Lundin Mining (LUN.TO) is renegotiating terms on a C$575 million credit line after falling out of compliance, the company said on Thursday as it posted a massive fourth-quarter loss due to weak metal prices and writedowns.
Lundin, whose deal to be taken over by HudBay Minerals (HBM.TO) was canceled this week, said its falling net worth put it in violation of the covenant, but that it had received a waiver giving it until June 5 to hammer out a new deal and avoid having to sell assets to raise funds.
That is a period of time that is sufficient in my opinion for us to complete our discussions on a new facility, probably by mid-April, Chief Executive Phil Wright said on a conference call.
He said the company has options if it can't come to suitable terms, but he doesn't want to or expect to have to sell any assets.
Some analysts have questioned Lundin's financial health following the collapse of HudBay's friendly bid for the company, which was scuttled following concerns from HudBay shareholders it was overpaying.
Wright said he believed the deal would have been good for both companies, but said that concerns about Lundin's solvency have been overblown.
Analyst Kerry Smith of Haywood Securities said the company's cash and debt positions were a bit better than he had expected -- net debt was $145.5 million at Dec. 31 -- but the credit facility raised a lot of uncertainties.
The question is what kind of facility will it be and what will the maturity be. Hopefully they can push it out to the point where it isn't repayable 12 months out, he said.
Toronto-based Lundin lost $728.5 million, or $1.77 a share, compared with a loss of $436.6 million, or $1.11 a share, in the year-before period, when the company also took writedowns.
Excluding the charges and a loss from discontinued operations, Lundin lost 32 cents a share. Analysts had expected a loss of 30 cents a share, before exceptional items.
Lundin has cut output as plunging metal prices have made some of its operations unprofitable, and it has refocused its efforts on three assets: The Neves-Corvo copper/zinc mine in Portugal, the Zinkgruvan zinc mine in Sweden, and the Tenke-Fungurume copper-cobalt deposit in the Democratic Republic of Congo.
Tenke, a partnership with U.S. miner Freeport-McMoRan (FCX.N), should start production in the second quarter, and construction costs to complete phase 1 of the project should be below Freeport's estimate of $1.75 billion, Lundin said.
Smith said he was unsure how Lundin would be able to fund its Tenke obligations for the next phase of the mine.
Sales plunged to $43.5 million from $253.1 million, hurt by lower year-on-year metal prices and $94.3 million in downward revisions of revenue on metal sold during previous quarters but finalized at fourth-quarter prices.
The company's shares, which have fallen 91 percent in the past year, were flat at 72 Canadian cents on the Toronto Stock Exchange.
($1=$1.25 Canadian) (Reporting by Cameron French; editing by Rob Wilson)© Thomson Reuters 2009 All rights reserved