Lundin Mining’s Cash Flow Wavers Through Q1 2019

In a Q1 2019 results update, Lundin Mining’s (TSX:LUN,OTC Pink:LUNMF) checkbook appeared a bit lighter from 2018’s first quarter, with cash flow from operations seeing a C$110.8 million decrease to C$62.1 million.

Cash and cash equivalents also dropped C$80.7 million over the past quarter, hitting C$734.7 million.

Additionally, net earnings came in at C$60.9 million, representing a C$26.2 million drop from Q1 2018. To explain the decrease, the company cited lower gross profit, higher income taxes and lower income from equity investment, including a loss of C$11.9 million on the company’s equity investment in Freeport Cobalt due to an inventory writedown.

Net cash was down C$145.5 million from December 31, 2018, due to lower operating cash flows, increased capital investments and an increase in lease liabilities.

However, Lundin’s investments in mineral properties, plants and equipment grew to C$182 million versus Q1 2018’s C$150.7 million.

Copper production for the quarter came in at 46,122 tonnes, down from Q1 2018’s 47,556 tonnes; meanwhile, zinc reached 40,446 tonnes, up from Q1 2018’s 36,880 tonnes. Nickel production saw a drop from Q1 2018’s 5,141 tonnes when Q1 2019 produced 4,213 tonnes.

The company attributes the drop in nickel and copper production to planned lower ore grades and severe winter weather conditions.

Commenting on the company’s results was financial services firm Raymond James, which has an optimistic outlook on Lundin’s predicted performance through the rest of 2019.

“After Q1, [Lundin] is tracking behind its 2019 operating guidance for copper production,” a report from the firm states. “However, with copper grades expected to increase in 2H19 at Candelaria and throughput expected to be higher at Neves-Corvo, we expect [Lundin] will be able to meet copper production guidance for the year. Zinc and nickel production are tracking well to 2019 guidance.”

Lundin President and CEO Marie Inkster also commented on the company’s results in a statement, highlighting operational plans and updates expected in the coming months.

“We anticipate closing of the recently announced Chapada acquisition early in the third quarter. Ramp-up of the Candelaria underground mines and more ore production from the open pit are expected to increase copper ore grades in the second half of this year,” Inkster said.

“Eagle East remains on schedule for first ore to the mill in the fourth quarter, and the Neves-Corvo zinc expansion project continues to make meaningful development progress.”

While the company had a fairly quiet quarter on the news front, Lundin shook things up earlier this month with an announcement that it will be buying the Chapada copper-gold mine in Brazil from Yamana Gold (TSX:YRI,NYSE:AUY) for a cumulative price tag of over US$1 billion.

Acquisition of the asset will boost the company’s copper production by over 25 percent, and will also add approximately 100,000 ounces of gold to Lundin’s yearly production lineup.

As of 11:20 a.m. EDT on Thursday (April 25), Lundin shares were down 1.77 percent on the TSX, reaching C$7.21.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.