197,000 respectively for 2003. The increase in
interest income is primarily due to the increase in cash from the
equity financing completed in June 2004.
Interest and bank charges were $122,000 and $131,000 respectively
for the second quarter and six months ended June 30, 2004 as
compared to $70,000 and $138,000 respectively for 2003. This
increase is primarily due to short-term liabilities of
Zinkgruvan.
Exchange gains for the second quarter and six month ended June
30, 2004 was $1.68 million and $1.70 million respectively, an
increase of $1.76 million and $1.80 million respectively compared
to 2003, mainly due to the re-evaluation of provisions for
pensions, provisions for assets retirement obligation, and future
income tax liabilities of Zinkgruvan.
Financial Condition, Liquidity and Capital Resources
Working Capital
At June 30, 2004, the Company had working capital of $28 million
as compared to working capital of $8.4 million at December 31,
2003 including cash of $31.03 million as compared to $9.10
million respectively. The improvement in the working capital is
primarily due to the equity financing completed during June 2004
and cash flows from operations.
Accounts receivable
The accounts receivable increased to $4.09 million as at June 30,
2004 from $124,000 at December 31, 2003, primarily as a result of
the acquired receivables from Zinkgruvan.
Total assets
Total assets increased to $254.15 million as at June 30, 2004
from $18.83 million at December 31, 2003. This large increase is
primarily due to the acquired inventory and properties, plant and
equipment associated with the acquisition of Zinkgruvan.
Current liabilities
Current liabilities increased to $15.74 million as at June 30,
2004 from $1.8 million at December 31, 2003 due to acquired
liabilities of Zinkgruvan. Furthermore the extended credit
facility to NAN was repaid during the second quarter.
Long-term liabilities
Long-term liabilities have increased to $84.5 million as at June
30, 2004 from $2.8 million at December 31, 2003 due to the
acquisition of Zinkgruvan which has large provisions for
pensions, provisions for assets retirement obligation and future
income tax liabilities in Zinkgruvan.
Management of the Company believes that the working capital at
June 30, 2004, together with cash flows from operations, is
sufficient to fund the Company's normal operating requirements,
and its exploration and development expenditures.
Restatement
The Company has restated its unaudited interim consolidated
financial statements for the three and six months ended June 30,
2003 to correct for its accounting for income taxes. The
restatement had the effect of reducing income tax expense by
$256,000, increasing net income by the same amount and increasing
basic and diluted earnings per share by $0.03.
The Company has also restated the interim consolidated statement
of cash flows for the three and six months ended June 30, 2003.
This restatement had the effect of increasing cash flow from
operating activities by $86,000, decreasing cash flow from
financing activities by $75,000 and decreasing cash flow from
investing activities by $12,000.
The Company has also restated its unaudited interim consolidated
financial statements for the three and six months ended June 30,
2003 for the retroactive effect of the change in accounting
policy for exploration expenses discuss below.
Related Party Transactions
The Company has transactions with related parties that are
disclosed in Note 6 of the consolidated financial statements.
Critical Accounting Policies
These unaudited interim consolidated financial statements have
been prepared in accordance with Canadian generally accepted
accounting principles ("GAAP") for interim financial information
and they follow the same accounting policies and methods of
application as the audited consolidated financial statements of
the Company for the year ended December 31, 2003 except as noted
below.
Stock-based compensation
Effective January 1, 2004, the Company adopted the amended
recommendations of the CICA Handbook Section 3870, "Stock-based
Compensation and Other Stock-based Payments". Under the amended
standards of this Section, the fair value of all stock-based
awards granted are estimated using the Black-Scholes model and
are recorded in operations over their vesting periods. The
compensation costs related to stock options granted after January
1, 2004 is recorded in operations.
Previously, the Company provided note disclosure of pro forma net
earnings and pro forma earnings per share as if the fair value
based method had been used to account for stock options granted
to employees, directors and officers after January 1, 2002. The
amended recommendations have been applied retroactively from
January 1, 2002 without restatement of prior periods.
No stock options were granted in the six months ended June 30,
2004 or 2003.
