Candelaria: A Resource Growth Success Story Chile Explore Conference September 27, 2017

Transcription

1 Candelaria TSX: LUN OMX: LUMI Candelaria: A Resource Growth Success Story Chile Explore Conference September 27, 2017 Copper / Gold / Silver Region III, Chile 1

2 Cautionary Statements Caution Regarding Forward-Looking Information and Non-GAAP Performance Measures This presentation contains forward-looking information, including, but not limited to, guidance on estimated annual production and cash costs. This forwardlooking information is not based on historical facts, but rather on current expectations and projections about future events and is subject to risks and uncertainties. Any statements not including historical facts are forward-looking statements and may be identified by terminology such as believe, budget, continue, can, estimate, expect, intend, likely, should, target, will and any similar expressions. Forward-looking statements involve known and unknown risks and uncertainties, and as such, they are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Potential risks leading to differing results include, without limitation: fluctuation to foreign currency rates, change in commodity prices, industry risks, drilling results, labour disputes or difficulties resulting in labour shortages or interruptions in production, environmental risks, political risks including changes in national or local government legislation, taxation, or regulation, climate and weather related risks, diminishing quantities or grades of reserves, operating or technical difficulties with mining or development activities, and increased costs, delays or suspensions. Readers are cautioned that many of the assumptions on which the Company s forward-looking statements are based are likely to change. Lundin cautions that it does not have any intention to update forward-looking statements as a result of new information, future changes, or otherwise. For further details of other risks and uncertainties see Risk Factors Relating to the Company s Business in the Company s Annual Information Form and Management s Discussion and Analysis. This presentation contains certain financial measures such as operating earnings, net debt, operating cash flow per share and cash costs which have no meaning within generally accepted accounting principles under IFRS and therefore amounts presented may not be comparable to similar data presented by other mining companies. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures or performance prepared in accordance with IFRS. Note: All dollar amounts are in US dollars unless otherwise denoted. 2

3 NI Compliance Unless otherwise indicated, Lundin Mining Corporation (the Company ) has prepared the technical information in this presentation including Mineral Reserve and Mineral Resource estimates ( Technical Information ) based on information contained in the technical reports and news releases (collectively the Disclosure Documents ) available under The Company s profile on SEDAR at Each Disclosure Document was prepared by or under the supervision of a qualified person ( Qualified Person ) as defined in National Instrument Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ( NI ). For readers to fully understand the information in this presentation, they should read the technical reports identified below in their entirety, including all qualifications, assumptions and exclusions that relate to the information set out in this presentation which qualifies the Technical Information. Readers are advised that Mineral Resource estimates that are not Mineral Reserves do not have demonstrated economic viability. The Disclosure Documents are each intended to be read as a whole, and sections should not be read or relied upon out of context. The Technical Information is subject to the assumptions and qualifications contained in the Disclosure Documents. The Technical Information in this presentation has been prepared in accordance NI and has been reviewed and approved by Stephen Gatley, BSc (Eng), C.Eng. Vice President - Technical Services of the Company, a "Qualified Person" under NI Mr. Gatley has verified the data disclosed in this presentation and no limitations were imposed on his verification process. Mineral Reserve and Mineral Resource estimates are shown on a 100 percent basis for Candelaria. The Measured and Indicated Mineral Resource estimates are inclusive of those Mineral Resources estimates modified to produce the Mineral Reserve estimates. Estimates at Candelaria are prepared by or under the supervision of a Qualified Person as defined in NI , or have been audited by independent Qualified Persons on behalf of the Company. Refer to the annual Mineral Resource and Mineral Reserves new releases on the Company s website ( For further Technical Information on Candelaria refer to the following technical reports, each of which is available on the Company s SEDAR profile at Candelaria: technical report entitled Technical Report for the Candelaria Copper Mining Complex, Atacama Province, Region III, Chile dated January 17, Candelaria: technical report entitled Technical Report for the Candelaria Copper Mining Complex, Atacama Province, Region III, Chile dated June 30, 2015 Candelaria: technical report entitled Technical Report for the Compan ía Minera Candelaria and Compan ía Minera Ojos del Salado Copper Projects, Atacama Province, Region III, Chile dated October 6,

