Post by
retiredcf on May 04, 2023 9:40am
CIBC Raise Target
EQUITY RESEARCH
May 3, 2023 Earnings Update
LUNDIN MINING CORPORATION
Solid Start To The Year, Earnings In Line
Our Conclusion
Lundin Mining reported Q1/23 adj. EPS of $0.16 and EBITDA of $337M, in
line with consensus of $0.17 and $334M, and our estimates of $0.16 and
$345M, respectively. Operationally, Lundin reported results that were again
in line with expectations. Lundin reaffirmed its annual production, cost, and
capex guidance and in our view is tracking well to guidance, as typically Q1
can be impacted by weather, most notably at Chapada.
We expect a muted market reaction. After model updates, we revise our
price target from C$9.50 to C$10 but maintain a Neutral recommendation. In
our view, the Caserones transaction was a positive development (expected
to close in early Q3/23) due to immediate production and cash flows, regional
synergies, and the potential to modestly delay Josemaria, which we still view
as a market risk due to current unknowns around upfront capex,
partnerships, and fiscal agreements with the Government of Argentina.
Key Points
Production Improves Q/Q: Consolidated copper production for the quarter
was 61.5kt, in line with our estimate of 62.0kt, and 9% ahead of the 56.6kt
reported in Q4/22. Zinc production of 48.6kt was 4% better than our 46.8kt
modelled; as well, gold production of 36koz was 6% ahead of our forecast.
Chapada had a good quarter on throughput and managed the wet season
better than last year. At Neves-Corvo, zinc throughput improved from 5.2ktpd
in Q4/22 to 5.7ktpd but was below our expectation of 6.2ktpd. Despite
missing our throughput expectations, Neves-Corvo produced 27.9kt Zn, 4%
ahead of our model and achieved a site record for zinc output. We expect the
zinc expansion to continue to ramp-up through the course of 2023.
Costs Improve Q/Q: Overall, costs were better than Q4/22 and mixed
versus our Q1/23 expectations. Chapada costs increased Q/Q but are below
the 2023 guidance ranges. Candelaria and Neves-Corvo improved costs
Q/Q, but Candelaria reported cash costs of $2.21/lb, ahead of our $1.83/lb
estimate. Candelaria costs were impacted by a one-off $0.08/lb as a result of
new three-year labour agreements with two remaining unions. At Neves-
Corvo, costs benefitted from easing electricity prices and Eagle’s costs
improved Q/Q, though lower nickel sales volumes impacted per pound
metrics.
Other Quick Notes: Lundin announced its regular quarterly dividend of
C$0.09, in line with our expectations. As of Q1/23, Lundin had a net debt
position of $37M, a better financial position than our $106M estimate. As of
May 3, net debt had increased to $90M, and we expect this to increase later
in the year with the upfront consideration of $800M for Caserones due.
A conference call is scheduled for May 4, at 8:00 a.m. ET. Dial: +1 416 764
8646.