News
Lundin Mining Corporation Twelve Months Corporate Update January 1, 2004-December 31, 2004
February 2, 2005
NEWS RELEASE TRANSMITTED BY CCNMatthews
FOR: LUNDIN MINING CORPORATION
TSX SYMBOL: LUN
FEBRUARY 2, 2005 - 09:06 ET
Lundin Mining Corporation Twelve Months Corporate
Update January 1, 2004-December 31, 2004
VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Feb. 2, 2005) - Lundin
Mining Corporation (TSX:LUN) -
- On December 8, 2004, Lundin Mining agreed to sell all of its silver
production from the Zinkgruvan mine in Sweden to Silver Wheaton
Corporation for an upfront payment of USD 50 million plus 30 million
shares and warrants in Silver Wheaton Corporation.
- On December 30, 2004 Lundin Mining acquired all of Boliden's
11,537,000 shares in North Atlantic Natural Resources AB (NAN),
corresponding to 36.9 percent of the shares and votes. Following the
acquisition, Lundin Mining holds 74.0 percent of the shares and votes of
NAN.
- Zinkgruvan mined 217,000 tonnes during the fourth quarter 2004, which
is a normal level going forward.
- Cash at December 31, 2004 was Canadian dollars ("CAD") 105.0 million
plus the Silver Wheaton Corp. shares and warrants valued at December 31,
2004, at CAD 27.6 million.
- Income before currency translation losses related to financing
activities was CAD 5.2 million (CAD -0.7 million) for the three months
ended December 31, 2004.
October - December 2004 (2003)
- Sales were CAD 27.4 million (nil)
- Income before income taxes was CAD 2.5 million (CAD -1.0 million)
- Net income was CAD 2.6 million corresponding to CAD 0.08 per share
(CAD -0.9 million corresponding to CAD -0.11 per share)
- Cash flow from operating activities was CAD 10.6 million (CAD -1.2
million)
January - December 2004 (2003)
- Sales were CAD 51.9 million (nil)
- Income before income taxes was CAD 7.7 million (CAD 0.8 million)
- Net income was CAD 6.2 million corresponding to CAD 0.28 per share
(CAD 0.3 million corresponding to CAD 0.03 per share)
- Cash flow from operating activities was CAD 15.8 million (CAD -1.6
million)
- The Company has no long term debt as at December 31, 2004.
/T/
Selected Financial Information (Unaudited)
Proforma
3 months 12 months 12 months
1 Oct- 1 Oct- 1 Jan- 1 Jan- 1 Jan-
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
THOUSANDS OF CAD 2004(i) 2003 2004(i) 2003 2004(ii)
--------------------------------------------------------------------
Sales 27,434 - 51,927 - 134,708
Cost of Sales,
excluding
depreciation and
amortization -12,979 -25,582 - -74,772
Depreciation of
fixed assets -2,526 - -5,546 - -15,083
Amortization of
mining rights -3,177 - -6,164 - -17,230
Gross margin 8,752 - 14,635 - 27,623
General exploration
and project
investigation -701 -395 -3,592 -1,029 -6,075
Net income/loss for
the period 2,552 -878 6,198 254 7,479
Operating Cash Flow 10,620 -1,185 15,847 -1,646 46,646
Capital expenditures -3,280 - -6,433 -16 -12,616
---------------------------------------------------------------------
(i)The acquisition of Zinkgruvan mine was completed on June 2, 2004
and the Company's income statement includes Zinkgruvan operations
from this date.
(ii) Pro-forma information including the Zinkgruvan mine and the
Storliden mine, assumes that the mines were acquired on January
1, 2004.
Key Financial Data
--------------------------------------------------------------------
1 Jan-31 Dec 1 Jan-31 Dec
2004 2003
--------------------------------------------------------------------
Shareholders' equity/share,
CAD (i) 6.03 1.64
Basic earnings/share, CAD 0.28 0.03
Diluted earnings/ share, CAD 0.28 0.03
Dividends Nil Nil
Basic weighted average number
of shares outstanding 22 160 451 7 718 880
Diluted weighted average number
of shares outstanding 22 432 326 8 033 507
Number of shares outstanding
at period end 33 419 271 9 776 457
--------------------------------------------------------------------
(i) Shareholders' equity/share is defined as shareholders' equity
divided by total number of shares outstanding at period end.
/T/
MANAGEMENT'S COMMENTS
Recent Events
On December 30, 2004 Lundin Mining Corporation ("Lundin Mining" or the
"Company") announced that it had acquired all of Boliden's 11,537,000
shares in North Atlantic Natural Resources AB (NAN), corresponding to
36.9 percent of the shares and votes. Total consideration for all of
Boliden's NAN shares amounted to 2,176,800 newly issued Lundin Mining
shares, corresponding to 6.5 percent of the shares and votes in Lundin
Mining on an undiluted basis. Applying the market price paid on the
Toronto Stock Exchange for Lundin Mining's shares at the time of
acquisition, of CAD 10.40 (Swedish krona ("SEK") 56.32), the total
consideration for all of Boliden's NAN shares corresponds to CAD
22,638,720. Following the acquisition, Lundin Mining holds 23,117,000
shares in NAN, corresponding to 74.0 percent of the shares and votes of
the company.