4 Geographically Diversified Eagle Nickel-Copper- PGMs (USA) Zinkgruvan Zinc-Lead-Copper (Sweden) Freeport Cobalt 1 Cobalt Refinery (Finland) Neves-Corvo Copper-Zinc (Portugal) Candelaria 2 Copper-Gold- Silver (Chile) 1. Lundin Mining holds an indirect 24% equity stake in the Freeport Cobalt Oy business which includes a cobalt refinery located in Kokkola, Finland. 2. Lundin Mining holds an 80% interest in Candelaria. 4

5 Revenue Breakdown Q2/17 Sales of $455M Gold 6% Lead Other 4% 2% Zinkgruvan 11% Nickel 7% Eagle 14% Neves-Corvo 16% Candelaria 59% Zinc 14% Copper 67% By Operation By Metal 5

6 2017 Production and Cash Cost Guidance Increased production guidance at Candelaria and Eagle; lowered copper guidance at Neves-Corvo; C1 cash cost guidance improved for Eagle Attributable Production 1 and C1 Cash Cost 2 (kt and $/lb, net of by-products) Previous Guidance Revised Guidance Copper Candelaria (80%) 145, ,000 $1.20/lb 147, ,000 $1.20/lb Eagle 15,000 18,000 19,000 22,000 Neves-Corvo 41,000 46,000 $1.00/lb 36,000 39,000 $1.00/lb Zinkgruvan 1,000 2,000 1,000 2,000 Total Attributable 202, , , ,000 Nickel Eagle 17,000 20,000 $2.00/lb 20,000 23,000 $1.35/lb Total 17,000 20,000 20,000 23,000 Zinc Neves-Corvo 72,000 77,000 72,000 77,000 Zinkgruvan 80,000 85,000 $0.40/lb 80,000 85,000 $0.40/lb Total 152, , , , Production guidance is based on certain estimates and assumptions, including but not limited to; Mineral Resource and Mineral Reserve estimates, geological formations, grade and continuity of deposits and metallurgical characteristics 2. C1 cash costs are based on various assumptions and estimates, including, but not limited to; production volumes, as noted above, exchange rates (forecast at /USD:1.10, USD/SEK:8.40, USD/CLP:675) and metal prices (forecast at Cu: $2.50/lb, Ni: $4.25/lb, Zn: $1.15/lb, Pb: $0.90/lb, Au: $1,250/oz, Ag: $16.50/oz), and operating costs. All figures in are in US$ unless otherwise noted. 6

7 Balance Sheet Strength and Flexibility Cash balance at July 26, 2017 of approximately $2.1B and net cash of approximately $1.1B - closed sale of interest in TF Holdings Limited in April 2017 receiving net proceeds of $1.121B $350M revolving credit facility undrawn Cash and Cash Equivalents (End of Quarter) Liquidity Position (July 26, 2017) 14% $2.4B $2,051M $142M $507M $658M 86% Q2/14 Q2/15 Q2/16 Q2/17 Cash and Cash Equivalents The Company has senior secured notes outstanding comprised of: $550M at 7.5% due 7 in 2020, and $450M ($445M net outstanding) at 7.875% due in 2022.

8 2017 Capital Expenditure and Exploration Guidance Capital Expenditures 1 (US$M) Prior Guidance Revised Guidance Total Capitalized Stripping Los Diques Facility Other Candelaria Sustaining Total Candelaria (100% basis) Eagle Sustaining Neves-Corvo Sustaining Zinkgruvan Sustaining Total Sustaining Eagle Expansionary Zinc Expansion (Neves-Corvo) - 30 Zinkgruvan Expansionary 5 5 Total Expansionary Total Capital Expenditures $390M $490M Los Diques estimated cost unchanged at $295M - $85M remaining in H2/17 and $30M in 2018 Candelaria - $55M reinvestment for mobile equipment and advancement of underground development Neves-Corvo - $30M to be spent in 2017 for the Zinc Expansion Project 2017 Exploration budget increased to $75M - increase of $10M for near-mine exploration programs 1. Excludes capitalized interest. Amounts forecast above are on a cash basis, and may vary from accrual based estimates. 2. During the production phase, waste stripping costs which provide probable future economic benefits and improved access to the orebody are capitalized to mineral properties. The Company capitalizes waste costs when experienced strip ratios are above the average planned strip ratio for each open pit phase under development. 8

