MMG Limited (MMG) today reported its full year financial results for the period ended 31 December 2017.
Full year 2017 highlights:
- Net Profit After Tax of US$348.4 million, including US$147.1 million attributable to equity holders of the Company, a US$299.8 million improvement on 2016.
- Net Operating Cash Flow of US$2,369.8 million, an increase of 228% on the prior corresponding period due to the contribution from Las Bambas, higher commodities prices and a strong focus on cash generation.
- MMG’s Net Debt reduced by US$1,452.0 million as a result of increased cash generation. The gearing ratio has reduced from 79% to 74%.
- Balance sheet initiatives to simplify and strengthen MMG’s capital structure will result in annualised interest savings of approximately US$90 million (based on prevailing LIBOR rates) at the consolidated group level.
- Las Bambas produced 453,749 tonnes of copper in copper concentrate in 2017, its first full year of commercial production.
- Dugald River commenced zinc production in the fourth quarter of 2017, with 12,412 tonnes of zinc in zinc concentrate produced as part of commissioning activities. This project is advancing ahead of schedule and below budget with commercial production expected in the first half of 2018.
- Reported EBITDA of US$2,210.0 million included US$178.6 million of pre-tax profit on the divestments of Golden Grove, Century and Avebury in 2017. EBITDA from Continuing Operations was US$2,031.4 million compared with US$949.2 million in 2016.
- Total capital expenditure for 2017 was US$705.3 million, including US$274.7 million for the Dugald River development. We expect full year capital expenditure for 2018 to be between US$550 and US$600 million, including approximately US$50 million for Dugald River completion.
Commentary from Jerry Jiao, Chief Executive Officer
“During 2017, MMG has focused on establishing Las Bambas as one of the world’s largest copper mines and on delivering our latest development project, Dugald River. We have reduced gearing, driven efficiencies and simplified our business.
“We now own and operate a copper and zinc portfolio based in some of the world’s most exciting mining regions.
“We have extracted more value from our assets through improved efficiencies and reductions in corporate and site costs.
“We have developed a strong foundation to grow – we must now deliver even greater value for all of our stakeholders.
“Safety underpins our culture. It remains our most important value, and our highest operating priority.
“While we have made significant progress in improving on safety, tragically in 2017 a colleague, Mr Hilario Castro, lost his life in an accident at Las Bambas. We extend our deepest sympathies and heartfelt condolences to Mr Castro’s family and friends.
“We saw strong reductions in our injury rates across the organisation. Our operations recorded a TRIF of 1.17 for the full year, which represents a 38% reduction on 2016.”
Financial performance and production
“2017 was another milestone year for the Company: we returned to profitability, reduced debt and achieved record production.
“MMG delivered a Net Profit After Tax of US$348.4 million and a Net Operating Cash Flow of US$2,369.8 million due to the contribution from Las Bambas, higher commodities prices and a strong focus on cash generation.
“As a result MMG been able to reduce debt by almost US$1.5 billion.
“We have taken a number of measures to simplify our capital structure, reduce funding costs and establish a strong platform to drive growth and shareholder returns.
“MMG operations produced 598,196 tonnes of copper in 2017 - a record for the company – and has delivered consistent production growth over the last six years. Las Bambas delivered 453,749 tonnes of copper in its first full year of commercial production, and is now firmly established as one of the world’s top 10 copper mines.
“Zinc production commenced at Dugald River, with 12,412 tonnes of zinc in zinc concentrate produced as part of commissioning activities and in total we produced 86,595 tonnes of zinc in 2017, an increase of 7% on 2016.
“The successful initial commissioning of Dugald River has been a remarkable effort, and we remain on track to deliver this project under budget and ahead of schedule.
“2018 annual guidance for the Group is 560,000 – 590,000 tonnes of copper and 190,000 – 220,000 tonnes of zinc.”
Democratic Republic of the Congo Mining Code
“We note with concern the passing of a revised mining Code in February this year, by the Democratic Republic of the Congo parliament.
“The Code has yet to be signed into law and we remain committed to working with all stakeholders to better understand and influence the application of the proposed measures.”
Strategy and growth
“Our objective has not changed – we continue to work towards being valued as one of the world’s top mid-tier miners by 2020 and, in the longer term, as one of the world’s top miners.
“We have established ourselves in key regions - South America, Africa and Australia. They are exciting potential sources of future growth.
“MMG will look for the next opportunity through M&A, exploration and brownfield expansion projects - our focus remains on copper and zinc.
“We have the developed a platform to step into the next phase of disciplined and sustainable growth, and with support from our major shareholder China Minmetals Corporation, we will take a long-term approach to investment.”