On December 8, 2004 Lundin Mining announced that it had closed the
agreement with Chap Mercantile Inc. (re-named "Silver Wheaton") whereby
Lundin Mining has agreed to sell all of its silver production from the
Zinkgruvan mine in Sweden to Silver Wheaton in consideration for an
upfront cash payment of US$50 million (CAD 61 million) and 30 million
Silver Wheaton shares and 30 million whole share purchase warrants with
an aggregate fair value of CAD 27.6 million , plus a per ounce payment
at a price equal to the lesser of (a) US$3.90 (subject to a consumer
price adjustment after three years) and (b) the then prevailing market
price per ounce of silver. Each warrant is exercisable at CAD 0.80 into
one Silver Wheaton common share and expires on August 5, 2009.
In mid-December 2004 Lundin Mining re-commenced the drilling on the
Discovery Zone at Rakkurijarvi located within its Norrbotten Copper-Gold
Project area in northern Sweden. The Discovery Zone drill program is
designed to continue defining the extent of copper/gold mineralization
as previously reported April 5 and June 1, 2004. Mineralization is
characterized by massive, sometimes brecciated, magnetite, with
stockworks and veins of chalcopyrite and pyrite. The objective of the
program is to define a commercially viable deposit of copper and gold
amenable to open-pit bulk-mining methods.
On December 3, 2004 the Swedish Depository Receipts (SDRs) of Lundin
Mining were listed on the Stockholmsborsen O-list.
Subsequent events
On January 21, 2005 Lundin Mining made an offer to the remaining
shareholders of NAN to acquire their NAN shares for either cash SEK
10.75 or 1 Lundin Mining share for 5.3 NAN shares. The prospectus is
expected to be distributed to the shareholders of NAN on February 14,
2005 and the offer is expected to close on March 4, 2005.
In January 2005 the Company entered into a hedge program covering
hedging USD 18 million at the level USD 1: SEK 6.95.
/T/
SUMMARY OF OPERATIONS
Q4 12 months
LUNDIN MINING METAL 2004 2004
PRODUCTION (i) Proforma 2003 Proforma 2003
--------------------------------------------------------------------
Zinc (tonnes)(i) 27,474 2,816 92,270 12,176
Copper (tonnes)(i) 2,396 1,100 8,254 4,769
Lead (tonnes) 11,175 - 31,448 -
Silver (oz) 865,676 - 2,038,291 -
--------------------------------------------------------------------
(i) Zinkgruvan and Storliden mine included with 100 % for 2004.
Storliden mine included with 38.35 % for 2003.
Zinkgruvan Mine
Q4 12 months
(100 PERCENT OF PRODUCTION) 2004 2003 2004 2003
--------------------------------------------------------------------
Ore milled (tonnes) 222,567 226,661 732,812 773,688
--------------------------------------------------------------------
Grades
Zinc (%) 9.0 9.6 9.1 9.2
Lead (%) 5.8 5.0 4.9 4.8
Silver (g/t) 107.0 103.7 99.0 103.0
--------------------------------------------------------------------
Recoveries
Zinc (%) 92.4 91.6 92.1 91.0
Lead (%) 87.8 89.0 87.6 87.9
Silver (%) 74.0 74.8 75.4 72.6
--------------------------------------------------------------------
Production
Zinc (tonnes) 18,683 19,082 61,547 64,495
Lead (tonnes) 11,175 10,096 31,448 31,760
Silver (oz) 865,676 570,735 2,038,291 1,840,887
Total Cash Cost
USc/pound zinc (i) 20.9 18.3 23.3 27.2
--------------------------------------------------------------------
(i) Total cash cost is the sum of direct costs, indirect cash costs,
interest charges and by-product credits.
/T/
Production
The acquisition of the Zinkgruvan mine, located in South Central Sweden,
was completed on June 2, 2004 and the Company's income statement
reflects Zinkgruvan mine operations from this date.
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 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 CAD 8 per common share for net proceeds of
approximately CAD 152 million.
In addition to zinc, lead and silver reserves and resources, there is a
copper resource of approximately 3.5 million tonnes (2.67 million tones
Indicated Resource and 0.85 million tones Inferred Resource) at 3.1%
copper adjacent to the existing main zinc ore body from the 650 meter
level to the 950 meter level.
The reason for the production problems in the mine during 2nd and 3rd
quarter 2004 was blockage of ore and waste passes. Those problems have
been dealt with; a new ore pass will be constructed during 2005 and a
new transportation route was developed and is utilized at the moment.
The Company is conducting a review of the mining operation with the
objective to increase revenues from the mine. This includes both the
possibilities to increase production of ore and/or increase mining of
metals by reducing dilution and ore losses. The review also includes
optimization of the life of mine plan and the timing and possibility in
developing the copper mineralization. The initial result of the review
will be presented to the Board of Directors of Lundin Mining during the
first quarter of 2005.
In July 2004 the Company's exploration permits in Zinkgruvan area were
increased by 7,400 hectares and now comprise a total area of 8,500
hectares ("ha"). Furthermore, the Company has identified a number of
highly prospective exploration zones which will be pursued during early
2005.
Zinkgruvan Mining's external environmental consultants presented in
November 2004 a report on the closure costs based on the present EU
regulations. This report indicates a final closure cost at about SEK 15
million. This report has now been presented to the authorities. The
final decision on this matter is expected during 2005 and the reasonable
result would be a substantially lower demand for surety to be provided
by Zinkgruvan Mining than the provisional level of SEK 65 million.
