Equinox Generates Operating Cash Flow of $467 Million in 2010
TORONTO, March 9 /CNW/ --
TORONTO, March 9 /CNW/ - Equinox Minerals Limited (TSX and ASX symbol: 'EQN') ('Equinox' or the 'Company') today released its results of operations
for the three and 12 months ended December 31, 2010, and its financial
condition as at December 31, 2010.
Equinox will host a conference call and webcast to discuss these results
on Wednesday, March 9, 2011 at 18:00 HRS (Toronto time).
All currencies specified in this press release are denominated in U.S.
dollars, unless identified otherwise.
HIGHLIGHTS FOR THE YEAR
Equinox made significant progress this year in delivering shareholder
value through the optimization of Lumwana as well as through the
acquisition of Citadel. Some of Equinox's key achievements during 2010
resulting from these efforts are listed below.
Financial Achievements
-- Generated an operating profit((1)) of $529 million in 2010, an
increase of 170% compared to $196 million in 2009((2)). An
after tax profit of $269 million in 2010 was also generated
compared to an after tax loss of $183 million in 2009((2)).
-- Cash resources of $320 million at the end of 2010, an increase
of 193% compared to $109 million in 2009((2)).
-- Generated earnings-per-share for the year ended December 31,
2010 of $0.38 compared to a loss-per-share for the year ended
December 31, 2009((2)) of $0.27.
Operating Achievements
-- Completed ramp up of the Lumwana mine.
-- Copper production increased to 146,690 tonnes in 2010, an
increase of 34% compared to 109,413 tonnes in 2009((2)),
surpassing the 2010 annual guidance.
-- Achieved C1 operating cost((1)) of $1.38 per pound of copper
for 2010, a decrease of 7% compared to $1.49 in 2009((2)).
-- Material movement exceeded 100 million tonnes in 2010, an
increase of 24% compared to 81.2 million tonnes in 2009((2)),
following improved operational and mechanical performance.
-- Ore milled increased to 18.6 million tonnes in 2010, an
increase of 42% compared to 13.1 million tonnes in 2009((2)),
exceeding design rate of 20 million tonnes per annum ('Mtpa')
over the second half of the year.
-- Copper recoveries improved to 91% compared to recoveries of 85%
in 2009((2)), with a lower percentage of transitional ore being
treated throughout 2010.
-- Mine head grade of 0.86% copper in 2010 compared to head grade
of 0.95% in 2009((2)), as mining moved away from the central
high grade core over the second half of 2010.
-- Commenced a two-phased feasibility study (the 'Lumwana
Expansion Study') to investigate expanding Lumwana to 35 Mtpa
by 2014 and awarded the two staged expansion plan for Lumwana
to Ausenco. The Lumwana Expansion Study was subsequently
modified to include an expansion to a plant capacity of 45
Mtpa.
-- Discovered the Chimiwungo East ore sheet, a substantial
extension of the Chimiwungo ore body that has the potential to
increase the Chimiwungo resource potential to 1 to 1.5 million
tonnes.
Corporate Achievements
-- Secured a new $400 million corporate loan facility replacing
the existing Lumwana project senior and subordinated debt
facilities.
-- Implemented a takeover offer for Citadel Resource Group Limited
('Citadel') (an Australian Securities Exchange ('ASX') listed
base metals and gold company with a portfolio of development
and exploration assets located in Saudi Arabia) to acquire all
of the issued and outstanding shares of Citadel and by year end
had acquired 89.47% of Citadel shares. By January 6, 2011, the
Company had acquired 90.59% and initiated compulsory
acquisition procedures to acquire all remaining shares in
Citadel. The compulsory acquisition process was completed on
February 15, 2011.
Subsequent to Year-End
-- Announced a takeover bid for Lundin Mining Corporation
('Lundin') (a Toronto Stock Exchange ('TSX') and the NASDAQ
OMS Stockholm ('OMX') listed diversified base metals company
with a portfolio of operating mines in the DRC, Portugal,
Sweden, Spain and Ireland) to acquire all of the issued and
outstanding shares of Lundin.
