Lundin Mining Fourth Quarter and Full Year 2012 Results

TORONTO, ONTARIO--(Marketwire - Feb. 21, 2013) - Lundin Mining Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company") today reported net earnings before impairment charges of $45.0 million ($0.08 per share) for the quarter ended December 31, 2012. Cash flows of $49.4 million were generated from operations during the quarter, not including the Company's attributable cash flows of $39.2 million from Tenke Fungurume.

Paul Conibear, President and CEO, commented, "Our operations continue to consistently perform. Especially pleasing this last quarter was the performance of Zinkgruvan, with record production of zinc, lead and copper in concentrate and maintaining a cash cost of 12 cents per pound of zinc for the quarter and 13 cents per pound for the year.

With the staged commissioning and substantial completion of Tenke's Phase II expansion achieved by year end 2012, we also saw record copper production at Tenke and continue to be very pleased with how this operation is running and the cash flow being generated.

Looking forward, we expect our own mine's aggregate 2013 production and operating costs to be substantially in line with that achieved in 2012, and surplus cash flows from Tenke contributing materially to our balance sheet."

Summary financial results for the quarter and full year:

	Three months ended		Twelve months ended
	December 31		December 31
US$ Millions (except per share amounts)	2012	2011	2012	2011
Sales	176.4	242.1	721.1	783.8
Operating earnings1	51.8	124.3	308.7	381.9
Net (loss) earnings	(17.1)	36.1	123.2	183.8
Net earnings, before impairment2	45.0	71.9	185.3	219.5
Basic (loss) earnings per share	(0.03)	0.06	0.21	0.32
Cash flow from operations	49.4	113.9	194.0	308.7
Ending cash position	275.1	265.4	275.1	265.4

¹ Operating earnings is a non-GAAP measure defined as sales, less operating costs (excluding depreciation) and general and administrative costs.
² Add back of asset impairment expense is net of tax.

Fourth quarter earnings were affected by a non-cash impairment charge of $67.3 million ($62.1 million after-tax) from a write down of mineral properties, plant and equipment and goodwill at the Aguablanca mine. Although the decision regarding the future configuration of the pit is not anticipated until the second quarter of 2013, the Company revalued the assets reflecting a reduction in the mineable reserve to only those areas not affected by pit wall instability and for the time being we assume no additional investment to attempt to recover reserves in the affected area.

Operational Highlights

Wholly-owned operations: The Company's strong and steady performance throughout the year is reflected in the production results which are at the high end of guidance targets.

• Neves-Corvo met its production goals for both zinc and copper. A significant amount of incremental lower grade, but profitable, copper ore was mined, compared to the reserve models, as additional volumes of mineralization on the periphery of stopes was encountered. Near record copper recoveries in the plant were achieved. Cash costs per pound of copper sold were $2.17 for the quarter as a result of the processing of more tonnes of ore at lower grades, and $1.79 for the year.
• Zinkgruvan finished the year with record production of zinc, lead and copper in concentrate and continued to report high recovery performance in the process plant. Zinc, copper and lead grades and plant recoveries met, and in some cases exceeded expectations. Cash costs per pound of zinc sold were $0.12 for the quarter and $0.13 for the year.
• Aguablanca's processing operations were restarted in August, with full production achieved earlier than planned, resulting in higher than expected nickel and copper metal production. Grades mined and plant recoveries for both nickel and copper were slightly better than expected. Cash costs per pound of nickel sold were $6.19 for the quarter, which was the first quarter of full production since mining was suspended in the fourth quarter of 2010.
• Galmoy's mining production from remnant ores exceeded expectations for the year. Although mining ceased in the fourth quarter of 2012, processing of stockpiled ore by a third party processing facility will continue into 2013.

Tenke: Tenke achieved record mining, milling and production rates in 2012 facilitated by the staged commissioning of Phase II expansion facilities. The Phase II expansion is substantially complete, on schedule and on budget.

• By the end of 2012, the expanded facilities were operating near full Phase II design capacity. Fourth quarter production of 44,130 tonnes of copper cathode is 91% of the expanded annual design capacity of 195,000 tonnes per annum copper cathode, on a prorated basis.
• During the year, the Phase II expansion and sustaining capital funding was met almost entirely with cash available from Tenke operations with the exception of a cash call for $15.0 million funded by the Company.
• Attributable operating cash flow related to Tenke for 2012 was $145.9 million.