Exploration Zinkgruvan 2004
In mine
During the year two exploration drifts, with a total length of 706 m,
have been driven in the Cecilia and Burkland areas. The drifts will make
it possible to diamond drill and upgrade, enlarge known resources. The
main objective of the diamond drilling for the year has been in fill
drilling of ore limits in stopes. The in fill drilling has followed the
development of stopes in the Burkland area and in Nygruvan below 950 m.
Near mine (Brown field)
The upward continuation of Borta Bakom mineralisation was investigated
by five diamond drill holes in early 2004. The holes where drilled from
surface and four holes intersected mineralisation at depths between 324
m and 577 m. The results have increased the knowledge about the
hangingwall geology of the area and has been used to refine the
structural model. The two deepest intersections have been included in
the inferred Borta Bakom resource i.e ddh 2150 and 2154 see tabel below.
They have somewhat extended the mineralised zone.
/T/
Ddh 2150 2154
------------------------------------------------
East (mine grid) 1585.48 1587
North (mine grid) 6519.66 6520.81
Z (mine grid) -48.88 -48.58
Dip 66.03 degrees 57.0 degrees
Dir 112.20 degrees 96.0 degrees
Total length 659.6 656.5
------------------------------------------------
Intercept depth 577 536
------------------------------------------------
/T/
In ddh 2150 the mineralised intercept is from 583.01 m to 584.85 m with
a true width of 1.82 m @ 14.95 % Zn, 4,65 % Pb, 64 g/t Ag. In ddh 2154
the mineralised intercept is from 589.42 m to 592.12 m with a true width
of 2.59 m @ 11.56 % Zn, 2.22 % Pb, 63 g/t Ag.
A structural model based on surface geology, geophysical data and
underground structural data was tested with one deep drill hole,
ddh2155, in the Dalby area 2.2 km north west of the Knalla Mine shaft.
The model predicted Zinkgruvan Formation rocks under a regional fault
zone and a cap of younger granites. Predicted depth for the ore zone
equivalent was modeled to about 1 200 m hole depth. The model was
confirmed and a tectonised, partly mineralised zone interpreted to
represent Zinkgruvan Ore zone equivalent was intersected at 1330 m hole
depth.
/T/
Ddh 2155
-------------------------------
East (mine grid) 535.91
North (mine grid) 6540.82
Z (mine grid) -58.37
Dip 77.04 degrees
Dir 3.96 degrees
Total length 1452
-------------------------------
/T/
In ddh 2155 the mineralised intercept is from 1317.55 m to 1317.91 m
with a true width of 0.33 m @ 2.98 %, 2.16 % Pb and 45 g/t Ag. The hole
has gained new structural and stratigraphical data that will be
incorporated in the geological model of the area. The hole is currently
being twinned by wedging and additional drilling is being planned in the
area.
Green field
Five new exploration licenses was granted south - south west of
Zinkgruvan and one extension of a license was granted north west of
Zinkgruvan. The licenses covers a total area of 8250 ha.
Two areas within the Lofallet exploration license have been surveyed by
ground magnetics and IP during late 2004. Interpretation of the ground
survey indicate anomalies some of which are interpreted as pyrrhotite
horisons known to exist in the area, whereas others have unknown origin.
Diamond drilling to test some of these targets is currently being
planned.
Chief Geologist, ZMAB, Lars Malmstrom is a qualified person, member of
The Australasian Institute of Mining and Metallurgy, Australia.
Outlook
The production for 2005 is planned to increase above 800,000 tonnes of
ore. The zinc metal production is expected to be around 65,000 metric
tonnes ("mt"), the lead metal production 32,000 mt and the silver
production 2,100,000 Oz.
Lundin Mining Exploration
The Norrbotten Copper - Gold Project
Lundin Mining holds 98,791 ha, called the Norrbotten gold/copper
project, of highly prospective ground in the Norrbotten mining district
of Norrbotten County, northern Sweden. The project is located along the
"Kiruna Break", an East-West trending fault system - an important
structural feature in the area offset by numerous copper/gold and iron
ore deposits
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.
During the first half of the year the Company focused exploration
drilling on the Rakkurijarvi Discovery Zone. A total of 26 drill holes
were completed totaling 3,920 meters which expanded the known
Rakkurijarvi copper/gold zone. Mineralized intercepts include 40.5
meters grading 1.4% copper and 0.3 gram gold per ton ("g/t") and 19.8
meters grading 1.6% copper and 0.4 g/t gold. A second drill program to
further delineate the deposit was commenced in the fourth quarter.
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.
On November 4, 2004, the Company announced a drilling program has been
completed on the Ailatis copper-gold target, located within the area of
the Anglo-Rio agreement.
The Ailatis target area is located 8 kilometers west of the Rakkurijarvi
target. Drilling commenced in early September 2004 and was completed in
late October 2004 of this year. Twenty-three drill holes totaling 2,559
meters were drilled to test a number of chargeability anomalies within
an area of four square kilometers where basal till samples of bedrock
indicate anomalous values in gold and copper. Underlying bedrock
consists of highly altered mafic volcanics, gabbro and conglomerate.
Numerous drill holes have been completed previously in the area by the
Swedish Geological Survey in 1990, the best of which intersected 17.3
meters grading 0.88% copper. These are historical drill results reported
before the implementation of National Instrument 43-101.
