Quadra FNX Mining Ltd.
TSX : QUX

Quadra FNX Mining Ltd.

January 24, 2011 08:00 ET

Quadra FNX Announces Fourth Quarter and 2010 Production Results and Provides Guidance for 2011

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 24, 2011) - Quadra FNX Mining Ltd. ("Quadra FNX" or the "Company") (TSX:QUX) is pleased to announce the 2010 fourth quarter and annual production results from its 100% owned mines in the United States, Canada and Chile. Combined production the year-ending December 31, 2010 totaled 224 million pounds of copper, 7 million pounds of nickel and 148 thousand ounces of total precious metals ("TPMs") of which 57 million pounds of copper, 2 million pound of nickel and 39 thousand ounces of TPMs were produced in the fourth quarter.

2010 annual and quarterly production:     
Production   Q1   Q2   Q3   Q4   2010
Copper (Million lbs)                         
Robinson1   32   24   27   27   109
Carlota2   8   7   7   7   29
Franke2   9   10   10   8   37
Podolsky3   3   9   5   8   25
Morrison3   2   4   6   7   19
Levack Complex excluding Morrison3   1   1   1   1   5
Total   55   55   57   57   224
 
TPM (kozs)                    
Robinson1   27   15   15   16   73
Podolsky3   5   12   5   11   33
Morrison3   1   2   3   4   10
Levack Complex excluding Morrison3   8   8   8   8   32
Total   41   37   32   39   148
 
Total Nickel (Million lbs)3   1   2   2   2   7
Note: The table above includes all the historical periods, including the period prior to the merger of Quadra Mining Ltd. and FNX Mining Company Inc. to form Quadra FNX Mining Ltd. on May 20, 2010. The table also includes pre-production ore from the Morrison deposit.
1 Produced in concentrate
2 Produced in cathode
3 Shipped payable metal

The table below highlights the payable metal sales volumes, including the period prior to the merger of Quadra and FNX on May 20, 2010, but excludes sales from the Morrison deposit prior to commercial production. Annual metal sales totaled 220 million pounds of copper, 5 million pounds of nickel and 146 thousand ounces of payable TPMs of which 59 million pounds of payable copper, 2 million pounds of nickel and 36thousand ounces of payable TPMs were sold in the fourth quarter.

2010 annual and quarterly metal sales volumes:
Sales     Q1     Q2     Q3     Q4     2010
Copper (Million lbs)                              
Robinson1     28     27     29     25     108
Carlota2     10     8     7     8     32
Franke2     10     8     13     10     41
Podolsky3     3     9     5     8     25
Morrison3     0     0     2     7     10
Levack Complex excluding Morrison3     1     1     1     1     5
Total     52     52     57     59     220
Copper price at beginning of period ($US/lb)4   $ 3.34   $ 3.56   $ 2.96   $ 3.65   $ 3.34
Copper price at end of period ($US/lb)4   $ 3.56   $ 2.96   $ 3.65   $ 4.40   $ 4.40
 
TPM (kozs)                              
Robinson1     24     20     19     13     75
Podolsky3     5     12     5     11     33
Morrison3     0     0     1     4     6
Levack Complex excluding Morrison3     8     8     8     8     32
Total     37     40     34     36     146
 
Total Nickel (Million lbs)3     1     1     1     2     5
Note: The table above includes sales from the period prior to the merger of Quadra and FNX on May 20, 2010. The table excludes sales from the Morrison deposit prior to commercial production since revenue therefrom was offset against capital expenditures.
1 Sold in concentrate
2 Sold in cathode
3 Sold payable metal
4 The average price used to value provisionally priced copper

US OPERATIONS:

Robinson

At Robinson, production for the year totaled 109 million pounds of copper and 73 thousand ounces of gold in concentrate. During the fourth quarter the mine completed the transition from the Veteran Pit to the Ruth Pit. Production in the fourth quarter was slightly below plan due to severe weather and grade variability and totaled 27 million pounds of copper.

Carlota

Copper production for the year totaled 29 million pounds of cathode. There was no change in percolation rates in the quarter. However, an unusually heavy rainfall in December, specifically 3 inches in 24 hours, while less severe than the January 2010 event, had some impact on plant performance.

