Lundin Mining First Quarter Results

April 29, 2014

TORONTO, ONTARIO–(Marketwired - April 29, 2014) - Lundin Mining Corporation (TSX:LUN)(OMX:LUMI) (“Lundin Mining” or the “Company”) today reported net earnings of $13.3 million ($0.02 per share) for the quarter ended March 31, 2014. Cash flows of $27.5 million were generated from operations in the quarter, not including the Company’s attributable cash flows from Tenke Fungurume.

Paul Conibear, President and CEO commented, “This year remains an exciting year for the Company as we prepare to bring the high grade Eagle nickel/copper mine into production. We are pleased that Eagle continues to remain on time and budget with first saleable concentrate expected in the fourth quarter of 2014. During the first quarter, production at our operations was generally in-line with expectations, however unit costs in some areas were higher than our annual average cost guidance. Mine performance improved as the quarter advanced and we maintain our annual production and cost guidance.”

Summary financial results for the quarter:
  Three months ended
  March 31
US$ Millions (except per share amounts) 2014 2013
Sales 149.9   188.2
Operating earnings1 43.1   68.1
Net earnings 13.3   50.1
Basic earnings per share 0.02   0.09
Cash flow from operations 27.5   45.8
Ending net (debt) / cash position (148.3 ) 199.4

Operational Highlights

Wholly-owned operations: Copper, nickel, and lead production all exceeded expectations, while zinc production was in-line with targeted production. Higher throughput at Neves-Corvo and Aguablanca resulted in better than expected copper and nickel production, respectively, while significantly higher lead grades at Zinkgruvan resulted in lead production exceeding expectations.

  • Neves-Corvo produced 12,765 tonnes of copper and 14,228 tonnes of zinc in the first quarter of 2014. Production from the Lombador ore body resulted in a 39% increase in zinc production over the comparable period in the prior year. Higher copper ore throughput was more than offset by lower head grades and recoveries resulting in lower copper production compared with the first quarter of 2013, but was in-line with the mine plan for the first quarter of 2014. Copper cash costs2of $2.10/lb for the quarter were higher than guidance ($1.90/lb) due primarily to unfavourable foreign exchange rates and secondarily due to lower grades and recoveries than we expect as yearly averages.
  • Zinc production of 19,239 tonnes at Zinkgruvan met expectations and was 23% higher than the comparable period in 2013, largely as a result of increased levels of mining and milling of zinc ore and improved head grades. Lead production of 9,133 tonnes exceeded expectations and presents an increase of 39% over the comparable period in 2013. Cash costs for zinc of $0.45/lb were higher than guidance ($0.35/lb) mostly due to higher levels of by-product inventory at period-end.
  • Aguablanca continued to display strong operational performance, with current quarter production of 1,980 tonnes of nickel and 1,652 tonnes of copper. This exceeded both expectations for the first quarter of 2014 and production levels of the prior year comparable period. Lower mining costs resulted in cash costs of $2.98/lb of nickel for the quarter, also below both guidance of $4.50/lb and the prior year quarter ($4.66/lb).

1 Operating earnings is a non-GAAP measure defined as sales, less operating costs (excluding depreciation) and general and administrative costs.

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

Tenke: Tenke operations continue to perform well.

  • Lundin’s attributable share of first quarter production included 11,871 tonnes of copper cathode and 713 tonnes of cobalt in hydroxide. The Company’s attributable share of Tenke’s sales included 9,168 tonnes of copper at an average realized price of $3.07/lb and 872 tonnes of cobalt at an average realized price of $9.21/lb.
  • Attributable operating cash flow from Tenke for the first quarter of 2014 was $27.7 million. Cash distributions received by Lundin Mining in the quarter were $16.7 million, lower than expected due to timing of shipments and lower copper price.
  • Operating cash costs for the first quarter of 2014 were $0.89/lb of copper sold, better than the revised full year guidance of $1.22/lb and prior year’s cost of $1.23/lb for the first quarter of 2013.

Eagle Nickel/Copper Project: advancing on time, on budget.

