FULLTEXT DEL 2 AV 2
Kvartalsrapport Q2 2023
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 20 -
18. FINANCIAL INSTRUMENTS
Derivative instruments
From time to time, the Company uses derivative contracts as part of its risk management strategy to mitigate exposure
to foreign currencies and commodities.
During 2022, the Company entered into EUR, BRL, CLP , SEK and CAD foreign currency options and forward contracts
intended to limit the foreign exchange exposure of its forecasted foreign currency denominated after -tax attributable
operating and capital expenditures. The foreign exchange contracts have not been designated as hedges for purposes
of hedge accounting and are measured at fair value with changes in fair value recognized in the consolidated
statement of earnings. The following table shows the remaining contract positions and their expiry dates:
Expired in Expiring throughout:
Foreign currency forward contracts 2023
remainder of
2023 2024
EUR/USD forwards
Average contract price 1.01 1.01 1.02
Position (EUR millions) 125 124 155
USD/SEK forwards
Average contract price 11.1 11.1 10.9
Position (SEK millions) 618 618 900
Expired in Expiring throughout:
Foreign currency zero cost collar contracts 2023
remainder of
2023 2024
USD/BRL collars
Average contract price 5.00/6.40 5.00/6.40 5.00/6.40
Position (BRL millions) 571 571 974
USD/CLP collars
Average contract price 900/1,050 900/1,050 900/1,050
Position (CLP millions) 123,256 123,257 143,426
USD/CAD collars
Average contract price 1.34/1.38 1.33/1.38 1.30/1.40
Position (CAD millions) 18 18 19
Subsequent to June 30, 2023, the Company entered into SEK 66 million of SEK forward contracts at a price of USD:SEK
10.83 expiring over the remainder of 2023, and SEK 396 million of zero cost collar contracts with a collar range of SEK
10.35 to SEK 11.15 expiring throughout 2024.
In April 2023, the Company entered into forward swap contracts intended to limit exposure to changes in the price of
diesel fuel purchases at Candelaria. Positions taken represent approximately 75% and 50% of Candelaria's forecas ted
attributable diesel fuel purchases for the remainder of 2023 and 2024, respectively.
Expired in Expiring throughout:
Diesel forward swap contracts 2023
remainder of
2023 2024
Average contract price ($/L) 0.691 0.690 0.667
Position (USD millions) 8 19 27
===== SIDA 65 =====
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 21 -
The Company’s net unrealized and realized (loss)/gain on foreign currency and diesel derivative contracts are as
follows:
Three months ended
June 30,
Six months ended
June 30,
2023 2022 2023 2022
Unrealized (loss)/gain on derivative financial instruments:
Foreign currency contracts $ (11,215) $ — $ 9,451 $ —
Diesel forward swap contracts (3,188) — (3,188) —
(14,403) — 6,263 —
Realized gain/(loss) on derivative financial instruments:
Foreign currency contracts 14,908 — 28,485 —
Diesel forward swap contracts (633) — (633) —
14,275 — 27,852 —
Total unrealized and realized (loss)/gain on derivative
contracts: $ (128) $ — $ 34,115 $ —
A summary of the fair values of unsettled derivative contracts recorded on the consolidated balance sheet is as follows:
June 30, 2023 December 31, 2022
Foreign currency contracts:
Current asset position $ 52,794 $ 43,521
Non-current asset position 20,147 25,111
Current liability position — —
Non-current liability position — 5,524
Diesel forward swap contracts:
Current liability position 1,967 —
Non-current liability position 1,221 —
Other contracts:
Chapada derivative current liability 25,000 24,423
Chapada derivative non-current liability 23,571 22,352
===== SIDA 66 =====
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 22 -
Fair values of financial instruments
The Company’s financial assets and financial liabilities have been classified into categories that determine their basis of
measurement. The following table shows the carrying values, fair values and fair value hierarchy of the Company’s
financial instruments as at June 30, 2023 and December 31, 2022:
June 30, 2023 December 31, 2022
Level
Carrying
value Fair value
Carrying
value Fair value
Financial assets
Fair value through profit or loss
Restricted funds 1 $ 55,301 $ 55,301 $ 50,195 $ 50,195
Trade receivables (provisional) 2 326,595 326,595 403,300 403,300
Marketable securities, and debt & equity investments 1 16,305 16,305 12,075 12,075
Foreign currency contracts 2 72,941 72,941 68,632 68,632
$ 471,142 $ 471,142 $ 534,202 $ 534,202
Financial liabilities
Amortized cost
Debt 3 $ 386,477 $ 386,477 $ 170,162 $ 170,162
Fair value through profit or loss
Pricing provisions on concentrate sales 2 $ 17,438 $ 17,438 $ 5,006 $ 5,006
Chapada derivative liability 2 48,571 48,571 46,775 46,775
Foreign currency contracts 2 — — 5,524 5,524
Diesel forward swap contracts 2 3,188 3,188 — —
$ 69,197 $ 69,197 $ 57,305 $ 57,305
Fair values of financial instruments are determined by valuation methods depending on hierarchy levels as defined
below:
Level 1 – Quoted market price in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted market prices included within Level 1 that are observable for the assets or
liabilities, either directly (i.e. observed prices) or indirectly (i.e. derived from prices).
