Neves-Corvo - Lundin Mining

TSX: LUN
OMX: LUMI
Neves-Corvo Mine Visit
April 2014
Today’s Agenda
•
•
Lundin Mining - General Overview
Neves-Corvo:
Overview
Exploration
Mining, Processing and Mineral Extraction
Tailings and Water Management
Concentrate Transport and Setubal Port
Mining Lease / Portuguese Fiscal Terms / Social &
Community
Capital and Operating Costs
Potential Upside Scenarios
2
Lundin Mining
Overview
3
Lundin Mining - Global Operations
• European Assets
•
•
•
•
Neves-Corvo, Portugal
Zinkgruvan, Sweden
Aguablanca, Spain
Kokkola Cobalt Refinery,
Finland (24% interest)
• Tenke Fungurume • Growth Projects
•
•
•
Tier 1 Cu/Co asset
24% interest
Freeport-McMoRan
operator
•
Eagle Mine, Michigan
•
Tenke Expansions
4
Good Growth Profile in Copper, Zinc and Nickel
Notes: LUN production profile based on 3-yr guidance
provided in Dec-2013. Copper profile does not include any
future expansions at Tenke
5
Low Cost Operations Across all Commodities
2014 C1 Copper Cost Curve, Grouped by Mine
($/lb)
Neves-Corvo
Tenke Fungurume
Weighted Average
$1.90
$1.70
$1.28
Cumulative Percentile Production
2015 C1 Nickel Cost Curve, Grouped by Mine
2014 C1 Zinc Cost Curve, Grouped by Mine
($/lb)
($/lb)
Aguablanca2
Zinkgruvan
Eagle1
(Est)
$4.50
$0.35
$2.00
Cumulative Percentile Production
_________________________________
Source: BrookHunt / WoodMackenize
Cumulative Percentile Production
NOTES:
1 - guidance for the first 3 years of operation
2 - 2014 guidance
6
Investment Capital - 2013 & 2014
2013
2014
$US M
$US M
Neves-Corvo
65
55
Zinkgruvan
35
40
Other
0
5
100
100
25
38
Neves – other
5
12
Aguablanca
15
10
Total New Investment – European Operations
45
60
Total Eagle
100
300
Total Tenke
65
50
Total Exploration
33
40
Total Capital Investment
343
550
Sustaining
Total Sustaining – European Operations
New Investment Lombador Phase I
7
Excellent Financial Outlook
• Strong Balance Sheet with excellent flexibility
• Net cash balance expected to grow rapidly as Eagle enters production
As of Dec. 31, 2013
$US M
Cash & Equivalents
$117
Total Debt
$229
Total Net Debt Balance
$112
Available Credit Facility
Outstanding
~$360
Consensus Estimates - Net Cash / (Debt) 1
Credit Facility totalling $600M completed in October 2013, for a four year term with rates between LIBOR +2.75% to LIBOR +3.75%
_________________________________
1
Consensus estimates sourced from Bloomberg on February 27, 2014
8
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
Proven disciplined growth approach
Geographic and base metal diversification
Neves-Corvo
Zinkgruvan
Eagle
Tenke Fungurume
9
Neves-Corvo
Overview
10
Senior Management - Neves-Corvo / Iberia
Neves-Corvo Headcount
Managing Director Iberian Operations
Michael Hulmes
NC
General Manager Aguablanca **
Lombador Project Manager*
Mike Struthers
Luis Merino
NC
AB
Employees:
1,042
Contractors:
1,170
Total Personnel
2,212
Lawyer and Legal Manager
Fatima Nunes
*Also reported under Project Management
as Director Strategic Studies
Portugal
** Also reported under Aguablanca
Strategic Development Manager
Mine Manager
Plant Manager
Continuous Improvement Manager
Antonio Salvador
Jose Lobato
Antonio Camacho Valente
Guido Sbrancia
NC
NC
NC
NC
Head of Mine Production
Safety, Health and Env. Manager
HR Manager
Finance, Purchasing & Mats. Manager*
Ernesto Fernandes
Celso Pessoa
Fernando Pedroso
Joao Loja Fernandes
NC
NC
NC
NC
*Also supports AB
11
Strong Focus on Safety Performance
Total Recordable Incident Frequency (TRIF)
6
# Incidents 200,000 hrs
5
4.88
4.53
4
4.19
3.85
3.64
3.18
3
2.83
2
1.83
1.94
1.59
1.11
1
0
2004
2005
2006
2007
2008
TRIF Somincor
2009
2010
2011
2012
2013
2014
Target 2014
12
Environmental Management - Water Management
• Climate results in winter surplus and summer deficit of water
• Conversion to sub aerial from sub aqueous storage for ease
of management
• Constructed a paste plant to reduce the water in tailings
• Constructing a dam for winter storage and summer recycling
13
Environmental Performance - Biodiversity
• Collaboration in projects with the the neighbouring Guardiana National
Park, Universities of Lisboa and Coimbra and support of Ph.D research
• Approximately 50% of the total European population of 4,000 individuals
nests in this area and has been impacted primarily by agricultural
practice
• Conservation area of 150hectares of mine owned agricultural land close
to the mine set aside for the ground dwelling Great Bustard.