Asset Retirement Obligations
On January 1, 2004, the Company adopted the recommendations of
the CICA Handbook Section 3110, "Asset Retirement Obligations",
which requires that the fair value of liabilities for asset
retirement obligations be recognized in the period in which they
are incurred. A corresponding increase to the carrying amount of
the related assets is generally recorded and depreciated over the
life of the asset. The amount of the liability is subject to
re-measurement at each reporting period. The effect of the change
has no material impact on the Company's consolidated financial
statements.
Exploration expenses
The Company has retroactively changed its accounting policy for
exploration costs, to be consistent with ZM. Exploration costs
are now expensed instead of being deferred. The effect of this
change was to decrease the net income for the three and six
months ended June 30, 2004 by $279,310 ($0.02 per share) and
$1,217,509 ($0.11 per share), respectively, and to decrease
mineral properties and increase the deficit as at December 31,
2003 by $1,136,598.
Comparative figures
Certain of the comparative figures have been reclassified to
conform with the current year's presentation.
As a result of the acquisition of Zinkgruvan, the Company has
also adopted the following accounting policies during the six
months ended June 30, 2004.
Inventories
Consumables have been valued at weighted average cost less
allowances for obsolescence. Ore and Concentrate stocks have been
valued at the lower of production cost and net realizable value.
Properties, plant and equipment
Tangible fixed assets are recognized as an asset in the balance
sheet when, based on available information, it is probable that
the future economic benefits associated with the asset will flow
to the Company and the cost of the asset can be measured
reliably.
Provision for pensions
ZM has a defined benefit pension plan, which is unfunded. The
provision for future benefits is in accordance with Canadian
GAAP, using management's best estimate of expected salary
escalation and retirement ages.
Depreciation and depletion
Depreciation is provided on a straight line basis over the
estimated economic life of the assets as follow:
/T/
Buildings 20-50 years
Plant and machinery 5-20 years
Equipment 5 years
/T/
Depletion of mining properties is made on a unit-of-production
basis.
Other Provisions
A provision, i.e. assets retirement obligation, is recognized in
the balance sheet when the Company has a legal or constructive
obligation as a result of a past event, and it is probable that
an outflow of resources will be required to settle the obligation
and a reliable estimate of the amount can be made.
Selected Quarterly Information
/T/
---------------------------------------------------------------------
Financial Data
for 8 Quarters
---------------------------------------------------------------------
Three Months
Ended Jun-04 Mar-04 Dec-03 Sep-03 Jun-03 Mar-03 Dec-02 Sep-02
---------------------------------------------------------------------
A. Total
revenue
(loss)
($'000)(i) 3,288 1,166 655 950 935 710 259 380
---------------------------------------------------------------------
B. Income (loss)
before
extraordinary
items
($'000)(ii) 202 (139) (935) 1,040 78 209 (256) (104)
---------------------------------------------------------------------
C. Net income
(loss)
($'000)(ii) 202 (139) (935) 1,040 78 209 (256) (104)
---------------------------------------------------------------------
D. Basis and
diluted
income
(loss) per
share ($)(ii) 0.01 (0.01) (0.13) 0.13 0.01 0.03 (0.04) (0.02)
---------------------------------------------------------------------
(i) Consists of sales, interest income, management fee and other
income and the equity in the income (loss) of the significantly
influenced investee.
(ii) Has been restated - see Notes 1 and 2 to the financial
statements.
/T/
Outstanding Share Data
As at August 12, 2004, the Company had 30,539,971 common shares
outstanding and 305,000 share options outstanding under its
stock-based incentive plans. As at the same date, the Company had
702,500 share purchase warrants outstanding.
Outlook
Metal Prices
Metal prices improved significantly during the first half of
2004. It is generally anticipated that metal prices will continue
to improve as global demand increases, especially in China.
/T/
-------------------------------------------
-------------------------------------------
SECOND SIX SECOND
QUARTER MONTHS QUARTER
PRICES 2004 2004 2003
-------------------------------------------
Zinc US$/lb 0.47 0.48 0.35
-------------------------------------------
Lead US$/lb 0.38 0.37 0.21
-------------------------------------------
Silver US$/oz 6.25 6.47 4.63
-------------------------------------------
-------------------------------------------
Hedging
The Company currently has no hedging in place for either metal
production or currency variations.