Performance
Three Twelve
months ended months ended
December 31 December 31
(in thousands of dollars 2009((2)) 2009((2))
except as otherwise noted) 2010 2010
Gross sales $325,509 $233,431 $1,046,787 $531,962
Net income/(loss) $91,984 ($27,465) $269,105 ($183,063)
Earnings/(loss) per share $0.13 ($0.04) $0.38 ($0.27)
(dollars)
Copper produced in tonnes 33,939 34,626 146,690 87,150
Copper produced in pounds 74.8 76.3 323.4 192.1
(millions)
Copper sold in tonnes 33,421 31,410 131,730 81,520
Copper sold in pounds 73.68 69.24 290.42 179.72
(millions)
Realized copper price per $4.05 $2.97 $3.25 $2.61
pound (net of smelter
charges)
C1 operating cost((1) )per
pound of copper $1.64 $1.53 $1.38 $1.49
Cash and cash equivalents $319,476 $109,130 $319,476 $109,130
Weighted average shares 717,983 706,210 710,209 670,385
outstanding (in thousands)
(1) The terms 'C1 operating cost' and 'operating profit' are non-GAAP
financial measures. 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
fourth quarter of 2010, the Company had 22,739 tonnes of payable copper
provisionally priced at $4.37 per pound ($9,637 per tonne) which
remained subject to final pricing adjustment in the first quarter of
2011. The final pricing adjustments recognized during the fourth
quarter of 2010 from the previous quarter provisionally priced copper
sales was a profit of $10 million, which is included in the gross sales
for the fourth quarter of 2010.
OPERATIONS
An operating profit((1)) of $529 million and an after tax profit of $269 million were generated
for the year ended December 31, 2010. The operating profit((1)) for 2010 represents an increase of 170.3% when compared to the 2009((2)) operating profit((1)) of $196 million due to the increase in copper sold, higher copper
prices and reduced C1 operating costs((1)). The after tax profit for 2010 represents an increase of $452 million
when compared to the 2009((2)) net loss of $183 million.
During the year, the mine and process plant operations at Lumwana were
fully ramped up. Ore processed at the Lumwana mine for the year was
18.6 million dry metric tonnes of ore, producing 354,256 dry metric
tonnes of concentrate at an average copper grade of 41%. This resulted
in copper produced in concentrate of 146,690 tonnes (323 million
pounds) at an average C1 operating cost((1)) of $1.38 per pound.
During the year, the mine ramped up to the full production rate with,
material movements of 100.5 million tonnes, representing a 24% increase
relative to 2009((2)). Improvements in mobile equipment availability, equipment utilization
and productivity, together with improved wet season management, all
contributed to the improvement in material mined. The improved
utilization and productivity resulted from the Hitachi fleet moving
into new pit stages, to both the north and the south of the Starter
Pit. The opening up of these additional stages and improved planning
practices resulted in longer working faces, larger blasts and higher
benches, leading to more efficient and productive mining during the
year. Ore mined was 17.6 million tonnes, operating at a rate exceeding
20 Mtpa over the last eight months of the year.
The plant processed 18.6 million tonnes of copper ore after running at
the design rate of 20 Mtpa for the second half of the year. The head
grade of the material treated was 0.86% copper following the treatment
of lower grade material later in the year as mining moved away from the
higher grade central zones. Copper recoveries were 91% and fluctuated
throughout the year in line with the amount of transitional ore being
treated.
In addition to the copper ore mined during the year, 2.1 million tonnes
of uranium rich ore was mined and stockpiled. The uranium ore stockpile
on the ROM pad has increased to 4.6 million tonnes of 900 ppm uranium
and 0.8% copper. This copper-uranium ore is being diverted away from
the copper concentrator, and is being classified as 'waste' to the
copper project. This uranium-rich copper ore stockpile may be treated
at a later date, if and when the Company builds a uranium processing
plant.
C1 operating costs((1)) were $1.38 per pound of copper which was a significant reduction of 7%
from 2009((2)) costs. The cost improvements were largely driven by improved mining
efficiencies and higher throughput, despite falling head grades. C1
operating costs((1)) in the fourth quarter increased to $1.64 as a result of falling head
grades, increases in diesel costs, MARC expenditure related to
undercarriage rebuilds and excessive tire usage at the start of the wet
season. First and fourth quarter costs have traditionally been higher
due to increased tire usage and lower equipment productivity during the
wet season.
Lumwana Mine Production Statistics
Production 2009((2))
Statistic Measure 2010 2008((2))
Total material 81.21
movement Tonnes (m) 100.5 -
Ore mined Tonnes (m) 17.58 13.09 -
Ore processed Tonnes (m) 18.58 13.69 -
Head grade Copper % 0.86 0.95 -
Copper recovery Copper % 91.30 84.51 -
Concentrate 43.09
grade Copper % 41.41 -
Copper in 109,413
concentrate Tonnes 146,690 -
Copper in 241.21
concentrate Pounds (m) 323.38 -
Copper sold Tonnes 131,730 81,520 -
C1 operating $1.49
cost(1) Per Pound $1.38 $1.53
(1) The terms 'C1 operating cost' and 'operating profit' are non-GAAP financial measures. See
'Non-GAAP Financial Measures'
(2) The Lumwana Mine commercial production commenced April 1, 2009.
Construction
Lumwana
Work has commenced on the Chimiwungo crushing and conveying plant with
the conveyor corridor, crusher site and initial stockpile area cleared.