14
Social and Community Programs
•Involvement in regional project to prevent suicide
of isolated elderly people
•Financial sponsorship of breakfasts for school
children via five local primary schools
•Creating Technical Support units for mobility
challenged local residents
•Promote cultural, social, sports and associated
activities in region.
•Sponsorships of historic and mining heritage.
15
Neves-Corvo - Overview
• Located in Portugal - a miningfriendly EU country
• Excellent infrastructure (rail,
port, highway, power, airports)
• Close to European suppliers
and customers
• Storage and ship loading
facility at Setubal Port
• Skilled, stable work force
16
History
• 1988 – Opened by Portuguese PM.
Total capital costs of $343 million
• 2004 - Acquired by EuroZinc
• 2006 - Acquired by Lundin Mining
through merger with EuroZinc
• 2010 - Exploration discovered a
new copper-rich massive sulphide
deposit, Semblana
• 2011 - Zinc plant successfully
expanded to 1.0Mtpa
• 2013 – Achieved annual record zinc
production aided by higher grades
from the Lombador ore body
17
2013 Results
• Production of 56.5kt copper and an annual record of 53.4kt zinc
• C1 costs of $1.90/lb Cu in-line with latest guidance
• Average copper grades of 2.6% with recovery rate of 84.5%
• Copper production exceeded guidance for the year due to higher
than expected throughput, offset by lower recoveries
• Higher zinc grades from initial production in the deeper sections
of Lombador contributed to increased zinc production in H2/2013
Location
• Portugal
2014 Production
Guidance
• 50–55 kt Cu
• 60–65 kt Zn
2014 C1 Costs
• $1.90/lb Cu
Mine Life
• +10 years Cu + Zn
18
Copper & Zinc Production Profile
Cu Metal
80
74
70
59
57
50 - 55
60
50 - 55
50 - 55
50
k tonnes
40
30
20
10
0
2011A
2012A
2013A
2014E
2015E
2016E
Zn Metal
75 - 80
75 - 80
80
60 - 65
70
53
60
k tonnes
50
30
40
30
20
4
10
0
2011A
2012A
2013A
2014E
2015E
2016E
Neves-Corvo – Outlook
• Copper production and costs consistent with 2013
• Zinc ore mining rates will continue to increase from bulk stopes in
upper Lombador resulting in an increased zinc production profile
• Initiatives progressing for deeper Lombador zinc and copper ores
• Potential increased zinc production subject to feasibility study
20
Production Summary by Orebody - Copper
• No significant changes expected in copper production over
next few years
Notes: All figures based on the NI 43-101 Technical Report published in Jan-2013.
21
Production Summary by Orebody – Zinc
• By 2017, all zinc production is expected to come from the
higher grade Lombador and Corvo orebodies
Notes: All figures based on the NI 43-101 Technical Report published in Jan-2013.