LUNDIN MINING CORPORATION
INTERIM CONSOLIDATED BALANCE SHEET
(in Canadian Dollars)
June 30, December 31,
2004 2003
------------- -------------
------------- -------------
(Unaudited) (Restated
- Note 1)
ASSETS
Current assets
Cash $ 31,027,432 $ 9,097,530
Accounts receivable 4,086,427 124,200
Income taxes receivable 653,667 -
Loan receivable from North
Atlantic Natural Resources AB - 925,316
Inventories 7,428,184 -
Prepaid expenses 519,872 11,657
Other short term receivables 10,154 -
------------- -------------
43,725,735 10,158,703
Long-term receivables 711,048 -
Investment in North Atlantic
Natural Resources AB 8,970,744 8,492,814
Properties, plant and equipment
Mining properties (Note 3) 177,052,567 178,420
Machinery and other technical
equipment 20,064,793 -
Future income tax assets 3,622,416 -
------------- -------------
$ 254,147,302 $ 18,829,937
------------- -------------
------------- -------------
LIABILITIES
Current liabilities
Accounts payable and other
accrued liabilities $ 8,327,308 $ 775,852
Accrued expenses 3,769,137 -
Due to related parties (Note 6) 150,073 1,026,705
Other current liabilities 3,495,475 -
------------- -------------
15,741,993 1,802,557
Capital lease obligations 652,687 -
Provisions for pensions 15,277,463 -
Other provisions 13,084,208 -
Future income tax liabilities 39,744,896 1,023,990
------------- -------------
84,501,248 2,826,547
------------- -------------
SHAREHOLDERS' EQUITY
Share capital (Note 5) 181,302,924 27,016,912
Contributed surplus 446,695 211,808
Deficit (Notes 1(a) and (c)) (11,919,340) (11,340,261)
Cumulative translation adjustments (184,226) 114,931
------------- -------------
169,646,053 16,003,390
------------- -------------
$ 254,147,302 $ 18,829,937
------------- -------------
------------- -------------
Approved by the board:
"John H. Craig" (signed) "Brian D. Edgar" (signed)
----------------------- ------------------------
Director Director
LUNDIN MINING CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(in Canadian Dollars)
(Unaudited)
Three months ended June 30, Six months ended June 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
(Restated - (Restated -
Notes 1 Notes 1
and 2) and 2)
Sales $ 2,967,861 $ - $ 2,967,861 $ -
Cost of
sales (4,682,324) - (4,682,324) -
------------ ------------ ------------ ------------
Gross margin (1,714,463) - (1,714,463) -
------------ ------------ ------------ ------------
Expenses
General
exploration
and project
investigation (529,411) (440,747) (1,467,610) (571,736)
Management
fees (48,000) (36,000) (96,000) (72,000)
Office and
general (239,160) (30,690) (247,434) (58,660)
Professional
fees (24,557) (8,140) (82,760) (41,905)
Consulting (33,227) - (33,227) -
Promotion
and public
relations (82,787) (487) (96,056) (27,422)
Stock
exchange and
filing fees (60,553) (1,895) (81,547) (18,912)
Telephone
and
facsimile (10,924) (1,207) (12,938) (1,386)
Transfer
agent and
share
information (24,978) (11,001) (29,866) (14,993)
Wages and
benefits (435,855) (20,976) (503,063) (43,621)
------------ ------------ ------------ ------------
(1,489,452) (551,143) (2,650,501) (850,635)
------------ ------------ ------------ ------------
Other income
(expenses)
Management
fees 20,393 20,976 40,160 43,621
Interest
income 239,515 38,182 291,046 197,242
Other income 46,783 - 46,783 -
Other
expense (52,731) - (52,731) -
Listing on
Stockholm
Exchange (16,204) - (30,626) -
Interest and
bank charges (122,320) (70,058) (130,899) (138,405)
Foreign
exchange
gains
(losses) 1,679,190 (66,610) 1,699,492 (99,775)
------------ ------------ ------------ ------------
1,794,626 (77,510) 1,863,225 2,683
------------ ------------ ------------ ------------
Loss before
the
undernoted (1,409,289) (628,653) (2,501,739) (847,952)
Gain on sale
of investment
in North
Atlantic
Natural
Resources AB 873,020 - 873,020 -
Equity in
income of
significantly
influenced
investee 13,469 875,482 1,107,997 1,404,259
------------ ------------ ------------ ------------
(Loss)
income
before
income taxes (522,800) 246,829 (520,722) 556,307
Future
income tax
(expense)/
recovery 724,469 (169,055) 582,643 (269,030)
------------ ------------ ------------ ------------
Net Income
(Loss) for
