TSX: LUN OMX: LUMI Handelsbanken Handelsbank Conf Con er f ence Stockholm

Transcription

1 TSX: LUN OMX: LUMI Handelsbanken Conference Stockholm June 2013

2 Cautionary Statements Caution Regarding Forward Looking Statements This presentation contains forward looking statements. These forward looking statements are not based on historical facts, but rather on current expectations and projections about future events. These forward looking statements are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from the future results expressed or implied by the forwardlooking statements. Such risks may include, without limitation: risks and uncertainties relating to foreign currency fluctuations; risks inherent in mining including environmental hazards, 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,developmentor mining results will notbe consistent with the Company s expectations; the potential for and effects of labor disputes or other unanticipated difficulties with or shortages of labor 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; and commodity price fluctuations. 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 in each management discussion and analysis. Note: All dollar amounts are in US dollars unless otherwise denoted. Ore Reserves The reserve estimates reported in this presentation have been prepared by Rio Tinto, using accepted industry practice and have been classified in accordance with the JORC Code. There are no material differences between the definitions of Proven and Probable Mineral Reserves under the applicable definitions adopted by the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM Definition Standards") and the corresponding equivalent definitions in the JORC Code for Proved and Probable Ore Reserves. For further information on the ore reserves, please refer to the news release of the Corporation dated June 12, Qualified Person The Qualified Person for the scientific and technical information contained herein is Stephen Gatley, Vice President Technical Services, Lundin Mining. Mr. Gatley has reviewed and approved the contents of this presentation. Mr. Gatley verified the probable ore reserves prepared by Rio Tinto and believes that the assumptions and parameters are reasonable and that there is sufficient data to support the estimate. t 2

3 Key Asset Overview European Assets Neves Corvo, Portugal (Cu/Zn) Zinkgruvan, Sweden (Zn/Pb/Cu) Aguablanca, Spain (Ni/Cu) Kokkola Cobalt ltrfi Refinery, Finland (24% interest) Tenke Fungurume Tier 1 Cu/Co asset 24% interest Freeport McMoRan operator Phase II expansion project completed Growth Projects Eagle Mine * Lombador Phase I Tenke Expansions Exploration Neves Corvo Eastern Europe Chilean Cu/Au * Note Acquisition of Eagle is subject to customary closing conditions, and is expected to close in July

4 Lundin Highlights Significant copper producer majority of revenues from copper Leverage to zinc, lead, nickel and cobalt Wholly owned high h quality assets portfolio of long life, relatively l low cost mines in stable jurisdictions Stake in Tenke a world class producing copper mine, contributing significant free cash flow to Lundin in 2013 Strong financial position all operations generating strong cash flow. No high risk capital projects Disciplined focus on value creation through incremental growth 4

5 Copper Dominant with Other Base Metal Leverage 2012 Revenue by Metal 2013 Metal Production Forecast Note: Includes revenues from Tenke. Tonnes Copper Europe 57,000 63,500 Copper Tenke (24%) 47,300 Total Copper 104, ,800 Total Zinc 118, ,000 Total Lead 33,000 36,000 Total Nickel 5,000 5,500 Excellent copper growth available through Tenke Excellent leverage to zinc through Neves Corvo and Zinkgruvan High grade nickel exposure through pending Eagle acquisition Profitable by products of lead and cobalt 5

6 Industry Trends 6

7 Industry Trends: Copper Supply/Demand Outlook Many analysts are forecasting a surplus in Cu production starting in 2013, as possible projects are expected to come on stream However, many majors have indicated that they are in a capitalrestraint mode and are deferring large capex projects Therefore we expect a delay in some of the large projects and we don t expect the copper price to soften 7

8 Copper Disruptions from Mines In addition to project delays, there are also many other factors which negatively impact production each year In the last 5 years, unplanned Cu production losses ranged between 700kt 1.9Mtpa. This is very significant relative to total global annual supply of ~17Mtpa Source: CRU International Limited 8

9 Industry Trends: Zinc Supply/Demand Outlook Due to the lack of significant new zinc projects, there is expected to be a prolonged deficit of supply starting in the medium term Significant mine closures: Brunswick (200kt, 2013); Perseverance (140kt, 2013); Lisheen (170kt, 2014); Century (500kt, 2016) Lower output expected from: Antamina, Red Dog, San Cristobal 9

10 Industry Trends: Nickel Supply/Demand Outlook Current oversupplied markets anticipated to persist over next several years High Pressure Acid Leach (HPAL) and nickel pig iron are key sources of supply growth, but face significant technical challenges and higher energy costs respectively At current nickel prices ~50% of producers (largely nickel pig iron) are generating operating losses therefore we do not see the current low price environment as being sustainable indefinitely 10

11 Historic Inventories and Prices Copper Zinc Nickel 11

12 Lack of Exploration Spending in Nickel and Zinc Worldwide Base Metals Budgets by Target, (US$ million) Source: Metals Economics Group 12

13 Global Exploration Focused Largely on Gold & Copper Percentage of Global Exploration Budgets by Target, 2012 (US$ million) Source: Metals Economics Group 13

14 Neves Corvo Resource Evolution Copper Copper Resource vs Drilling , ,000 80,000 Metres Dri lled 60,000 40,000 90,000 20, Mineral Resource Tonnes 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Meas + Ind Inferred Sfc + UG Metres Drilled

15 Neves Corvo Resource Evolution Zinc 120,000 Zinc Resource vs Drilling , , ,000 Miner ral Resource To onnes80,000 60,000 40,000 80,000 60,000 40,000 Metres Drilled 20,000 20, Meas + Ind Inferred Metres Drilled 15