Clearing and grubbing has commenced on the area of the Chimiwungo
Starter Pit. The bulk earthworks contract has been let and the tender
for the initial mining has been issued with a view to commencing the
pre-strip in mid-2011.
Jabal Sayid
The Company's mining contractor, Byrnecut Mining, has mobilized initial
equipment and personnel to site and temporary power and ventilation has
been established. Stripping sections of the existing decline, to allow
for access of larger equipment and ventilation ducting, passing bays
and generally improving the ventilation capacity, is largely complete.
Development headings have been established for the second decline, as
have access to the first working level and recommencement of
development from the base of the original decline. Raiseboring
contractors will mobilize to site in the second quarter of 2011 to
commence the drilling of new ventilation raises. First mining of ore
is planned from Lode 2 in the fourth quarter of 2011.
The engineering, procurement, construction and management ('EPCM')
contractor, SNC Lavalin, has mobilized to site. Engineering design is
well advanced with completion of design scheduled for the second
quarter of 2011. Procurement activities are also well advanced, with
all key procurement packages complete, and contract awards expected to
be completed by the end of the second quarter of 2011. The camps for
the contractor and initial stage of the permanent village have been
completed. Surface roads, security fencing and the temporary power
plant have been completed. Bulk earthworks have commenced with concrete
supply and tank fabrication packages awarded and mobilization commenced
with the first concrete pour scheduled for the first quarter of 2011.
The total project cost estimate remains at $315 million with plant
commissioning due to commence by the end of the first quarter of 2012,
for first production mid-year in 2012.
Production Guidance
The target Lumwana production for 2011 is 145,000 tonnes of copper in
concentrate with a target C1 operating cost((1)) of $1.45 per pound.
A plant debottlenecking and optimization program has commenced and is
expected to increase throughput to 25 Mtpa by the end of 2011. Key
operational trends for 2011 include increased material movements in the
mine, and increased throughput in the plant. Average grades for 2011
are expected to remain around similar grades achieved in the fourth
quarter of 2010 as mining operations move along strike away from the
higher grade Starter Pit at Malundwe. Recoveries are expected to
continue to be around 90%, improving as a lower proportion of
transitional material is processed.
Discontinuation of Publication of Preliminary Production Results
The Company's practice of disclosing its preliminary production results
originated from the Company's desire to keep the market more frequently
updated on its progress during mine ramp-up. While not a requirement
to disclose these preliminary results, the Company provided this
information. However, now that the Company has reached steady-state
operations, the Company will no longer provide an early release of the
preliminary production results and all results will be released with
the quarterly management's discussion and analysis.
Offtake
During the year, concentrate delivery was predominantly directed to the
Chambishi Copper Smelter Limited ('CCS') operated by China Non-ferrous
Metal Mining and Yunnan Copper, and the Konkola Copper Mines Plc
('KCM') smelter at Nchanga on the Zambian Copperbelt. Concentrate
stocks have remained at similar levels during each quarter with
stronger than expected production results towards year end producing
concentrate in excess of processing capacity at the smelters, partly
due to operating issues at the smelters. It is anticipated that these
concentrate stocks will be drawn down over the first half of 2011.
Exploration Activities
Drilling activity continued at the Chimiwungo deposit throughout the
fourth quarter of 2010 up to mid-December. The focus of the work
completed during the fourth quarter comprised:
-- extending resources to the south of the Chimiwungo South
deposit;
-- commencing the infill drilling of the Chimiwungo East
Shoot;
-- sterilization drilling between Chimiwungo North and East; and
-- resource drilling along the eastern flank of Chimiwungo East.
Chimiwungo South
Chimiwungo South Ore Extension: As advised last quarter, historical scout drilling of CHI026 by Phelps
Dodge in 1994 identified the strong possibility that the higher grade
mineralization within the Chimiwungo South pit could extend
considerably further to the south (CHI026, 80m @ 1.34%Cu from 285m).
The holes drilled last quarter confirmed that mineralization continues
at depth and that the pit design for Chimiwungo South needs to be
extended. During the fourth quarter, the possibility that
mineralization extends to the east of the Chimiwungo South pit was
drill with significant grades and thicknesses encountered. The results
indicate that Chimiwungo Main shoot is connected by a substantial
thickness of mineralization to the Chimiwungo East shoot.
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. The host rocks are interpreted to be comparable to the
Malundwe and Chimiwungo deposits, although the prospects lie on a
different thrust sheet. In November 2010, a diamond rig was moved to
the Odile prospect, where seven holes were drilled. ODL011 intersected
8m at 1.02% copper of chalcopyrite and bornite mineralization, as well
as uraninite associated with a quartz vein. Holes ODL006 and 007 also
intersected copper anomalous schist. The drilling is interpreted to
have intersected the up dip position of a south-plunging shoot and
additional drilling is required during the 2011 field program to better
define the discovery.
