Equinox Q2-10 Results Generate Operating Profit of $91.1 mil
TORONTO, ON, August 12, 2010 : 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 (“Q2-10”) and six month (“H1-10”) period ended June 30, 2010.
Equinox will host a conference call and webcast to discuss these results on Thursday, August 12, 2010 at 18:00 HRS (Toronto time).
All currencies specified in this press release are denominated in U.S. dollars.
HIGHLIGHTS FOR THE QUARTER
Events
• Generated an operating profit(1) of $91.1 million, an increase of 11% over the first quarter of 2010 and an after tax profit of $73.4 million, an increase of 128% over the first quarter.
• Copper production increased 44% over Q1-10 and by 80% over Q2-09, with 43,835 tonnes (96.64 million pounds) of copper in concentrate produced.
• Achieved the lowest quarterly C1 operating cost(1) to date of $1.19 per pound of copper.
• Increased cash resources to $212.2 million, an increase of $92.1 million over Q1-10 and as a result of positive operating cash flows.
• Achieved Lumwana Mine design output levels for the first time with in excess of 5 million tonnes of ore mined. Total material movement increased by 77% over Q1-10 and by 28% compared to the corresponding quarter in Q2-09. Ore mined increased by 65% over Q1-10 and by 68% compared to the corresponding quarter in Q2-09.
• Achieved recoveries of 94% and mine head grade of 1.02% Cu.
• Commenced a two-phase feasibility study to investigate expanding the Lumwana Mine to 35 million tonnes per annum (“Mtpa”) by 2014.
• Initiated an additional $10 million drilling program at the Chimiwungo copper deposit following the first drill hole which intersected significant intercepts of 127m (225m – 352m) of 0.82% Cu including 64m (288m – 352m) of 1.03% Cu.
Commenting on the results, Equinox President and Chief Executive Officer Craig Williams said: “We are extremely pleased to have delivered record copper production and operating profits this quarter. With improvements in all areas of mining and processing operations, our committed hard work over the past year is now paying off; Lumwana is starting to show its true potential.”
Performance
(in thousands of dollars except as otherwise noted) Three months ended
June 30 Six months ended
June 30
2010 2009(2) 2010 2009(2)
Gross sales $223,934 $127,734 $424,619 $127,734
Net income/(loss) $73,442 ($38,741) $105,969 ($99,332)
Earnings/(loss) per share (dollars) $0.10 ($0.06) $0.15 ($0.16)
Copper produced in tonnes 43,835 24,413 74,306 46,676
Copper produced in pounds (millions) 96.64 53.8 163.81 102.9
Copper sold in tonnes 35,929 23,635 62,525 47,601
Copper sold in pounds (millions) 79.21 52.11 137.84 104.94
Realized copper price per pound (net of smelter charges) $2.47 $2.08 $2.72 $1.60
C1 operating cost(1) per pound of copper $1.19 $1.44 $1.36 $1.44
Cash and cash equivalents $212,189 $187,249 $212,189 $187,249
Weighted average shares outstanding (in millions) 707.55 675.76 707.48 636.57
(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 Q2-10 the Company had 24,533 tonnes of payable copper provisionally priced at $2.95 per pound ($6,498 per tonne) which remained subject to final pricing adjustment in Q3-10. The final pricing adjustments recognized during the second quarter from Q1-10 provisionally priced copper sales was a loss of $9.5 million which is included in the gross sales for the second quarter.
Operations
An operating profit(1) of $91.1 million and an after tax profit of $73.4 million were generated during Q2-10. The operating profit at June 30, 2010 represents an increase of 142% when compared to the June 30, 2009 quarter operating profit of $37.6 million. The after tax profit for the three months ended June 30, 2010 represents an increase of 290% when compared to the June 30, 2009 quarter net loss of $38.7 million.
Production performance at the Lumwana Mine continued to improve in the second quarter with 43,835 tonnes of copper produced at a C1 operating cost(1) of $1.19 per pound of copper. Production for the first half of the year was 74,306 tonnes of copper at a C1 operating cost(1) of $1.36 per pound of copper.