the period $ 201,669 $ 77,774 $ 61,921 $ 287,277
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic and
diluted
income per
share $ 0.01 $ (0.01) $ 0.00 $ 0.04
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic
weighted
average
number of
shares
outstanding 16,393,870 7,709,957 13,123,055 7,709,957
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted
weighted
average
number of
shares
outstanding 17,301,370 7,709,957 14,030,555 7,709,957
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
LUNDIN MINING CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Canadian Dollars)
(Unaudited)
Three months ended June 30, Six months ended June 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
(Restated - (Restated -
Notes 1 Notes 1
and 2) and 2)
Cash flow
from (for)
operating
activities
Net income
(loss) for
the period $ 201,669 $ 77,774 $ 61,921 $ 287,277
Add non-cash
items
Accrued
interest on
notes
receivables - (144,753) - (126,104)
Depreciation
and
amortiza-
tion 1,693,278 - 1,693,278 -
Gain on sale
of
investment (873,020) (873,020)
Equity in
income of
significantly
influenced
investee (13,469) (875,482) (1,107,997) (1,404,259)
Future
income taxes (724,469) 169,055 (582,643) 524,540
Provision
for pensions
and other (181,305) - (181,305) -
Unrealized
foreign
currency
transla-
tion (1,548,080) 209,000 (1,548,080) 115,470
Net changes
in non-cash
working
capital
items
Accounts
receivable
and other
current
assets 4,229,878 (4,496) 4,140,468 (26,620)
Accounts
payable and
other
current
liabilities 304,571 11,298 583,859 13,468
------------ ------------ ------------ ------------
3,089,054 (557,604) 2,186,482 (616,228)
------------ ------------ ------------ ------------
Cash flows
from (for)
financing
activities
Common
shares
issued 151,661,499 - 151,854,249 -
Due to
related
parties (331,530) (83,215) (876,632) (119,649)
Loans
payable - 21,949 - 21,397
------------ ------------ ------------ ------------
151,329,969 (61,266) 150,977,617 (98,252)
------------ ------------ ------------ ------------
Cash flow
from (for)
investing
activities
Acquisition
of
subsidiary,
net of
cash
acquired
(Note
3(a)) (132,278,252) - (132,535,499) -
Mining
properties
and related
expenditures (848,377) 2,587 (848,377) (230,952)
Repayment of
loan
receivable 469,103 8,103 925,316 52,320
Proceeds
from
sale of
mineral
property - - - 367,000
Proceeds
from sales
of shares 1,224,363 - 1,224,363 -
------------ ------------ ------------ ------------
(131,433,163) 10,690 (131,234,197) 188,368
------------ ------------ ------------ ------------
Increase
(decrease)
in cash 22,985,860 (608,180) 21,929,902 (526,112)
Cash,
beginning of
the period 8,041,572 1,662,948 9,097,530 1,580,880
------------ ------------ ------------ ------------
Cash, end of
period $ 31,027,432 $ 1,054,768 $ 31,027,432 $ 1,054,768
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplementary
information
regarding
non-cash
transactions
Investing
activities
Common
shares
issued for
mineral
property
acquisi-
tion $ 655,249 $ - $ 655,249 $ -
Common
shares
issued for
acquisition
expense 1,370,400 - 1,370,400 -
------------ ------------ ------------ ------------
$ 2,025,649 $ - $ 2,025,649 $ -
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Other
supplementary
information
Interest
paid $ 122,320 $ 18,918 $ 130,899 $ 58,045
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
LUNDIN MINING CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(in Canadian Dollars)
(unaudited)
Share Contributed
Capital Surplus Deficit
------------------------------------------
As at December 31, 2003 $ 27,016,912 $211,808 ($ 10,203,663)
Cumulative effect of
change in accounting
policy (Note 1 (c)) - - (1,136,598)
--------------------------- ------------
As at December 31,
2003, as adjusted $ 27,016,912 $ 211,808 (11,340,261)
Cumulative effect of
change in accounting
policy (Note 1(a)) 52,713 588,287 (641,000)
Exercise of stock
options and warrants 854,250 - -
Transfer of contributed
surplus on
exercise of stock
options 353,400 (353,400) -
New share issue 153,025,649 - -
Translation adjustment
for the period - - -
Net income for the
period - - 61,921
--------------------------- ------------
