Lundin Mining Reports Third Quarter Results

TORONTO, ONTARIO–(Marketwire - Oct. 24, 2012) - Lundin Mining Corporation (“Lundin Mining” or the “Company”) (TSX:LUN)(OMX:LUMI) today reported net earnings of $37.9 million ($0.07 per share) for the three months ended September 30, 2012 compared to $16.4 million ($0.03 per share) for the three months ended September 30, 2011.

Sales volumes in the current quarter were directly impacted by labour action of dock workers in Portugal and Sweden resulting in lower sales volumes than the prior quarter, with the offsetting positive impact to be realized in the fourth quarter. Unit cash costs¹of $1.87/lb for copper were in line with expectations after taking into account planned maintenance, and were much lower than the $2.35/lb realized the third quarter of 2011. Unit cash costs for zinc were $0.08/lb for the quarter compared to $0.13/lb in the third quarter of last year.

Paul Conibear, President and CEO, commented, “Our operations performed well this quarter, building on the production increases of the past two quarters of 2012. The Company continues to expect to deliver a strong fourth quarter operationally, with production from all metals now anticipated to be near the high-end of our guidance ranges.

In addition, we continue to be very pleased with the performance at Tenke. For the quarter, production at Tenke achieved another all-time record high for both copper and cobalt, while the Phase II Expansion Project remains on budget and is expected to be substantially completed by year end.

The sustained execution by our operating teams continues to underpin our ability to add value by consistently achieving strong operational performance at all of our mines.”

Operational Highlights

Wholly-owned operations: The Company continued to perform well in the third quarter with production and operational results that were in line with expectations. Financial results for the quarter were affected by labour action by dock workers in Portugal and Sweden. This resulted in a disruption to concentrate shipments in the latter part of September and some of the quarter’s sales were pushed into the fourth quarter.

• Operational improvements, on target grades, good copper recoveries and out of reserve mining continued to assist Neves-Corvo metal production. 
• Zinkgruvan experienced another quarter of high zinc and lead head grades resulting in higher metal production than last year; grades are expected to return to historical levels in the fourth quarter. 
• Aguablanca recommenced production in August 2012, ahead of schedule, with ramp up towards full production expected in the fourth quarter. The Company continues to monitor new south pit wall stability issues and is taking additional measures to secure areas deemed to be higher risk.

Tenke: The mine and mill continue to perform very well, achieving record mining, milling and copper production rates. Construction activities on the Phase II expansion are expected to be on budget and substantially completed by the end of 2012; currently, the expansion is approximately 90% complete. The addition of a second sulphuric acid plant is expected to be completed in 2015.

• A combination of the higher mining rate due to additional mine equipment and the increase in mill throughput from the ramp-up of parts of the Phase II expanded facilities (including the new jaw crusher which was completed ahead of schedule), resulted in production being higher than expected. 
• Cobalt production was in line with expectations. 
• A cash call for $15.0 million was funded by the Company during the quarter to cover sustaining capital, on-going concession exploration and expansion initiatives. If copper prices remain strong, surplus cash from Tenke operations should be sufficient to cover the Company’s share of capital and non-capital requirements for the remainder of the year.

1. Lundin Mining’s attributable share of Tenke’s production was reduced from 24.75% to 24.0% effective March 26, 2012, when changes to bylaws of Tenke Fungurume Mining (“TFM”) were signed.

Financial Highlights

• Operating earnings for the third quarter of 2012 were $71.1 million, an increase of $17.3 million from the $53.8 million reported in the comparable quarter of 2011. The increase was largely attributable to lower per unit production costs ($10.4 million) and favourable foreign exchange rates ($6.0 million).
  
  On a year-to-date basis, operating earnings of $256.9 million were in line with the $257.6 million reported for the first nine months of 2011. The $0.7 million decrease in operating earnings was mainly attributable to lower realized metal prices for current period sales ($62.4 million), partially offset by prior period price adjustments ($14.9 million), lower costs ($21.4 million) and favourable effects of foreign exchange ($20.3 million).