  • There are approximately 700 people currently working at the mine and mill, including contractors. All of the major equipment has been delivered and is in an advanced stage of installation. As of March 31, 2014, construction is progressing as planned at 79% project completion.
  • Capital costs are on budget, expecting to come in at the original forecast of $400 million from the date of acquisition. $160 million has been spent since that time, of which $62 million was spent in the first quarter of 2014. The majority of remaining costs to complete construction are within fixed price contracts.
  • Operations hiring is well advanced with all key positions filled.
  • Mine area facility commissioning has started and mill commissioning is expected to start in the third quarter of 2014. Eagle is on track to ship first saleable copper and nickel concentrates in the fourth quarter of 2014. Ore processing and concentrate production are expected to reach full design rates in the second quarter of 2015.

Financial Performance

  • Operating earnings for the first quarter of 2014 were $43.1 million, a decrease of $25.0 million from the $68.1 million reported in the comparable quarter of 2013. The decrease was primarily attributable to lower realized metal prices ($14.8 million) and lower sales volumes at Neves-Corvo and Aguablanca ($10.0 million).
  • For the quarter ended March 31, 2014, sales of $149.9 million decreased by $38.3 million from the first quarter of the prior year ($188.2 million) mainly due to lower realized metal prices and lower nickel and copper sales than in the prior year first quarter. Increased zinc and lead volumes were not enough to offset the decrease in nickel and copper sales volumes.
  • Average London Metal Exchange (“LME”) metal prices for copper, lead and nickel for the quarter ended March 31, 2014 were lower (11%, 8% and 15%, respectively) than that of the comparable quarter in the prior year, while zinc prices remained flat.
  • Operating costs (excluding depreciation) of $100.2 million in the current quarter were lower than the prior year comparative quarter ($113.5 million) primarily as a result of decreased sales volumes at Neves-Corvo and Aguablanca, partially offset by increased sales volumes at Zinkgruvan and unfavourable foreign exchange rates.
  • Net earnings of $13.3 million ($0.02 per share) for the three months ended March 31, 2014 were $36.8 million lower than the $50.1 million ($0.09 per share) reported for corresponding quarter in the prior year. Earnings were impacted by:
    • lower operating earnings primarily due to lower realized metal prices and lower sales volumes ($25.0 million);
    • lower income from equity investment in Tenke Fungurume ($12.9 million); and
    • no contribution from insurance proceeds as compared to the $15.1 million in insurance proceeds for business interruption at the Aguablanca mine received in the first quarter of 2013; partially offset by
    • higher net tax recovery ($12.5 million), primarily as a result of lower taxable income
  • Cash flow from operations for the current quarter was $27.5 million compared to $45.8 million in the first quarter of 2013. The comparative decrease in the cash flow is attributable to lower operating earnings in the current quarter.

Financial Position and Financing

  • Net debt position at March 31, 2014 was $148.3 million compared to $112.1 million at December 31, 2013.
  • The $36.2 million increase in net debt during the quarter was attributable to investments in mineral properties, plant and equipment of $92.4 million, primarily the development of the Eagle project, partially offset by operating cash flows of $27.5 million, distributions from Tenke of $16.7 million and $10.8 million reduction in restricted funds.
  • The Company has corporate term and revolving debt facilities available for borrowing up to $600 million. At March 31, 2014 the Company had $262.3 million committed against these facilities, leaving debt capacity of $337.7 million available for future drawdowns.