9 Responsible Mining Safety Performance TRIF per 200,000 person hours worked Environmental Performance - excellent track record and improving performance each year - increased reporting and disclosure practices International Green Apple Award for Environmental Best Practice for Galmoy Wetlands Project Community & Social - strong community relations at all sites - focused on strategic investments which create sustainable value in the communities and countries where we operate 9

10 Candelaria Copper / Gold / Silver Region III, Chile 10

11 Candelaria Mine & Infrastructure Complex Caldera Port & Desalination Plant Atacama Region Copiapó 10 km Pit Candelaria 11

12 Candelaria Integrated Mining Complex Current Candelaria Tailings Facility Candelaria Large open pit with overall mining rate of 270 ktpd Candelaria Underground Mine (14 ktpd) 75 ktpd Candelaria processing plant Ojos del Salado Two underground mines: Alcaparrosa (4 ktpd) & Santos (5.1 ktpd) 3.8 ktpd PAC processing plant 12

13 Candelaria Los Diques Facility Project 13 As at August 4, 2017

14 Candelaria Purchase: Opportunity Recognized Purchase completed November 3, 2014 Transformational asset acquisition for Lundin Mining Entry into Chile as immediate significant copper producer Special counter-cycle acquisition Lundin recognized significant Mineral Resource Growth Potential in 4 Areas: 1. Conservative $US 2.00/lb Cu Pit Design undervalued pit potential 2. Considerable Underground Mineral Resource Growth Potential at both the North and South Sectors 3. Opportunity to Grow Mineral Resources at Santos & Alcaparrosa (2-3 yr LoM then) 4. Opportunity for New Discoveries within large District Land Package that hadn t seen much exploration in past 20 years Acquisition was Not without Risk (Los Diques TSF, short LOMs, Copper Production Profile) 14

15 Candelaria: One of Worlds Largest IOCG Deposits # Deposit Original Estimated Contained Copper 1 Contained Copper 2 (Remaining) Past Copper Production 3 1 Olympic Dam 84.4 Mt 80.4 Mt 4.0 Mt Mine 2 Candelaria 9.4 Mt 5.3 Mt 4.1 Mt Mine 3 Salobo 8.0 Mt 7.5 Mt 0.5 Mt Mine 4 Manto Verde 4.1 Mt 3.0 Mt 1.1 Mt Mine Status 5 Mina Justa 3.3 Mt 3.3 Mt Project 6 Carrapateena 3.1 Mt 3.1 Mt Project 7 Gameleira 3.0 Mt 3.0 Mt Project 8 Prominent Hill 2.6 Mt 1.8 Mt 0.8 Mt Mine 9 Cristalino 2.4 Mt 2.4 Mt Project 10 Sossego 2.2 Mt 0.7 Mt 1.5 Mt Mine 11 Ernest Henry 2.2 Mt 0.9 Mt 1.3 Mt Mine 1 Original Contained Copper: Contained Copper 2 (remaining) plus Past Copper Production 3. 2 Contained Copper (Remaining): from SNL Measured & Indicated Resources, plus Inferred Resources, inclusive of Reserves. 3 Past Copper Production: from SNL. 15

16 Candelaria History 1927: Ojos del Salado Plant Constructed; 1985: Phelps Dodge Acquires Ojos del Salado - Ojos del Salado consisted of small mines Lar, Bronce, in addition to the Santos Mine and Plant 1987: Phelps Dodge discovers Candelaria Deposit - Candelaria was discovered at depth, exploring for additional deposits between the Lar and Bronce Mines 1992: Candelaria Mine Construction commences 2005: Candelaria Underground Norte Mine commences 2007: Freeport McMoRan acquires Candelaria/Ojos del Salado 2014: Lundin Mining acquires Candelaria/Ojos del Salado from Freeport McMoRan 2015: Lundin Mining receives EIA approval for Candelaria 2030 extending the life of mine. 16

17 Candelaria: Mineral Resource Growth Lundin Purchase M&I Mineral Resource estimate Contained Copper Metal Total District 2013 to 2017 > 90% Growth Mineral Resource Depletion Increment Mineral Resource Depletion Increment Mineral Resource Depletion Model Drilling Mineral Resource Estimate Jan 14 - Jun Estimate Jul 15 Jun Estimate Jul 16 Jun 17 Increment Increment Estimate Dec 2013 Jun 2015 Jun Jun 2017 Total M&I Mineral Resource estimate Contained Copper at Purchase vs Today 90% Growth in M&I Mineral Resource estimate Contained Copper in 28 months 17

