Lundin Mining Q1 profit up 150%, misses expectations

Vancouver – Admitting earnings were lower than expected, Lundin Mining (LUN-T, LMC-X) still turned in a net profit of US$53.7 million (19 per share) in this years Q1 to more than double the US$21.5 million (18 per share) lodged in the first quarter of 2006.

Company president and CEO, Karl-Axel Waplan, cited the earnings shortfall to “fewer shipments and strong production volumes in Neves-Corvo and Zinkgruvan which led to a temporary build-up in inventories at these two operations.”

Sales for Q1 came in at US$193.9 million, versus US$91.8 million in Q1-2006, on increased revenues buoyed by its recently acquired Neves-Corvo mine in Portugal.

The company closed its acquisition of EuroZinc Mining in October 2006 that adds significant zinc, copper and silver production from Neves-Corvo. The mine contributed 6,302 tonnes (13.9 million lbs.) of zinc, 23,405 tonnes (51.6 million lbs.) of copper and 222,792 oz. silver to Lundin Minings latest Q1 and was its most profitable operation.

The Zinkgruvan mine in Sweden operated comparably in both Q1s, turning out 17,162 tonnes (37.8 million lbs.) zinc, 8,643 tonnes (19 million lbs.) lead and 439,014 oz. silver in the latest first quarter. The operation saw its largest quarterly mill throughput, at 235,390 tonnes, but was offset by a drop in the head grade for zinc (averaging 7.7% versus 11.2% in last years Q1) and lead (4.2% versus 5.2%) attributed to mine sequencing.

With mine closure scheduled for the end of 2007, production from Storliden in Sweden is winding down. The operation kicked in 4,578 tonnes (10.1 million lbs.) zinc and 1,198 tonnes (2.6 million lbs.) copper in the latest Q1, down 44% and 63% respectively over the first three months of 2006.

The Galmoy mine in Ireland was a poor performer for Lundin in Q1 with mill throughput down 40% (at 94,060 tonnes) versus Q1-2006. Metal output was 9,961 tonnes (22 million lbs.) zinc and 2,404 tonnes (5.3 million lbs.) lead. Slipping productivity was attributed to delays in contract negotiations with unionized workers.

Lundin Mining has recently been on an aggressive acquisition tear. Besides its merger of EuroZinc last year, it picked up 49% of the Ozernoe zinc-lead deposit in the Republic of Buryatia, located in the Russian Federation, for US$125 million. In early-April 2007 the company floated a $5.00-per-share offer for Rio Narcea Gold Mines (RNG-T, RNO-X) to gain the Aguablanca nickel-copper-PGM mine in southern Spain.

The latest deal saw Lundin move to absorb sister company Tenke Mining (TNK-T, TNKDF-O) in a share-swap takeover offer valued at about US$1.4 billion. The prize is Tenkes 24.75% interest in the giant Tenke Fungurume copper-cobalt deposit, in the Democratic Republic of Congo currently under construction and expected to come on-stream by early 2009.

With about 286-million shares outstanding, the company posts a $4-billion market capitalization based on its recent $14.00 share price. The stock has a 52-week trading range of $8.05-to-$15.84.