Zambia Regional Exploration Targets
In November 2009, the Company was granted the 1,957 km(2) Mufapanda license, which covers an Iron Oxide Copper Gold target,
located 250 kilometres southeast of Lumwana and 195 kilometres
west-northwest of Lusaka. Ground work has been conducted using
radiometrics, ground gravity and ground magnetics in conjunction with
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 is hopeful this situation will be
resolved in the near future.
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 has been successful in its
court case for the Kitwe PLLS026 lease to be re-instated in principle,
which in turn sets a precedent for another two retention licences owned
by Equinox in western 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.
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 25 Mtpa through optimization and debottlenecking with
minor plan modification and accelerating the commencement of mining the
Chimiwungo deposit. Now that Lumwana has reached design capacity, it
is the Company's objective to increase mine output to achieve this 25
Mtpa target by the end of 2011. At Chimiwungo, clearing of the
crusher, conveyor and initial mining areas has already commenced with
overburden removal scheduled to commence in mid 2011. While first ore
production is expected towards the end of 2012, crushing facilities
will not be available until mid 2012.
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 initial Ausenco work is
anticipated to take approximately ten months to complete with scoping
study results expected at the end of the first quarter of 2011.
Following the success of the Chimiwungo drill program, the scope of
the Expansion Feasibility Study was changed in the fourth quarter of
2010 to focus on an increased production rate of 45 million tonnes per
year.
It is expected that Lumwana will be able to debottleneck the plant to
increase production to 25 Mtpa by the end of 2011. At Chimiwungo,
overburden removal is scheduled to commence in mid 2011, with first ore
production expected towards the end of 2012.
Corporate Activities
In March 2010, the Company secured a new $400 million corporate loan
(the 'Corporate Facility'), which it used to repay certain existing
senior and subordinated project loan facilities provided to the
Company's wholly-owned subsidiary Lumwana Mining Company ('LMC') in
2006 for the development of Lumwana.
The Corporate Facility was placed with four leading commercial banks,
Standard Bank Plc, Standard Chartered Bank, Industrial and Commercial
Bank of China and BNP Paribas. The key elements of the Corporate
Facility are a three-year $220 million term loan with quarterly
principal and interest repayments, which commenced on March 31, 2010,
and a five-year $180 million revolving facility that the Company is
allowed full repayment and/or full redraw of, up to the facility limit,
over the term. The Corporate Facility is less restrictive than LMC's
project debt facilities and afforded the Company greater control over
its financial management and business. Benefits included the removal
of any 'cash sweep' provisions and the lack of any mandatory hedging
requirements, and the Company was no longer required to maintain its
undrawn $45 million cost overrun facility.
Also in March, 2010, the Company reached a settlement with ZESCO in
relation to electrical power supply charges incurred during the
construction phase of Lumwana. The terms of the $4 million settlement
agreement between the Company and ZESCO afforded Equinox full and final
satisfaction and release from all claims and causes relating to the
dispute that involved ZESCO electrical power off-take supplied to
Lumwana up to and including December, 2009.
In October, 2010, the Company implemented a takeover offer (the 'Citadel
Offer') for Citadel to acquire all of the issued and outstanding shares
of Citadel and by year end had acquired 89.47% of Citadel shares. By
January 6, 2011, the Company had acquired 90.59% and initiated
compulsory acquisition procedures to acquire all remaining shares in
Citadel.
Pursuant to a bid implementation agreement (the 'Bid Implementation
Agreement') dated October 24, 2010 between the Company and Citadel, the
Company offered to acquire all of the outstanding ordinary shares of
Citadel (including all rights attaching thereto) (the 'Citadel Shares')
by way of an off-market takeover bid under Chapter 6 of the Corporations Act 2001 (Commonwealth of Australia). The Citadel Offer was made by the Company
through Equinox Resources.
Citadel is an emerging base metals and gold company with a portfolio of
development and exploration assets located in Saudi Arabia, within the
Arabian Shield minerals province. Citadel's flagship asset is Jabal
Sayid, a copper and gold project located 350 km northeast of the Red
Sea port city of Jeddah, the commercial capital of Saudi Arabia, and
120 km southeast of Medina. The company currently holds a 70% interest
in the Jabal Sayid assets and is in the process of completing a
transaction under which it would acquire the remaining 30% ownership of
Jabal Sayid from its local Saudi Arabian partners. Citadel also owns
several other advanced exploration projects in Saudi Arabia, including
the Jabal Shayban and Jabal Baydan gold-base metal projects, the Lahuf
gold project, the Bari porphyry gold-copper project and the Wadi Kamal
sulphide nickel-copper-PGM project. Prior to the completion of the
transactions described above, the Citadel Shares were posted for
trading on the Australian Securities Exchange. The Citadel Shares were
de-listed from the Australian Securities Exchange following close of
trade on January 18, 2011.