Financial Highlights

• Operating earnings for the year ended December 31, 2012 were $308.7 million, a decrease of $73.2 million from the $381.9 million reported in 2011. The decrease was primarily attributable to a change in sales mix, as less profitable zinc replaced copper sales in 2012 ($48.0 million), lower realized prices and price adjustments from prior period sales ($39.7 million), higher costs ($10.4 million) and lower overall sales volume ($3.2 million) which more than offset the impact of the favourable exchange rates ($22.3 million) and restart of the Aguablanca operation ($5.8 million).
• For the year ended December 31, 2012, sales of $721.1 million decreased $62.7 million from the prior year ($783.8 million) which was mainly as a result of lower net sales volume ($24.8 million) and lower realized metal prices and prior period price adjustments ($39.7 million). Increased volume of metal concentrate sales at Zinkgruvan and the restart of the Aguablanca mine were more than offset by lower copper sales at Neves-Corvo and overall reduced sales at Galmoy.
• Average London Metal Exchange ("LME") metal prices for copper, zinc, lead and nickel for the year ended December 31, 2012 were significantly lower (10% - 23%) than that of the prior year.
• Operating costs (excluding depreciation) of $385.0 million in the current year were slightly higher than the prior year of $382.0 million. Excluding increased costs from Aguablanca ($18.2 million) associated with restart of production, costs decreased by $15.2 million which is primarily attributable to:
  • Neves-Corvo ($11.5 million): Favourable foreign exchange rate and lower royalty charge, partially offset by higher per unit costs; and
  • Galmoy ($4.4 million): Lower production and cessation of mining operations.
• Net earnings of $123.2 million ($0.21 per share) for the current year were $60.6 million lower than the $183.8 million ($0.32 per share) reported in 2011. Earnings were impacted by:
  • lower operating earnings primarily due to lower sales and lower realized metal prices ($73.2 million)
  • higher impairment loss on write-down of Aguablanca's mineral properties, plant and equipment and goodwill in 2012 compared to 2011 ($31.6 million);
  • higher exploration and business development expenditures ($15.4 million); offset by
  • lower depreciation, depletion and amortization expense ($31.4 million) as a result of lower production at Neves-Corvo and foreign exchange rates; and
  • lower tax expense of $27.6 million, reflecting lower operating earnings and a decrease in Sweden's future tax rate from 26.3% to 22% effective January 1, 2013.
• Cash flow from operations for the year was $194.0 million compared to $308.7 million for 2011. The comparative decrease in the cash flow is mostly attributable to lower operating earnings and changes in working capital.
• Shortly after the restart of production at Aguablanca, the mine encountered pit stability issues on the south wall which restricted access to certain areas of the pit. As the Company continues to assess its options, the mine is operating on a modified mine plan with a mine life of only two years due to restricted access to its ore. This has resulted in a decrease in the value of certain of Aguablanca's assets below their carrying values. Accordingly, the Company has recognized an impairment loss of $39.2 million ($34.0 million after-tax) on mineral properties, plant and equipment and $28.1 million on goodwill.

Tenke Fungurume

• Milling facilities continued to produce above rated capacity, with throughput averaging approximately 13,000 metric tonnes of ore per day during 2012, an estimated 1,900 metric tonnes of ore per day higher than the previous year.
• For the year ended December 31, 2012, Tenke produced 157,671 tonnes of copper and sold 152,355 tonnes at an average realized price of $3.51/lb. In addition, 11,669 tonnes of cobalt in hydroxide was produced and 11,259 tonnes were sold at an average realized price of $7.83/lb of cobalt.
• Cash costs¹ of $1.23/lb of copper for the year were higher than the $1.07/lb reported in the prior year, primarily resulting from lower cobalt credits.
• During the year, $158.9 million was spent on the Company's attributable share of Tenke's capital requirements which was funded by a cash advance of $15.0 million and excess cash flow from operations.

¹ Cash cost/lb of copper are non-GAAP measures defined as all cash costs directly attributable to mining operating, less royalties and by-product credits.

Corporate Highlights

• On September 4, 2012, the Company reported its Mineral Reserve and Resource estimates as at June 30, 2012. The Company also filed independent NI 43-101 compliant technical reports on the Neves-Corvo mine (including the Semblana deposit) and the Zinkgruvan mine in January 2013.
• In December 2012, the Company executed an amendment to its revolving credit agreement that increases the amount of its credit facility to $350 million from $300 million, reducing the costs of borrowing and extending the term of the facility to December 2015.
• In January 2013, the Company, together with its partners in Tenke Fungurume, entered into a definitive agreement to acquire a large scale cobalt chemical refinery in Finland to provide direct end-market access for Tenke's cobalt hydroxide production. See press release entitled, "Lundin Mining, together with Tenke partners, to acquire Kokkola cobalt operations in Finland", dated January 21, 2013.

Financial Position and Financing

• Net cash¹ position at December 31, 2012 was $265.1 million compared to a net cash position of $236.1 million at December 31, 2011.
• The $29.0 million increase in net cash during the year was primarily attributable to cash inflow from operations of $194.0 million, offset by investment in mineral properties, plant and equipment of $159.4 million, a $15.0 million cash advance to Tenke and a full repayment of the Company's commercial paper program ($19.7 million).

¹ Net cash is a Non-GAAP measure defined as available unrestricted cash less long-term debt and finance leases.