Encouraging copper mineralization was encountered in several scout drill
holes designed to test anomalous trends defined by IP chargeability. In
the eastern part of the area a single drill hole, AIL04023, intercepted
26 meters averaging 0.27% copper along a chargeability anomaly with an
un-tested strike length of 1.5 kilometers. Drill hole AIL04005
intercepted 21.1 meters averaging 0.18% copper and drill hole AIL04009
intercepted 37.10 meters averaging 0.15% copper along a chargeability
anomaly which is open to the west for 1 kilometer. Drill hole AIL04022
intercepted 10.85 meters averaging 0.29% copper and 11.5 meters
averaging 0.22% copper along a chargeability anomaly with 2 kilometers
of previously untested strike length.
All drill core was split, sampled and shipped to the preparation lab of
North Atlantic Natural Resources AB in Uppsala, Sweden. Samples were
subsequently shipped to ALS Chemex Labs in Vancouver, Canada for gold
and multi-element analysis. The Qualified Person in charge of the
project is Robert Lilljequist, professional consulting geologist.
Outlook
The regional geological setting is consistent with the IOCG model
including the giant Olympic Dam deposit, and the Rakkurijarvi Discovery
Zone is a new IOCG discovery which warrants continued drilling to define
resources.
The drilling on the Discovery Zone has produced positive results. The
best result has been 1.07% Cu and 0.27 g/t Au over 48.45 m in hole
RAK04023 (including 12.80 m with 2.11% Cu and 0.52 g/t Au). The
mineralized zones are, however, not yet sufficiently coherent to form a
base for mineral resource estimation.
The Anglo/Rio Tinto Pahtohavare oxide target, adjacent to the
past-producing mine, appears to have potential for the discovery of
further copper oxide mineralization;
At Ailatis target, eight IP anomalies were tested and the best
intersections were 26m with 0.27% Cu (Dh AIL04023), 37,1 m with 0.15% Cu
(Dh AIL04009) and 26,3 m with 0.18% Cu (Dh AIL04005). The continuation
of the IP anomalies tested by AIL04023 and AIL04005 towards the east
remains to be tested by drilling.
The excellent land position in a highly prospective area warrants
significant additional exploration.
/T/
NAN
Production Storliden
Q4 12 months
(100 PERCENT OF PRODUCTION) 2004 2003 2004 2003
-------------------------------------------------------------------
Ore milled (tonnnes) 68,670 87,622 286,749 333,363
-------------------------------------------------------------------
Grades
Copper (%) 3.53 3.57 3.07 4.1
Zinc (%) 10.12 9.15 8.41 11.0
-------------------------------------------------------------------
Recoveries
Copper (%) 91.8 91.6 89.7 91.0
Zinc (%) 92.1 91.5 91.0 90.6
-------------------------------------------------------------------
Production
Copper (tonnes) 2,396 2,869 8,254 12,435
Zinc (tonnes) 6,412 7,342 22,348 33,158
Total Cash Cost Usc/pound
zinc (i) 16.7 23.7 11.3 20.0
-------------------------------------------------------------------
(i) Total cash cost is the sum of direct costs, indirect cash costs,
interest charges and by-product credits.
/T/
NAN Exploration
In addition to the Storliden mine, NAN holds exploration permits
covering several areas in and around the Skellefte district. During the
fall of 2004, NAN initiated an exploration program focusing on several
targets:
Storliden Mine Area
In the Storliden Mine area NAN has identified several nearby target
areas which are considered favorable for hosting another zinc-copper
massive sulfide deposit.
A drill program was initiated to test targets located to the northeast
and southeast of the Storliden orebody during the fourth quarter. As of
the end of the period 9 drill holes have been completed for a total of
1,723 meters of drilling.
Zinc mineralization previously encountered about 400 meters northeast of
Storliden was tested by one drill hole (STOB04-235) which intersected
2.6 meters averaging 1% zinc at a depth of 46 meters. The thickness and
grade is not considered economic and the remaining potential of this
"northeast zone" appears remote.
Three drill holes were completed in an area approximately 500 meters
south of the Storliden deposit, targeted to test the possible extension
of mineralization previously encountered in drill hole STOB02-232 in the
year 2002. No mineralization was observed in any of these drill holes.
Five drill holes were completed on separate geophysical anomalies
located from one to two kilometres south and east of the Storliden
deposit. No noticeable mineralization was encountered in any of these
holes and the source of the geophysical anomaly is attributed to iron
sulfides (pyrrhotite) disseminated in volcanic sediments and tuffs.
Outlook
A number of targets remain to be tested and the drill program is
expected to continue into the second quarter of this year.
The Lappvattnet Nickel deposit
This deposit is composed of nickel sulfide mineralization (pentlandite)
hosted in ultramafic volcanic rocks and sheared gneiss. It has been
traced by previous drilling for a strike length of 600 meters to a depth
of 100 meters. Drill results reported in November of this year (see news
release of November 10, 2004) indicate mineralization extends beyond 100
meters in depth and plunges to the east where it appears to be open for
further expansion.
Outlook
The results of this drilling are considered sufficiently encouraging to
justify continued drilling down-dip and along strike of the
mineralization to the northeast. Additional new drill sites are
currently being designed by NANs' exploration staff. This continuation
of the drill program is expected to commence during the second quarter
of 2005.
