Equinox Minerals Q3-10 Results Generate Operating Profit of $166.4 million and Operating Cash Flow of $112.9 million
07.11.2010 | CNW
TORONTO, Nov. 8 - Equinox Minerals Limited (TSX and ASX symbol: “EQN“) (“Equinox“ or the “Company“) today released its results of operations and financial condition for the three month (“Q3-10“) and nine month period ended September 30, 2010.Equinox will host a conference call and webcast to discuss these results on Monday, November 8, 2010 at 18:00 HRS (Toronto time).
All currencies specified in this press release are denominated in U.S. dollars.
HIGHLIGHTS FOR THE QUARTER
Operating Events
- Generated an operating profit(1) of $166.4 million, an increase of 160% from $64.1 million in the third quarter of 2009. An after tax profit of $71.2 million was also generated, an increase of 226% from a loss of $56.3 million in the same period in 2009.
- Copper production increased 37% over the third quarter of 2009, with 38,445 tonnes (84.76 million pounds) of copper in concentrate produced.
- Material movement increased to 30.39 million tonnes and is the best quarterly result to date.
- The Lumwana plant produced at its design rate of 20 million tonnes per annum over the quarter with 4.94 million tonnes of ore milled.
- Achieved a quarterly C1 operating cost(1) of $1.21 per pound of copper.
- Cash resources of $263.3 million at the end of the quarter, an increase of $51.1 million over the second quarter, resulting from positive operating cash flows.
- Achieved recoveries of 89% and mine head grade of 0.87% Cu.
Corporate Events (following quarter end)
- Equinox announced a takeover bid for Citadel Resource Group Limited, an emerging ASX-listed base metals and gold company with a portfolio of development and exploration assets located in Saudi Arabia.
Performance
-------------------------------------------
Three months ended Nine months ended
Sept 30 Sept 30
(in thousands of dollars -------------------------------------------
except as otherwise noted) 2010 2009(2) 2010 2009(2)
-------------------------------------------------------------------------
Gross sales $296,658 $170,798 $721,277 $298,531
Net income/(loss) $71,152 ($56,266) $177,121 ($155,598)
Earnings/(loss) per share
(dollars) $0.10 ($0.08) $0.25 ($0.24)
Copper produced in tonnes 38,445 28,111 112,751 74,787
Copper produced in pounds
(millions) 84.76 61.97 248.57 164.87
Copper sold in tonnes 35,784 26,465 98,309 50,100
Copper sold in pounds
(millions) 78.89 58.34 216.73 110.45
Realized copper price per
pound (net of smelter
charges) $3.41 $2.58 $2.97 $2.38
C1 operating cost(1) per
pound of copper $1.21 $1.46 $1.31 $1.46
Cash and cash equivalents $263,256 $119,862 $263,256 $119,862
Weighted average shares
outstanding (in thousands) 707,785 701,169 707,587 658,312
-------------------------------------------------------------------------
(1) C1 operating cost is a non-GAAP financial measure. See “Non-GAAP Financial Measures“.
(2) The Lumwana Mine commercial production commenced April 1, 2009.
In relation to the concentrate offtake contracts, at the end of the third quarter of 2010, the Company had 25,037 tonnes of payable copper provisionally priced at $3.63 per pound ($8,012 per tonne) which remained subject to final pricing adjustment in the fourth quarter of 2010. The final pricing adjustments recognized during the third quarter of 2010 from the previous quarter provisionally priced copper sales was a profit of $12.9 million, which amount is included in the gross sales for the third quarter of 2010.
Operations
An operating profit(1) of $166.4 million and an after tax profit of $71.2 million were generated during the third quarter of 2010. The operating profit(1) for the year to date as at September 30, 2010 represents an increase of 160% when compared to the third quarter 2009 operating profit(1) of $64.1 million. The after tax profit for the three months ended September 30, 2010 represents an increase of 226% when compared to the third quarter 2009 net loss of $56.3 million.
Lumwana Mine produced 38,445 tonnes (84.76 million pounds) of copper produced at a C1 operating cost(1) of $1.21 per pound of copper for the third quarter of 2010. Production for the nine months ending September 30, 2010 was 112,751 tonnes (248.55 million pounds) of copper at a C1 operating cost(1) of $1.31 per pound of copper.
In the third quarter of 2010, 4.18 million tonnes of ore was mined, with 4.94 million tonnes of ore milled, at a head grade of 0.87% Cu and copper recovery of 89% which resulted in the production of 38,445 tonnes (84.76 million pounds) of copper. The mine continued to increase the total material movement averaging more than 10 million tonnes per month, while the plant operated at design capacity with 4.94 million tonnes of ore treated in the quarter. Production for the nine months to the end of September 2010 totalled 112,751 tonnes of copper in concentrate.