16 Eagle Historyof Growing Reserves Strong exploration potential exists to continue to increase reserves andresources Probable bl Resserves (million tonnes) Contained metal tl(t (tonnes) 61% increase in reserves 22% increase in contained Ni 32% increase in contained Cu 16

17 Operations and Outlook 17

18 Neves Corvo Snapshot Underground copper and zinc mine located in Portugal 220km southeast of Lisbon in the western part of the Iberian Pyrite PriteBelt Active mining in five major ore bodies underground Excellent infrastructure with dedicated rail link into Portuguese rail network and port of Setubal Potential for future growth from Lombador zinc/copper deposit and the Semblana copper deposit Significant exploration potential near mine Location 2013 Production Guidance Portugal kt Cu kt Zn 2013 C1 Costs $1.80/lb Cu Mine Life +10 years Cu + Zn 18

19 Neves Corvo Production Outlook Midpoint of guidance range assumed for

20 Zinkgruvan Snapshot Underground zinc/lead/copper mine located 200km southwest of Stockholm High quality zinc concentrate sought after by European smelters Lowest quartile cost producer due to high zinc grades and strong by product credits Upside potential with plant modernization initiatives Location 2013 Production Guidance Sweden kt Zn kt Pb kt Cu 2013 C1 Costs $0.20/lb Zn Mine Life +10 years 20

21 Zinkgruvan Production Profile Midpoint of guidance range assumed for

22 Tenke Snapshot One of the world s largest known copper cobalt resources located in Katanga Province, DRC Operated by Freeport McMoRan Lundin 24% equity interest Phase 2 Expansion completed, increasing i capacity to at least 195,000 tpa of copper cathode and 15,000 tpa of cobalt hydroxide Cash distribution of $45 million received by Lundin during Q1/13 representing significant investment milestone Location Democratic Republic of Congo Ownership 24% 2013 Sales Estimate (LMC share) 47,300 tonnes Cu 2013 C1 Cost $1.18/lb Cu Mine Life +40 years 22

23 Tenke Copper Production Outlook?? Phase 4 Expansion Phase 2 Expansion >270 Phase 3 Expansion Note: Freeport has provided 2013 sales guidance which has been assumed to approximate Tenke s production for

24 Acquisition of Eagle Mine (Michigan, USA) 24

25 Eagle Mine Site 25

26 Eagle Mill Site 26

27 Eagle Mine Acquisition Summary Acquiring the high grade Eagle nickel/copper mine from Rio Tinto for approximately $325 million Consisting of $250 million asset purchase amount, plus ~$75 million repayment of project expenditures from Jan. 1 st 2013 until transaction closing Advanced stage of construction (over 50% completed), scheduled for startup in Q4/2014 Acquisition to be funded from cash on hand & existing credit facility Transaction is expected to be completed by end of July 2013, subject to customary closing conditions 27

28 Eagle Mine Overview JORC Reserves of 2.93% Ni, 2.49% Cu with gold, cobalt, platinum & palladium credits Project well advanced (construction just over 50% complete) Initial production in late Full commercial production by mid 2015 ~$400M remaining capex to be spent by Lundin post closing Average production in first three full years of 23ktpa Ni and 20ktpa Cu (+80ktpa of Cu equivalent 1 ) Average C1 cash costs in first three years of ~$2.00/lb Ni lowest quartile of nickel cost curve Average Life of Mine production of 17ktpa Ni and 17ktpa Cu (+60ktpa Cu Equivalent 1 ) at C1 cash costs of ~$2.55/lb Ni 8 year mine life (late ) with excellent upside potential Notes: 1 Copper equivalent calculation based on $8.00/lb Nickel and $3.00/lb Copper 28

29 For Lundin Mining Eagle Mine is Perfect Fit STATED ACQUISITION CRITERIA Incremental growth add producing or near producing asset High Quality & Low Cost Copper or Polymetallic Asset EAGLE Manageable size, adds operational depth and excellent cash flows Meaningful additional production (30 70kt Cu equivalent) Straightforward mining and processing Low risk jurisdiction Affordable acquisition to be funded from cash on hand and existing undrawn debt facility Accretive to Lundin Mining shareholders 29

30 Lundin Mining Growth Profile Including Eagle Pro Forma Production Profile Copper Pro Forma Production Profile fl Nickel kl Pro Forma Production Profile Zinc Notes: LUN production profile based on 3 yr guidance provided in Dec Copper profile does not include any future expansions at Tenke 30

31 Lundin Mining Low Cost Operations Cu & Zn 2013 C1 Copper Cost Curve, Grouped by Mine ($/lb) $3.00 $2.50 Neves Corvo $2.00 $1.50 Tenke Fungurume Weighted Average $1.00 $0.50 $0.00 As Tenke production increases, Lundin will move down the cost curve 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cumulative Percentile Production 2013 C1 Zinc Cost Curve, Grouped by Mine ($/lb) $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $ ($0.20) Zinkgruvan ($0.40) -- 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: BrookHunt / WoodMackenize Cumulative Percentile Production 14

32 Eagle Low Cost Nickel Project We estimate Eagle LOM C1 cash cost at $2.55/lb, which is in the lowest estcost quartile Eagle (est.) 32

33 Lundin Mining Summary Portfolio of high quality, long life mines that are performing well Optimization opportunities and exploration potential at all existing assets No high risk major capital projects Disciplined growth initiatives supported by strong cash flows Strong financial position Neves Corvo Zinkgruvan Aguablanca Tenke Fungurume 33

34 TSX: LUN OMX: LUMI