Boliden Limited Reports First Quarter 2000 Results

BOLIDEN LIMITED REPORTS FIRST QUARTER 2000 RESULTS (All dollar amounts are in United States dollars) Overview * Common share rights offering over 97% subscribed. Net proceeds exceed $142 million. * Stronger copper and zinc prices help improve operating performance compared to the first quarter of 1999. * Rönnskär +200 expansion project continues on schedule and on budget. * Apirsa experiencing metallurgical difficulties at Los Frailes mill. * Independent experts engaged by Spanish judge investigating cause of Los Frailes tailings dam failure release their report. Their conclusions are consistent with those previously reached by experts engaged by Apirsa. * Encouraging drill results from Simon, Renström Deep and Einarsson underground exploration programs. TORONTO, CANADA (April 26, 2000) - Boliden Limited today reported an improvement in its operating performance for the first quarter of 2000, compared with the first quarter of 1999. The Company reported an operating loss of $6.4 million for the quarter, compared with an operating loss of $21.4 million for the first quarter of 1999. The principal reasons for the change are higher prices for the Company's primary metals, copper and zinc, improved performance from the Company's smelting operations, increased production at Aitik and Lomas Bayas and the restart of operations at Myra Falls. The operating loss for the quarter compares with operating income of $5.5 million for the fourth quarter of 1999. The principal reasons for the change are lower prices for all the Company's metals except copper and lower production at Lomas Bayas and Los Frailes. After accounting for interest expense and income taxes, the Company reported a net loss of $18.3 million or $0.18 per common share for the quarter, compared with a net loss of $22.9 million or $0.21 per common share for the first quarter of 1999 and a net loss of $9.9 million or $0.11 per common share for the fourth quarter of 1999. Cash provided by operations before non-cash working capital changes for the quarter was $11.2 million or $0.10 per common share, compared with cash used by operations of $5.9 million or $0.05 per common share for the first quarter of 1999 and cash provided by operations of $24.9 million or $0.23 per common share for the fourth quarter of 1999. METAL PRICES, CURRENCIES AND INTEREST RATES Prices for the metals produced by the Company as reported by the London Metal Exchange (LME) and the London Bullion Market Association (LBM) for the quarter compared with the first and fourth quarters of 1999 were as follows: Average Three months ended Three months ended LME/LBM March 31, December 31, 1999 Prices 2000 1999 Zinc $/lb 0.51 0.45 0.53 Copper $/lb 0.81 0.64 0.79 Lead $/lb 0.21 0.23 0.22 Gold $/oz 290 287 296 Silver $/oz 5.17 5.29 5.24 The Company manages its exposure to changes in prices for the metals produced by the Company through hedge transactions, including forward sales contracts and put and call options. The Company has sold 28.5 million ounces of silver in an option strategy that provides the Company with a maximum average price of $5.67 per ounce. The Company's other metals are essentially unhedged. Most of the Company's costs are in Swedish, Canadian, Norwegian and Spanish currencies. The average rates of exchange for Swedish kronor (SEK), Canadian dollars (C$), Norwegian kroner (NOK) and Spanish pesetas (ESP) per United States dollar for the quarter compared with the first and fourth quarters of 1999 were as follows: Average Exchange Three months ended Three months ended Rates March 31, December 31, per United States 2000 1999 1999 dollar SEK 8.60 8.00 8.32 C$ 1.45 1.51 1.47 NOK 8.21 7.66 7.88 ESP 168 148 160 The Company manages its exposure to changes in foreign exchange rates through the use of forward exchange contracts and put and call options to hedge future transactions and investments denominated in foreign currencies. The Company hedges a portion of its anticipated but not yet committed foreign currency exposures when such transactions are probable and the significant characteristics and expected terms are identified. As at March 31, 2000, the Company had in place a hedging program covering more than two years exposure to exchange rate fluctuations. A combination of options and forward contracts has been used to hedge costs in Swedish, Canadian, Norwegian and Spanish currencies against the United States dollar at minimum average rates of 7.80, 1.48, 7.65 and 149, respectively, and maximum average rates of 7.90, 1.49, 7.68 and 150, respectively. The Company manages its exposure to changes in interest rates through periodically entering into interest rate swaps. The interest rates on the Company's long-term debt are floating rates and are largely unhedged. OPERATIONS The operating income (loss) at the Company's operating segments for the quarter compared with the first and fourth quarters of 1999 was