CANADIAN OPERATIONS:

Production from the Canadian operations totaled 49 million payable pounds of copper, 7 million pounds of nickel and 75 thousand ounces of TPMs. Production from the Morrison deposit continued to increase during the fourth quarter and the orebody contributed 19 million pounds of payable copper for the year. McCreedy West contributed 5 million pound of payable copper and 32 thousand ounces of TPMs. Plans for mining of Contact Nickel ore from McCreedy West have not progressed. In the fourth quarter Podolsky fully recovered from the ground control issues experienced in the third quarter and contributed 25 million pounds of payable copper and 33 thousand ounces of TPMs for the year.

CHILEAN OPERATIONS:

Franke

Copper production for the year totaled 37 million pounds of cathode and 8 million pounds for the quarter, production in the quarter being impacted by a failure of the secondary crusher in late November and into early December. Optimization of leaching operations continued although consistency in pad recoveries has yet to be fully realized. Further testing is ongoing.

2011 GUIDANCE:

For the 2011 fiscal year Quadra FNX expects consolidated copper production of 240 million pounds +/- 10% of payable copper, plus approximately 115 thousand ounces of payable TPMs and approximately 7 million pounds of payable nickel. The table below outlines a guidance range for each of the operations, with further discussion below.

2011 Production Guidance:

  Payable Copper (Mlbs)
  Low High
Robinson 105 120
Morrison 30 40
Franke 35 45
Carlota 30 35
Podolsky 18 21
Levack Complex excluding Morrison 5 6
     
US OPERATIONS:    

Robinson

The company expects 2011 payable copper production to range between 105 and 120 million pounds, while gold production is expected to decline to approximately 45-50 thousand payable ounces due to lower gold grades at Ruth. The contribution of molybdenum, however, is expected to increase. Key factors to achieving the upper end of the 2011 range are sustaining throughput at 44ktpd and no unexpected adverse events. Note that from 2011 onwards, Robinson's production and guidance will be reported as payable metal rather than as metal in concentrate.

Carlota

In 2010, Quadra FNX established that the high levels of fines identified in the Carlota orebody have resulted in a reduced percolation rate, and a broad range of studies to resolve the issue have been ongoing. Conclusions that have emerged from this work are that agglomeration, fines removal and blending are not viable options. However, test work has shown that conveyor stacking in place of direct truck dumping substantially improves percolation rates. Conveyor stacking using a contractor will be used indefinitely from the second quarter onwards to firm up this concept.

As previously disclosed, the Company currently has a significant amount of recoverable copper stacked on the Carlota leach pads. The existence of fines is affecting the recovery of copper from these pads and studies have also been ongoing to determine the best way to deal with this issue.

CANADIAN OPERATIONS:

Morrison

At Morrison, the Company continues to advance the rehabilitation of the #2 Shaft, as well as the 3600 level loading pocket and related infrastructure. Additional haul truck capacity is expected to allow continued improvement in the ore production rate until the #2 Shaft is fully serviceable at the end of 2011.

Development of the Morrison deposit remains on track with production expected to continue to increase through 2011 and into 2012 and the Company expects 2011 production from Morrison to range between 30 and 40 million pounds of payable copper, approximately 20-25 thousand ounces of payable TPMs and approximately 5 million pounds of payable nickel. Quadra FNX's ability to attain the upper end of the production range is mainly dependent on maximizing utilization of the internal ramp system and the successful commissioning of the backfill system. Completion of the shaft rehabilitation is expected to allow the production rate to be increased to over 45million payable pounds of copper.

Podolsky

Quadra FNX expect 2011 production from Podolsky to range between 18 and 21 million pounds of payable copper and approximately 20-25 thousand ounces of payable TPMs and about 1 million pounds of payable nickel. In 2011 increased focus will also be placed on exploration with the aim of improving the reserve base.

Other Sudbury Operations

Quadra FNX currently expect 2011 production at McCreedy West mine to be limited to the copper-rich footwall zones to be approximately 5-6 million pounds of payable copper plus approximately 25-30 thousand ounces of payable TPMs and approximately 1 million pounds of payable nickel. Contact Nickel ore mining plans currently remain on hold.

CHILEAN OPERATIONS:

Franke

As previously disclosed, the Company has been adjusting the leach operating parameters including, changing the crush size, reducing the lift height, increasing the leach pad area, and increasing solution application rates in an effort to improve recoveries. These changes have proven beneficial and will continue along with other optimizations, but steady-state recovery levels are yet to be achieved.