18 Candelaria Open-Pit: Mineral Resource Growth M&I Mineral Resource estimate Contained Copper Metal Open Pit 2013 to 2017 Lundin Purchase 14% Growth Mineral Resource Depletion Increment Mineral Resource Depletion Increment Mineral Resource Depletion Model Drilling Mineral Resource Estimate Jan 14 - Jun Estimate Jul 15 Jun Estimate Jul 16 Jun 17 Increment Increment Estimate Dec 2013 Jun 2015 Jun Jun 2017 Candelaria Open Pit M&I Mineral Resource estimate growth during 2013 to 2017 is related to increased exploration drilling Open pit Mineral Resources are reported within a conceptual pit shell based on metal prices of US$3.16/lb copper and US$1,000/oz gold and are reported at a cut-off grade of 0.2% Cu. 18

19 Candelaria Underground: Mineral Resource Growth Lundin Purchase M&I Mineral Resource estimate Contained Copper Metal Candelaria Underground 2013 to 2017 South Sector Growth North Sector Growth Model Integration North Sector Growth > 1,200% Growth Mineral Resource Depletion Increment Mineral Resource Depletion Increment Mineral Resource Depletion Model Drilling Mineral Resource Estimate Jan 14 - Jun Estimate Jul 15 Jun Estimate Jul 16 Jun 17 Increment Increment Estimate Dec 2013 Jun 2015 Jun Jun 2017 The UG Mineral Resource estimates include the Candelaria North & South Sectors 2015 increase is due to addition of Susana, Damiana and Elisa 2016 increase is due to the addition of the Lila 1 & 2 models Candelaria UG North Sector Mineral Resource model is a new integrated model of 9 previously independent models. The UG Mineral Resource estimates are reported using a 0.6% CuT cutoff grade within a 0.4% CuT envelope. 19

20 Candelaria Underground Underground (UG) North Sector Present UG Production Oeste Open Pit Sector Future Underground Growth Potential in the South Sector of Candelaria Open Pit Sector Damiana Underground (UG) South Sector Future UG Production 20 Mariana Susana Underground South Sector

21 Candelaria Underground: North Sector Substantial Mineral Resource Growth achieved by the Integration of Historically Fragmented Resource Block Models Underground (UG ) North Sector Candelaria Open Pit Underground (UG ) North Sector UG North Sector Remains Open UG North Sector Remains Open Ore Types: Manto ( Cu > 0.2% ) Veins ( Cu > 0.2% ) North Sector (UG) Unified Model 21

22 Alcaparrosa Underground: Mineral Resource Growth Lundin Purchase M&I Mineral Resource estimate Contained Copper Metal Alcaparrosa UG 2013 to 2017 > 300% Growth Viviana Sector Growth Mineral Resource Depletion Increment Mineral Resource Depletion Increment Mineral Resource Depletion Model Drilling Mineral Resource Estimate Jan 14 - Jun Estimate Jul 15 Jun Estimate Jul 16 Jun 17 Increment Increment Estimate Dec 2013 Jun 2015 Jun Jun 2017 Viviana 2015 Mineral Resource estimate increased due to the addition of the Viviana sector in the north, and extension to the South. Minimal drilling at Alcaparrosa during 2015 and Mineral Resource estimates considers 7 independent models (integration nearing completion) and an extension of the Viviana Model Mineral Resources are reported on a cutoff grade of 0.6% CuT within a 0.4% CuT envelope. 22

23 Santos Underground: Mineral Resource Growth Lundin Purchase M&I Mineral Resource estimate Contained Copper Metal Santos UG 2013 to 2017 Melendez & Helena Helena Sector Model Integration Helena Sur Growth > 140% Growth Mineral Resource Depletion Increment Mineral Resource Depletion Increment Mineral Resource Depletion Model Drilling Mineral Resource Estimate Jan 14 - Jun Estimate Jul 15 Jun Estimate Jul 16 Jun 17 Increment Increment Estimate Dec 2013 Jun 2015 Jun Jun Mineral Resource estimate increase due to growth in the Melendez and Helena sectors gave additional growth in Helana Sector Santos UG Model Mineral Resource estimate is a newly constructed integrated model built from 5 previously independent models including the Helena Sur model defined in 2016 Mineral Resources are reported on a cutoff grade of 0.6% 23 CuT within a 0.4% envelope.