As at June 30, 2004 $181,302,924 $ 446,695 ($ 11,919,340)
--------------------------- ------------
--------------------------- ------------
Cumulative
Translation
Adjustments Total
------------------------------------------
As at December 31, 2003 $ 114,931 $ 17,139,988
Cumulative effect of
change in accounting
policy (Note 1 (c)) - (1,136,598)
------------ ------------
As at December 31,
2003, as adjusted $ 114,931 $ 16,003,390
Cumulative effect of
change in accounting
policy (Note 1(a)) - -
Exercise of stock
options and warrants - 854,250
Transfer of contributed
surplus on exercise of
stock options - -
New share issue - 153,025,649
Translation adjustment
for the period (299,157) (299,157)
Net income for the
period - 61,921
------------ ------------
As at June 30, 2004 ($ 184,226) $169,646,053
------------ ------------
------------ ------------
LUNDIN MINING CORPORATION
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004
(in Canadian Dollars)
(Unaudited)
/T/
1. Basis of Presentation
The unaudited interim consolidated financial statements of Lundin
Mining Corporation (the "Company") are prepared in accordance
with Canadian generally accepted accounting principles using the
same accounting policies and methods of application as those
disclosed in Note 2 to the Company's consolidated financial
statements for the year ended December 31, 2003, except as
described below.
These interim consolidated financial statements do not contain
all of the information required by Canadian generally accepted
accounting principles for annual financial statements and
therefore should be read in conjunction with the Company's 2003
annual audited consolidated financial statements.
The acquisition of Zinkgruvan mine was completed on June 2, 2004
and the Company's income statement reflects Zinkgruvan operations
from this date. The Company's third quarter report will be the
first to include the mine's operation for a full quarter.
During the six months ended June 30, 2004, the Company made
changes to its accounting policies.
(a) Stock-based compensation
Effective January 1, 2004, the Company adopted the amended
recommendations of the CICA Handbook Section 3870, "Stock-based
Compensation and Other Stock-based Payments". Under the amended
standards of this Section, the fair value of all stock-based
awards granted are estimated using the Black-Scholes model and
are recorded in operations over their vesting periods. The
compensation costs related to stock options granted after January
1, 2004 is recorded in operations.
Previously, the Company provided note disclosure of pro forma net
earnings and pro forma earnings per share as if the fair value
based method had been used to account for stock options granted
to employees, directors and officers after January 1, 2002. The
amended recommendations have been applied retroactively from
January 1, 2002 without restatement of prior periods.
No stock options were granted in the six months ended June 30,
2004 or 2003.
(b) Asset Retirement Obligations
On January 1, 2004, the Company adopted the recommendations of
the CICA Handbook Section 3110, "Asset Retirement Obligations",
which requires that the fair value of liabilities for asset
retirement obligations be recognized in the period in which they
are incurred. A corresponding increase to the carrying amount of
the related assets is generally recorded and depreciated over the
life of the asset. The amount of the liability is subject to
re-measurement at each reporting period. The effect of the change
has no material impact on the Company's consolidated financial
statements.
(c) Exploration expenses
The Company has retroactively changed its accounting policy for
exploration costs, to be consistent with Zinkgruvan Mining AB
("ZM"). Exploration costs are now expensed instead of being
deferred. The effect of this change was to decrease the net
income for the three and six months ended June 30, 2004 by
$279,310 ($0.02 per share) and $1,217,509 ($0.11 per share),
respectively, and to decrease mineral properties and increase the
deficit as at December 31, 2003 by $1,136,598.
(d) Certain of the comparative figures have been reclassified to
conform with the current year's presentation.