Material movement of 30.4 million tonnes is the best quarterly result to date and is as a result of continued operational improvements with longer working faces, larger blasts and higher benches, leading to better equipment productivity and utilization. The Company's five new Hitachi EH-4500 trucks have now been commissioned and were operating during the third quarter of 2010. Mining operations moved into new production stages during the third quarter, resulting in additional stripping and slightly lower ore production for the quarter at 4.18 million tonnes, necessitating the drawdown of stockpiles.
The plant produced at its design rate of 20 million tonnes per annum over the quarter with 4.94 million tonnes of ore milled. Despite the higher throughput rates, copper production was down relative to the second quarter of 2010. This was due to lower head grades of 0.87% copper as mining moved out of the higher grade Starter Pit and slightly lower copper recovery of 89% with some transitional oxide-sulphide material from the new stages being treated. The lower head grade and recoveries achieved in the third quarter are expected to continue into the fourth quarter.
C1 operating costs(1) were $1.21 per pound of copper for the third quarter of 2010, which was a slight increase from the second quarter of 2010 and a 17% decrease from the third quarter of 2009. Lower operating costs offset the lower grade and copper recovery. Operating costs were reduced as much of the material moved in the pit was removal of overburden and therefore capitalized rather than expensed. The amount of overburden removal is expected to reduce in the fourth quarter of 2010.
In addition to the copper ore mined during the quarter, mining of the uranium zones Valeria South and Valeria North within the Malundwe pit continued during the quarter. The uranium stockpile on the ROM pad has increased to 4.5 million tonnes of almost 900 ppm uranium and 0.8% copper, and is being classified and expensed as “waste“ to the copper project. This uranium-copper stockpile may be treated at a later date, if and when the Company builds a uranium plant.
Lumwana Mine Production Statistics
-------------------------------------------------------------------------
Q3 Q2 Q1 Q4 Q3
Production Statistic Measure 2010 2010 2010 2009 2009
-------------------------------------------------------------------------
Total material
movement Tonnes (m) 30.39 26.60 14.99 22.23 29.30
Ore mined Tonnes (m) 4.18 5.09 3.09 4.20 4.02
Ore processed Tonnes (m) 4.94 4.57 3.59 3.96 3.82
Head grade Copper % 0.87 1.02 0.93 0.94 0.92
Copper recovery Copper % 89 94 92 93 80
Concentrate grade Copper % 41 44 44 46 47
Copper in concentrate Tonnes 38,445 43,835 30,471 34,626 28,111
Copper in concentrate Pounds (m) 84.76 96.64 67.18 76.33 61.97
Copper sold Tonnes 35,784 35,929 26,596 31,410 26,470
C1 operating cost(1) Per Pound $1.21 $1.19 $1.60 $1.53 $1.46
-------------------------------------------------------------------------
Production Guidance
As a result of both the mine and plant operating at “nameplate“ design and the stronger than expected results in the third quarter, management has increased its full year production guidance to 140,000 tonnes (308 million pounds) of copper metal in concentrates at an average estimated C1 operating cost(1)of $1.35 per pound.
Town Development
The Lumwana town development continues to advance with 939 houses completed as at September 30, 2010. The commercial and retail developments, including the recently opened Lumwana supermarket, are advancing and a self-sustaining modern town environment is being developed.
Corporate Activities
Subsequent to quarter end, in October 2010, Equinox entered into an agreement with Citadel Resource Group Limited (“Citadel“), under which Equinox proposes to acquire all of the issued and outstanding ordinary shares of Citadel by way of a recommended takeover offer (the “Offer“) in accordance with the laws of Australia and the rules of the ASX. The board of directors of Citadel has recommended unanimously that Citadel shareholders accept the Offer, in the absence of a superior proposal.
The Offer is comprised of a combination of 1 Equinox CHESS depositary interest (an “Equinox CDI“) for every 14.3 Citadel shares, plus A$0.105 per Citadel share in cash, or, at the option of each Citadel shareholder, comprised of a combination of 1 Equinox common share (an “Equinox Share“) for every 14.3 Citadel shares, plus A$0.105 per Citadel share in cash. The total value of the Offer is approximately A$1.25 billion. After completion of the transaction, Equinox shareholders will own approximately 81% of the combined group and Citadel shareholders will own approximately 19%. All directors of Citadel who hold Citadel shares as well as certain key Citadel shareholders, in aggregate representing 19.9% of Citadel's outstanding shares, have entered into pre-bid acceptance agreements with Equinox under which they have agreed to accept the Offer in the absence of a superior proposal that is not matched by Equinox.
