Emerging copper major and positioned for the upside

MMG Limited (MMG) (Stock Code 1208.HK) today reported its full year results for the period ended 31 December 2015.

Key points

• First copper from commissioning activities achieved at Las Bambas with first shipment to customers of approximately 10,000 tonnes of copper concentrate in January 2016. Project construction is essentially complete with MMG expecting to produce 250,000–300,000 tonnes of copper in concentrate in 2016.
• Revenue down US$528.9 million or 21% on 2014 to US$1,950.9 million. Record copper production offset by lower average realised prices. Average realised prices for copper and zinc 20% and 11% lower respectively.
• Record copper sales volumes due to outstanding production performance at Kinsevere and Sepon.
• Zinc sales volumes 12% lower due to Century processing final ore in November 2015, marginally offset by zinc-focused production at Golden Grove.
• Operating expenses down US$178.1 million including US$114.3 million benefit from weaker Australian dollar exchange rate. Cost reductions include a US$30.6 million reduction in exploration expenses and a US$20.7 million reduction in administration expenses.
• Cashflow from operating activities of US$282.4 million demonstrates ability to deliver continued operational efficiencies.
• Underlying loss (after tax) of US$264.4 million due to lower average realised prices for all commodities and an increase to Century’s 2014 mine rehabilitation provision of US$146.3 million.
• Non-cash impairment net of tax of US$784.3 million to asset accounting carrying values, primarily as a result of commodity price movements, resulting in a full year loss of US$1,048.7 million (after tax).
• Appointment of Mr Ross Carroll as Chief Financial Officer and member of the Executive Committee of the Company. 
• The Board does not recommend the payment of a final dividend for the year ended 31 December 2015.

Commentary from Andrew Michelmore, Chief Executive Officer:

“Amongst continued market volatility and subdued commodity prices, MMG pursued its vision to build the world’s most respected diversified base metals company.

“Our people demonstrated their resilience and focus on safety, production volume and costs while we delivered the world’s next major copper mine, Las Bambas.

Safety

Safety is our most important value.  In 2015 we achieved a reduction in injuries to our employees, contractors and communities. In 2015 our Total Recordable Injury Frequency (TRIF) was 2.1 per million hours worked including Las Bambas operations. This was an improvement on the TRIF of 2.3 reported for MMG operations excluding Las Bambas at the end of 2014.

We are embedding a safety-first mindset to ensure that supporting behaviour, culture and processes are in place across every site and in every area of our operations.

Financial performance

Solid revenue of US$1,950.9 million was achieved primarily as a result of strong copper production. Total copper sales were 2% higher than in 2014 due to outstanding production from Kinsevere and Sepon.

Earnings Before Interest, Tax, Depreciation, Amortisation and Impairments (EBITDA) was US$420.9 million with an EBITDA margin of 22% as a result of strong cash generation from operations. 

Market conditions and lower realised prices for key commodities impacted profit in 2015. This, combined with an increase to the Century mine rehabilitation provision, resulted in an underlying after tax loss of US$264.4 million. An additional US$784.3 million non-cash impairment net of tax to asset values as a result of commodity price movements and goodwill revaluations resulted in a full year loss of US$1,048.7 million.

However, we continued to manage the key drivers that are in our own hands – operational productivity and cost.

Our operating expenses decreased 12% or US$178.1 million compared to the same period 2014. While we maintain our focus on cost efficiency across all operations, $114.3 million of the decrease was driven by a favourable Australian dollar exchange rate.

We achieved positive cash generation of US$282.4 million from operations in Australia, Laos and the Democratic Republic of Congo (DRC) in 2015. This was a result of tight cost controls and our focus on asset utilisation and operational efficiency.

Production

In 2015, all operations met or exceeded production guidance. Outstanding copper production was achieved across the Group with highlights from our copper cathode production facilities. Kinsevere set a new record of 80,169 tonnes and Sepon beat guidance with 89,253 tonnes. These results led to a 2% increase in total copper sales volumes compared to 2014.

Century operations exceeded production guidance for both zinc and lead for the year, despite the end of open pit mining at Century.

Our Rosebery underground polymetallic mine recorded a 10% increase in zinc production, a record, as it celebrated 80 years of continuous operation.

However, due to the processing of Century’s final variable and lower grade zinc ore in November, overall zinc sales volumes were 12% lower than the previous year, marginally offset by zinc focused production at Golden Grove.

Copper production began at Las Bambas in the fourth quarter of 2015 with 9,121 tonnes of copper in copper concentrate produced as part of commissioning activities. This was an important milestone for commissioning the project, with construction now essentially complete.

MMG announced 2016 Las Bambas production guidance of 250,000-300,000 tonnes of copper in concentrate in January.

2016 annual guidance for the Group is 415,000 – 477,000₁  tonnes of copper and 120,000 – 135,000 tonnes of zinc.

Strategy

Our confidence in the long-term fundamentals of our core commodities, copper and zinc, remains intact.

We believe increasing supply side constraints will converge with consumption demand. With the strategic insight and financial support of our major shareholder, China Minmetals Corporation (CMC), we are well positioned to maximise potential down cycle opportunities.

We remain committed to generating maximum value from our assets by challenging ourselves to achieve further operational efficiencies – through the optimisation of assets and careful capital allocation.

The current market environment will continue to pose challenges but also provide significant opportunities.
With MMG’s operational track record, and the support of our major shareholder, we are well-placed to emerge from this period as a globally significant base metals producer.”

Andrew Michelmore
Chief Executive Officer

-Ends-

Media enquiries

Sally Cox
General Manager Corporate Affairs
T +61 3 9288 0850
M + 61 417 144 524
E sally.cox@mmg.com

Andrea Atell
Group Manager Corporate Affairs
T (61) +613 9288 0758
M (61) +476 830 491
andrea.atell@mmg.com

Investor enquiries

Peter Budd
Investor Relations
T + 61 3 9284 4711
M + 61 434 434 291
E peter.budd@mmg.com

Chinese language

Christine Chan
T +852 2801 6090
M +852 6173 9039
E christine@corporatelink.com.hk

Downloads

• 2015 Annual Results Presentation – FINAL (PDF 2mb)