Lundin shares bounce on payout, guidance

By Frik Els / December 01, 2016 / www.mining.com / Article Link

Shares in Lundin Mining (TSX:LUN) jumped more than 5% on Thursday after the company announced the introduction of a quarterly dividend policy and provided a strong production outlook for its copper and zinc operations. The company, worth $3.7 billion in New York, is up nearly 90% this year thanks to the rally in base metals.

The first $0.03 per share payment, pending board approval, is expected to be made in March 2017 and represents a 1.8% annualized yield on the Toronto-based company's current share price.

Haywood Securities in a research note said it views the dividend, which follows Lundin's sales of a 24% interest in Congo's Tenke Fungurume copper mine $1.136 billion, as "a strong vote of confidence for Lundin's financial (and operating) outlook."

Lundin also announced production guidance for the next three years with improvements in cash costs, output and capital and exploration expenditure guidance particularly at its flagship Candelaria mine in Chile:

Attributable copper production guidance for 2017 and 2018 from mines operated by the Company has increased from last year's three-year guidance on an improved production profile at Candelaria.Zinc production guidance for 2017 and 2018 has been improved from last year's three-year guidance primarily on operational improvements at Neves-Corvo achieved in 2016. The zinc production profile assumes plant capacity continues at current levels and does not yet include potential additional zinc production from the Neves Corvo Zinc Expansion Project (ZEP) pending its formal approval.Cash costs are expected to be lower year-over-year in 2017 at Candelaria and Neves-Corvo, and unchanged at Zinkgruvan. Eagle cash costs will be higher than 2016 but remain low on the cost curve.Estimated costs to complete the Los Diques tailings facility at Candelaria have been further reduced by approximately $25 million. Expenditures to complete are expected to amount to $135 million in 2017 and $30 million in 2018.

The company now expects to produce between 202,000 - 216,000 tonnes of copper on an attributable basis next year declining to 189,000 - 203,000 tonnes in 2018 and staying flat in 2019. Candeleria is responsible for three-quarters of Lundin's copper production and Lundin sees cash cost at the mine reducing to $1.20 a pound.

Zinc output is pegged at 152,000 - 162,000 tonnes next year, while nickel production from its Eagle mine in Michigan, US is set to decline from next year's 17,000 - 20,000 to 11,000 - 14,000 tonnes during 2019.

Copper was trading at $2.63 a pound on Thursday, a 23.5% improvement since the start of the year. Zinc is the best performing metal of 2016, up 70% since the end of last year reaching an eight year high of just over $2,900 a tonne on Monday before retreating. Nickel is up nearly 30% year-to-date to above $11,00o a tonne.

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