Our view: We expect a neutral reaction from Lundin shares to Q1 results that were mostly in line with estimates. Financial performance benefitted from rising metal prices over the quarter which resulted in positive provisional pricing adjustments, while operations performed in line with expectations. Lundin maintained 2023 production, cost, and capex guidance as all metrics remain on track with production expected to be weighted toward the second half and cash costs expected to ease further.
Q1 financial results ahead of expectations: Lundin reported adjusted EPS of $0.16, in line with consensus, but above our estimate of $0.14. Adjusted EBITDA was $337M, above our estimate of $314M and consensus of $327M. The solid financial results were supported by q/q improvements in copper and zinc production. Results also benefitted from $40M in positive provisional pricing adjustments in line with our estimate of $38M. Lundin generated -$34M of FCF in the quarter, excluding working capital, ahead of our estimate of -$58M, primarily attributable to lower capex spend.
Sales in line with estimates: Copper sales volumes were marginally up q/q, but below our estimates on solid operations at Candelaria and minimal seasonal impacts at Chapada as higher throughput offset lower planned recoveries. Zinc sales were ahead of our forecast on better production as ZEP continues to ramp up at Neves-Corvo and strong operational performance at Zinkgruvan. C1 cash costs came in at $2.16/lb, down -12% q/q, but still ahead of our estimate of $2.12/lb, as new labour agreements impacted Candelaria's production costs and consumable costs remain elevated.
Liquidity update: Lundin ended the quarter with $184M of cash, down from $191M at the end of Q4. Total debt at the end of Q1/23 was higher q/q, rising to $219M (prior quarter $197M).