The Copperstone Project
This project consists of three separate copper prospects, A, B and C,
where historical reports indicate copper mineralization grading from 1%
to 2% copper exists in veins and disseminations in volcanic rocks over
an area of approximately 3 square kilometers. Geophysical surveying by
NAN has identified a number of drill targets indicative of copper
sulphide mineralization.
A drill program consisting of ten scout drill holes was completed during
the fourth quarter consisting of a total of 1,296 meters of drilling.
These holes were designed to test the nature and extent of the source of
the geophysical anomalies near existing mineralization and determine if
additional drilling is justified. Visual inspection of the drill results
indicates copper mineralization exists well beyond areas previously
identified from past drill results (1971-1978) as indicated by the NAN
geophysical survey results and, extensive further work is justified.
In the northern portion of the Copperstone project (Area "C") area five
drill holes were completed on five separate geophysical anomalies, four
of which encountered visible, weak to moderate copper mineralization.
In the southern portion of the Copperstone project area (Area "A") five
drill holes were completed on four separate geophysical anomalies, all
of which intersected indications of copper mineralization as well as
lead and zinc.
Outlook
The results of the drill program will be reported in detail when all the
drill core assays are available. Meanwhile, more detailed geophysical
surveying is planned along with a detailed re-examination of historical
drilling. This work is expected to lead to a more comprehensive drill
program which is planned to commence within the next month.
The professional geologist in charge of exploration for NAN in the
Skellefte district is Mr. Alain Chevalier who is a Qualified Person
under the auspices of the Swedish Mining Association.
Metal prices and treatment charges
Compared to the fourth quarter last year, lead and zinc prices have been
considerably higher. The zinc price is still lagging behind the other
base metals, but the reduction in inventory levels on LME seen during
the end of 2004 and the beginning of 2005 have caused the price of zinc
to rise to a level not seen during the last seven years.
/T/
METAL PRICES (LME/LBMA) Q4 Change 12 months Change
(average) 2004 2003 % 2004 2003 %
--------------------------------------------------------------------
Zinc, USD/tonne 1,025 969 5.8 1,039 829 25.3
Lead, USD/tonne 958 639 49.9 882 512 72.3
Silver, USD/oz 7.23 5.27 37.2 6.67 4.88 36.7
Copper, USD/tonne 3,076 2,227 38.1 2,935 1,799 63.1
--------------------------------------------------------------------
/T/
The treatment charge ("TC), and refining charge ("RC"), for copper
reached their lowest levels in 15 years during 2004. At the same time
the TC for zinc reached the lowest level for 10 years and the TC for
lead was also at a very low level.
Outlook
The outlook for metal prices in 2005 is in general still positive. The
growth in demand, especially from Asia, is expected to continue during
most of 2005 and this is not expected to be met by a similar increase in
production. We expect that the zinc price will remain strong during the
whole of 2005. In respect of the price of copper and lead we expect them
to remain at high levels. It should be noted that the price of silver
for all silver production from Zinkgruvan mine going forward has been
fixed by the deal with Silver Wheaton. See above.
The production of copper concentrate has increased during 2004 and will
most probably also increase during 2005 and this has already resulted in
higher TC and RC. In respect of lead a small increase in the TC can be
expected.
/T/
Currencies
EXCHANGE RATES Q4 Change 12 months Change
(average) 2004 2003 % 2004 2003 %
--------------------------------------------------------------------
SEK/USD 0.14 0.13 +7.7 0.14 0.12 +16.7
SEK/CAD 0.18 0,17 +5.9 0.18 0.17 +5.9
USD/CAD 1.22 1.31 -6.9 1.30 1.42 -8.4
--------------------------------------------------------------------
In January 2005 the Company entered into a hedge program covering
hedging USD 18 million at the level USD 1: SEK 6.95.
Lundin Mining Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
3 months 12 months
1 Oct- 1 Oct- 1 Jan- 1 Jan-
Thousands of Canadian 31 Dec 31 Dec 31 Dec 31 Dec
dollars 2004 2003 2004 2003
(i) (i)
--------------------------------------------------------------------
Sales (Note 1(j)) 27,434 - 51,927 -
Cost of sales -18,682 - -37,292 -
---------------------------------------------
Gross margin 8,752 - 14,635 -
---------------------------------------------
Expenses
General exploration
and project
investigation -701 -395 -3,592 -1,029
Administration -1,848 -175 -3,660 -458
Stock based
compensation -250 -100 -588 -100
Wages and benefits -1,432 -52 -2,698 -116
---------------------------------------------
-4,230 -722 -10,538 -1,703
---------------------------------------------
Other income/expenses
Management fees 18 20 78 84
Interest income 209 29 536 259
Other income 33 - 189 -
Other expenses -6 -399 -176 -399
Interest and bank
charges - -66 -109 -266
Foreign exchange
gains/losses -2,627 -177 525 -326
---------------------------------------------
-2,373 -593 1,043 -648
---------------------------------------------
Income/loss before
the undernoted 2,149 -1,315 5,140 -2,351
Unusual items, net - -320 - 244
Gain on sale of
investment in NAN - - 873 -
Equity in income of
NAN 334 606 1,724 2,907
---------------------------------------------
Income/loss before
income taxes 2,483 -1,029 7,737 800
Income taxes 69 151 -1,539 -546
---------------------------------------------
Net income/loss for
the period 2,552 -878 6,198 254
---------------------------------------------
---------------------------------------------
Basic earnings/loss
per share 0.08 -0.11 0.28 0.03
---------------------------------------------
---------------------------------------------
Diluted
earnings/loss per
share 0.08 -0.11 0.28 0.03
---------------------------------------------
---------------------------------------------
Basic weighted
average number of
shares outstanding 30,583,572 7,745,647 22,160,451 7,718,880
---------------------------------------------
---------------------------------------------
Diluted weighted
average number of
shares outstanding 30,855,447 7,745,647 22,432,326 8,033,507
---------------------------------------------
---------------------------------------------
(i) Restated, see note 1
Lundin Mining Corporation
CONSOLIDATED BALANCE SHEETS (Unaudited)
Thousands of Canadian dollars 31 31
December December
2004 2003
(i)
--------------------------------------------------------------------
ASSETS
Current assets
Cash 104,977 9,097
Accounts receivable 16,650 124
Loan receivable from NAN - 925
Investments (Note 3) 27,584 -
Inventories 5,577 -
Prepaid expenses 4,719 12
--------- ---------
159,507 10,159
Long term receivables 706 -
Investment in NAN (Note 2(c)) - 8,493
Properties, plant and equipment
Mining properties 205,550 257
Machinery and other technical equipment 21,145 -
Future income tax assets 6,629 -
Deferred financing costs (Note 1(j)) 2,697 -
--------- ---------
396,234 18,908
--------- ---------
--------- ---------
LIABILITIES
Current liabilities
Accounts payable 11,488 776
Accrued expenses 7,907 -
Due to related parties (Note 5) 19 1,027
Income taxes payable 3,658 -
Other current liabilities 1,501 -
Current portion of deferred revenue
(Note 1(j)) 3,503 -
--------- ---------
28,076 1,803
Deferred revenue (Note 1(j)) 84,077 -
Provisions for pensions 16,148 -
Other provisions 13,488 -
Future income tax liabilities 45,995 1,024
--------- ---------
187,784 2,827
--------- ---------
NON-CONTROLLING INTEREST 6,991 -
SHAREHOLDERS- EQUITY
Share capital (Note 4) 206,220 27,017
Contributed surplus 1,035 212
Deficit (Notes 1(a) and (c)) -5,705 -11,262
Cumulative translation adjustments -91 115
--------- ---------
201,459 16,081
--------- ---------
396,234 18,908
--------- ---------
--------- ---------
(i) Restated, see note 1.
Lundin Mining Corporation
CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)
3 months 12 months
1 Oct- 1 Oct- 1 Jan- 1 Jan-
Thousands of Canadian 31 Dec 31 Dec 31 Dec 31 Dec
dollars 2004 2003 2004 2003
(i) (i)
--------------------------------------------------------------------
Cash flow from
operating activities
Net income/loss for
the period 2,552 -878 6,198 254
Add/deduct non-cash
items
Amortization of
deferred revenue
(Note 1(j)) -558 - -558 -
Accrued interest - 142 - 122
Depreciation and
amortization 5,703 - 11,711 -
Stock based
compensation 250 100 588 100
Gain on sale of
investment in NAN - - -873 -
Equity in income of
NAN -334 -606 -1,724 -2,907
Future income taxes -69 -151 1,539 546
Provision for
pensions and other -365 - -306 -
Unrealized foreign
currency
gains/losses 2,830 108 -1,047 163
Net changes in
non-cash working
capital items
Accounts receivable
and other current
assets -1,416 -33 1,706 -79
Accounts payable and
other current
liabilities 2,027 133 -1,387 155
---------------------------------------------
10,620 -1,185 15,847 -1,646
---------------------------------------------
Cash flow from
financing activities
Common shares issued 1,433 9,842 154,133 9,842
Deferred revenue
(Note 1(j)) 60,589 - 60,589 -
Financing costs
(Note 1(j)) -2,809 - -2,809 -
Due to related
parties -70 49 -1,008 -665
Loans payable - -2,384 - -2,344
Capital lease
obligations -52 - - -
---------------------------------------------
59,091 7,507 210,905 6,833
---------------------------------------------
Cash flow for
investing activities
Acquisition of
subsidiaries (Note
2(a-c)) 6,100 - -126,589 -
Mining properties
and related
expenditures -3,280 - -6,433 -16
Loan receivable - -44 - 680
Repayment of loan
receivable from NAN - 429 925 429
Proceeds from sale
of mineral property - 870 - 1,237
Proceeds from sale
of shares in NAN - - 1,224 -
---------------------------------------------
2,820 1,255 -130,873 2,330
---------------------------------------------
Increase in cash 72,531 7,576 95,879 7,517
Cash, beginning of
period 32,446 1,522 9,098 1,581
---------------------------------------------
Cash, end of period 104,977 9,098 104,977 9,098
---------------------------------------------
---------------------------------------------
Supplementary
information
regarding non-cash
transactions
Financing and
investing activities
Investments in
Silver Wheaton
received as
proceeds from
deferred revenue 27,584 - 27,584 -
Common shares issued
for acquisition of
NAN 22,639 - 22 639 -
Common shares issued
for mineral property
acquisition - - 655 -
Common shares issued
for acquisition
expenses - - 1,370 -
---------------------------------------------
50,223 - 52,248 -
---------------------------------------------
---------------------------------------------
Other supplementary
information
Interest paid -63 18 109 76
---------------------------------------------
---------------------------------------------
(i) Restated, see note 1.
Lundin Mining Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
Contrib- Cumulative
Thousands of Share uted translation
Canadian dollars capital surplus Deficit adjustments Total
-------------------------------------------------
As at December 31,
2003 27,017 212 -10,204 115 17,140
Cumulative effect
of changes in
accounting policy
(Note 1(c)) - - -1,058 - -1,058
-------------------------------------------------
As at December 31,
2003, adjusted 27,017 212 -11,262 115 16,082
Cumulative effect
of changes in
accounting policy
(Note 1(a)) 53 588 -641 - -
Exercise of stock
options and
warrants 2,434 - - - 2,434
Transfer of
contribute surplus
on
exercise of stock
options 353 -353 - - -
Stock-based
compensation - 588 - - 588
New share issues
(Note 2) 176,363 - - - 176,363
Translation
adjustments for
the period - - - -206 -206
Net result for the
period - - 6,198 - 6,198
-------------------------------------------------
As at December 31,
2004 206,220 1,035 -5,705 -91 201,459
-------------------------------------------------
-------------------------------------------------
Lundin Mining Corporation
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004 (Unaudited)
/T/
1. Basis of Presentation
The unaudited interim consolidated financial statements of Lundin Mining
Corporation (the "Company" or "Lundin Mining") 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 statement of operations reflects Zinkgruvan operations from
this date.
During the twelve months ended December 31, 2004, the Company made
changes to its accounting policies as follows.
(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 are 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.
During the three months ended December 31, 2004, compensation expenses
of CAD 250,000 were recorded in operations. During the twelve months
ended December 31, 2004, compensation expenses of CAD 588,000 were
recorded in operations.
(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 had 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 twelve
months ended December 31, 2003 by $ 291,000 ($0.04 per share) and $
922,000 ($0.12 per share), respectively and to decrease mineral
properties and increase the deficit as at December 31, 2003 by
$1,058,000.
(d) Certain of the comparative figures have been reclassified to conform
to current year's presentation.
As a result of the acquisition of Zinkgruvan (Note 2(a)) and NAN (Note
2(c)), and the transaction with Silver Wheaton (Note 3) the Company has
also adopted the following accounting policies during the twelve months
ended December 31, 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) Investments
The Company holds shares and warrants in Silver Wheaton (Note 3). The
investments have been valued at the lower of cost and market value.
(g) 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.
(h) 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.
(i) 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.
(j) Deferred revenue and Financing costs
The Company has received an upfront payment in relation to the Silver
Wheaton agreement (Note 3). Deferred revenue will be recognized as sales
on delivery of the silver. Arrangement fees for the Silver Wheaton
agreement shown as deferred financing costs, will be amortized to match
deferred revenue recognition.
(k) 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. Acquistions
(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
Zinkgruvan Mining AB ("ZM") from Rio Tinto Plc ("Rio Tinto"). This 100%
interest comprised 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 Swedish krona 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 performance of lead and silver prices in the
fourth quarter 2004 resulted in an additional payment of US$ 0.1 million
(US$ 0.2 million for the period 2 June-31 December, 2004). This amount
is also included in the purchase price described below.
The acquisition was financed through a public equity offering in Canada
and Sweden. The Company issued 20 million common shares at a price of
CAD 8 per common share for net proceeds of approximately CAD 152 million.
The acquisition has been accounted for using the purchase method. The
current estimate of fair values of the net assets acquired was as
follows:
/T/
Purchase price:
Cash paid $144,848,291
Acquisition expenses paid by issue of shares 1,370,400
Acquisition expenses paid in cash 2,223,600
------------
$148,442,291
------------
------------
Net assets acquired:
Cash $ 14,289,071
Other working capital, net 2,470,706
Mining properties 175,236,088
Property, plant and equipment 21,546,761
Future income tax assets 3,865,891
Other long-term receivables 709,237
Future income tax liabilities -40,307,452
Provisions for pensions -15,919,768
Other provisions -13,448,244
------------
$148,442,291
------------
------------
/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 known as the Norrbotten Project 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.
(c) North Atlantic Natural Resources AB
On December 30, 2004 the Company acquired all of Boliden's 11,537,000
shares in NAN, corresponding to 36.9 percent of the shares and votes.
The consideration for all of Boliden's NAN shares amounts to 2,176,800
newly issued Lundin Mining shares, corresponding to 6.5 percent of the
shares and votes in Lundin Mining on an undiluted basis. Applying the
market price paid on Toronto Stock Exchange for Lundin Mining's shares
of CAD 10.40 (SEK 56.32), the total consideration for all of Boliden's
NAN shares corresponds to CAD 22,638,720.
Prior to the acquisition of Boliden's NAN shares, Lundin Mining holds
11,580,000 shares in NAN, corresponding to 37.1 percent of the shares
and votes. Following the acquisition, Lundin Mining holds 23,117,000
shares in NAN, corresponding to 74.0 percent of the shares and votes. A
public offer in line with the Swedish Industry and Commerce Stock
Exchange Committee's (Naringslivets Borskommitte (NBK)) mandatory bid
rules is intended to be made to all remaining NAN shareholders in
February 2005. The additional acquisition of 36.9 percent from Boliden
AB has been accounted for using the purchase method. The current
estimate of the fair values of the net assets acquired are as follows:
/T/
Purchase price:
Consideration paid with new shares $ 22,638,720
------------
$ 22,638,720
------------
------------
Net assets acquired:
Cash $ 6,195,057
Other working capital, net 2,551,263
Mining properties 63,958,412
Property, plant and equipment 236,326
Future income tax liabilities -11,232,135
Other provisions -357,379
------------
$ 61,351,544
Less:
Non-controlling interest $-15,951,401
Carrying value of prior investment in NAN -22,761,423
$ 22,638,720
------------
/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.