The combined group will be a leading independent copper producer with a portfolio of high-quality assets in Zambia, including the long-life Lumwana copper Mine, and in Saudi Arabia, where Citadel is developing the Jabal Sayid copper-gold project.
Based on Equinox's volume weighted average share price (“VWAP“) on the ASX of A$5.96 over the 10 days to October 22, 2010 (being the last trading day prior to announcement of the Offer), the value of the Offer is A$0.522 per Citadel share. This represents:
- a 21% premium to Citadel's 10-day VWAP prior to the Offer; and
- a 27% premium to Citadel's Enterprise Value(1) over the same period.
Equinox has entered into a Bid Implementation Agreement with Citadel, which includes customary terms for a transaction of this nature including “no shop“ and “no talk“ provisions and a break fee of A$12 million payable in certain circumstances. In addition, the Bid Implementation Agreement provides Equinox with the right to match any superior proposal.
The Offer is subject to a number of conditions, including minimum acceptance of the Offer by holders of at least 90% of the outstanding Citadel shares, no material adverse change occurring in Citadel prior to the expiry of the Offer and certain key milestones being met in relation to the proposed acquisition by Citadel of an increased interest in the Jabal Sayid project. Equinox has already received approval for the Offer from Australia's Foreign Investment Review Board. The issuance of Equinox Shares in connection with the Offer is subject to approval by the TSX.
The conditions to the Offer, as well as a summary of the key terms of the Bid Implementation Agreement, are provided in the appendices to this announcement.
Equinox's Bidder's Statement is expected to be despatched to Citadel shareholders, and the Offer to open for acceptance, in early November 2010. Bid conditions and key terms can be found in the press release that was issued on October 25, 2010.
Citadel is an emerging ASX-listed base metals and gold company with a portfolio of development and exploration assets located in Saudi Arabia, within the highly prospective Arabian Shield minerals province. Citadel's flagship asset is Jabal Sayid, a copper-gold project located 350 kilometres north-east of the Red Sea port city of Jeddah, the commercial capital of Saudi Arabia, and 120 kilometres south-east of Medina.
(1) Enterprise Value is calculated as the 10-day VWAP for Citadel, less A$0.086 per share in cash as at September 30, 2010
Exploration Activities
Drilling activity has been maintained throughout the third quarter of 2010 at the Chimiwungo deposit, the second ore body to be developed at the Lumwana Mine after Malundwe. After the completion of the Chimiwungo East reverse circulation percussion drilling (“RC“) program and the successful exploratory deep core drilling of the Chimiwungo East south plunging shoot during the second quarter of 2010, the Company turned its attention in the third quarter of 2010 to:
- RC drilling in the footprint of the Chimiwungo South starter pit;
- extending resources to the south of the Chimiwungo South deposit;
- Diamond drilling of the Chimiwungo South Fault along the northern boundary of this deposit; and
- sterilization drilling for infrastructure and waste dumps to the immediate west of the pit area.
Chimiwungo South
Chimiwungo South open pit resource drilling: Chimiwungo South represents the down dip extension of the Chimiwungo Main ore body that has been up-faulted along a broad east-west trending, steep north-dipping fault zone, such that near surface mineralization facilitates open pit mining. As with the Chimiwungo East mineralization that was reported last quarter, the three ore horizons that typify Chimiwungo mineralization were intersected on all section lines, and plunge south to south-easterly. Ore grade intercepts have been returned from transition and sulphide ore types, and assaying of all material types is being undertaken to better define the near-surface copper sulphide distribution. Drilling utilized 72 RC drill holes totalling 5,823m to infill the shallower sections of the ore body to a 50 x 50m spacing.
Chimiwungo South Ore Extension: An historical scout exploration hole, CHI026 drilled by Phelps Dodge in 1994 was up until recently the best hole in the Chimiwungo series of deposits (CHI026, 80m @ 1.34%Cu from 285m), and is located 100m south of the Chimiwungo pit southern toe as currently designed (i.e. it lies within the southern wall of the pit and is not captured within the ore to be mined). This suggests that the pit design for the Chimiwungo South portion of the overall Chimiwungo mineralization is constrained by lack of drill data. Accordingly, during the third quarter of 2010, diamond drill holes were completed in two east-west fences, one to incorporate CHI026 (8640000N) at 100m south of the currently quoted resource, and an additional line 200m further south again (8639800N). To date, 14 holes have been drilled. On both lines holes have intersected significant copper mineralization comprising both chalcopyrite and bornite, predominantly in the two lower ore schist horizons. Mineralization tenor has been indicated by portable XRF units on prepared pulps, but confirmatory chemical assays are awaited before intercepts are reported. The mineralization is open to the south at depths of 250m to 500m, and the grade distribution in the intercepts indicates that the mineralization is hosted in a south plunging shoot comparable to the Chimiwungo East area (Fig 1).