22
Exploration
23
Mineral Reserves & Resources
June 30,
2013
000’s
Tonnes
Cu %
Mineral Reserves – Copper:
June 30,
2013
000’s
Tonnes
Zn%
Mineral Reserves – Zinc:
Proven
5,821
4.6%
Proven
10,700
8.4%
Probable
21,192
2.5%
Probable
12,578
6.6%
Total P&P
27,013
2.9%
Total P&P
23,278
7.4%
Mineral Resources (inclusive of Reserves)
Mineral Resources (inclusive of Reserves)
Measured
10,401
4.8%
Measured
23,545
7.5%
Indicated
44,867
2.5%
Indicated
67,313
5.5%
Inferred
24,701
1.8%
Inferred
22,496
4.5%
Inferred Semblana
7,776
2.9%
24
Neves-Corvo Resource Growth - Copper
Copper Resource
100,000
140,000
90,000
120,000
100,000
70,000
60,000
80,000
50,000
60,000
40,000
30,000
Metres Drilled
Mineral Resource Tonnes
80,000
40,000
20,000
20,000
10,000
0
-
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Inferred
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
Meas + Ind
Sfc + UG Metres Drilled
Acquired by Lundin
in 2006
25
Neves-Corvo Resource Growth - Zinc
Zinc Resource
120,000
140,000
120,000
100,000
80,000
80,000
60,000
60,000
Metres Drilled
Mineral Resource Tonnes
100,000
40,000
40,000
20,000
20,000
0
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
Inferred
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
Meas + Ind
Metres Drilled
Acquired by Lundin
in 2006
26
Neves-Corvo – 2013 Resource Drilling
• Main investigation areas in 2013 were:
− Monte Branco W; Monte Branco NE; Semblana; Monte Branco – Semblana; Monte Branco Zambujal
27
Lombador Copper Discovery - Evolution
• Lombador Orebody – Copper Metal Evolution:
2008
Mea+Ind: 851,000 @ 4.10% Cu (34,900 t metal)
Mea+Ind+Inf: 1,299,000 @ 3.68% Cu
2013
Mea+Ind: 12,971,000 @ 2.06% Cu (267,200 t metal)
Mea+Ind+Inf: 32,100,000 @ 1.80% Cu
Exploration Expenditures
2013
Actual
2014
forecast
Underground Exploration drilling m
50,100
50,600
Surface Exploration drilling m
45,200
12,400
Underground exploration cost $000
8,100
7,200
Surface Exploration cost $000
17,700
6,900
Total Exploration drilling m
95,300
63,000
Total drilling Drilling cost $000
25,800
14,100
29
Mining, Processing & Mineral Extraction
30
Surface Infrastructure
Canteen
Headframe
Administration
Copper Plant
Zinc Plant
31
Mine Site Layout
32
Mine General Information
Shaft: Mine collar 210m above sea level
Capacity 4.7 Mtpa
Depth 770 m
UG Workshops
3 Mobile Equipment
1 Fix Equipment
160 km - horizontal infrastructure
60 km - vertical infrastructure
Crusher 700
Rate: 600 ton/hr
Storage Silos: 4 x 1500 ton
TP12 Inclined shaft
Connect 550L to 700 L (742 m)
Crusher 550
Rate: 600 ton/hr
Storage Silos: 600 ton and 400 ton
33
2013 Development Lombador Ramp
• Lombador Phase 1 Downward Ramp – 1,000m Depth
Achieved
34
Neves-Corvo Deposits
35
Neves-Corvo Mine
3D of the Total Zinc Resources
Zinc Mineralisation
36
Neves-Corvo Mine
3D of the Total Copper Resources
Copper Mineralisation
37
Different Ore Types
Typical Copper Stockwork Ore
Typical Massive Zinc Ore
Proportion of different Ore types mined
Massive % Stockwork %
Typical low grade
FC oreOre
Copper
22
78
Zinc Ore
85
15
38
Four Mining Methods
• Drift and fill – A very selective mining method used mainly in copper
ore. Employs cemented hydraulic sandfill