In Q2-10, a record 5.09 million tonnes of ore was mined, with 4.57 million tonnes of ore milled, at a head grade of 1.02% Cu and copper recovery of 94%, which resulted in the production of 43,835 tonnes of copper. This was 44% higher than the first quarter and 80% higher than the corresponding quarter in 2009. Although still impacted by some wet weather early in April, total material moved was 26.6 million tonnes, which represents an annualized rate in excess of 100 million tonnes, while ore mined exceeded 5 million tonnes (equivalent to annualized 20 Mtpa) for the first time.
Lumwana Mine Production Statistics
Production Statistic Measure Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009
Total material movement Tonnes (m) 26.60 14.99 22.23 29.30 20.80
Ore mined Tonnes (m) 5.09 3.09 4.20 4.02 3.03
Ore processed Tonnes (m) 4.57 3.59 3.96 3.82 3.03
Head grade Copper % 1.02 0.93 0.94 0.92 0.98
Copper recovery Copper % 94 92 93 80 82
Concentrate grade Copper % 44 44 46 47 39
Copper in concentrate Tonnes 43,835 30,471 34,626 28,111 24,413
Copper in concentrate Pounds (m) 96.64 67.18 76.33 61.97 53.82
Copper sold Tonnes 35,929 26,596 31,410 26,470 23,640
C1 operating cost(1) Per Pound $1.19 $1.60 $1.53 $1.46 $1.44
Improvements in mobile equipment availability, equipment utilization and productivity 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, which had been stripped of oxide material by the light fleet over the wet season. 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 Q2-10. Most of the ore mined was still sourced from the higher grade Starter Pit over the quarter, but this will shift to the new stages over the remainder of the year resulting in lower grade feed to the mill.
The maintenance improvement program, undertaken in conjunction with Hitachi, has resulted in an improvement in equipment availability with the focus now shifting to planned maintenance and better management of parts inventories. Two of the new Hitachi EH4500 trucks have been now been commissioned, with assembly of the other three expected to be completed progressively over Q3-10. At times, the shovels were truck-limited, with longer waste hauls while raising the height of the tailings dam, but management expects this to be mitigated as the lift finishes in Q3-10 and the five new trucks become available.
The mill and crusher had a planned six-day shutdown in May, but produced at rates of close to 20 Mtpa in April and June. The primary constraint is now the Crushing circuit and plans are underway to improve utilization, availability and feed rates to the Crusher in the third quarter. Very little transitional ore was treated during the second quarter and this saw record recoveries of 94%. It is expected that some transition ore will be treated over the remainder of the year and this will see lower recoveries over the second half of 2010.
C1 operating costs(1) were $1.19 per pound of copper which was a significant (26%) decrease from Q1-10, an 18% decrease from Q2-09 and the lowest quarterly operating costs achieved to date. The cost improvements were largely driven by high head grades and improved mining efficiencies. 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.
In addition to the 5.09 million tonnes of copper ore mined during Q2-10, mining of the uranium zones at Valeria South and Valeria North within the Malundwe pit continued during the quarter with 1.145 million tonnes of uranium-copper ore mined. The uranium-copper ore stockpile on the ROM pad has increased to 4.2 million tonnes of 924 ppm uranium and 0.8% copper. This uranium-copper ore is being diverted away from the copper concentrator, and is being classified and expensed as “waste” to the copper project. This uranium-copper ore stockpile may be treated at a later date, if and when the Company builds a uranium plant.
Production Guidance
The Lumwana Mine continues to ramp up both the mine and process plant operations, with the mine achieving design throughput during the second quarter. It is anticipated that ramp up of the process plant to design throughput will be achieved in the second half of 2010. Management estimates that Lumwana will produce 135,000 tonnes (300 million pounds) of copper metal in concentrates at an average estimated C1 operating cost(1) of $1.35 per pound for the 2010 year.
Town Development
The Lumwana town development continues to advance with 931 houses completed as at June 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.
In June 2010, the Commerce, Trade and Industry Minister of the Republic of Zambia launched the Lumwana Multi-Facility Economic Zone (“MFEZ”) after granting the Company a Statutory Instrument to operate MFEZ within the 1,355 km2 Lumwana large scale mining license. The objective of the MFEZ is to kick start industrial and economic development in the manufacturing sector near Lumwana Mine and to ultimately enhance domestic and export oriented business activity through the provision of competitive environments that encourage investors to set up businesses with relative ease. At capacity, it is hoped the MFEZ will create some 13,000 jobs and initial investment of $60 million has already been secured from local and foreign investors. Once established, the estimated 13,000 jobs would be in addition to the 3,800 jobs already created by the Company at its wholly-owned Lumwana Mine.