As a result of the acquisition of Zinkgruvan, the Company has
also adopted the following accounting policies during the six
months ended June 30, 2004.
(e) Inventories
Consumables have been valued at weighted average cost less
allowances for obsolescence. Ore and Concentrate stocks have been
valued at the lower of production cost and net realizable value.
(f) Properties, plant and equipment
Tangible fixed assets are recognized as an asset in the balance
sheet when, based on available information, it is probable that
the future economic benefits associated with the asset will flow
to the Company and the cost of the asset can be measured
reliably.
(g) Provision for pensions
ZM has a defined benefit pension plan, which is unfunded. The
provision for future benefits is in accordance with Canadian
GAAP, using management's best estimate of expected salary
escalation and retirement ages.
(h) Depreciation and depletion
Depreciation is provided on a straight line basis over the
estimated economic life of the assets as follow:
/T/
Buildings 20-50 years
Plant and machinery 5-20 years
Equipment 5 years
/T/
Depletion of mining properties is made on a unit-of-production
basis.
(i) Other Provisions
A provision, i.e. assets retirement obligation, is recognized in
the balance sheet when the Company has a legal or constructive
obligation as a result of a past event, and it is probable that
an outflow of resources will be required to settle the obligation
and a reliable estimate of the amount can be made.
2. Restatement
The Company has restated its unaudited interim consolidated
financial statements for the three and six months ended June 30,
2003 to correct for its accounting for income taxes. This
restatement had the effect of reducing income tax expense by
$255,510, increasing net income by the same amount and increasing
basic and diluted earnings per share by $0.03.
The Company has also restated the interim consolidated statement
of cash flows for the three and six months ended June 30, 2003.
This restatement had the effect of increasing cash flow from
operating activities by $86,258, decreasing cash flow from
financing activities by $74,512 and decreasing cash flow from
investing activities by $11,746.
The Company has also restated its unaudited interim consolidated
financial statements for the three and six months ended June 30,
2003 for the retroactive effect of the change in accounting
policy for exploration expenses (Note 1 (c)).
3. Acquisitions
(a) Zinkgruvan Mine
The Company acquired, on June 2, 2004, a 100 percent interest in
North Mining Svenska AB ("NMS") and a 100 percent indirect
interest in ZM from Rio Tinto Plc ("Rio Tinto"). This 100%
interest comprises all of the outstanding shares of NMS and a
loan payable by NMS to Rio Tinto. ZM owns the Zinkgruvan mine
located in Southern Sweden. The purchase price for NMS and ZM was
US$100 million in cash plus payments of SEK 39,699,129 for
working capital and a US$1 million non-refundable deposit. In
addition, the Company will pay Rio Tinto a maximum of US$5
million in price participation payments based on the performance
of zinc, lead and silver prices for a period up to two years. The
acquisition of Zinkgruvan establishes the Company as a mid-tier
zinc producer, creating a new base metal investment vehicle in
Canada and Europe.
The acquisition was financed through a public equity offering in
Canada and Sweden. The Company issued 20 million common shares at
a price of $8 per common share for net proceeds of approximately
$152 million.
The acquisition has been accounted for using the purchase method.
The current estimate of the purchase price and the fair value of
the net assets acquired are as follows:
/T/
Purchase price:
Cash paid $ 144,694,970
Acquisition expenses paid with new shares 1,370,400
Acquisition expenses paid in first quarter 257,247
Acquisition expenses paid in second quarter 1,872,353
-------------
$ 148,194,970
-------------
-------------
Net assets acquired:
Cash $ 14,289,071
Working capital 2,470,706
Mining properties 174,929,143
Plant and equipment 21,546,761
Future income tax assets 3,865,891
Other long-term receivables 709,237
Future income tax liabilities (40,247,827)
Provisions for pensions (15,919,768)
Other provisions (13,448,244)
-------------
$ 148,194,970
-------------
-------------
/T/
The allocation of the purchase price is preliminary in nature and
will be amended for events and information that comes to light
subsequent to the date of these interim financial statements.