as follows: Operating Segment Three months ended Three months ended ($ thousands) March 31, December 31, 2000 1999 1999 Mining $ (16,114) $ (22,288) $ (1,977) Smelting 14,066 3,521 12,092 Fabrication 890 1,103 1,740 Corporate and other (5,249) (3,735) (6,379) Total $ (6,407) $ (21,399) $ 5,476 Mining The Company's mining operations reported an operating loss of $16.1 million for the quarter, compared with an operating loss of $22.3 million for the first quarter of 1999. The principal reasons for the change are higher prices for the Company's primary metals, copper and zinc, increased production at Aitik and Lomas Bayas and the restart of operations at Myra Falls. The operating loss for the quarter compares with an operating loss of $2.0 million for the fourth quarter of 1999. The principal reasons for the change are lower prices for all the Company's metals except copper and lower production at Lomas Bayas and Los Frailes. The Company's mines produce primarily copper and zinc, with by-product lead, gold and silver. Contained metal production at each of the Company's mines for the quarter compared with the first and fourth quarters of 1999 was as follows: Mine Three months ended Three months March 31, ended 2000 1999 December 31, 1999 ( 1) Boliden Area Operations (BAO) Zinc (tonnes) 14,163 12,499 14,424 Copper (tonnes) 2,319 2,814 2,747 Lead (tonnes) 742 504 615 Gold (ounces) 11,854 17,506 13,153 Silver (000s ounces) 474 470 504 Garpenberg Zinc (tonnes) 7,821 9,087 7,917 Copper (tonnes) 169 215 227 Lead (tonnes) 3,600 4,255 3,645 Gold (ounces) 2,408 2,472 3,270 Silver (000s ounces) 804 755 765 Aitik Copper (tonnes) 16,053 13,697 18,732 Gold (ounces) 11,626 13,684 10,718 Silver (000s ounces) 527 330 693 Laisvall Lead (tonnes) 16,864 19,305 18,664 Zinc (tonnes) 3,755 3,664 3,814 Silver (000s ounces) 125 140 138 (2) Los Frailes Zinc (tonnes) 21,404 - 24,776 Copper (tonnes) 699 - 846 Lead (tonnes) 10,463 - 9,968 Silver (000s ounces) 403 - 426 (3) Myra Falls Zinc (tonnes) 14,155 855 14,571 Copper (tonnes) 4,922 225 2,925 Gold (ounces) 5,361 259 4,895 Silver (000s ounces) 116 3 102 Lomas Bayas Copper (tonnes) 12,502 10,160 13,864 Notes: (1) BAO comprises four underground mines, one underground mine and one mill. (2) The Company's Spanish subsidiary, Boliden Apirsa SL (Apirsa), halted mining and milling operations at Los Frailes in April 1998 following the failure of the tailings dam used by Apirsa for the storage of tailings and process water from milling and concentrating operations. Apirsa recommenced mining operations at Los Frailes in April 1999 and milling operations in June 1999. (3) Boliden temporarily suspended mining operations at Myra Falls in December 1998 to carry out stope and access route rehabilitation and development and rehabilitation work. Boliden resumed mining operations at Myra Falls in March 1999. Total contained metal production at the Company's mining operations for the quarter compared with the first and fourth quarters of 1999 was as follows: Three months ended Three months ended March 31, December 31, (1) 2000 1999 1999 Copper (tonnes) 36,664 27,111 39,341 Zinc (tonnes) 61,298 26,106 65,502 Lead (tonnes) 31,669 24,064 32,892 Gold (ounces) 31,249 38,600 36,733 Silver (000s ounces) 2,449 1,698 2,628 Note: (1) Includes 50% of production from SCPM. The Company sold its 50% interest in SCPM during the fourth quarter of 1999. Copper Copper production was higher for the quarter compared with the first quarter of 1999 due to the restart of operations at Myra Falls and higher production at Aitik and Lomas Bayas. Copper production was lower for the quarter compared with the fourth quarter of 1999 due to lower production at Aitik and Lomas Bayas. Production at Aitik fluctuates with the grades encountered in mining operations. Recoveries of dissolved copper from the run-of-mine (ROM) leach pads at Lomas Bayas were lower than planned during the quarter due to temporary shortages of water and sulphuric acid. Because of the delayed effect of the leaching process, these shortages will also likely affect ROM recoveries in the second quarter. ROM recoveries represent approximately 20% of total production at Lomas Bayas over the life of the project. During the quarter, production of copper cathode at Lomas Bayas averaged approximately 83% of design capacity (60,000 tonnes of copper cathode per year) at a cash operating cost of $0.50 per pound of copper. On February 1, 2000, the Company's subsidiary, Compañía Minera Lomas Bayas (CMLB), commenced the completion test for Lomas Bayas required under the project financing documents. Zinc Zinc production was higher for the quarter compared with the first quarter of 1999 due to the restart of operations at Los Frailes and Myra Falls. Zinc production was lower for the quarter compared with the fourth quarter of 1999 due to metallurgical difficulties being experienced by the Company's Spanish subsidiary, Boliden Apirsa SL (Apirsa), at the