The Citadel Shares were acquired under the Citadel Offer for
consideration comprised of (i) 1 Equinox CHESS depositary interest (an
'Equinox CDI') for every 14.3 Citadel Shares held plus A$0.105 in cash
for each Citadel Share held, or (ii) at the election of each holder of
Citadel Shares, 1 common share of the Company (an 'Equinox Share') for
every 14.3 Citadel Shares held plus A$0.105 in cash for each Citadel
Share held. Equinox Shares are listed on the Toronto Stock Exchange
and Equinox CDIs are listed on the Australian Securities Exchange.
Each outstanding Equinox CDI confers a unit of beneficial ownership in
the Equinox Shares registered on Equinox's Australian register in the
name of CHESS Depositary Nominees Pty Ltd, a wholly-owned subsidiary of
the Australian Securities Exchange.
On December 17, 2010, Equinox had acquired a 56.05% interest in Citadel
and declared the Citadel Offer free from all defeating conditions. On
December 22, 2010, Equinox had acquired a 66.87% interest in Citadel
and changes to the board of directors and management of Citadel were
effected, including Equinox securing a majority of the board seats of
Citadel and replacing Citadel's Chief Executive Officer and Company
Secretary. On December 30, 2010, Equinox extended the Offer period to
January 17, 2011.
On January 6, 2011, Equinox had acquired a 90.59% interest in Citadel
and initiated compulsory acquisition procedures under the Australian
Corporations Act. The compulsory acquisition process was completed on
February 15, 2011.
Subsequent to Year End
Subsequent to year end, on February 28, 2011, the Company announced its
intention to make an unsolicited offer for Lundin. On March 7, 2011,
the Company launched its unsolicited takeover offer to acquire all the
issued and outstanding shares of Lundin for approximately C$4.8 billion
in cash and shares (the 'Lundin Offer').
Under the terms of the Lundin Offer, Equinox proposes to acquire all of
the outstanding common shares of Lundin for a combination of cash and
Equinox shares for a total consideration value of C$8.10 per Lundin
share. Each Lundin shareholder can elect to receive consideration per
Lundin share of either C$8.10 in cash or 1.2903 Equinox shares plus
$0.01 for each Lundin share, subject to a pro-ration based on a maximum
cash consideration of approximately C$2.4 billion and maximum number of
Equinox shares issued of approximately 380 million. The Lundin Offer
reflects a 26% premium to the closing price of C$6.45 per Lundin share
on the TSX on February 25, 2011.
The cash consideration of Equinox's Lundin Offer is to be financed
through a US$3.2 billion bridge facility being led by Goldman Sachs
Lending Partners and Credit Suisse Securities. Equinox intends to
refinance the bridge facility through a combination of medium and long
term debt instruments. Equinox has no plans to undertake an equity
raising as part of the refinancing of the bridge.
The Lundin Offer will be subject to certain conditions including,
without limitation, termination of the existing Lundin-Inmet
Arrangement Agreement in accordance with its terms, and a simple
majority approval of Equinox shareholders of the issuance of the
Equinox shares to be issued under the Lundin Offer at a meeting of
Equinox shareholders that Equinox expects to occur in early to mid
April. Other conditions will include acceptance of the Lundin Offer by
Lundin shareholders owning not less than two-thirds of Lundin's shares
outstanding on a fully-diluted basis, and receipt of applicable
regulatory approvals, and other customary unsolicited offer conditions.
Equinox's bid circular can be found under the Company profile on SEDAR
at www.sedar.com.
Lundin is a TSX-listed and OMX-listed diversified base metal mining
company with a portfolio of operations in the DRC, Portugal, Sweden,
Spain and Ireland.
FINANCIAL CONDITION
As at December 31, 2010, Equinox had cash resources of $320 million, an
increase of $210 million from December 31, 2009((2)) due to positive operating cash flows generated from strong operating
profit at the Lumwana mine.
Financial Position
As at December 31
(thousands of dollars, except as
otherwise noted) 2010 2009((2)) 2008
Cash and cash equivalents 319,476 109,130 51,327
Property, plant and equipment 2,548,211 1,102,773 1,067,290
Total assets 3,242,295 1,457,674 1,471,131
Long-term debt 399,033 518,652 613,407
Total liabilities 1,267,070 777,102 760,923
Shareholders' equity 1,975,225 680,572 710,208
Weighted average number of 710,209 670,385 583,800
outstanding Shares (000's)
Total assets increase on Citadel acquisition
On December 17, 2010 (the 'acquisition date'), Equinox had acquired
56.03% of the issued share capital of Citadel and declared the Citadel
Offer free from all conditions. The Citadel acquisition has been
accounted for in accordance with CICA Section 1582 'Business
Combinations'. The cash and share consideration paid for the 56.03%
interest at the acquisition date, was $699 million.