(b) Norrbotten Property
By agreement dated March 31, 2004, the Company acquired a
copper-gold property located in the Kiruna mining district in
northern Sweden from Anglo American Exploration BV ("Anglo") and
Rio Tinto Mining and Exploration Limited ("Rio") (collectively,
"Anglo-Rio"). The Company can earn a 100 percent interest in the
property by expending a minimum of US$1 million in the first year
and a total of US$6 million over a period of three years, and
issuing 187,214 shares in the Company with a fair value of
US$500,000 to Anglo-Rio. The shares have been issued. The Company
has granted a four-year buy back right to Anglo-Rio for the
purchase of 60 percent of any proven copper-gold deposit which
meets a threshold equivalent to three million tonnes of contained
copper (for example, 300 million tonnes at 1 percent Cu). The
buy-back right will be at a price equal to three times the
expenditures incurred by the Company. Any deposit developed that
does not meet this threshold will carry a 2.25 percent NSR
royalty to be paid to Anglo-Rio by the Company.
4. Pro-forma result of operations
The following is a pro-forma condensed consolidated financial
information, which assumes that the acquisition of NMS and ZM had
been made on January 1, 2004.
/T/
Three months Six months
ended ended
June 30, June 30,
2004 2004
------------ ------------
Sales $ 19,819,997 $ 41,413,746
Cost of sales (17,982,449) (33,936,269)
------------ ------------
Gross margin 1,837,548 7,477,477
Administrative expenses (1,836,741) (3,393,568)
General exploration and project
investigation (1,248,426) (2,390,837)
Other income 1,744,743 2,094,422
------------ ------------
Income before the undernoted 497,125 3,787,495
Gain on sale of investment in NAN 873,020 873,020
Equity in income of significantly
influenced investee 13,469 1,107,997
------------ ------------
Income before income taxes 1,383,614 5,768,512
Future income tax expense (310,507) (1,233,832)
------------ ------------
Net income for the period $ 1,073,107 $ 4,534,680
------------ ------------
------------ ------------
Basic and diluted income per share $ 0.04 $ 0.15
------------ ------------
------------ ------------
Weighted average number of
shares outstanding 30,368,671 30,368,671
------------ ------------
------------ ------------
Cash Flow from operating activities 11,962,185 23,251,408
Cash Flow from financing activities 329,969 (22,383)
Cash Flow from investing activities 137,201 (2,588,644)
/T/
This pro-forma information is not necessarily indicative of the
results of operations that may be obtained in the future.
General exploration and project investigation expenses for the
second quarter ended June 30, 2004 were $969,116 for ZM and
$279,310 for Norrbotten and for the six months ended June 30,
2004 were $1,173,328 for ZM and $1,217,509 for Norrbotten.
5. Share capital
The authorized and issued share capital is as follows:
(a) Authorized:
Unlimited number of common shares with no par value and one
special share with no par value.
/T/
--------------------------------------------------------------------
Number of
shares Amount
--------------------------------------------------------------------
Common shares issued and outstanding:
Balance, December 31, 2003 9,776,457 $ 27,016,912
Cumulative effect of change in
accounting policy (Note 1(a)) - 52,713
Equity financing, net of
financing expenses (Note 3(a)) 20,000,000 151,000,000
Common shares issued for
acquisition expense 171,300 1,370,400
Shares issued to acquire a mineral
property (Note 3(b)) 187,214 655,249
Stock options exercised 380,000 798,000
Warrants exercised 25,000 56,250
Transfer of contributed surplus on
exercise of stock options - 353,400
--------------------------------------------------------------------
Balance, June 30, 2004 30,539,971 $181,302,924
--------------------------------------------------------------------
--------------------------------------------------------------------
(b) Incentive stock options outstanding and held by directors,
officers and employees of the Company are as follows:
Number of Weighted-Average
Options Shares Exercise Price
------- --------- ----------------
Outstanding at December 31, 2003 585,000 $3.14
Exercised in the first quarter 2004 (65,000) $2.10
Exercised in the second quarter 2004 (315,000) $2.10
--------- ----------------
Outstanding at June 30, 2004 205,000 $5.00
--------- ----------------
--------- ----------------
As at June 30, 2004, the 205,000 options outstanding expire on
December 4, 2005.
