February 28, 2008 / 3:24 PM / 10 years ago

Lundin says profit squeezed by lower metals prices

OTTAWA (Reuters) - Lundin Mining Corp (LUN.TO) said on Thursday that, on a preliminary basis, its fourth-quarter earnings were $84 million before impairment charges and income tax, and were hurt by lower metals prices.

The Canadian base metals miner said it had planned to issue final results on Thursday, but has not finalized goodwill impairment assessments related to its takeover of EuroZinc Mining Corp and its acquisition of miner Rio Narcea.

Lundin said that in its 2006 takeover of EuroZinc, which has operations in Portugal, it used a lower tax rate than allowed by the Portuguese government, “resulting in an under declaration of past tax contributions.”

It said that on the preliminary basis its quarterly profit fell about 1 percent, from $84.7 million in the same period last year, with sales rising, but prices for zinc falling.

Lundin said the results, which include $56.9 million of pricing adjustments, matched its recent forecast.

Two weeks after warning that its results would not meet analysts’ expectations because of lower metal prices, Lundin said sales increased 7.2 percent in the quarter to $253 million from $236 million.

Lundin, which expects stronger Asian demand to balance “softness” in North America and Europe, is forecasting 2008 production of 92,000 tonnes of copper, 202,000 tonnes of zinc, 6,800 tonnes of nickel and 47,000 tonnes of lead.

Capital expenditures for the year are estimated at $350 million to $400 million, with exploration spending matching or slightly above 2007 levels.

The company, which has operating mines in Portugal, Sweden, Iceland and Spain, said it expects the price of copper to remain at or rise above current levels with some weakness in zinc, lead and nickel.

“While we remain optimistic on copper and lead prices going forward, we do expect some weakness in zinc until the effect of the present economic slowdown is known,” Chief Executive Phil Wright said in a statement.

It also expects copper concentrate treatment charges to fall, but sees charges for zinc concentrate increasing.

The company, which said it was shifting its corporate headquarters to Vancouver, British Columbia, from Geneva, Switzerland, said it is reviewing all its projects and operations to try to find improvements.

In the quarter ended December 31, Lundin said copper production rose 76 percent over the same period in 2006 to 27,487 tonnes, zinc output slipped nearly 13 percent to 37,184 tonnes and lead production dropped 9.4 percent to 10,370 tonnes.

Nickel production began with 1,690 tonnes produced, and silver output increased 17.5 percent to 715,000 ounces.

Lundin also said it restated and refiled earnings for the first three quarters of 2007 to reflect the tax rate error for its Portuguese operations. The effect on 2006 earnings is being reviewed, but is not seen as being significant.

For the third quarter of 2007, restated earnings dropped to $76.6 million from the previously reported $123.1 million, second-quarter profit fell to $153.8 million from $159.9 million, and first-quarter earnings dropped to $52.1 million from $53.7 million.

Shares in Lundin rose about 1.8 percent to C$8.95 on the Toronto Stock Exchange and 2 percent to $9.18 in New York after the results were issued.

($1=$0.97 Canadian)

    Reporting by Susan Taylor; Editing by Rob Wilson

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