Lundin Mining provides operational outlook and update

Highlights

• Copper production is to increase to 258 000 – 282 000 t on a consolidated basis in 2022.
• Zinc production is forecast to increase to 188 000 – 203 000 t in 2022 as the Neves-Corvo Zinc Expansion Project (ZEP) ramps up and on an improved near-term production profile at Zinkgruvan.
• Gold production is forecast to be 153 000 – 163 000 oz in 2022, of which approximately 85 000 oz, at the midpoint of guidance, are unencumbered and to receive full market pricing.
• Nickel production is moderate to 15 000 – 18 000 t in 2022 with priority on increasing Eagle East ore.

Production outlook 2022 – 2024

Candelaria

Copper production for the next three years is forecast to increase over that of 2021, primarily on improved copper head grades and achievement of planned processing rates as initiatives to debottleneck the Candelaria plant pebble crushing circuit are realised in early 2023.

From the Candelaria opencast, ore mining is to continue primarily from the Phase 10 pushback in 2022, with initial ore production from the Phase 11 pushback during the year. In 2023 and 2024, ore is to be mined primarily from Phase 11.

Over the guidance period, total mill throughput is forecast to range between 27 – 28 million tpy. Debottlenecking initiatives of the Candelaria plant pebble crushing circuit will increase mill capacity starting in early 2023 and, based on the planned mill feed blend and the ore hardness throughput model, annual throughput is expected to exceed 28 million tpy, commencing in 2025.

In 2022 and 2023, Candelaria opencast ore is forecast to contribute approximately 16 million tpy to the mill feed, increasing to approximately 18 million tpy in 2024. The underground mines are forecast to contribute approximately 8 million tpy of ore, with stockpile ore comprising the balance of the mill feed.

Production guidance considers a mine-to-mill grade call factor of 8% in 2022, reducing to 5% in 2023 and 2024. With focus on operational practices, improvement in grade discrepancy was observed in 3Q21 compared to the prior two quarters, and to-date in 4Q21 the positive trend has continued. Candelaria is continuing its methodical approach to identify and address sources of unplanned dilution and discrepancy across the mine-to-mill process.

Candelaria’s copper production guidance is 155 000 – 165 000 t for 2022. Copper production is forecast to be modestly greater in 2H22 than 1H22, primarily owing to the copper grade profile. Gold production guidance is 83 000 – 88 000 oz for 2022 and, similarly, modestly weighted to 2H22.

Chapada

Copper production guidance is consistent with the prior outlook, while gold production guidance has been increased for 2022 on refinement of near-term operating plans. Production expectations are based on the current 24 million tpy throughput capacity over the guidance period with annual changes driven primarily by the forecast grade profile.

Chapada’s copper production is forecast to increase in 2022 to 53 000 – 58 000 t. Copper production is expected to be modestly greater in 2H22, primarily due to the forecast grade profile and seasonal operating considerations. Gold production guidance is 70 000 – 75 000 oz for 2022 and, similarly, modestly weighted to 2H22 due to the forecast grade profile and seasonal operating considerations. All of Chapada’s gold production remains unencumbered and is to receive full market pricing.

Eagle

Nickel production guidance is modestly lower for 2022 and consistent for 2023, compared to the prior outlook, while copper production guidance is consistent for 2022 and for 2023.

Eagle’s nickel production is forecast to be 15 000 – 18 000 t in 2022. Nickel production is expected to be greater in 2H22, primarily due to the forecast grade profile. Copper production guidance is 15 000 – 18 000 t for 2022, modestly weighted to 2H22 on the forecast grade profile.

Neves-Corvo

Copper production guidance has increased for 2022 and 2023 compared to the prior outlook, on refinement of the near-term mine plan positively impacting the forecast copper head grade. Zinc production guidance is modestly lower in 2022 and 2023 compared to the prior outlook, on the metal recovery assumption for these years. Construction of the ZEP is progressing on schedule and on budget to be substantially complete by the end of 2021.