(c) Share purchase warrants outstanding as at June 30, 2004:
Number of Exercise
Warrants Price Expiry Date
--------- -------- -----------
360,000 $2.25 December 16, 2004
342,500 $2.25 December 19, 2004
-------
702,500
-------
-------
/T/
6. Other related party transactions
(a) Charges from related parties
During the six months ended June 30, 2004 and 2003, charges from
a company owned by the Chairman of the Company for management and
administrative services were $96,000 and $72,000, respectively,
of which $150,173 was unpaid at June 30, 2004.
(b) The Company earned $40,160 and $43,621 during the six months
ended June 30, 2004 and 2003, respectively, in management fees
for providing management services to NAN for a fee of US$5,000
per month.
7. Segmented Information
The Company is currently engaged in one operating segment, the
acquisition, exploration and development of mineral properties,
primarily in Canada and Sweden. Geographic segmented information
is as follows:
/T/
-----------------------------------------------------------
Six months ended Six months ended
June 30, 2004 June 30, 2003
-----------------------------------------------------------
Revenues (i)
Sweden $ 4,383,999 $ 1,518,596
Canada 69,848 126,526
-----------------------------------------------------------
$ 4,453,847 $ 1,645,122
-----------------------------------------------------------
-----------------------------------------------------------
(i) Consists of sales, interest income, management fee and
other income, and the equity in the income (loss) of the
significantly influenced investee.
/T/
The Company's properties, plant and equipment are located in
Sweden and have a carrying value of $197,117,360 at June 30, 2004
(December 31, 2003 - $178,420). The increase in properties, plant
and equipment is mainly due to the acquisition of ZM.
8. Employee future benefits
The recovery of pension costs for the defined benefit pensions
plan for the three and six months ended June 30, 2004 were
$206,944. The positive outcome is related to a decrease in the
provision for pensions due to changes in estimated mortality
rates.
9. Name Change and Listing on the Toronto Stock Exchange ("TSX")
At the Annual General Meeting held in Vancouver on June 11, 2004,
the shareholders approved to change the name of the Company from
South Atlantic Ventures Ltd. to Lundin Mining Corporation. The
name change is effective August 12, 2004.
The Company's application for listing on the TSX has been
approved by the TSX and is effective August 12, 2004. The
securities of the Company will be delisted from the TSX Venture
Exchange at the close of business on August 11, 2004.
/T/
LUNDIN MINING CORPORATION
SUPPLEMENTARY INFORMATION
TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(in Canadian Dollars)
1. Key Financial Data
--------------------------------------------------------------------
January 1 - June 30
2004 2003
--------------------------------------------------------------------
Shareholders' equity per share(1) $ 5.55 $ 0.77
Basic and diluted income per share $ (0.01) $ 0.04
Dividends NIL NIL
Number of shares outstanding at period end 30,539,971 7,709,957
--------------------------------------------------------------------
(1) Shareholders' equity per share is defined as the Company's
shareholders' equity divided by the number of shares outstanding
at period end.
2. LIST OF DIRECTORS AND OFFICERS AT JUNE 30, 2004:
(a) Directors:
Brian D. Edgar
Edward F. Posey
John H. Craig
Lukas H. Lundin
Pierre Besuchet
William A. Rand
(b) Officers:
Lukas H. Lundin, Chairman
Edward F. Posey, President
Karl-Axel Waplan, Executive Vice President Operations
Wanda Lee, Chief Financial Officer
Jean R. Florendo, Corporate Secretary
3. FINANCIAL INFORMATION
John Craig and Brian D. Edgar, directors of the Company, signed this
report on August 12, 2004.
The report for the third quarter 2004 will be published November 11,
2004.
4. OTHER INFORMATION
Address (Vancouver office):
Lundin Mining Corporation
Suite 2101
885 West Georgia Street
Vancouver B.C. V6C 3E8
Canada
Telephone: +1 604 689 78 42
Fax: +1 604 689 42 50
Address (Sweden office):
Lundin Mining AB
Hovslagargatan 5
SE-111 48 Stockholm
Sweden
Telephone: +46 8 545 074 70
Fax: +46 8 545 074 71
Website: www.lundinmining.com
The corporate number of the Company is 306723-8.
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Lundin Mining Corporation
Sophia Shane
Corporate Development
(604) 689-7842
Website: www.lundinmining.com