Corporate Activities
Equinox held its annual shareholders’ meeting on May 7, 2010 at which shareholders re-elected the directors, re-appointed PricewaterhouseCoopers as the Company’s auditors and authorized and approved until 2013 the Company’s Long-Term Incentive Plan.
Exploration Activities
The Company has accelerated its exploration program on the 1,355 km2 Large Scale Mining License that surrounds the Lumwana Mine. This program primarily focused on the Chimiwungo East area, adjoining the previously defined Chimiwungo Open Pit that is planned as the second stage of Lumwana development.
Chimiwungo East
The induced polarization geophysical anomalies identified during Q4-09 in the Chimiwungo East area were the focus of exploration during Q2-10. Evaluation of the geophysical target was undertaken by two drill programs within the footprint of the interpreted south plunging shoot at Chimiwungo East and its daylight position.
Chimiwungo East Shallow Target: RC drilling (43 RC drill holes totaling 4,544m) evaluated the potential for near surface sulphide ore in the daylight position of the mineralization. The three ore horizons that typify Chimiwungo mineralization were intersected on all section lines. Assay results have been received only for the northern part of the drill grid where the mineralized sheets come to surface. Ore grade intercepts have been returned from oxide, transition and sulphide mineralization and as the sequence dips to the south, it is expected that the volume of sulphides will increase down dip of the oxidized ore schists.
Chimiwungo East Down Plunge Target: Diamond core drilling (8 holes totaling 4,407m) was conducted on three drill traverses to test down plunge the potential for an ore shoot to exist at Chimiwungo East similar to that at the Chimiwungo Main shoot 2 km further to the west. The objective was to identify sufficient grade and thickness to establish the viability of extending the Chimiwungo open pit eastwards into this area. In the first quarter, the Company reported that the first hole of this drill program (CHI0084) intersected 127m of 0.85% Cu from 225m, including 65m of 1.06% Cu. These are significant intercepts and support the concept of a south plunging shoot of higher grade mineralization at Chimiwungo East.
An additional seven deep diamond holes on the interpreted down plunge trend were completed during the second quarter. The geological core logging suggests that thicker mineralization typical of a shoot was intersected on all three drill traverses with significant widths of copper sulphides, bornite and chalcopyrite identified in core. Table 1 presents the assays received to date, with only one hole now outstanding (CHI0058). Assay results for holes CHI0055 and CHI0057 suggest that these holes were drilled to the east of the ore shoot, where the mineralization has returned to the typical planar habit of the stacked ore schists. CHI0059 and CHI0083 support the concept of an ore shoot plunging south from CHI0084.
Hole ID East North Dip Azimuth Intercept (m) Cu% Cu* Interval top below surface
From To Width
CHI0054 379502 8641802 -80 360 299 373.2 74.2 0.69 s 294
incl 299 325 26 0.77 s 294
incl 331 366 35 0.80 s 326
CHI0055 379833 8641622 -70 320 372 449 77 0.37 s 350
incl 385 399.2 14.2 1.06 s 362
CHI0056 379343 8641103 -80 360 566 626.5 60.5 0.87 s 557
incl 591 609 18 1.52 s 582
incl 617.9 626.5 8.6 1.27 s 609
CHI0057 379737.51 8641102 -80 360 567 583 16 0.54 s 558
CHI0059 379098.4 8640200 -80 360 517 594.1 77.1 0.84 s 509
incl 543.8 594.1 50.3 1.08 s 536
CHI0083 378950 8641100 -80 360 407 530 123 0.51 s 401
incl 500.2 530 29.8 1.31 s 493
NOTES:
Cu* = Copper mineralization type
s = sulphide
Intercepts in bold are indicative intercepts across the three ore schist units and include barren gneiss units that lie between the schists; the intervals below these that are not bolded represent intercepts within that overall bold intercept where Cu≥0.2% and the interval may contain ≤4m of sub-grade material.