• Bench and Fill – Productive bulk mining method used mainly in zinc
and also in copper ore. Employs paste fill in primary stopes and
waste rock in secondary stopes
• Mini Bench – Modified bench and fill method used in zinc and copper
ore. Employs paste fill in primary stopes and waste in secondary
stopes
• Optimized Bench and Fill – Productive bulk mining method used in
zinc ore. Paste in primary stopes and waste in secondary stopes
39
Mining Methods
Sill-Pillar
Drift&Fill
Hangingwall
access outside
overlap zone
Contour of
Lower stoping
20m
Upper level
already filled
3m ore skin taken
on retreat w ith uppers
Footwall Access
5mx5m Drifts
perpendicular to
Footwall contact
Filled w ith
cemented
Rock fill
RAMPA
Filled immediately
by Slinger Truck
HW
FW
Mini-Bench&Fill
Bench&Fill
40
Neves-Corvo Mining Methods - Optimised Bench and Fill
41
Neves Corvo Mining Methods - Drift and Fill Mining
42
Three types of Backfill
• Uses mill tailings strengthened with cement. Preferred fill type, good from
environmental perspective, very cheap, capacity being increased
• Hydraulic Sandfill – Uses sand mined from our own quarry strengthened
with cement. Railed to the mine from our own quarry. Expensive and will
be largely displaced by paste in next twelve months
• Waste Fill- Waste rock mined from ore access tunnels. Previously hoisted
to surface for disposal but now mostly is stowed underground
43
Zinc and Copper Treatment
•Copper and zinc ore are handled separately
in the mine and also treated separately
•Zinc plant has a capacity of 1.2Mtpa and
2014 is the first year of full utilisaton
•Copper plant currently operates at 2.3Mtpa
and has capacity for 2.7Mtpa
TMF
•Ore is crushed underground and on surface,
Cu economic
Plant
are then ground and
minerals are
concentrated using thr flotation process
•Copper Concentrate grade is approximately
23.5% copper
•Zinc Concentrate grade is approximately
50% zinc
Zn Plant
Copper Plant Flowsheet
Fluxograma Lavaria de Cobre - Junho 2009
BRITAGEM
Moinho Barras
Linha 2
Ciclones
Linha 2 20"
Silo
Ciclones
Secundários 10"
Ciclones
Primários 20"
Moagem Linha 1
Moinho Bolas
Linha 2
Moinho 2º
Moinho 1º
Moinho Barras
2 - Alimentação Linha 2
Arejamento
1 - Alimentação Linha 1
Relavagem
Scalper
1ºDesbaste
1ºDesbaste
2ºDesbaste
2ºDesbaste
3ºDesbaste
3 - Concentrado Linha 2
Concentrado Linha 2
para Rem. Linha 1
Ciclones de
Remoagem 6"
119 - Rejeitado Linha 2
Bomba de
Remoagem
Moinho Rem
Acab. Grosseiro
5 - Rejeito Linha 1
Rejeito Escórias - para BCL
Concentrado
Escórias
Condicionador
RC
Rel. RC
72 m3
1ºDesbaste RC
2ºDesbaste RC
DPR
Acab. Fino
223 - Rejeitado RC
Ciclones de
Remoagem RC - 3"
Condicionadores Zn
2 x 10m3
3ª Relavagem
Remoagem RC
2ª Relavagem
1ª Relavagem
Cal
CuSO4
Bombas de
Rejeitado
IsaMill
Rel.2 + Rel. 1 +
Desbaste
Zinco RC
Condicionador
Desbaste RC
Rel. + Desbaste
Cobre RC
Barragem de
Cerro do Lobo
50 m3
Filtro 5
10A - Conc. Linha 1
220 - Concentrado Zn RC
214 - Concentrado Cu RC
Filtração Cobre
Filtro Zinco
45
Process Plant Outlook - 2014
Tonnes
Treated (kt)
Head Grade
%
Metallurgical
Recovery %
Copper Plant
2,372
2.59
86.9%
Zinc plant
1,116
7.03
78.8%
Notes: All figures based on the NI 43-101 Technical Report published in Jan-2013.
