Lundin Mining achieves 2019 production targets

The Candelaria open pit mine in the Atacama Desert of northern Chile. Source: Lundin Mining Corp.

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Lundin Mining Corp. [LUN-TSX; LUMI-Sweden] on Thursday January 23 released weaker-than-anticipated operating results in the fourth quarter of 2019, largely driven by lower grades at its Candelaria mine in Chile.

Lundin is a diversified Canadian base metals mining company with operations in Chile, the United States, Portugal, Sweden and Finland, primarily producing copper, nickel and zinc. Lundin also holds an indirect 24% equity stake in the Freeport Cobalt Oy business, which includes a cobalt refinery in Kokkala Finland.

However, despite a somewhat softer end to the year, 2019 production guidance was achieved at every asset, and there were no changes to the company’s previously announced production forecasts.

On Thursday, Lundin shares eased 2.5% or 19 cents to $7.30 on volume of 2.5 million. The 52-week range for the shares is $5.47 and $8.08.

In the fourth quarter of 2019, attributable copper production of 59,000 tonnes was 8% below Scotiabank forecasts of 64,000 tonnes. This was largely a reflection of a weaker performance at Candelaria due to below mine plan head grades, and to a lesser extent, the performance of the Chapada copper-gold mine in Brazil.

Despite the softer fourth quarter operational results, total 2019 consolidated copper, zinc and nickel production of 235,000 tonnes, 152,000 tonnes and 13,500 tonnes all met or slightly exceeded the most recent annual guidance ranges of 227,000-245,000 tonnes, 149,000-157,000 tonnes and 12,000-15,000 tonnes respectively.

Lundin has recently said it anticipates strong growth in its metal production.

The company said copper production is expected to rise by over 20% in 2020 compare to 2019, with full year contributions from the Chapada copper-gold mine and Candelaria mining complex.

The company said zinc production is forecast to increase by over 15% in the same period while nickel production will jump by over 25%.

Lundin acquired a 100% interest in the Chapada copper-gold mine from Yamana Gold Inc. [YRI-TSX; AUY-NYSE] for US$800 million. A traditional open-pit truck and shovel operation, Chapada was previously expected to produce approximately 54,500 tonnes of copper and 100,000 ounces of gold this year (75,000 tonnes of copper equivalent) at a co-product cash cost of between US$1.60 and US$1.80 a pound for copper and US$430 per ounce for gold equivalent.

The three-year production outlook for Chapada is based on a NI 43-101 technical report that was filed on SEDAR on October 10, 2019. Copper production is forecast to be between 51,000 and 56,000 tonnes over the next three years based on the current 24 million tonne per-year throughput rate.

Chapada gold production is expected to be 70,000 to 95,000 ounces over the next three years, marking a significant increase in Lundin’s upstream gold output.

At Candelaria, copper production is expected to increase during the next two years, primarily on the back of improving copper head grades and as the benefits of reinvestment initiatives are realized.

Copper production there is forecast to average approximately 180,000 tonnes annually over the 10-year period from 2020 to 2029.

Meanwhile, after an expected increase of 25% next year, nickel production is expected to remain at this increased level over the three-year period as higher grade ore from the Eagle East mine in Michigan contributes to mill feed. Eagle is a 2,000 tonnes-per-day underground nickel-copper mine.

Additionally, the Neves-Corvo Zinc Expansion Project (ZEP) in Portugal is advancing on schedule for phased ramp-up in 2020. Following next year’s 15% rise, zinc production is forecast to increase by a further 30% in 2021, over 2020, with a full year contribution from ZEP.

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