Chimiwungo South Fault delineation: The Chimiwungo South Fault provides a natural break between the Chimiwungo Main and South ore bodies. It is along this east-west structure that vertical movement has occurred to bring the mineralization present at depth down plunge of Chimiwungo Main mineralization (at 250m) back to near-surface in the Chimiwungo South area. As scant information was available on the attitude of the structure, 15 diamond holes (CHI0086-0100) were targeted into the zone for geotechnical reasons, as the fault zone will likely form the northern wall of the Chimiwungo South Year 1 pit. The anastomosing fault zone is a compound feature up to 65m wide that dips northward at 60 degrees.
Chimiwungo Sterilization Drilling: The primary crusher and Years 1 - 3 waste dumps lie to the north west of the proposed Chimiwungo South open pit. This immediate area has been shown to be free of mineralization within open pittable depths using RC and diamond drilling over a restricted area. Additional drilling is warranted north and south from this area to ensure future waste dumps do not encroach upon potentially mineralized positions.
Lumwana Mine Lease Exploration
During 2009, extensive field work occurred at the North Dome and Odile Prospects. The prospects were both identified by the coincidence of spectrometer (uranium), soil geochemical and Induced Polarisation anomalies in host rocks interpreted to be comparable to the Malundwe and Chimiwungo deposits. At the close of the third quarter, a diamond rig was moved to the North Dome site to commence drill testing the target and will move to Odile in November.
Zambia Regional Exploration Targets
In November 2009, the Company was granted the 1,957km(2) Mufapanda license, an Iron Oxide Copper Gold target which is located 250km southeast of Lumwana and 195km west-northwest of Lusaka. Ground work has been enhanced by the addition of spectrometers, ground gravity and ground magnetic survey capabilities to aid the field mapping.
The planned exploration program included an airborne magnetic, radiometric and gravity survey over the property to provide the essential foundation for exploration for this style of mineralization. Due to the proximity of Mufapanda to an air force base, airborne access has been restricted and the Company continues to seek permission to fly the airborne survey.
The Company holds additional exploration tenements and applications elsewhere in Zambia that have been affected by the introduction of legislation in 2008 that governs the title and commitments on prospecting licenses in Zambia. The Company continues to work closely with the Government of the Republic of Zambia (the “GRZ“) to resolve the inconsistencies and ambiguities in the legislation before committing expenditure to these regional tenements. No work is being undertaken on these properties currently.
To view Figure 1, please go to http://files.newswire.ca/707/Equinox_Chimiwungo.doc
Expansion and Optimization Plans
Significant opportunities exist at the Lumwana Mine to further expand and optimize the concentrator and mine throughput rate; to assess and evaluate the additional near mine deposits discovered to date; and to develop the Lumwana Mine uranium resource. Equinox will continue to assess these opportunities for expansion and organic growth at the Lumwana Mine.
The Lumwana processing plant is capable of treating ore at rates above the design capacity of 20 Mtpa and management believes it is capable of treating about 24 Mtpa through optimization and debottlenecking without any significant modification. Now that Lumwana has reached design capacity, it is the Company's objective to increase mine output to achieve this 24 Mtpa target by 2012. However, given the very large resource and long mine life of the Lumwana Mine, there is potential to increase mine output further to at least 35 Mtpa. Such an increase will require expansion of the processing plant and possibly mining fleet.
During the second quarter of 2010, Equinox commenced a two phased feasibility study (the “Expansion Feasibility Study“) to investigate an expansion to 35 Mtpa of the Lumwana copper project with the award of the engineering contract to Ausenco. The Ausenco work is anticipated to take approximately ten months to complete with results expected by the end of the first quarter of 2011.
During the third quarter of 2010, the Company continued the Expansion Feasibility Study and this study is progressing on schedule. It is expected that Lumwana will be able to debottleneck the plant to increase production to 24 Mtpa by the end of 2011, with the Chimiwungo pit commencing production towards the end of 2012.