Level 3 – Inputs for the assets or liabilities are not based on observable market data.
The Company calculates fair values based on the following methods of valuation and assumptions:
Marketable securities/debt and equity investments/restricted funds – The fair value of investments in shares and
bonds is determined based on the quoted market price.
Trade receivables/pricing provisions on concentrate sales – The fair value of trade receivables that contain
provisional pricing sales arrangements are valued using quoted forward market prices. The Company recogni zed
negative pricing adjustments of $82.1 million in revenue during the three months ended June 30, 2023 (Q2 2022 -
$222.6 million negative pricing adjustments) and negative pricing adjustments of $53.8 million in revenue during
the six months ended June 30, 2023 (YTD Q2 2022 - $134.1 million negative pricing adjustments).
===== SIDA 67 =====
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 23 -
Foreign currency and diesel forward swap contracts – The fair value of these derivatives are determined by the
counterparties to the contracts and are assessed by Management using pricing models based on active market
prices.
Chapada derivative liability – The fair value of this derivative is determined using a valuation model tha t
incorporates such factors as metal prices, metal price volatility, expiry date, and risk-free interest rate.
Debt – The fair values approximate carrying values as the interest rates are comparable to current market rates.
The carrying values of certa in financial instruments maturing in the short -term approximate their fair values.
These financial instruments include cash and cash equivalents, trade and other receivables other than those
provisionally priced, and trade and other payables other than tho se provisionally priced, which are classified as
amortized cost.
19. COMMITMENTS AND CONTINGENCIES
a) The Company has capital commit ments of $531.3 million on various initiatives, of which $218.6 million is
expected to be paid during 2023.
b) The Company may be involved in legal proceedings arising in the ordinary course of business, including the action
described below. The potential amount of the liability with respect to such legal proceedings is not expected to
materially affect the Company's financial position.
c) Significant changes to commitments and contingencies, since those reported at December 31, 2022, are
described below:
i) With respect to the Ontario class action, the Ontario Court of App eal overturned the decision of the Ontario
Superior Court of Justice on May 24, 2023, and allowed the plaintiff’s appeal and granted the leave
application. The Company is preparing an application for leave to appeal to the Supreme Court of Canada
which it expects to file in August 2023.
20. SEGMENTED INFORMATION
The Company is engaged in mining, exploration and development of mineral properties, primarily in Chile, Brazil, USA,
Argentina, Portugal and Sweden. Operating segments are reported in a manner consistent with the internal reporting
provided to executive m anagement who act as the chief operating decision -maker. Executive management are
responsible for allocating resources and assessing performance of the operating segments.