Los Frailes mill. These difficulties have resulted in lower than planned metal recoveries and higher penalties related to concentrate quality. The Los Frailes mill had only a brief operating history and was not fully commissioned before Apirsa halted mining and milling operations in April 1998 following the failure of the Los Frailes tailings dam. Apirsa has assembled technical resources from within the Boliden organization to assist it in addressing the metallurgical issues. Late in the quarter, the independent experts engaged by the Spanish judge investigating the cause of the tailings dam failure released their report. Based on a review of a summary of the report, Apirsa believes that their conclusions with respect to the causes of the failure are consistent with the conclusions previously reached by the independent experts engaged by Apirsa. Apirsa is currently carrying out a detailed review of the report which comprises over 2000 pages. Smelting The Company's smelting operations reported operating income of $14.1 million for the quarter, compared with operating income of $3.5 million for the first quarter of 1999 and $12.1 million for the fourth quarter of 1999. The Company's smelters produce primarily copper, zinc and lead, with significant quantities of gold and silver. Metal production at each of the Company's smelters for the quarter compared with the first and fourth quarters of 1999 was as follows: Smelter Three months ended Three months ended March 31, December 31, 2000 1999 1999 Rönnskär Copper (tonnes) 28,388 28,494 27,237 Lead (tonnes) 10,531 10,348 7,676 (1) Zinc clinker (tonnes) 8,827 8,922 8,343 Gold (kilos) 2,095 2,391 2,287 Silver (kilos) 97,721 71,073 82,551 (2) Norzink Zinc (tonnes) 17,801 18,508 17,832 Bergsöe Lead in lead alloys (tonnes) 12,195 12,851 10,287 Notes: (1) Zinc clinker produced at Rönnskär is sold as feed to Norzink. (2) Represents the Company's 50% share of production from Norzink. Rönnskär Rönnskär continued its strong performance with production for the quarter similar to that achieved during the first quarter of 1999 and above that achieved during the fourth quarter of 1999. Production for the second quarter of 2000 will be lower than the first quarter due to a scheduled seven day maintenance stop in May. The Rönnskär +200 expansion project continued on schedule and on budget. During the second quarter, the second of the three new converters is scheduled for installation and commissioning. The project will increase Rönnskär's design capacity by 71% to 240,000 tonnes of copper cathode per year and is scheduled for completion in the third quarter of 2000. Norzink Production at Norzink for the quarter was slightly below that achieved during the first quarter of 1999 and similar to that achieved during the fourth quarter of 1999. Production for the second quarter of 2000 will be lower than the first quarter due to a scheduled five day maintenance stop in May. A feasibility study into the possible expansion of the production capacity at Norzink by approximately 80% was begun at the beginning of the year. The study is expected to take approximately 18 months to complete. Fabrication The Company's copper tubing and brass fabrication operations reported operating income of $0.9 million for the quarter, compared with operating income of $1.1 million for the first quarter of 1999 and $1.7 million for the fourth quarter of 1999. EXPLORATION AND DEVELOPMENT Underground drilling of the Simon and Renström Deep zones at the Renström mine and the Einarsson East and West zones at the Kristineberg mine continued to encounter encouraging intersections of economic grade polymetallic mineralization. These diamond drilling programs will continue during 2000. During 1999, the Company reevaluated its extensive geological data base of the Skellefteå mineral district in northern Sweden. This reevaluation resulted in the identification of approximately 150 new drill targets. Drilling of some of these targets in late 1999 led to the discovery of several new semi-massive to massive sulphide mineral environments. A drill program, estimated to cost $3.5 million and consisting of approximately 32,000 metres of surface drilling, will be carried out in 2000 to further test these targets and investigate the discoveries. DIVIDEND ON CONVERTIBLE PREFERRED SHARES On December 17, 1999, the board of directors of the Company decided to postpone payment of dividends on the Company's convertible preferred shares pending completion of the Rönnskär +200 expansion project scheduled for the third quarter of 2000. FINANCING ACTIVITIES Bridge Facility On February 8, 2000, the Company entered into a credit agreement with an international banking syndicate pursuant to which it was entitled to borrow up to an aggregate of $191 million (the Committed Amount), $85 million (Tranche A) of which is available until February 1, 2001 (subject to extension at the option of the lenders) and $106 million (Tranche B) of which is available until February 8, 2002 (Bridge Facility). As part of the compensation paid to the lenders in connection with the Bridge Facility, the Company issued warrants, exercisable until February 8, 2005, to purchase an aggregate of one million common shares at an exercise price of C$4.05 per share. Under the credit agreement, if the Company receives funds (a) under any credit agreement entered into after February 8, 2000, (b) through an issuance of debt or equity securities (including the common share rights offering described below) or (c) through a disposal of assets for cash proceeds (except in the ordinary course of business), then the Committed Amount will be reduced, pro rata between Tranche A and Tranche B, by an amount equal to all or part of the net funds received. The actual amount of the reduction will depend on the Company's liquidity requirements at the time, and as agreed with the lenders. Common Share Rights Offering On March 30, 2000, the Company completed a U.S.$149 million (C$216 million and SEK1.29 billion) common share rights offering to the holders of its common shares and Swedish depository receipts representing common shares (SDRs). The offering was over 97% subscribed. A total of 107,122,402 common shares were issued pursuant to the offering for net proceeds of over $142 million. A portion of the net proceeds of the rights offering will be used to repay the amount outstanding under the Bridge Facility and the balance will be used to fund the completion of the Rönnskär +200 expansion project. The issue of common shares pursuant to the rights offering resulted in an adjustment to the conversion rate of the Company's outstanding convertible preferred shares. Each convertible preferred share is now convertible at the option of the holder into 14.3803 common shares, representing an increase of 3.0167 common shares. The adjusted conversion rate was determined in accordance with the terms of the convertible preferred shares. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS TO FOLLOW NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying unaudited consolidated financial statements should be read in conjunction with the notes to the Company's audited consolidated financial statements for the year ended December 31, 1999. The accompanying unaudited consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the interim periods presented. 2. Los Frailes Incident On April 25, 1998, the tailings dam at the Los Frailes mine owned by the Company's subsidiary, Boliden Apirsa SL (Apirsa), failed releasing acidic water and tailings material into the local environment. The Company recorded a provision of $42.5 million in 1998 to cover Apirsa's estimated loss, net of insurance proceeds, from the tailings dam failure. The legal process currently underway will eventually determine and allocate liability for the damages caused by the tailings dam failure, including the loss suffered by Apirsa. The provision recorded by the Company has been established based upon current estimates of costs, allocation of liability and insurance proceeds. The carrying value of the Company's investment in the Los Frailes mine is approximately $142 million. After consideration of the factors associated with the future of operations at the Los Frailes mine as they presently exist, the Company has decided that it would not be appropriate to write down the carrying value of its investment in the Los Frailes mine. There can be no assurance that the Company will not be required to increase the provision recorded by it or to write off all or part of the carrying value of its investment in the Los Frailes mine. 3. Per Share Information Per share information is based on the weighted average number of common shares outstanding during the first quarter of 2000 (109.3 million: 1999 - 107.0 million). On March 30, 2000, the Company completed a common share rights offering pursuant to which it issued 107.1 million common shares. As at March 31, 2000, there were 217.4 million common shares outstanding. 4. Segmented Data (In thousands of United States dollars) The Company operates principally in three operating segments: mining, smelting and fabrication. The Company's operating income (loss) at each of these operating segments was as follows: Consolida QUARTER tion ENDED adjustmen Fabric Corporate Mar 31, 2000 Mining Smelting ation and other t Total Revenues 98,279 165,045 68,396 4,238 (43,187) 292,771 Operating (16,114) 14,066 890 (5,249) - income (6,407) (loss) QUARTER ENDED Mar 31, 1999 Revenues 70,226 141,059 70,078 5,076 (41,409) 245,030 Operating (22,288) 3,521 1,103 (3,735) - (21,399) income (loss) Intersegment revenues are principally sales from the Company's mines to its smelters, which are recorded at fair market value. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/04/27/20000509BIT00030/bit0001.doc http://www.bit.se/bitonline/2000/04/27/20000509BIT00030/bit0002.pdf