March 19, 2008 / 1:51 PM / in 10 years

Hefty charge drags Lundin to loss

TORONTO (Reuters) - Lundin Mining (LUN.TO) said on Wednesday a $491.9 million impairment charge related to recent acquisitions pushed it deep into the red in the fourth quarter, with results also hurt by lower zinc prices and a weak U.S. dollar.

<p>A mining shovel loads a mining truck at the Los Bronces copper mine, some 65 km (40 miles) northeast of Santiago city and 3500 meters above sea level, March 12, 2008. REUTERS/Ivan Alvarado</p>

The company, which operates mostly in Europe but is headquartered in Vancouver, British Columbia, said it lost $436.6 million, or $1.11 a share, compared with a profit of $62.2 million, or 27 cents a share, in the year-before quarter.

Amid a wider market downturn on the Toronto Stock Exchange, Lundin shares fell as much as 75 Canadian cents, or 10.1 percent, to C$6.66, their lowest level in about two years. In New York, the stock was off 86 cents, or 11.5 percent, at

$6.60.

Late last month, the company hinted the noncash impairment charge -- related to its takeover of EuroZinc Mining and its purchase of Rio Narcea -- would dampen results in the quarter.

The charge includes $350.0 million in goodwill which arose because of currency changes between the time Lundin allocated purchase prices to its acquisitions and when it calculated its impairment charge.

Specifically, Lundin said it was hurt by the U.S. dollar’s decline relative to both the euro and nickel prices since the deals were done.

“It’s an accounting issue that’s quite difficult to sometimes get your mind around,” Phil Wright, the company’s chief executive, said on a conference call.

The charge also includes a $193.1 million writedown in the carrying value of the Aljustrel mine in Portugal, which Lundin acquired from EuroZinc.

The company noted that because the charges are non-cash, they “will have the effect of marginally increasing future earnings as a result of reducing future amortization.”

The unaudited results, released on Wednesday, match preliminary numbers that Lundin issued in February, before it had finalized acquisition-related charges. The company plans to file audited results later in March.

Excluding impairment charges and income taxes, Lundin said it earned $84 million, compared with adjusted earnings of $84.7 million.

After-tax earnings slipped to $55 million from $62.2 million. Sales rose 7.2 percent to $253.1 million as increased copper and nickel sales were partly offset by lower zinc volumes and prices.

Lundin said the results also include $56.9 million of pricing adjustments.

Shares of the company have fallen nearly 60 percent in less than a year. Last month, Lundin took the unusual step of providing revenue and production forecasts that it said were lower than the Street was expecting.

($1=$1.01 Canadian)

Reporting by Jonathan Spicer and Susan Taylor; editing by Rob Wilson

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