===== SIDA 68 =====
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 24 -
For the three months ended June 30, 2023
Candelaria Chapada Eagle Josemaria Neves-Corvo Zinkgruvan Other Total
Chile Brazil USA Argentina Portugal Sweden
Revenue $ 290,426 $ 94,721 $ 105,250 $ — $ 68,614 $ 29,520 $ — $ 588,531
Cost of goods sold
Production costs (184,958)
(80,113)
(45,735)
— (76,080)
(17,786)
(526)
(405,198)
Depreciation, depletion and amortization (69,696)
(14,989)
(12,670)
— (27,719)
(4,913)
(518)
(130,505)
Gross profit (loss) 35,772 (381)
46,845 — (35,185)
6,821 (1,044)
52,828
General and administrative expenses — — — — — — (14,898)
(14,898)
General exploration and business development (5,112)
(3,067)
(1,443)
— (2,197)
(354)
(1,520)
(13,693)
Finance (costs) income (8,295)
(5,682)
(1,086)
3,995 (1,148)
(1,084)
(2,597)
(15,897)
Other (expense) income (16,108)
10,296 (821)
36,219 384 (5,207)
8,598 33,361
Income tax (expense) recovery (3,732)
15,864 (3,539)
(678)
10,617 (2,286)
3,355 19,601
Net earnings (loss) $ 2,525 $ 17,030 $ 39,956 $ 39,536 $ (27,529) $ (2,110) $ (8,106) $ 61,302
Capital expenditures $ 123,417 $ 19,690 $ 3,562 $ 92,093 $ 22,133 $ 15,994 $ 3,024 $ 279,913
For the six months ended June 30, 2023
Candelaria Chapada Eagle Josemaria Neves-Corvo Zinkgruvan Other Total
Chile Brazil USA Argentina Portugal Sweden
Revenue $ 670,831 $ 205,839 $ 174,670 $ — $ 198,017 $ 90,518 $ — $ 1,339,875
Cost of goods sold
Production costs (372,937)
(148,747)
(91,184)
— (161,806)
(46,691)
(1,597)
(822,962)
Depreciation, depletion and amortization (128,071)
(27,070)
(23,821)
(38)
(57,799)
(13,000)
(953)
(250,752)
Gross profit (loss) 169,823 30,022 59,665 (38)
(21,588)
30,827 (2,550)
266,161
General and administrative expenses — — — — — — (30,008)
(30,008)
General exploration and business development (8,952)
(4,571)
(2,029)
— (3,333)
(1,974)
(7,599)
(28,458)
Finance (costs) income (16,296)
(11,716)
(2,170)
6,805 (1,713)
(2,187)
(4,319)
(31,596)
Other (expense) income (2,797)
16,664 (1,003)
51,532 2,953 (5,455)
17,712 79,606
Income tax (expense) recovery (46,279)
21,213 (3,546)
(678)
9,345 (6,265)
(2,882)
(29,092)
Net earnings (loss) $ 95,499 $ 51,612 $ 50,917 $ 57,621 $ (14,336) $ 14,946 $ (29,646) $ 226,613
Capital expenditures $ 214,103 $ 35,717 $ 10,664 $ 182,648 $ 47,194 $ 30,462 $ 5,244 $ 526,032
===== SIDA 69 =====
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 25 -
For the three months ended June 30, 2022
Candelaria Chapada Eagle Josemaria Neves-Corvo Zinkgruvan Other Total
Chile Brazil USA Argentina Portugal Sweden
Revenue $ 261,999 $ 57,260 $ 106,828 $ — $ 93,538 $ 70,596 $ — $ 590,221
Cost of goods sold
Production costs (168,164) (71,507) (55,128) — (77,788) (29,066) (537) (402,190)
Depreciation, depletion and amortization (75,911) (8,473) (21,904) (288) (23,979) (11,030) (457) (142,042)
Gross profit (loss) 17,924 (22,720) 29,796 (288) (8,229) 30,500 (994) 45,989
General and administrative expenses — — — — — — (11,168) (11,168)
General exploration and business development (3,696) (2,909) (679) (40,278) (2,248) (761) (960) (51,531)
Finance costs (6,892) (4,516) (471) (165) (2,604) (839) (1,822) (17,309)
Other income (expense) 5,799 7,110 330 24,269 2,284 7,223 (12,619) 34,396
Income tax (expense) recovery (5,421) (27,265) (2,396) (982) 2,405 (11,986) (3,358) (49,003)
Net earnings (loss) $ 7,714 $ (50,300) $ 26,580 $ (17,444) $ (8,392) $ 24,137 $ (30,921) $ (48,626)
Capital expenditures $ 86,107 $ 29,760 $ 2,923 $ 54,934 $ 24,429 $ 14,083 $ 5,032 $ 217,268
For the six months ended June 30, 2022
Candelaria Chapada Eagle Josemaria Neves-Corvo Zinkgruvan Other Total
Chile Brazil USA Argentina Portugal Sweden
Revenue $ 719,545 $ 216,865 $ 256,697 $ — $ 228,105 $ 160,088 $ — $ 1,581,300
Cost of goods sold
Production costs (320,973) (151,184) (94,686) — (156,258) (60,254) (1,262) (784,617)
Depreciation, depletion and amortization (144,020) (19,590) (38,753) (288) (44,824) (23,509) (895) (271,879)
Gross profit (loss) 254,552 46,091 123,258 (288) 27,023 76,325 (2,157) 524,804
General and administrative expenses — — — — — — (22,670) (22,670)
General exploration and business development (6,281) (4,785) (924) (40,278) (3,804) (1,720) (2,021) (59,813)
Finance costs (13,895) (9,098) (941) (165) (4,150) (1,743) (2,289) (32,281)
Other income (expense) 1,582 (3,966) 10 24,269 2,134 7,366 14,257 45,652
Income tax (expense) recovery (78,390) 416 (16,158) (982) (4,706) (23,251) (3,138) (126,209)
Net earnings (loss) $ 157,568 $ 28,658 $ 105,245 $ (17,444) $ 16,497 $ 56,977 $ (18,018) $ 329,483
Capital expenditures $ 169,071 $ 44,215 $ 7,383 $ 54,934 $ 58,099 $ 23,122 $ 5,356 $ 362,180
===== SIDA 70 =====
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 26 -
21. RELATED PARTY TRANSACTIONS
a) Transactions with associates - The Company may enter into transactions related to its investment in associate.