24 Total Mineral Resource Growth with Lundin Mining Lundin Purchase M&I Mineral Resource estimate Contained Copper Metal Total District Mineral Resource estimate 2013 Contained to 2017 Copper Metal Total District 2013 to 2017 Candelaria Underground Candelaria UG & Alcaparrosa Growth Candelaria UG & Santos Growth > 90% Growth Mineral Resource Depletion Increment Mineral Resource Depletion Increment Mineral Resource Depletion Model Drilling Mineral Resource Estimate Jan 14 - Jun Estimate Jul 15 Jun Estimate Jul 16 Jun 17 Increment Increment Estimate Dec 2013 Jun 2015 Jun Jun 2017 Lundin has increased Measured & Indicated Mineral Resources by almost 2.5 Mt Contained Cu since purchase. Candelaria has grown Total Measured and Indicated Mineral Resources by over 90% since the December 2013 Mineral Resource estimate Growth: Addition of Susana & Damiana (South UG Sector), and Elisa (North UG Sector) 2016 Growth: Addition of the Lila 1 & 2 in Candelaria UG North, and Viviana at Alcaparrosa Growth: Addition of the Lila 3 & 4 in Candelaria UG North, and Helena Sur at Santos. 24

25 Candelaria LOM Production Profile Copper Production Profile 1 (100% basis, kt Cu) A January 2017 Technical Report At Purchase (Nov 2014) Since acquisition, contained copper and gold in the Mineral Reserves estimate 2 has increased by over 65% 3, and the production profile has been significantly improved Potential for further improvement to production profile and mine life extension 1. Production shown on 100% basis and is based on the NI Technical Report filed January Refer to Press Release Lundin Mining Announces 2017 Mineral Resource and Mineral Reserve Estimates dated September 5, Mine depletion included. 25

26 How Are We Succeeding? Resource Development Team (RDT): Team was formed immediately after purchase to drive future Mineral Resource growth Formed from key members of the local resource team, and international exploration to maximize in-house expertise Strategic Projects were developed to attack key resource growth requirements. District 3D GOCAD Model: A comprehensive District 3D GOCAD Model was developed in 2015, within 1 year of purchase. Allowed a holistic appreciation of all growth opportunities within Candelaria land position, resources, and district growth potential. 26

27 How Are We Succeeding? District Mineral Inventory Ranking: Definition and Ranking of all growth opportunities within Candelaria Land position, including resources, and district growth potential. Aggressive Near-Mine Exploration: >$20M annual Exploration Budgets New Aggressive District Exploration: Leverage large mining concession holdings. Prioritized by the Mineral Inventory Rank Add l Targeting Tools now being applied: Low Frequency TEM Modern IP Physical Parameter acquisition to link all new data in the 3D district Model. Improved Exploration Targeting 27 District 3D Model Candelaria Open Pit

28 Improved Targeting: TEM Mapping Manto Surface TEM survey mapping mineralized manto horizon at 800m depth Candelaria Open Pit 800 m Candelaria North Manto Cu Deposit TDEM: Resistivity Model 28

29 Improved Targeting: Mag Breccia Extensions Looking West Long Section View Candelaria Deposit North Open Pit Modified VPMG 3D Magnetic+Gravity Inversion Results Drilled Magnetite Breccia Interpreted Magnetic Breccia Recent thick intercepts of massive magnetite hosting significant Cu intervals 1000 m Cu > 0.6% Intercepts m step-out from last Magnetite Breccia intercept with Copper!

30 Candelaria: The Opportunity Realized Successful counter-cycle acquisition Addressed Key Risk (Los Diques TSF) Realized 90% increase of contained copper in Total Mineral Resources Realized 65% increase of contained copper and gold in Total Mineral Reserves Extended LOM s at Candelaria, Santos & Alcaparrosa Extended & Improved Copper Production Profile Platform for Additional Future Growth More to Come 30

31 TSX: LUN OMX: LUMI 31