Outlook

2013 Production and Cost Guidance

• Production guidance for the three-year period of 2013 through 2015 for wholly-owned operations remains unchanged from the guidance provided on December 6, 2012 (see news release entitled "Lundin Mining Provides Operating Outlook for 2013-2015"). Production and cash cost guidance for 2013 are as follows:

2013 Guidance
(contained tonnes)		Tonnes	C1 Costa
Copper	Neves-Corvo	50,000 - 55,000	$ 1.80
	Zinkgruvan	2,500 - 3,500
	Aguablanca	4,500 - 5,000
	Wholly-owned	57,000 - 63,500
	Tenke(@24%)b	44,650	$ 1.03
	Total attributable	101,650 - 108,150
Zinc	Neves-Corvo	45,000 - 50,000
	Zinkgruvan	73,000 - 78,000	$ 0.20
	Total	118,000 - 128,000
Lead	Zinkgruvan	33,000 - 36,000
Nickel	Aguablanca	5,000 - 5,500	$ 5.00

^a Cash costs remain dependent upon exchange rates (forecast at EUR/USD:1.30, USD/SEK:6.75) and metal prices (forecast at Cu: $3.50, Zn: $0.95, Pb: $1.00,Ni: $8.00, Co: $12.00).
^b Freeport has provided 2013 sales and C1 cash cost guidance. The sales guidance is assumed to approximate Tenke's production.

2013 Capital Expenditure Guidance

Capital expenditures for 2013 are expected to be $285 million (2012: $318.3 million), an increase of $15 million from our previously released estimate of $270 million on December 6, 2012. This increase is primarily attributable to revised forecasts for 2013 capital investments at Tenke. Major capital investments for 2013 are as follows:

• Sustaining capital in European operations - $110 million (2012: $129.5 million), consisting of approximately $70 million for Neves-Corvo and $40 million for Zinkgruvan.
• New investment capital in European operations - $60 million (2012: $29.9 million), consisting of:
  • Lombador Phase I ($30 million) - For underground development, improvements to the main surface substation, installation of surface power cables, and other items related to positioning for increased copper and zinc production from the Lombador ore bodies over the next several years.
  • Neves-Corvo industrial water dam ($9 million) - Work was to have commenced in 2012 on this dam but was delayed until 2013 due to drilling on the Monte Branco copper discovery which lies beneath.
  • Zinkgruvan ore dressing plant ($13 million) - During 2012, a pre-feasibility study was completed showing that with an estimated $52 million investment over a 24 month period, replacement of the current crushing, screening and grinding circuits would result in higher plant availability, lower operating costs, improved noise and dust emissions and an increase in mine production. A feasibility study is advancing with expected completion in the first half of 2013. Permitting of the plant modernization and tailings facility expansion is in progress and, subject to positive results, investment in the zinc plant modernization will be fast tracked.
  • Other improvement initiatives ($8 million).
• New investment in Tenke - $115 million (2012: $158.9 million), estimated by the Company as its share of the remaining Phase II expansion costs and sustaining capital funding for 2013. All of the capital expenditures are expected to be self-funded by cash flow from Tenke operations. If current metal prices and operating conditions prevail, it is reasonable to expect meaningful amounts of excess operating cash flows from Tenke to come back to the funding partners to repay initial capital investments on a 70/30 basis.

Exploration Investment

• Exploration expenditures are expected to be in the range of $40 million in 2013 (2012: $50.9 million). Approximately $18 million of this will be spent at Neves-Corvo where a large drilling program will advance exploration on various targets including the new copper discovery at Monte Branco. An additional $5 million will be spent on several other copper targets in the Iberian Region.
• The Company continues to seek exploration investment opportunities. In November 2012, Lundin Mining signed an Option Agreement with Southern Hemisphere Mining (ASX:SUH) to earn up to a 75% interest in the Llahuin Project in Chile by investing $35 million in development over a period of 6 years; approximately $7 million is expected to be spent in 2013.

About Lundin Mining

Lundin Mining Corporation is a diversified base metals mining company with operations in Portugal, Sweden, Spain and Ireland, producing copper, zinc, lead and nickel. In addition, Lundin Mining holds a 24% equity stake in the world-class Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo.

On Behalf of the Board,

Paul Conibear, President and CEO

Forward-Looking Statements

Certain of the statements made and information contained herein is "forward-looking information" within the meaning of the Ontario Securities Act. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, risks and uncertainties relating to foreign currency fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological formations, ground control problems and flooding; risks associated with the estimation of mineral resources and reserves and the geology, grade and continuity of mineral deposits; the possibility that future exploration, development or mining results will not be consistent with the Company's expectations; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses; commodity price fluctuations; uncertain political and economic environments; changes in laws or policies, foreign taxation, delays or the inability to obtain necessary governmental permits; and other risks and uncertainties, including those described under Risk Factors Relating to the Company's Business in the Company's Annual Information Form and in each management's discussion and analysis. Forward-looking information is, in addition, based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long-term price of copper, zinc, lead and nickel; that the Company can access financing, appropriate equipment and sufficient labour and that the political environment where the Company operates will continue to support the development and operation of mining projects. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements.