Lundin Mining Corporation

TSX : LUN
OMX : LUMI


Lundin Mining Corporation

December 06, 2012 19:30 ET

Lundin Mining Provides Operating Outlook for 2013-2015

TORONTO, ONTARIO--(Marketwire - Dec. 6, 2012) - Lundin Mining Corporation (TSX:LUN)(OMX:LUMI) ("Lundin Mining" or the "Company") provides the following production guidance for the three-year period of 2013 through 2015. Key highlights are as follows:

  • 2013 to 2015 annual attributable copper production is expected to be in the range of 100-110kt assuming Tenke production remains flat at Phase II expansion nameplate levels.

  • Zinc production is expected to continue to grow progressively year-over-year, as Neves-Corvo zinc production continues to ramp-up and plant modernization initiatives become operative at Zinkgruvan.

  • Lead production is expected to continue to represent a valuable by-product credit for the Company.

  • Aguablanca nickel and copper production forecasts reflect a conservative modified mine plan, pending results of ongoing investigations related to south pit wall instability.

Commenting on the production guidance, Mr. Paul Conibear, President and CEO of Lundin Mining said, "We will continue to strive to optimize performance of our operations, to meet production targets and focus on profitability. Our assets offer attractive, low risk, near-term production growth with only modest capital investment required, maintaining a strong balance sheet to pursue future opportunities."

Production Outlook 2013 - 2015:

2013 2014 2015
Copper: Tonnes Tonnes Tonnes
Neves-Corvo 50,000 - 55,000 50,000 - 55,000 50,000 - 55,000
Zinkgruvan 2,500 - 3,500 2,000 - 3,000 4,000 - 5,000
Aguablanca 4,500 - 5,000 1,000 - 1,500 -
Copper wholly-owned operations 57,000 - 63,500 53,000 - 59,500 54,000 - 60,000
Tenke1 (24%) ~47,000 ~47,000 ~47,000
Total Attributable Copper 104,000 - 110,500 100,000 - 106,500 101,000 - 107,000
Zinc:
Neves-Corvo 45,000 - 50,000 57,000 - 62,000 75,000 - 80,000
Zinkgruvan 73,000 - 78,000 80,000 - 85,000 85,000 - 90,000
Total Zinc 118,000 - 128,000 137,000 - 147,000 160,000 - 170,000
Lead:
Zinkgruvan 33,000 - 36,000 35,000 - 38,000 30,000 - 33,000
Total Lead 33,000 - 36,000 35,000 - 38,000 30,000 - 33,000
Nickel:
Aguablanca 5,000 - 5,500 1,500 - 2,000 -
Total Nickel 5,000 - 5,500 1,500 - 2,000 -
1 Note - Tenke guidance has not yet been provided by operator, Freeport McMoRan Copper and Gold Inc. ("Freeport"). Lundin Mining anticipates production from Tenke in 2013 to be at least Phase II expansion nameplate capacity of 195,000 tpa copper cathode.
  • Neves-Corvo: Copper production is expected to be maintained above 50,000 tonnes per annum with an increasing zinc by-product credit. The zinc plant is expected to operate at full capacity in 2013 and beyond, initially processing approximately 1.0 million tonnes per annum ("Mtpa") of ore, and reaching 125% of nameplate capacity in 2015 with minor investment in plant debottlenecking, to take advantage of higher grade Lombador feed and expected improvements in zinc price. The production forecasts assume that the zinc plant will be used exclusively to process zinc ore over the next three years. This plant has been already proven to have the flexibility to process either zinc or copper ores and therefore the plan may be adjusted going forward in order to optimize the profitability of the operation depending on relative zinc and copper prices, and concentrate customer commitments.

  • Zinkgruvan: Zinc production in 2013 is expected be in line with 2012 and grow in 2014 and 2015 reflecting potential new investment in the front end of the plant to modernize and increase total site processing capacity to approximately 1.5 Mtpa of ore. The copper plant is expected to reach its full throughput capacity of 300,000 tpa in 2015.

  • Aguablanca: The mine has continued to experience south pit wall instability and this has resulted in restricted access to certain areas in the pit. The current production guidance reflects a reduction in the mineable reserve to only those areas not affected by the instability and assumes no additional investment to attempt to recover reserves in the affected area. Revised life of mine plan and reserves remain under evaluation.

  • Tenke Fungurume: 2013 production guidance has not yet been provided by Freeport, the mine's operator. Lundin Mining anticipates production from Tenke in 2013 to be significantly greater than 2012, reflecting completion of the Phase II expansion project to 195,000 tpa of copper cathode (production on a 100%-basis). The three year outlook for Tenke does not reflect potential increases in copper production that could occur from Phase III expansion initiatives which could entail further plant debottlenecking and heap leach investment to fully utilize the 270,000 tpa copper electro-winning capacity that has been installed as part of the Phase II project. The Lundin Mining estimate and comments do not represent the official guidance for the mine which will ultimately be provided by Freeport.