• For the quarter ended September 30, 2012, sales of $159.6 million increased $13.4 million over the prior year ($146.2 million) which was mainly as a result of higher sales volume ($5.9 million), higher realized metal prices for current quarter sales ($5.4 million) and positive prior period price adjustments ($2.1 million). The increase in volume from the restart of the Aguablanca mine was partially offset by a stevedore strike in Portugal which prevented the loading and shipment of concentrate, leaving approximately 11,000 dry metric tonnes (“dmt”) of copper concentrate in inventory at the end of the period.
  
  Sales of $544.6 million for the nine months ended September 30, 2012 were in line with the comparable period in 2011 ($541.7 million). Lower realized metal prices ($62.4 million) were more than offset by the effects of higher sales volume ($50.4 million) and prior period price adjustments ($14.9 million).

• Average metal prices for copper, zinc and lead for the three and nine months ended September 30, 2012 were significantly lower (14% - 27%) than the same periods in the prior year. 
• Operating costs (excluding depreciation) of $82.3 million in the current quarter were slightly lower than the prior year comparative quarter of $88.2 million as a result of lower per unit production costs and positive foreign exchange impacts at both Neves-Corvo and Zinkgruvan.
  
  On a year-to-date basis, operating costs (excluding depreciation) for the nine months ended September 30, 2012 of $267.7 million were marginally lower than the $269.8 million reported for the first half of 2011.

• Net earnings of $37.9 million ($0.07 per share) in the current quarter were $21.5 million higher than the $16.4 million ($0.03 per share) reported in 2011. Earnings were impacted by: 
  • higher equity earnings from investment in Tenke ($7.8 million); 
  • lower unrealized loss on revaluation of marketable securities ($8.6 million); 
  • lower depreciation, depletion and amortization expense ($6.7 million); 
  • lower tax expense of $14.1 million, $12.5 million (EUR9.1 million) of which relates to a Spanish tax assessment recorded in 2011 for deductibility of accelerated depreciation; offset by 
  • lower other income ($25.3 million) arising mostly from reduced foreign exchange gains.
• Cash outflow from operations for the current quarter was $25.7 million compared to $36.6 million for 2011. The comparative decrease in the cash outflow is mostly attributable to higher net earnings in the current quarter.
  
  For the nine months ended September 30, 2012, cash flow from operations was $144.6 million compared to $194.8 million for 2011 primarily as a result of changes in non-cash working capital.

Tenke Fungurume

• Milling facilities continued to produce above rated capacity, with throughput averaging 13,600 metric tonnes of ore per day in the third quarter of 2012, approximately 700 metric tonnes of ore per day higher than the previous quarter in 2012. 
• For the quarter ended September 30, 2012, Tenke produced 41,446 tonnes of copper and sold 39,790 tonnes at an average realized price of $3.53/lb. In addition, 3,356 tonnes of cobalt in hydroxide was produced and 3,519 tonnes were sold at an average realized price of $8.29/lb of cobalt. 
• Cash costs of $1.23/lb of copper in the third quarter of 2012 were higher than the $1.12/lb in the prior year comparable quarter, reflecting lower cobalt credits and higher consumable costs. 
• Cash advances of $15.0 million were made to Tenke in the quarter ended September 30, 2012. During the quarter, $38.4 million was spent on our attributable share of capital requirements, which was funded by the above noted cash call and excess cash flow from operations. 
• Attributable operating cash flow related to Tenke for the third quarter of 2012 was $26.1 million and now totals $106.7 million year-to-date.

Financial Position and Financing

• Net cash(1) position at September 30, 2012 was $245.0 million compared to $236.1 million at December 31, 2011, $312.7 million at June 30, 2012 and $208.7 million at September 30, 2011. 
• The $67.7 million decrease in net cash during the quarter was primarily attributable to cash outflow from operations of $25.7 million (including a $61.7 million outflow for working capital), investment in mineral properties, plant and equipment of $37.3 million and a $15.0 million cash advance to Tenke. 
• Year-to-date, net cash remained relatively unchanged as cash flow from operations was offset by investment in mineral properties, plant and equipment ($130.4 million) and a $15.0 million advance to Tenke. 
• Cash balance at October 22, 2012 was approximately $290 million.