Equinox also completed in 2008 the UFS investigating the onsite treatment of discrete and high grade uranium mineralization contained within the Lumwana Mine copper pit shells. The UFS has confirmed the potential viability of onsite uranium treatment. During the second quarter of 2010, Equinox undertook an assessment of the uranium offtake market aimed at identifying the current level of demand and available terms for uranium offtake. The findings of this assessment supported recent industry research suggesting that current supply levels outweigh demand and as a result the prevailing offtake terms are currently more favourable to offtakers. However, the uranium market is predicted to tighten over the next two to three years primarily due to forecast increases in demand from China. Equinox will continue to monitor the uranium market and assess the future development of the uranium project. Should Equinox be successful in negotiating viable uranium offtake agreements and securing the requisite project capital financing, the Company estimates plant construction to take approximately 18 to 24 months. The decision to proceed with the development of the Lumwana uranium project will depend, subject to Board approval, on a number of factors including satisfactory financing and offtake terms being secured. In the interim, the separate stockpiling of Lumwana Mine uranium ore is ongoing and at the end of the third quarter of 2010, the stockpile totalled 4.5 million tonnes of 886 ppm uranium and 0.84% copper.
Outlook
As a result of both the mine and process plant operating at “nameplate“ design and the stronger than expected results in the third quarter of 2010, management has increased its full year production guidance to 140,000 tonnes (308 million pounds) of copper metal in concentrates at an average estimated C1 operating cost(1)of $1.35 per pound.
For further, detailed financial and other results of operations, readers are directed to such information contained in the accompanying 2009 financials posted on Equinox's website (www.equinoxminerals.com) and filed on SEDAR (www.sedar.com). Readers are also directed to the cautionary notices and disclaimers contained herein and therein.
CONSOLIDATED BALANCE SHEETS
As at September 30, 2010 and December 31, 2009 (unaudited)
2010 2009
-------------------------
ASSETS $000 $000
Current assets
Cash and cash equivalents 263,256 109,130
Accounts receivable 133,607 134,193
Prepayments 8,507 16,080
Inventories 87,819 67,428
-------------------------
493,189 326,831
Restricted cash 25,351 26,164
Property, plant and equipment 1,136,935 1,102,773
Other financial assets 2,247 1,906
-------------------------
1,657,722 1,457,674
-------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 64,204 62,504
Current portion of long term debt 113,363 113,229
Current portion of finance leases 8,329 9,339
Current portion of derivative instruments 56,496 85,179
Current other liabilities 22,454 160
-------------------------
264,846 270,411
Long term debt 319,690 405,423
Finance leases 13,773 16,762
Income tax liability 6,727 6,727
Future income tax liability 98,863 5,938
Asset retirement obligation 7,894 7,504
Long term compensation 5,545 2,469
Derivative instruments - 22,131
Other payables 80,378 39,737
-------------------------
797,716 777,102
-------------------------
SHAREHOLDERS' EQUITY
Share capital 739,511 737,838
Retained earnings/(deficit) 102,401 (74,720)
Contributed surplus 16,480 15,966
Accumulated other comprehensive income 1,614 1,488
-------------------------
860,006 680,572
-------------------------
1,657,722 1,457,674
-------------------------
CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2010 and 2009 (unaudited)
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------
$'000 $'000 $'000 $'000
Copper sales revenue 296,658 170,798 721,277 298,531
Smelter treatment charges (27,532) (20,517) (76,950) (35,887)
-------------------------------------------
Net sales revenue 269,126 150,281 644,327 262,644
Direct and indirect mining
costs 74,206 64,864 229,801 125,807
Amortization and depreciation 20,629 17,191 54,093 28,938
Royalties 7,928 4,118 20,866 7,630
-------------------------------------------
Cost of sales 102,763 86,173 304,760 162,375
-------------------------------------------
166,363 64,108 339,567 100,269
-------------------------------------------
Expenses
Derivative loss 32,636 88,431 8,837 260,846
Exploration costs 1,328 1,303 3,670 3,413
Other operating costs 1,956 2,916 11,464 3,861
General and administration 3,850 2,521 9,868 6,789
Financing costs 9,355 16,481 27,377 32,406
Long term compensation expense 2,657 562 3,570 1,410
Other expense 7,248 1,142 4,734 5,512
-------------------------------------------
59,030 113,356 69,520 314,237
-------------------------------------------
Profit/(Loss) before
income tax 107,333 (49,248) 270,047 (213,968)
Income tax (expense)/benefit (36,181) (7,018) (92,926) 58,370
-------------------------------------------
Net income/(loss) for
the period 71,152 (56,266) 177,121 (155,598)
-------------------------------------------
Basic earnings/(loss) per
share $0.10 ($0.08) $0.25 ($0.24)
Diluted earnings/(loss)
per share $0.10 ($0.08) $0.25 ($0.24)
Weighted basic average number
of shares outstanding (000's) 707,785 701,169 707,587 658,312
Weighted diluted average