46
Production Outlook
• Copper production to remain steady going forward at 50-55kt
• Zinc production expected to increase to 75-80kt by 2015
Notes: LUN three year guidance released on December 4, 2013. Production outlook assumes mid-point of guidance range.
47
Tailings and Water Management
48
Tailings Management System
• The tailings have acid generation potential and have been placed, since
mine start up, sub-aqueously, in a large tailings pond.
• The new method consists of Paste/Thickened Tailings production, uses
latest available technology and is sub-aerially deposited.
49
Tailings Management System – Paste/Thickened Tailings Technology
• The sequential deposition areas are defined by berms or dykes,
built with mine waste rock
• The Paste/Thickened Tailings Technology allows:
– Cover of each area with an engineered cover after filling
– Co-disposal of acid generating tailings and waste rock
– Minimization of acid rock drainage impacts
– Better geochemical and geotechnical stability
– A progressive and concurrent closure of the tailings dam
during operation of the mine.
50
Concentrate Transport and Setubal Port
51
Concentrate Marketing
• All concentrates, both copper and zinc, are sold under long
term contracts directly to mainly European smelters
• The commercial terms under the contracts are negotiated on
an annual basis and the concentrates are sold at the
respective benchmark for copper and zinc concentrates or
better
• Copper Benchmark terms for 2014
– Treatment charge $92/t concentrate
– Refining charge $0.092/lb payable copper
• Zinc benchmark terms for 2013 (negotiations still in progress
for 2014)
– Treatment charge $212/t concentrate based on zinc prices of
$2,000/t with escalators 2-6%, and de-escalators 2%
52
Neves Corvo copper concentrate
Boliden
Rönnskär, Sweden
Atlantic Copper
Huelva, Spain
Boliden
Harjavalta, Finland
Aurubis
Hamburg, Germany
Aurubis
Pirdrop, Bulgaria
Paranapanema
Salvador, Brazil
Neves Corvo Zinc Concentrates
Boliden
Kokkola, Finland
Boliden
Odda, Norway
Xstrata
Nordenham, Germany
Nyrstar
Balen, Belgium
Glencore
Porto Vesme, Italy
Nyrstar
Auby, France
Xstrata
San Juan de Nieva, Spain
Concentrate Transport and Setubal Port
• Storage at the mine approximately:
– 20,000t for Copper concentrates
− Built a covered concentrate
warehouse at the mine 2013
– 12,000t for Zinc concentrates
• Concentrates loaded into containers
and railed 180 km to our storage and
shiploading facility at Setubal on
Atlantic Coast
• Sampling for concentrate quality
before it leaves the mine
• Concentrates are typically shipped as
7,000t bulk cargos from Setubal
55
Setubal Port Concentrate Handling
• The Setúbal facility is owned by Somincor and includes warehouses
equipped with mechanised load out and blending equipment
• Warehouse capacity is 27,000t of copper concentrates and 8,000t of
zinc concentrates but the proportions can be adjusted
• From time to time Somincor also loads concentrates for other mining
operations
• Approximately 6 ships are loaded every month primarily for European
Smelters
56
Mining Lease / Portuguese Fiscal Terms /
Social and Community
57
Mining Lease
SEMBLANA
MONTE
BRANCO
58
Investment in Portugal: Fiscal Environment
• High public deficit and inability to independently obtain finance led to
2011 agreement with IMF & ECB to finance Portuguese economy. Three
year program considered a success and planned to finish at the end of
May 2014
• Austerity measures being enforced under the bailout agreement, which
contemplated amongst other things:
– Taxes, such as personal, VAT and Corporate Tax were increased
– Measures to promote economic growth, notably employment measures to grant
more labor contract flexibility
– Reduction in number of annual holidays, public holidays and penalty rates for
overtime
– Reduction in public deficit
• Income Tax Rate – 29.5% in 2014 vs 31.5% in 2013
59
Investment in Portugal: Royalties
ARTICLE 13.1 OF CONCESSION CONTRACT:
In additional to Corporate tax Somincor pays royalties, in
accordance with the latter’s sole criteria and discretion:
a) 10% of annual net profits less all corresponding tax
charges;
or
b) Alternatively, 1% of NSR.