2014 Production and Cost Guidance

  • 2014 production and cash cost guidance for wholly-owned operations remains unchanged from that provided on February 20, 2014 in the Company’s annual MD&A. Freeport-McMoRan Copper & Gold Inc.’s (“Freeport”, or “FCX”) forecast copper production at Tenke of 47,900 tonnes is down slightly from the 48,400 tonnes previously guided. Tenke’s full year cash cost is expected to be lower than guided earlier (now $1.22/lb versus previous guidance of $1.28/lb of copper), largely as a result of higher realized cobalt prices. Given its performance year-to-date, Aguablanca’s nickel and copper production are expected to be at the top end of the guidance range. Aguablanca’s production and cash cost guidance will be re-assessed mid-year.
(contained tonnes) Tonnes Cash Costsa
Copper Neves-Corvo 50,000 - 55,000 $1.90/lb
  Zinkgruvan 3,000 - 4,000  
  Aguablanca 5,000 - 6,000  
  Eagle 2,000 - 3,000  
  Wholly-owned 60,000 - 68,000  
  Tenke(@24%)b 47,900 $1.22/lb
  Total attributable 107,900 - 115,900  
Zinc Neves-Corvo 60,000 - 65,000  
  Zinkgruvan 75,000 - 80,000 $0.35/lb
  Total 135,000 - 145,000  
Lead Neves-Corvo 2,000 - 2,500  
  Zinkgruvan 27,000 - 30,000  
  Total 29,000 - 32,500  
Nickel Aguablanca 6,000 - 7,000 $4.50/lb
  Eagle 2,000 - 3,000  
  Total 8,000 - 10,000  
a   Cash costs remain dependent upon exchange rates (forecast at EUR/USD:1.35, USD/SEK:6.50) and metal prices (forecast at Cu: $3.15/lb, Zn: $0.90/lb, Pb: $0.95/lb, Ni: $6.50/lb, Co: $12.00/lb). Prior guidance forecast EUR/USD at 1.30, Zn at $0.87/lb and Pb at $1.00/lb.
b   Freeport has provided updated 2014 sales and cash costs guidance. Tenke’s 2014 production is assumed to approximate Freeport’s sales guidance.

2014 Capital Expenditure Guidance

Capital expenditures for 2014 are expected to be $440 million (including Eagle, but excluding Tenke), a $20 million reduction from previous guidance. Major capital investments for 2014 are as follows:

  • Sustaining capital in European operations - $100 million, consisting of approximately $55 million for Neves-Corvo, $40 million for Zinkgruvan and $5 million across other sites.
  • New investment capital in European operations - $40 million (previous guidance - $60 million), consisting of:
    • Lombador - $25 million (previous guidance - $44 million): For underground vertical and horizontal development and associated mine infrastructure related to the development of the upper Lombador ore bodies for future high grade zinc and copper production. Redesign and optimization of development has allowed for a combination of cost savings and the deferral of certain expenditures into 2015.
    • Neves-Corvo zinc plant debottlenecking and zinc expansion studies - $5 million: For the installation of a zinc tailings recovery circuit, zinc expansion feasibility studies and Santa Barbara hoisting shaft capacity increase design work.
    • Aguablanca underground mining project - $10 million: For ramp and initial ore body development and the installation of associated mine infrastructure.
  • New investment in Eagle project - $300 million, to complete construction of the Humboldt mill and Eagle mine.
  • New investment in Tenke - $50 million, estimated by the Company as its share of the remaining Phase II expansion costs, other expansion related initiatives and sustaining capital funding for 2014. All of the capital expenditures are expected to be self-funded by cash flow from Tenke operations.

    The Company believes it is reasonable to expect Lundin’s attributable cash distributions from Tenke to be in the range of $100 to $130 million in 2014, below previous guidance due to lower copper prices. Guidance will be updated again at the end of the second quarter reflecting copper price trends and expectations for the balance of the year.

2014 Exploration Guidance

  • Total exploration expenses for 2014 (excluding Tenke) are estimated to be $35 million, $5 million less than prior guidance. These expenditures will be principally directed towards underground and surface mine exploration at Neves-Corvo, Zinkgruvan and Eagle, select greenfield exploration programs and new business development activities in South America and Eastern Europe.

About Lundin Mining

Lundin Mining Corporation is a diversified Canadian base metals mining company with operations and development projects in Portugal, Sweden and Spain and the USA, 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 and in the Freeport Cobalt Oy business, which includes a cobalt refinery located in Kokkola, Finland.

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. This report includes, but is not limited to, forward looking statements with respect to the Company’s estimated full year metal production, cash costs, exploration expenditures, and capital expenditures, as noted in the Outlook section and elsewhere in this document. These estimates and other forward-looking statements are based on a number of assumptions and 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 the estimated cash costs, timing and amount of production from the Eagle project, cost estimates for the Eagle project, 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; litigation risks; and other risks and uncertainties, including those described in the Risk and Uncertainties section of the Company’s Annual Information Form and in each Management’s Discussion and Analysis. Forward-looking information may also be based on other 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 the forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements.



Lundin Mining Corporation
Sophia Shane
Investor Relations North America

Lundin Mining Corporation
John Miniotis
Senior Manager, Corporate Development and Investor Relations

Lundin Mining Corporation
Robert Eriksson
Investor Relations Sweden
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