Further increases in ownership of Citadel are accounted for as a step
acquisition in accordance with CICA Section 1602 'Non-Controlling
Interest'. As at December 31, 2010, Equinox had acquired an additional
33.44% of the issued share capital of Citadel for cash and share
consideration totalling $428.5 million of which $184 million remained
payable at year end. The difference between the change in value of the
non-controlling interest ($417.2 million) and the fair value of
consideration for the additional 33.44% acquisition ($428.5 million) is
recorded within shareholders' equity as transactions with owners
reserve ($11 million). As at December 31, 2010, Equinox had acquired
89.5% of the issued share capital of Citadel, the residual 10.5% not
yet acquired gives rise to a non-controlling interest of $131.3 million
presented in the shareholders' equity section of the balance sheet.
The fair value of the Citadel assets acquired includes $1,389 million,
net of tax, for the Jabal Sayid copper project and $66 million for
exploration and evaluation assets representing a number of copper and
gold projects located in the Kingdom of Saudi Arabia.
Deferred Acquisition Costs on Citadel acquisition
At December 31, 2010, pursuant to the Offer a portion of Citadel share
acceptances had not yet been settled with $119.8 million of shares yet
to be issued and $64.2 million of cash payable.
On September 8, 2010, Citadel reached agreement with its joint venture
partners to acquire the remaining 30% shareholding of Bariq Mining
Limited, the owner of the Jabal Sayid copper project, for US$112.5
million. Following approval of the increase in ownership by Citadel
shareholders on November 3, 2010, a deposit of $12.5 million was paid
with the balance of $100 million payable on or before June 30, 2011.
Reductions in long term debt
As a consequence of the debt restructuring announced in the first
quarter of 2010, long term debt repayments of $370 million were made
during the year ending December 31, 2010 which reduced the total long
term debt balance at December 31, 2010 to $399 million. The repayment
of $370 million was funded by the drawdown of the Company's $400
million corporate loan facility and the remaining amount through cash
reserves. The debt repayment included $19 million of break fees and $14
million loan origination fees associated with the refinancing of the
Lumwana senior and subordinated project debt facilities which closed in
March 2010.
Future income tax liability increase from strong profits and Citadel
acquisition
The future income tax liability has significantly increased during the
year ending December 31, 2010 due to the $137 million income tax
expense on the $407 million profit for the same period. The uplift in
value of the Citadel net assets carrying value to the acquisition fair
value has generated, for accounting purposes, a deferred tax liability
of $229 million.
Shareholders' equity increases due to net profit and Citadel acquisition
The Company recorded a net income of $269 million for the year ending
December 31, 2010 due to increasing production and lower operating
costs at the Lumwana Mine. Shares issued or yet to be issued as part
of the consideration for acquiring 89.47% of the issued share capital
of Citadel totalled $898.4 million.
Outlook
The target Lumwana production for 2011 is 145,000 tonnes of copper in
concentrate with a target C1 operating cost((1)) of $1.45 per pound.
A plant debottlenecking and optimization program has commenced and is
expected to increase throughput to 25 Mtpa by the end of 2011. Key
operational trends for 2011 include increased material movements in the
mine, and increased throughput in the plant. Average grades for 2011
are expected to remain around similar grades achieved in the fourth
quarter of 2010 as mining operations move along strike away from the
higher grade Starter Pit at Malundwe. Recoveries are expected to
continue to be around 90%, improving as a lower proportion of
transitional material is processed.
Construction of the Jabal Sayid project will continue during 2011 with
commissioning expected to commence in the first half of 2012.
For further, detailed financial and other results of operations, readers
are directed to such information contained in the accompanying 2010
financials posted on Equinox's website (www.equinoxminerals.com) and filed on SEDAR. Readers are also directed to the cautionary
notices and disclaimers contained herein and therein.
Q4 AND 2010 CONFERENCE CALL & WEBCAST
Date: Wednesday, March 9, 2011
Time: 18:00 HRS (Toronto time)
18:00 HRS (New York time)
23:00 HRS (London time)
01:00 HRS (Lusaka time - Thursday, March 10, 2011)
07:00 HRS (Perth time - Thursday, March 10, 2011)
10:00 HRS (Sydney / Melbourne time - Thursday, March 10, 2011)
Webcast: The Company's website at
www.equinoxminerals.com.
A webcast replay of the event will be available until March 9, 2012.
Dial-in
Australia: 1 800-822-994 (Toll-free)
Dial-in 1 866-605-3852 (Toll-free)
Canada: 080-8238-9064 (Toll-free)
Dial-in UK: 1 877-317-6789 (Toll-free)
Dial-in US:
Dial-in 1 412-317-6789
International:
Call Please call in 10 minutes prior to the call and reference 'Equinox
Instructions: Minerals.' An operator will be available to assist you.
Replay: Available approximately one hour after completion of the call and
until 09:00 HRS (Toronto time) on April 11, 2011.
Replay 1 412-317-0088 (Canada / International) and 1 877-344-7529 (US
Dial-in: Toll-Free). To access the recording, please enter Conference #
448829. An archived transcript of the call will also be available on
the Company's website
CONSOLIDATED BALANCE SHEETS
As at December 31, 2010 and 2009
(unaudited)
2010 2009
ASSETS $000 $000
Current Assets
Cash and cash equivalents 319,476 109,130
Restricted cash 3,337 -
Accounts receivable 166,342 134,193
Prepayments 13,640 16,080
Inventories 98,826 67,428
601,621 326,831
Restricted cash 22,287 26,164
Property, plant and equipment 2,548,211 1,102,773
Exploration and evaluation 66,000 -
Other financial assets 4,176 1,906
3,242,295 1,457,674
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 119,714 62,504
Current portion of long term debt 113,981 113,229
Current portion of finance leases 9,228 9,339
Current portion of derivative instruments 41,966 85,179
Current other liabilities 256,236 160
541,125 270,411
Long term debt 285,052 405,423
Finance leases 10,515 16,762
Income tax provision 8,960 6,727
Future income tax liability 401,048 5,938
Asset retirement obligation 10,500 7,504
Long term compensation 6,648 2,469
Derivative instruments - 22,131
Other payables 3,222 39,737
1,267,070 777,102
SHAREHOLDERS' EQUITY
Share capital 1,642,127 737,838
Retained earnings/(deficit) 194,385 (74,720)
Contributed surplus 15,192 15,966
Accumulated other comprehensive income 3,535 1,488
Transactions with owners reserve (11,344) -
Non-controlling interest 131,330 -
1,975,225 680,572
3,242,295 1,457,674
Commitments for expenditure
Contingencies
CONSOLIDATED STATEMENTS OF INCOME
For the quarters and years ended December 31, 2010 and 2009
(unaudited)
2010 2009
$000 $000
Copper sales revenue 1,046,787 531,962
Smelter treatment charges (104,361) (63,483)
Net sales revenue 942,426 468,479
Direct and indirect mining costs 308,292 212,016
Amortization and depreciation 75,742 46,688
Royalties 29,434 14,114
Cost of sales 413,468 272,818
528,958 195,661
Expenses
Derivative loss 27,264 329,826
Exploration costs 6,010 5,119
Other operating costs 7,652 5,870
General and administration 21,700 10,241
Financing costs 37,592 76,871
Long term compensation expense 4,675 3,474
Other expense 7,392 4,223
Citadel acquisition costs 10,180 -
122,465 435,624
Profit/(loss) before income tax 406,493 (239,963)
Income tax (137,388) 56,900
(expense)/benefit
Net income/(loss) for the period 269,105 (183,063)
Profit/(loss) is attributable to:
Owners of Equinox Minerals Limited 268,705 (183,063)
Non-controlling interest (600) -
268,105 (183,063)
Basic earnings/(loss) per share 0.38 (0.27)
Diluted earnings/(loss) per share 0.37 (0.27)
Weighted basic average number of shares 710,209 670,385
outstanding (000's)
Weighted diluted average number of shares 721,714 683,665
outstanding (000's)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2010 and 2009
(unaudited)
2010 2009
$000 $000
Net Income/(Loss) 269,105 (183,063)
Other comprehensive income
Net unrealized gains on available-for-sale 2,047 1,500
securities
Total comprehensive income/(loss) 271,152 (181,563)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 2010 and 2009
(unaudited)
2010 2009
$000 $000
Share capital
Balance at start of period 737,838 581,477
Issue of shares 898,424 148,325
Share issue costs - (7,356)
Conversion of stock options 5,865 15,392
Balance at end of period 1,642,127 737,838
Balance at start of period (74,720) 108,343
Income/(loss) for the period 269,105 (183,063)
Balance at end of period 194,385 (74,720)
Balance at start of period 15,966 20,400
Stock based compensation 1,831 2,516
Transferred to share capital on conversion of (2,117) (6,424)
stock options
Forfeited stock options (488) (526)
Balance at end of period 15,192 15,966
Transactions with owners reserve
Balance at the start of period - -
Transactions with owners (11,344) -
Balance at the end of period (11,344) -
Accumulated other comprehensive income/(loss)
Balance at start of period 1,488 (12)
Net unrealized gains on available-for-sale 2,047 1,500
securities
Balance at end of period 3,535 1,488
Total equity attributable to the shareholders of 1,843,895
the Company
Non-controlling interest at the date of 548,531 -
transaction
Net loss attributable to non-controlling (600) -
interest
Other decrease in non-controlling interest (416,601) -
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2010 and 2009
(unaudited)
2010 2009
$000 $000
Cash flows (used in)/provided by operating
activities
Income/(loss) for the period 269,105 (183,063)
Items not affecting cash:
Amortization and depreciation 81,272 50,179
Unrealized foreign exchange loss 1,363 787
Income tax expense/(benefit) 137,388 (56,900)
Amortisation of financing costs 7,432 24,274