The new stacker, which was delivered in November had a significant structural design defect which is being addressed. The operation is confident that it can sustain its throughput objectives with its existing equipment on an interim basis. Based on the current throughput and recoveries Quadra FNX expects 2011 production from Franke would total approximately 35 pounds of copper cathode while further improvements to stacking volumes and recoveries could increase copper production to the 45 million pound range. A portion of our employees at Franke have recently formed a union, and first contract negotiations are ongoing.

2011 Operating Costs

With the exception of Robinson and Morrison, onsite plus offsite costs in 2011 are expected to remain in line with those of 2010. Operating costs are expected to be higher at Robinson mainly as a result of the higher expense related to the removal of mud from the bottom of the Ruth Pit, which is expected to contribute an additional $15-$20 million costs in the first half of 2011. As a result of higher volume of material mined, operating costs are also expected to increase at Morrison. Assuming the Company's production range and current input assumptions, 2011 onsite plus offsite costs are Morrison are expected to be in the $70 to $80 million range.

2011 Capital Expenditure Guidance

Capital expenditures for the year are expected to be approximately $140 million which includes approximately $50 million for development of the Morrison deposit. Not included in this are expenditures on Victoria or Sierra Gorda.

Paul Blythe, President & CEO comments; "2011 will be the first year of full operation of Quadra FNX as a consolidated company. We enter the year with a strong cash position, following the sale of our Gold Wheaton shares. Our focus in 2011 will be on continuous improvement of the performance of our open pit operations as well as increasing output at our low-cost Morrison deposit. While we continue to make progress on resolving the issues at our heap-leach open pit operations including Carlota, these are learn-and-adapt developments. We will also continue to drive forward on our Victoria discovery, which will remains a key option for improving our production profile and longevity in the Sudbury Basin. We are currently in the process of completing the internal Financing Study for Sierra Gorda, on track for the end of the first quarter of 2011. In conjunction with this, partnership discussions are ongoing and progressing well."

The 2010 fourth quarter financial results will be announced prior to market open on Monday, February 28th, 2011. Dial in details of the accompanying conference call will be issued under separate press release.

About Quadra FNX Mining Ltd. (TSX:QUX)

Quadra FNX Mining Ltd. is a leading mid-tier copper mining company with corporate offices in Vancouver, B.C. and Toronto, Ontario. Quadra FNX produces copper and platinum group metals from its operating mines: Robinson in Nevada, Carlota in Arizona, Franke in northern Chile, and McCreedy West, Levack, which includes Morrison, and Podolsky in Sudbury, Ontario. The Company possesses several advanced development projects, including the Sierra Gorda copper-molybdenum project in Chile, the Malmbjerg molybdenum development project in Greenland and the Victoria project, an advanced exploration project in Sudbury. Quadra FNX employs approximately 1,650 people in North and South America.

FORWARD-LOOKING INFORMATION

This Press Release contains "forward-looking information" that is based on Quadra FNX's expectations, estimates and projections as of the dates as of which those statements were made. This forward-looking information includes, among other things, statements with respect to the Company's business strategy, plans, outlook, financing plans, long-term growth in cash flow, earnings per share and shareholder value, projections, targets and expectations as to reserves, resources, results of exploration (including targets) and related expenses, property acquisitions, mine development, mine operations, mine production costs, drilling activity, sampling and other data, estimating grade levels, future recovery levels, future production levels, capital costs, costs savings, cash and total costs of production of copper, gold and other minerals, expenditures for environmental matters, projected life of Quadra FNX's mines, reclamation and other post closure obligations and estimated future expenditures for those matters, completion dates for the various development stages of mines, availability of water for milling and mining, future copper, gold, molybdenum and other mineral prices (including the long-term estimated prices used in calculating Quadra FNX's mineral reserves), end-use demand for copper, currency exchange rates, debt reductions, use of future tax assets, timing of expected sales and final pricing of concentrate sales, the percentage of anticipated production covered by option contracts or agreements, anticipated outcome of litigation and anticipated impact of converting to IFRS. Generally, this forward-looking information can be identified by the use of forward-looking terminology such as "outlook", "anticipate", "project", "target", "believe", "estimate", "expect", "intend", "should", "scheduled", "will", "plan" and similar expressions. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause Quadra FNX's actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, and developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to:

  • risks associated with the mineralogy and block model assumptions at all mines and projects including, in particular the complex Robinson mine;
  • uncertainties related to the extent to which historical mining activities at Robinson have removed mineral material expected to be present;
  • uncertainties related to the impact of the recent storm event at the Carlota Mine and uncertainty relating to the leaching rate achieved at Carlota;
  • risks related to maintaining current operating parameters at Podolsky;
  • uncertainties related to actual capital costs, operating costs, production schedules and economic returns associated with the ramp-up of the Morrison deposit;
  • risks associated with Quadra FNX's off-take agreement with Vale Inco, including the risk of potential adjustment to final payable metal and processing cost terms;
  • uncertainties relating to availability of updated equipment for Franke and the leach recovery rate achieved at Franke;
  • uncertainties related to the construction quality and structural design at Franke;
  • risks relating to the performance of the mining contractor at Franke;
  • risks associated with the development of the Sierra Gorda project, a large project with significant capital expenditure, permitting and infrastructure requirements;
  • risks relating to the preliminary nature of the testwork underlying the scoping study described in the Sierra Gorda Technical Report;
  • risks associating with ongoing litigation at Sierra Gorda and with potential future litigation at Sierra Gorda and other projects;
  • risks relating to Quadra FNX's ability to find a suitable partner or obtain project financing for Sierra Gorda;
  • uncertainties related to the amount of funding required to achieve full production levels at Franke and Carlota and at the Morrison deposit;
  • uncertainties related to Quadra FNX's ability to expand or replace depleted reserves;
  • uncertainties related to the possible recalculation or reduction of the Company's mineral reserves and resources;
  • risks that Quadra FNX's title to its property could be challenged, including potential challenges from First Nations with respect to the Sudbury operations;
  • risks associated with Quadra FNX's dependence on transportation facilities and infrastructure;
  • risk associated with labour relations;
  • risks related to Quadra FNX's shareholder rights plan;
  • risk related to derivative contracts and exposure to the credit risk of counterparties;
  • risks associated with taxation;
  • conflicts of interest;
  • risks associated with fluctuations in costs of operating supplies and other inputs;
  • uncertainties related to actual capital costs, operating costs and expenditures, production schedules and economic returns from the Company's mining projects;
  • inherent hazards and risks associated with mining operations;
  • inherent uncertainties associated with mineral exploration;
  • risks associated with Quadra FNX being subject to government regulation, including changes in regulation;
  • risks associated with Quadra FNX being subject to extensive environmental laws and regulations, including change in regulation;
  • risks associated with Quadra FNX's need for governmental license and permits;
  • political and country risk;
  • Quadra FNX's need to attract and retain qualified personnel;
  • risks related to the need for reclamation activities on Quadra FNX's properties, including the nature of reclamation required and uncertainty of costs estimates related thereto;
  • risk of water shortages and risks associated with competition for water;
  • increases in off-site transportation and concentrate processing costs;
  • risks related to the stability of mine pit walls;
  • uncertainties related to fluctuations in copper and other metal prices;
  • uncertainties related to the current global financial conditions; and
  • uncertainties related to fluctuation in foreign currency exchange rates.

A discussion of these and other factors that may affect Quadra FNX's actual results, performance, achievements or financial position is contained in the filings by Quadra FNX with the Canadian provincial securities regulatory authorities, including Quadra FNX's Annual Information Form and the Annual Information Form filed by FNX prior to the merger between Quadra and FNX. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to the continued operation of Quadra FNX's mining operations, no material adverse change in the market price of commodities, that the mining operations will operate in accordance with Quadra FNX's public statements and achieve its stated production outcomes, and such other assumptions and factors as set out herein. Although Quadra FNX has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements. Quadra FNX disclaims any intent or obligations to update or revise publicly any forward-looking statements whether as a result of new information, estimates or options, future events or results or otherwise, unless required to do so by law.

Contact Information

  • Media and Investor Relations Contact:
    Quadra FNX Mining Ltd.
    Derek White
    Executive Vice President, Corporate Development
    604-807-7555
    or
    Quadra FNX Mining Ltd.
    Nawojka Wachowiak
    Vice President, Investor Relations
    416-642-9209