number of shares outstanding
(000's) 720,465 715,934 720,267 673,077
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and nine months ended September 30, 2010 and 2009 (unaudited)
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------
$'000 $'000 $'000 $'000
Income/(loss) for the period 71,152 (56,266) 177,121 (155,598)
Other comprehensive income
Net unrealized gains on
available-for-sale
securities 688 431 126 1,570
-------------------------------------------
Total comprehensive
income/(loss) 71,840 (55,835) 177,247 (154,028)
-------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three and nine months ended September 30, 2010 and 2009 (unaudited)
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------
$'000 $'000 $'000 $'000
Share capital
Balance at start of period 738,871 722,753 737,838 581,477
Issue of shares - - - 148,325
Share issue costs - - - (7,356)
Conversion of stock options 640 10,822 1,673 11,129
-------------------------------------------
Balance at end of period 739,511 733,575 739,511 733,575
-------------------------------------------
Retained earnings/(deficit)
Balance at start of period 31,249 9,011 (74,720) 108,343
Income/(loss) for the period 71,152 (56,266) 177,121 (155,598)
-------------------------------------------
Balance at end of period 102,401 (47,255) 102,401 (47,255)
-------------------------------------------
Contributed surplus
Balance at start of period 16,322 21,125 15,966 20,400
Stock based compensation 394 562 1,459 1,936
Transferred to share capital
on exercise of stock options (236) (4,720) (945) (4,843)
Forfeited stock options - - - (526)
-------------------------------------------
Balance at end of period 16,480 16,967 16,480 16,967
-------------------------------------------
Accumulated other
comprehensive income
Balance at start of period 926 1,127 1,488 (12)
Net unrealized gains on
available-for-sale
securities 688 431 126 1,570
-------------------------------------------
Balance at end of period 1,614 1,558 1,614 1,558
-------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and nine months ended September 30, 2010 and 2009 (unaudited)
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------
$'000 $'000 $'000 $'000
Cash flows (used in)/provided
by operating activities
Income/(loss) for the period 71,152 (56,266) 177,121 (155,598)
Items not affecting cash:
Amortization and
depreciation 21,954 17,079 58,052 28,938
Unrealized foreign
exchange (gain)/loss (1,699) (1,168) (4,555) 3,411
Long term compensation
expense 3,276 1,229 4,188 2,959
Income tax expense/
(benefit) 36,181 7,018 92,926 (58,370)
Mark to market changes in
derivative instruments 32,636 88,431 8,837 260,846
(Payments)/proceeds from
settlement of derivative
instruments (17,538) (3,876) (55,386) 44,778
Deferred payments 13,907 8,014 41,164 11,526
Accretion expense 132 125 390 308
Net financing costs 2,095 2,389 5,404 (8,521)
Changes in non-cash working
capital
Decrease/(increase) in
inventories 4,286 (16,377) (20,391) (29,874)
Increase/(decrease) in
accounts payable and
accrued liabilities (20,878) (11,176) 1,700 2,171
Decrease/(increase) in
accounts receivable and
prepayments (32,633) 6,318 8,160 (44,303)
-------------------------------------------
112,871 41,740 317,610 58,271
-------------------------------------------
Cash flows (used in)/provided
by financing activities
Issue of share capital 404 6,285 1,075 154,795
Share issue costs - - - (7,356)
Payments of loan origination
fees and break fees - - (32,847) -
Proceeds from borrowings - - 275,701 4,044
Repayment of borrowings (20,000) (78,119) (333,109) (95,418)
Finance lease principal
repayments (1,956) (1,837) (7,918) (2,380)
-------------------------------------------
(21,552) (73,671) (97,098) 53,685
-------------------------------------------
Cash flows (used in)/provided
by investing activities
Decrease/(increase) in
restricted cash (13) (50) 813 (31)
Additions for property,
plant and equipment (39,754) (35,302) (66,298) (43,430)
-------------------------------------------
(39,767) (35,352) (65,485) (43,461)
-------------------------------------------
Net increase/(decrease) in
cash and cash equivalents 51,552 (67,283) 155,027 68,495
Cash and cash equivalents -
start of period 212,189 187,249 109,130 51,327
Exchange rate changes on cash
held in foreign currencies (485) (104) (901) 40
-------------------------------------------
Cash and cash equivalents -
end of period 263,256 119,862 263,256 119,862
-------------------------------------------
Q3-2010 Conference Call & Webcast
The Company's President & CEO, Craig R. Williams and COO, Cobb Johnstone will host a conference call and webcast to discuss the results
Date: Monday, November 8, 2010
Time:
18:00 HRS (Toronto time)
18:00 HRS (New York time)
23:00 HRS (London time)
01:00 HRS (Lusaka time - Tuesday, November 9, 2010)
07:00 HRS (Perth time - Tuesday, November 9, 2010)
10:00 HRS (Sydney/Melbourne time - Tuesday,November 9, 2010)
Webcast: The Company's website at www.equinoxminerals.com
Dial-in International: +1 412-317-6789
Dial-in Australia: +1 800-822-994 (Toll-free)
Dial-in North America: +1 877-317-6789 (Toll-free)
Dial-in UK & EU: - 080-8238-9064 (Toll-free)
Call Instructions: Please call in 10 minutes prior to the call and reference “Equinox Minerals“. An operator will be available to assist you.
Conference ID: 445180
Replay: Available approximately one hour after completion of the call and until 09:00 HRS (Toronto time) on December 13, 2010.
Replay Dial-in: +1 412-317-0888 (International) and +1-877-344-7529 (North America). To access the recording, please enter Conference ID: 445180. An archived transcript of the call will also be available on the Company's website.
Craig R. Williams
President & Chief Executive Officer
About Equinox
Equinox Minerals Limited is an international mining company dual listed on the Canadian (Toronto) and Australian stock exchanges.
The Company is currently focused on operating its 100% owned large scale Lumwana Copper Mine in Zambia, one of the largest new copper mines to be developed globally over the last few years.
Equinox acquired the Lumwana project in 1999 and following nearly 10 years of feasibility, financing and construction, commissioned the mine, plant and infrastructure in December 2008. Situated 220 km northwest of the Zambian Copperbelt, Lumwana is now a major copper mine.
Lumwana is mining and processing in excess of 20 million tonnes of ore per year, mined at an average life of mine strip ratio of 4.2:1. Lumwana ore, which is predominantly sulphide, is treated through a large, yet conventional plant, producing a copper concentrate for sale to local and international offtakers.
In addition, Equinox is looking at opportunities to grow the Company through both internal expansion and through the international search for mergers and acquisitions.
For information on Equinox and technical details on the Lumwana Project please refer to the company website at www.equinoxminerals.com
Cautionary Notes
Forward-Looking Statements
Certain information contained or incorporated by reference in this press release, including any information as to the Company's strategy, projects, plans, prospects, future outlook, anticipated events or results or future financial or operating performance, constitutes “forward-looking statements“ within the meaning of Canadian securities laws. All statements, other than statements of historical fact, are forward-looking statements. Forward-looking statements can often, but not always, be identified by the use of words such as “plans“, “expects“, “budget“, “scheduled“, “estimates“, “forecasts“, “intends“, “anticipates“, “predicts“, “potential“, “continue“ or “believes“, or variations (including negative variations) of such words; or statements that certain actions, events or results “may“, “could“, “would“, “should“, “might“, “potential to“, or “will“ be taken, occur or be achieved or other similar expressions concerning matters that are not historical facts. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made or incorporated in this press release are qualified by these cautionary statements.
Without limitation, statements that management estimates that Lumwana will produce 140,000 tonnes (308 million pounds) of copper metal in concentrates at an average estimated C1 operating cost(1) of $1.35 per pound for the 2010 year; statements that head grades and recoveries in the second half of 2010 are expected to be lower which will negatively impact C1 operating costs(1) for the remainder of the year; statements with respect to the expansion and optimization plans at Lumwana, and statements with respect to the proposed Citadel takeover, including the timing and other related matters of such statements, are forward-looking statements. The purpose of forward-looking statements is to provide the reader with information about management's expectations and plans for 2010 and subsequent years. Actual results may vary.