Long term compensation expense 5,522 4,189
Mark-to-market changes in derivative instruments 27,264 329,826
(Payments)/proceeds from settlement of derivative (92,608) 34,163
instruments
Accretion expense 524 372
Deferred payments 2,202 30,163
Changes in non-cash working capital
Increase in accounts payable and accrued 76,127 9,488
liabilities
Increase in inventories (22,916) (39,954)
Increase in accounts receivable and prepayments (25,673) (108,395)
467,002 95,129
Cash flows (used in)/provided by financing
activities
Issue of share capital 3,750 157,293
Share issue costs - (7,356)
Payments of loan origination fees and break fees (32,847) -
Proceeds from borrowings 275,701 4,470
Repayment of borrowings (370,064) (139,323)
Finance lease principal repayments (10,276) (2,443)
(133,736) 12,641
Cash flows (used in)/provided by investing
activities
Decrease/(increase) in restricted cash 271 (88)
Payments for property, plant and equipment (117,733) (50,164)
Payments for acquisition of subsidiary, net of cash (3,725) -
acquired
(121,187) (50,252)
Net increase/(decrease) in cash and cash 212,079 57,518
equivalents
Cash and cash equivalents - start of period 109,130 51,327
Effects of rate changes on cash held in foreign (1,733) 285
currencies
Cash and cash equivalents - end of period 319,476 109,130
Total interest payments made 28,918 44,121
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 and construction of the Jabal Sayid
copper-gold project in Saudi Arabia.
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
kilometres north-west of the Zambian Copperbelt, Lumwana is now a major
copper mine which has established Equinox as one of the world's top 20
copper producing companies.
Equinox recently acquired the Jabal Sayid project as the project entered
the construction phase with first production scheduled for 2012. Jabal
Sayid is located within the Arabian Shield minerals province, 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.
Equinox also owns several other advanced exploration projects in Saudi
Arabia, including the Jabal Shayban and Jabal Baydan gold-base metal
projects, the Lahuf gold project and the Bari Porphyry gold-copper
project.
For information on Equinox and technical details on the Lumwana and
Jabal Sayid projects please refer to the Company's 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 145,000 tonnes of copper metal in concentrates at an
average estimated C1 operating cost(1) of $1.45 per pound for the 2011
year; that average grades for 2011 are expected to remain around
similar grades achieved in the fourth quarter of 2010, that recoveries
are expected to continue to be around 90%, that commissioning of the
Jabal Sayid project is expected to commence in the first half of 2012,
that a plant debottlenecking and optimization program is expected to
increase throughput to 25 Mtpa by the end of 2011, statements with
respect to the expansion and optimization plans at Lumwana, and
statements with respect to the Lundin Offer, 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
2011 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 and
competitive uncertainties and contingencies. Such factors, estimates
and assumptions include, but are not limited to, anticipated financial
or operating performances of Equinox, it 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; the
successful acquisition of Citadel and the successful integration of the
combined companies upon completion of the Offer; and limitations of
insurance coverage. 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 145,000 tonnes of copper metal in concentrates at an
average estimated C1 operating cost(1) of $1.45 per pound for the 2011
year, the Company has assumed that its ongoing expansion and
optimization plans will be successful and that the wet season will not
have a material effect on production. In stating that average grades
for 2011 are expected to remain around similar grades achieved in the
fourth quarter of 2010, and that recoveries are expected to continue to
be around 90%, 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 Lundin Offer, the Company has
assumed that the Company will complete the Lundin Offer in accordance
with the terms and conditions of the Lundin Offer set out in the Bid
Circular; that management's assessment of the successful integration of
the combined companies upon completion of the Lundin Offer prove to be
correct; the Company's and Lundin's mineral reserve and mineral
resource estimates are correct; management's expectation that Lundin's
assets 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 Lundin's ordinary shares are
correct; management's expectation of there being no significant risks
relating to the Company's or Lundin mining operations, including
political risks and instability and risks related to international
operations, are correct;; that 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 also 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, and in the Company's Bid Circular in connection with
the Lundin Offer, each of which can be found on SEDAR at www.sedar.com 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,
except as required by law Equinox disclaims