These transactions are entered into in the normal course of business and on an arm’s length basis.
b) Key management personnel - The Company has identified its directors and senior officers as its key management
personnel. Employee benefits for key management personnel are as follows:
Three months ended
June 30,
Six months ended
June 30,
2023 2022 2023 2022
Wages and salaries $ 2,127 $ 1,893 $ 3,421 $ 3,259
Pension benefits 33 46 77 87
Share-based compensation 723 902 1,466 2,137
Termination benefits 388 — 1,794 —
$ 3,271 $ 2,841 $ 6,758 $ 5,483
c) Other related parties - For the three and six months ended June 30, 2023, the Company incurre d $0.4 million (Q2
2022 - $nil) and $0.7 million (YTD Q2 2022 – $nil), respectively, for services provided by a company owned by a
member of key management personnel.
22. SUPPLEMENTARY CASH FLOW INFORMATION
Three months ended
June 30,
Six months ended
June 30,
2023 2022 2023 2022
Changes in non-cash working capital items consist of:
Trade and income taxes receivable, inventories, and
other current assets $ 71,878 $ 336,880 $ 57,709 $ 163,008
Trade and income taxes payable, and other current
liabilities 12,329 (20,215) 3,306 (1,891)
$ 84,207 $ 316,665 $ 61,015 $ 161,117
Operating activities included the following cash
payments:
Income taxes paid $ 33,083 $ 132,228 $ 72,940 $ 213,337
23. SUBSEQUENT EVENT
On July 13, 2023, the Company announced the closing of the acquisition of fifty -one percent (51%) of the issued and
outstanding equity of SCM Minera Lumina Copper Chile (“Lumina Copper”), which owns the Caserones copper -
molybdenum mine located in Chile, from JX Metals Corporation and certain of its subsidiaries, as previously announced
on March 27, 2023.
The Company paid an aggregate of approximately $800 million in cash consideration at closing, drawing down the
Company's existing $1,750.0 million revolving credit facility. Remaining deferred cash consideration of $150 million will
be payable in installments over the six ‑year period following the closing date. Lundin Mining also has the right to
acquire up to an additional 19% interest in Lumina Copper for $350.0 million over a five -year period commencing on
the first anniversary of the date of closing.
===== SIDA 71 =====
LUNDIN MINING CORPORATION
Notes to condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)
- 27 -
As the transaction closed in July 2023, the initial allocation of the purchase price to the assets and liabilities acquired
has not been prepared. The Company’s preliminary purchase price allocation will be completed in the third quarter of
2023. The Company will account for the acquisition as a business combination with the Company as the acquirer.
In addition, the Company announced the closing of a three -year term loan in a principal amount of $800.0 million on
July 27, 2023. The term loan has an additional $400.0 million accordion becoming available upon receipt of additional
binding commitments and closing of up to an additional nineteen percent (19%) in terest in Caserones and satisfaction
of relevant conditions precedent. The Company has used the term loan to refinance the drawdown under the existing
$1,750.0 million revolving credit facility used to fund the Caserones acquisition.
The term loan bears interest on US dollar denominated drawn funds at an annual rate equal to Term SOFR+CSA+1.60%
to 2.65%, depending on the Company’s net leverage ratio. The term loan is unsecured, save and except for a charge
over certain assets in the USA, and has sim ilar covenants to the Company’s existing $1,750.0 million revolving credit
facility.
===== SIDA 72 =====
Corporate Office
150 King Street West, Suite 2200, P.O. Box 38, Toronto, ON M5H 1J9
Phone: +1 416 342 5560 Fax: +1 416 348 0303
lundinmining.com