Neves-Corvo’s copper production is forecast to increase to 33 000 – 38 000 t in 2022, modestly weighted to 1H21 owing to the forecast grade profile. Zinc production is guided to increase over 65% in 2022, to 110 000 – 120 000 t, as production ramp up from the ZEP is completed in 1H22. With the ZEP contributing a full year of production at design throughput, 2023 zinc production is forecast to be 142 000 – 152 000 t.

Zinkgruvan

Zinc production guidance has increased 14% for 2022 and 11% for 2023, at the midpoint of the ranges compared to the prior outlook, with minor refinement of operating plans forecasting higher head grades and improved metal recoveries. Copper production guidance for 2022 and 2023 is generally consistent with the prior outlook. Zinc production is forecast to increase in 2022 to 78 000 – 83 000 t.

2022 cash cost guidance

Candelaria’s cash costs are expected to approximate US$1.55/lb copper in 2022, similar to 2021 levels, after by-product credits. By-product credits have been adjusted for the terms of the streaming agreement.

At Chapada, cash costs are expected to approximate US$1.60/lb copper in 2022, after unencumbered gold by-product credits. The forecast increase in Chapada’s cash costs reflects higher consumable costs and lower stockpile values. Effects of copper stream agreements are reflected in the realised copper revenue.

Eagle is expected to maintain the first quartile cash costs of -US$0.25/lb nickel in 2022, considering significant by-product copper credits. The forecast increase in Eagle’s cash costs is primarily a reflection of lower volumes.

At Neves-Corvo, cash costs for 2022 are expected to improve y/y to approximately US$1.80/lb copper, after zinc and lead by-product credits. The forecast decrease in cash costs is primarily due to increased zinc production volumes.

Zinkgruvan’s cash costs for 2022 are expected to approximate US$0.55/lb zinc after copper and lead by-product credits.

2022 capital expenditure guidance

Capital expenditures in 2022 are forecast to be US$630 million on a 100% basis, including deferrals from 2021. The majority of sustaining capital expenditures are for opencast waste stripping, underground mine development, and tailings storage facility (TSF) and water management works. The scope of these activities is generally consistent with prior plans, with expenditure guidance reflecting inflationary cost pressures on key inputs, in particular, fuel, electricity, freight, logistics and labour costs in some markets.

Candelaria

Capital expenditures at Candelaria in 2022 are forecast to total US$370 million. Of this total, capitalised waste stripping expenditures are estimated to be US$180 million, and underground mine development, including infill drilling and ramp works, is estimated to be approximately US$90 million. Capital expenditures for mobile and mine equipment are estimated to be US$25 million and US$55 million for the continued build of the Los Diques TSF. Pebble crushing debottlenecking initiatives are estimated to be US$15 million and forecast to be completed in 2022.

Chapada

Capital expenditures at Chapada in 2022 are estimated to total US$65 million. This includes approximately US$20 million for capitalised waste stripping, US$20 million for TSF and water management systems and US$10 million for mine and mobile equipment.

Eagle

Capital expenditures are estimated to total US$10 million in 2022 composed of underground mine development, mobile equipment and mill water treatment plant sustaining initiatives.

Neves-Corvo

Capital expenditures are estimated to total US$125 million in 2022, of which US$30 million is expansionary capital to complete pre-production works on the ZEP and US$95 million is forecast sustaining capital. Of the forecast sustaining capital expenditures, approximately US$50 million is for underground mine development, including infill drilling, US$30 million for TSF works and water initiatives and US$15 million for mine and mobile equipment. Total ZEP pre-production capital cost estimate of US$430 million (€360 million) remains unchanged.

Zinkgruvan

Sustaining capital expenditures are estimated to total US$60 million in 2022, including approximately US$35 million for underground development, including the Dalby orebody, and the remainder primarily for mine and mobile equipment, TSF works and other improvement initiatives.

2022 exploration investment guidance

Exploration expenditures are planned to be US$45 million in 2022. Approximately US$40 million is to be spent supporting significant in-mine and near-mine targets at the operations (US$15 million at Candelaria, US$10 million at Chapada, US$8 million at Neves-Corvo, US$5 million at Zinkgruvan and US$2 million at Eagle). The remaining US$5 million is planned to advance activities on exploration stage and new business development projects.

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