60
Capital and Operating Costs
61
Neves-Corvo: 2014 Capital Budget
Sustaining: $US 55 million mainly for:
•
•
•
Underground development
Mobile equipment
New water dam
Project Capital: $US 49 million mainly for:
•
•
•
Lombador Phase I underground development ($38M)
Lombador Phase II and underground drilling ($6M)
Zinc plant expansion and shaft upgrade project studies ($5M)
62
Operating Cost Summary
2013 Cost per tonne
60.00
A = Actual
B =Budget
50.00
€ / tonne milled
40.00
30.00
A
53.0
B
55.5
20.00
A
31.1
B
31.5
10.00
A
12.3
B
13.2
A
9.6
B
10.8
0.00
Mine Cost
Plant Cost
G&A
Total
63
Neves-Corvo Operating Cost Summary
2013 C1 Cost
300
7
250
47
74
$ Cts / Lb
200
150
100
208
188
50
0
Operating
Costs
TC/RC
Freight &
Marketing
By products
C1 Cost
64
Mine & Mill Cost Breakdown - 2014
• Salaries & contractors are the largest component of mining
costs
• Energy is the largest component of millings costs
Notes: All figures based on the NI 43-101 Technical Report published in Jan-2013.
65
Neves-Corvo: Capital Investment USD M
120
100
80
24
31
16
19
42
60
33
11
36
30
42
40
20
42
42
2011
2012
28
36
39
2013
2014 B
0
2010
Sustaining
Projects
Exploration (Inc. In-fill)
66
Potential Upside Scenarios
67
Excellent Resource Upside Potential
68
Example Mine Extension to Lombador Phase 2
700L Haulage & Shaft
Zinc stoping (blue)
Copper stoping (brown)
550L Haulage
Base of Lombador Phase 1
Base of Lombador Phase 2
69
…includes a variety of materials handling options
Copper stoping (brown)
Zinc stoping (blue)
TP12
700 Level
Crusher
550 Level
Haulage
Base of
Lombador
Phase 2
(-20m EL)
Base of Lombador
Phase 1
and 260 Level
Crusher
18%
Conveyor
Ramp
Looking east, approximately on strike
70
Zinc Expansion Project
• Neves-Corvo zinc orebodies Neves Corvo can yield at up to
3Mtpa of zinc ores whereas we now have 1.2Mtpa plant
capacity
• Current studies are defining the optimum mine and plant
expansions to achieve a sustainable zinc output in the order
of 150,000tpa zinc.
• Two main areas of study are the underground ore and waste
handling (incl. shaft capacity) and the process plant.
– Debottlenecking has increased the shaft output from 2.5Mtpa to
4.9Mtpa, so some expansion scenarios require modest
investments
– A SAG mill was previously acquired for the zinc plant expansion.
71
Zinc Resource Base – Peer Comparison
• LUN has a very large zinc resource base for a company of our size
• Relative to our peers we have one of the largest zinc reserve &
resource bases trailing only
Total Zinc Reserves & Resources (including Inferred)
Companies
Contained Zn (kt)
Market Cap ($US Bn)
Glencore Xstrata
93,787
$73.0
Vedanta
42,922
$3.8
MMG Ltd
20,032
$0.9
Teck
13,007
$13.0
Lundin
9,345
$2.7
Boliden
6,213
$4.3
Nyrstar
6,180
$0.7
Hudbay
5,213
$1.5
First Quantum
1,662
$11.5
• Market Caps as of Feb. 28, 2014
• All reserves & resources as of Dec. 31, 2012, except for Lundin and MMG as of Jun. 30, 2013
• Based only on our peer group, may exclude certain companies which are not considered comparable to LUN
72
TSX: LUN
OMX: LUMI
Thank you.