The copper mineralization at Chimiwungo is open both to the south and east, and pit optimization studies suggest that the size of the Chimiwungo Pit is limited by the current extent of drilling. As a consequence of the encouraging results at Chimiwungo East, a substantially expanded drill program has commenced to evaluate expected areas for extensions, increase hole density and gain a better understanding of the structural controls on the mineralization. This work should also provide a better spread of drill data to enable mine expansions to be optimized to the scale of the Chimiwungo deposit. The Company now has four diamond rigs and two RC percussion rigs working in the Chimiwungo area.
Zambia Regional Exploration Targets
In November 2009, the Company was granted the 1,957 km2 Mufapanda license, an Iron Oxide Copper Gold target which is located 250 km southeast of Lumwana and 195 km west-northwest of Lusaka. Ground work has commenced with mapping, soil and rock chip sampling programs underway, and the construction of a semi-permanent field camp for the field teams. The planned exploration program includes 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 an airborne geophysical 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 is working 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 following the completion of ramp up 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 without any significant modification. Once Lumwana reaches design capacity, it is the Company’s objective over a further period of 18 months to increase mine output to achieve this 24 Mtpa target. However, given the very large resource and long mine life of the Lumwana Mine, there is potential to increase mine output further to 35 Mtpa. Such an increase will require expansion of the processing plant and possibly mining fleet.
During the second quarter, Equinox commenced a two phased 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.
The Phase 1 expansion to 24 Mtpa throughput rate at Lumwana is a continuation of mine ramp up. It is expected to be largely achieved through project optimization and “de-bottlenecking” with some supplemental ore feed required from Chimiwungo and achieved with limited additional capital and within an 18-month time frame.
The Phase 2 expansion study will investigate the further expansion of the Lumwana Mine to 35 Mtpa. A scoping study aimed at identifying the appropriate mining and processing scale for the Lumwana operation has indicated that the Chimiwungo orebody would be capable of sustaining a mining rate of 35 Mtpa of ore feed to an expanded Lumwana plant. Further scoping work has indicated that the plant expansion could be implemented by incorporating an additional SAG mill to support a milling rate of similar scale. Preliminary estimates indicate that an expansion to 35 Mtpa would take approximately three to four years to complete and cost in the order of $300 million to $400 million.
Equinox also completed in 2008 a uranium feasibility study (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 Q2-10, 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 favorable 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 to the end of Q2-10, the stockpile totaled 4.2 million tonnes at 924 ppm uranium and 0.8% copper.
Equinox will continue to review and assess opportunities for organic growth and expansion, and corporate opportunities to grow the Company.
Outlook
Mine and process plant operations continued to ramp up at the Lumwana Mine, with the mine achieving design throughput during Q2-10. Consistent with previous guidance, it is anticipated that ramp up of the Lumwana Mine and process plant operations to design throughput will be achieved in the second half of 2010. Management estimates that Lumwana will produce 135,000 tonnes (300 million pounds) of copper metal in concentrates at an average estimated C1 operating cost(1) of $1.35 per pound for the 2010 year.
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.
Q2–2010 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: Thursday, August 12, 2010
Time: 18:00 HRS (Toronto time)
18:00 HRS (New York time)
23:00 HRS (London time)
00:00 HRS (Lusaka time - Friday,
August 13, 2010)
06:00 HRS (Perth time - Friday,
August 13, 2010)
08:00 HRS (Sydney / Melbourne time -
Friday, August 13, 2010)
Webcast: The Company's website at www.equinoxminerals.com.
Dial-in: International +1 201-689-8035
Australia 0011-800-4626-6666 (Toll-free)
North America 1-877-407-8035 (Toll-free)
UK & EU 00-800-4626-6666 (Toll-free)
Conference ID: 353537. Call in 10 minutes prior to the call and an operator will be available to assist you.
Replay: Available approximately one hour after completion of the call and until 23:59 HRS (Toronto time) on September 12, 2010
Replay Dial-in: International +1-201-612-7415
North America +1-877-660-6853
To access the recording, please enter Account # 286, followed by the Conference ID: 353537. An archived transcript of the call will also be available on the Company’s website.
Craig R. Williams - President & Chief Executive Officer
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