2013 Cash Costs

  • At Neves-Corvo, estimated C1 cash costs for 2013 are expected to approximate $1.80/lb Cu after zinc by-product credits. Improvement on this estimated unit cost could occur if zinc prices are higher than internal assumptions and if increased productivity can be realized from the new continuous underground shift regime and recent projects targeted to improve operational efficiency.

  • At Zinkgruvan, estimated C1 cash costs are expected to approximate $0.20/lb Zn after copper and lead by-product credits. Zinkgruvan is expected to remain one of the lower cost zinc producers for the foreseeable future.

  • Aguablanca C1 cash cost for 2013 is estimated to be $5.00/lb Ni.

  • For Tenke, cash cost guidance will be provided by Freeport in due course.

The 2013 cash cost estimates were calculated using the following metals price and exchange rate assumptions.

Cost Guidance Assumptions $/lb 2013
Copper $3.50
Zinc $0.95
Nickel $8.00
Lead $1.00
EUR/USD 1.30
USD/SEK 6.75

2013 Capital Expenditure Guidance

Capital expenditures for 2013 are expected to be $270 million (compared to an estimated $380 million in 2012) which includes:

  • Sustaining capital in European operations: $110 million, consisting of approximately $70 million for Neves-Corvo and $40 million for Zinkgruvan.

  • New investment capital expenditures in European operations: $70 million, on the basis of:

    • Neves-Corvo Future Future Materials Handling Studies - significant work advanced during 2012 on multiple scenarios to consider potential economic merits of a major re-investment in underground access by a new shaft or large inclined ramp from surface. This new infrastructure would enable access to deeper deposits such as Semblana and lower portions of the Lombador deposits enabling large mine production rates (>5.0 Mtpa) through new underground infrastructure and an expanded zinc processing plant. Results from these multi-year, large investment studies were compared to scenarios to access Semblana and Lombador Phase II mineralization using lower capital cost, lower risk, shorter schedule, lower tonnage approaches consisting of internal ramps from existing underground workings and hoisting up the existing main shaft. Merits of each scenario were found to be particularly sensitive to future zinc price assumptions. Given near term projected zinc prices remain weak, a decision has been made to suspend further new major infrastructure studies for the time being and focus on lower cost internal ramp investment until economic projections for new major underground infrastructure investment are more compelling.

    • 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. Portions of the underground investment for Lombador in 2013 are aimed at advancing greater copper production than previously envisioned taking preference over zinc for better returns. A preliminary economic assessment will also advance in 2013 to assess the exploitation of deeper Lombador copper and zinc mineralization ("Lombador Phase II") using internal ramps and the existing mine hoisting infrastructure. In parallel a study is advancing to assess further de-bottlenecking of the existing shaft

    • Semblana ($8 million) - for engineering studies, drilling and access ramp development. The Semblana deposit lies within the Castro Verde exploration concession, adjacent to the Neves-Corvo mining permits. A preliminary economic assessment study is in progress based on Semblana's current inferred resource to support permitting, discussions with the government on conversion to a mining concession and as a basis for discussions with EDM, the Portuguese state entity that holds an option for a 15% contributing interest in discoveries made on the Castro Verde concessions. Subject to positive outcomes on those discussions it is the Company's intent to aggressively advance the Semblana twin access ramps to support underground infill drilling of the deposit. The main ramp, which commenced development in the first half of this year will facilitate infill drilling access but is sized for production haulage. A parallel ramp has now started to enable faster overall underground drilling access and for future ventilation and production capability.

    • 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 approximately $52 million investment over 20 - 24 months, replacement of the current crushing, screening and grinding circuits would provide a number of advantages including higher plant availability, lower operating costs, improved noise and dust emissions and a significant increase in mine production - all with an economically attractive end result. 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 of the study and permitting progress, investment will proceed in a fast track manner on the zinc plant modernization.

    • Other improvement initiatives ($10 million).

  • Tenke: Assuming substantial completion of the Phase II expansion by year end 2012, we contemplate our share of remaining Phase II expansion costs and sustaining capital funding to be in the range of $90 million 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 cashflows from Tenke to come back to the partners to repay initial capital investments on a 70/30 basis.

2013 Exploration Investment

Exploration expenditures are expected to be in the range of $40 million in 2013 (2012 - estimated at $50 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 high priority 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 75% interest in the Llahuin Project in Chile by investing $35 million in development over 6 years; $6.9 million is expected to be spent in 2013. Other exploration opportunities, particularly in Eastern Europe and the Americas, will be pursued in the year ahead.

About Lundin Mining

Lundin Mining Corporation is a diversified Canadian base metals mining company with operations in Portugal, Sweden, Spain and Ireland, producing copper, zinc, lead and nickel. In addition, Lundin Mining holds a development project pipeline which includes expansion projects at Neves‐Corvo and Zinkgruvan mines along with its 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 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, nickel, lead and zinc; 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.

Contact Information

  • Lundin Mining Corporation
    Sophia Shane
    Investor Relations North America
    +1-604-689-7842

    Lundin Mining Corporation
    John Miniotis
    Senior Business Analyst
    +1-416-342-5565

    Lundin Mining Corporation
    Robert Eriksson
    Investor Relations Sweden
    +46 8 545 015 50
    www.lundinmining.com