Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Lundin Mining Corporation reported on Friday net income of $57.7 million for the second quarter of 2011, up 36% from the same quarter last year.
The numbers were below management expectations as a result of lower than expected metal production and higher unit costs at its flagship Neves-Corvo copper mine in Portugal north of the city of Faro (pictured). Lundin said the Tenke Fungurume mine in the Democratic Republic of Congo, its first venture beyond Europe, should start contributing to cash flows in the third quarter.
“The monthly mine plans going forward particularly at Neves-Corvo, provide for a significantly improved second half and towards the end of the third quarter we should also expect our first cash returns from Tenke, contributing significantly to our operating cash flows,” said Paul Conibear, President and CEO in a statement released to the press.
According to Lundin at Neves-Corvo, lower grades in the quarter resulted in less metal produced and consequently higher cash costs on a per pound basis. The company’s mid-year plant maintenance shut-down was brought forward to the end of June to coincide with other tie-in activities necessary for the start of commissioning of the new zinc circuit and this also affected Q2 production.
The new zinc plant started up on time and on budget; however, given the strong copper prices as compared to zinc, Lundin will utilize the new zinc circuit to process copper ore as soon as commissioning is complete in order to maximize copper production and revenues for the balance of the year. The company mined and milled record tonnes during this quarter which will assist it in production recovery for the balance of the year.
At Zinkgruvan the company treated a high volume of low-grade overflow material that had accumulated over the past year and while this detracted somewhat from planned production Lundin did build up ore stockpiles on surface to record levels allowing it to maximize mill throughput through the summer holiday season. Significant amounts of waste stored underground were removed, providing additional in-mine flexibility for mining and ore handling activities going forward.
“As a result of the added haulage capacity from the recently completed daylight ramp, for the first time in many years, the mine is able to produce at a rate greater than the mill. We are now working on de-bottlenecking the front end of the plant to pursue great capacity from the entire operation,” said Conibear.
For detailed results click here.