Corporate Highlights

• On September 4, 2012 the Company reported its Mineral Reserve and Resource estimates as at June 30, 2012. The full press release can be found on the Company’s website at www.lundinmining.com. 
• The Company announced its intention not to exercise its option under the purchase option agreement to acquire a controlling interest in the Touro copper project located in northern Spain. See press release entitled “Lundin Mining update on Touro Copper Project Option”, dated September 25, 2012. 
• As part of the Company’s growth strategy to add more copper production to its asset base in established, low-risk mining jurisdictions, subsequent to quarter-ender, the Company committed to investments in two highly prospective, rapidly developing copper/gold projects. Both of these investments have advanced resource exploration in low altitude properties within the coastal cordillera of central Chile. 
  • The Company has agreed, by way of a binding term sheet, to enter into a strategic agreement with Southern Hemisphere Mining (SHM), a ASX/TSX-listed Chile-focused exploration company who control the Llahuin copper-gold porphyry project, located only 56 km from the Pacific Ocean. As part of the agreed terms, the Company can earn a direct interest of up to 75 per cent over a six-year period by spending up to $35 million at the Llahuin Project. Lundin Mining will fund the Llahuin project expenditures in stages with an initial commitment of $3 million to be spent on exploration within the first three years. Lundin Mining will also take a strategic 11.5% per cent stake in Southern Hemisphere by way of a $5 million share placement, $3 million of which will also be spent on the Llahuin Project. 
  • The Company has also recently committed to making a $5 million private placement equity investment in ASX-listed Hot Chili Ltd. (“HCH”) who control the advanced resource exploration stage Productora Cu-Au project, also located within the coastal cordillera belt of central Chile. This investment is subject to HCH shareholder approval expected prior to year end.

Outlook

2012 Capital Expenditure Guidance

Capital expenditures for 2012 are expected to be $380 million, $30 million lower than previous guidance as a result of reduced estimated Tenke requirements. Estimated capital investment for the year is as follows:

• Sustaining capital in European operations - $130 million: Primarily in support of pre-stripping costs at Aguablanca and development costs at our Zinkgruvan and Neves-Corvo operations. 
• New investment capital expenditures in European operations - $70 million: Consisting largely of Lombador Phase I and Neves-Corvo water dam improvements. 
• New investment in Tenke - $180 million: Estimated total capital expenditures for the year have been reduced by $30 million from previous guidance to reflect on budget performance of the Phase II expansion, deferral of some costs to 2013 and overall lower sustaining and expansion capital requirements this year. Year-to-date there has been one cash call for $15.0 million made by TFM from Lundin as surplus cash from operations has covered substantially all Phase II expansion costs incurred during the period. No other cash calls for 2012 are expected to Lundin.

2012 Production and Cost Guidance

• Cash cost guidance for Zinkgruvan has been improved, reflecting overall better mine performance. 
• Production guidance for Aguablanca has been increased to reflect earlier than planned restart of production at the mine. Despite stability issues on the south pit wall, no disruptions to planned concentrate production prior to year-end are expected as there is a significant amount of ore that has been stockpiled which will be supplemented with ongoing mining of ore from the north side of the pit. 
• Guidance for Galmoy has also been updated to reflect better zinc production estimates prior to closure. 
• Revised guidance from Freeport on Tenke’s copper sales from 140,600 to 149,700 tonnes (100% basis) has been reflected in the revised guidance below and is based on the assumption that production volumes will approximate sales. Freeport has also increased its guidance on full year cash cost as a result of lower average cobalt prices.

1. Cash costs remain dependent upon exchange rates (forecast at EUR/USD:1.28, USD/SEK:6.80) and metal prices (forecast at Cu: $3.50, Zn: $0.85).
2. Galmoy production tonnage is based on a 50% attributable-share to Lundin Mining.
3. Lundin Mining’s attributable share was reduced from 24.75% to 24.0% in March 2012, after approval of changes to TFM’s bylaws.

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 development project pipeline which includes expansion projects at its Neves‐Corvo mine, along with a 24% equity stake in the world-class Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo, which is undergoing expansion to 195,000 tonnes per annum copper cathode production.

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.

Attachment Available: http://cnrp.marketwire.com/cnrp_files/20121024-lun1024.pdf

FOR FURTHER INFORMATION PLEASE CONTACT:

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