Forward-looking statements are necessarily based on a number of factors, estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic an competitive uncertainties and contingencies. Such factors, estimates and assumptions include, but are not limited to, anticipated financial or operating performances of Equinox, its subsidiaries and their respective projects; future prices of copper and uranium; the estimation of mineral reserves and resources; the realization of mineral reserve estimates; the timing and amount of estimated future production; estimated costs of future production; the grade, quality and content of the concentrate produced; the sale of production and the performance of offtakers; capital, operating and exploration expenditures; costs and timing of the development of the Lumwana Mine, the costs of Equinox's hedging policy; costs and timing of future exploration; requirements for additional capital; government regulation of exploration, development and mining operations; environmental risks; reclamation and rehabilitation expenses; title disputes or claims; and limitations of insurance coverage. These risks and uncertainties are fully described in detail in the Company's Annual Information Form dated March 15, 2010 which can be found on SEDAR at www.sedar.com or the Company's website at www.equinoxminerals.com. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Without limitation, in stating that management estimates that Lumwana will produce 140,000 tonnes (308 million pounds) of copper metal in concentrates at an average estimated C1 operating cost(1) of $1.35 per pound, the Company has assumed that its ongoing efforts towards improving efficiencies will result in improvements in mine, mill and processing plant performance and in availability and utilization of the mining fleet, that the Company's Hitachi trucks will improve availability and utilization of the mining fleet and that the wet season will not have a material effect on production. In stating that the head grades and recoveries in the second half of 2010 are expected to be lower which will negatively impact C1 operating costs(1) for the remainder of the year, the Company has assumed that it will be mining a greater amount of transitional ore from the surface of additional pits, which transitional ore will dilute head grade and recoveries. In making statements with respect to the expansion and optimizations plans at Lumwana, including the schedule and timing, anticipated results and work required to complete the plans and achieve the desired results, the Company has assumed that the preliminary studies completed to date prove to be accurate, any costs associated with completing such plans will be feasible, that the materials, labour, regulatory approvals and expertise will be available and that the price and demand for copper and uranium will be profitable and that it will secure any necessary financing and/or offtake commitments on satisfactory terms and that the underlying assumption and information in the preliminary studies are correct. In making statements about the Citadel takeover bid, the Company has assumed that the Company will complete the Offer in accordance with the terms and conditions of the Bid Implementation Agreement; management's assessment of the successful integration of the combined companies upon completion of the Offer prove to be correct; the Company's and Citadel's mineral reserve and mineral resource estimates are correct; management's expectation that Citadel's Jabal Sayid copper and gold project will be commissioned in late 2011 is correct; Citadel's Jabal Shaybank, Lahuf, Bari, Wadi Kamal, Murayjib-Bil'iwy, and Jabal Baydan prospects are viable on a basis consistent with management's current expectations; management's expectations of the trading price of the Equinox Shares and Equinox CDIs and of Citadel's ordinary shares are correct; management's expectation of there being no significant risks relating to the Company's or Citadel's mining operations, including political risks and instability and risks related to international operations, are correct; management's expectation that exchange rates will be approximately consistent with current levels or as set out in the news release dated October 25, 2010 are correct; certain price assumptions for copper, uranium, gold and base metals prove to be correct; certain price assumptions for natural gas, fuel oil, electricity and other key supplies remain consistent with current levels; management's expectation of production forecasts prove to be correct; and management's expectations of permitting, development and expansion at the Company's existing properties prove to be correct.
Readers are cautioned that forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Equinox and/or its subsidiaries, including costs, production and returns, to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These factors are fully discussed in the Company's Annual Information Form dated March 15, 2010 which can be found on SEDAR or the Company's website at www.equinoxminerals.com.
Although Equinox has attempted to identify statements containing important factors that could cause actual actions, event or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking information contained herein are made as of the date of this document based on the opinions and estimates of management on the date statements containing such forward looking information are made, and Equinox disclaims any obligation to update any forward-looking information, whether as a result of new information, estimates or opinions, future events or results or otherwise. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.
Technical Information
Certain technical information in this press release has been summarized or extracted from the Technical Report on the Lumwana Project, North Western Province, Republic of Zambia dated June 2008 and as re-filed in April 2009 (the “Technical Report“). Scientific and technical information contained in this press release has been prepared under the supervision of Robert Rigo, BEng., FAusIMM, MIEAust, Vice President, Project Development of Equinox who is a “Qualified Person“ in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects. Readers are cautioned not to rely solely on the summary of information contained in this release, but should read the Technical Report which is posted on Equinox's website at www.equinoxminerals.com and filed on SEDAR and any future amendments to such report. Readers are also directed to the cautionary notices and disclaimers contained therein.
Non-GAAP Measures
The term “C1 operating cost“ is a non-GAAP performance measure reported in this press release and is prepared on a per-pound of copper produced basis. The term C1 operating cost does not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers. C1 operating cost is a common performance measure in the copper industry and is prepared and presented herein on a basis consistent with the industry standard definitions. C1 operating costs includes all mining and processing costs, mine site overheads and realization costs through to refined metal.
(1) The terms “C1 operating cost“ and “operating profit“ are non-GAAP financial measures.
For further information:
Craig R. Williams (President and Chief Executive Officer), Michael Klessens (Vice President - Finance and Chief Financial Officer), Phone: +61 (0) 8 9322 3318, Email: equinox@equinoxminerals.com; or David Griffiths (Gryphon Management Australia), Phone +61 (0) 419 912 496, Email: david.griffiths@gryphon.net.au