3. Silver Wheaton Corporation
On December 8, 2004 the Company entered into an agreement with Silver
Wheaton Corporation to sell all of its silver production from the
Zinkgruvan mine to Silver Wheaton in consideration for an upfront cash
payment of USD 50 million (CAD 60,589,000) and 30 million Silver Wheaton
shares and 30 million whole share purchase warrants with an aggregate
fair value of CAD 27,584,000, plus a per ounce payment at a price equal
to the lesser of (a) USD 3.90 (subject to a consumer price adjustment
after three years) and (b) the then prevailing market price per ounce of
silver. Each warrant is exercisable at CAD 0.80 into one Silver Wheaton
common share and expires on August 5, 2009.
Lundin Mining has agreed to deliver a minimum of 40 million ounces of
silver to Silver Wheaton over a 25-year period. The Zinkgruvan mine is
expected to produce approximately 2 million ounces of silver per year.
If at the end of the 25-year period, Lundin Mining has not delivered the
agreed 40 million ounces, then it will pay to Silver Wheaton USD 1.00
per ounce of silver not delivered.
At December 31, 2004 the quoted market value of the investments in
Silver Wheaton aggregated to CAD 32.7 million.
4. 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.
Shares issued and outstanding
/T/
Number of Amount
shares (CAD'000)
--------------------------------------------------------------------
Balance, December 31, 2003 9,776,457 27,017
Cumulative effect of change in
accounting policy (Note 1(a)) - 53
Equity financing, net of
financing expenses (Note 2(a)) 20,000,000 151,698
Shares issued for payment of
acquisition expenses 171,300 1,370
Shares issued to acquire a
mineral property (Note 2(b)) 187,214 655
Shares issued to acquire shares
in NAN (Note 2(c)) 2,176,800 22,639
Stock options exercised 380,000 798
Warrants exercised 727,500 1,637
Transfer of contributed surplus
on exercise of stock options - 353
--------------------------------------------------------------------
Balance, December 31, 2004 33,419,271 206,220
--------------------------------------------------------------------
--------------------------------------------------------------------
/T/
(b) Incentive stock options outstanding and held by directors, officers
and employees of the Company are as follows:
/T/
Weighted-
Number of Average
Options Shares Exercise Price
--------------------------------------------------------------------
Outstanding at December 31, 2003 585,000 $ 3.14
Granted in 2004 167,500 $ 8.05
Exercised in 2004 (380,000) $ 2.10
---------- ----------
Outstanding at December 31, 2004 372,500 $ 6.41
---------- ----------
---------- ----------
/T/
As at December 31, 2004, 205,000 options outstanding expire on December
4, 2005, 100,000 expire on July 8, 2006 and 67,500 expire on October 6,
2006.
(c) There were no share purchase warrants outstanding at December 31,
2004.
5. Other related party transactions
During the twelve months ended December 31, 2004, charges from a company
owned by the Chairman of the Company for management and administrative
services were CAD 192,000 (2003 - CAD 153,000). At December 31, 2004,
CAD 16,000 (2003 - CAD 13,000) was due to this company and is included
in amounts due to related parties.
The Company earned CAD 78,000 and CAD 84,000 during the twelve months
ended December 31, 2004 and 2003, respectively, in management fees for
providing management services to NAN.
6. Segmented Information
The Company is currently engaged in one operating segment, the
acquisition, exploration and development of mineral properties,
primarily in Sweden. Geographic segmented information is as follows:
/T/
In thousands of 1 Jan-31 Dec 1 Jan-31 Dec
Canadian dollars 2004 2003
--------------------------------------------------------
Revenues (i)
Sweden 54,376 3,166
Canada 78 84
--------------------------------------------------------
54,454 3,250
--------------------------------------------------------
--------------------------------------------------------
/T/
(i) Consists of sales, interest income, management fee and other
income, and the equity in the income of NAN.
The Company's properties, plant and equipment are located in Sweden and
have a carrying value of $226,695,000 at December 31, 2004 ($257,000 at
December 31, 2003). The increase in properties, plant and equipment is
mainly due to the acquisition of ZM and NAN.
/T/
AGM
Lundin Mining's Annual General Meeting is scheduled for May, 2005.
Dividend
At the AGM, Lundin Mining's Board of Directors intends to recommend
that no dividend be paid for 2004.
Annual Report
Lundin Mining's annual report will be distributed to shareholders by
mail in May, 2005, and will be available at the Lundin Mining office
in Stockholm from May, 2005.
Next report
The three months interim report for 2005 will be published on May 12,
2005.
SUPPLEMENTARY INFORMATION
1. LIST OF DIRECTORS AND OFFICERS AT DECEMBER 31, 2004:
(a) Directors:
Adolf H. Lundin
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
2. FINANCIAL INFORMATION
The report for the first quarter 2005 will be published on
May 12, 2005.
3. 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 Head of Corporate Communications (604) 689-7842 (604) 689-4250 (FAX) info@lundinmining.com www.lundinmining.com |