Lundin Mining Corporation (TSX: LUN) (Nasdaq Stockholm: LUMI) reported its third quarter 2023 financial results.

“Our operations continued with a strong performance in the third quarter. As a result, we are increasing our production guidance for Caserones and Eagle. The acquisition of Caserones enabled us to achieve a new record in quarterly consolidated copper production, and we also achieved a record in quarterly zinc production. This led the Company to an adjusted EBITDA of $415 million for the period.” commented Peter Rockandel, CEO.

Mr. Rockandel added, “During the integration process of Caserones, our team has identified and outlined synergies between Caserones and Candelaria, which are expected to yield initial annual savings of $20 to $30 million per year. We are excited about launching the largest exploration program at Caserones since production commenced, targeting resource extensions and near-mine discoveries. The corporate office move to Vancouver is complete and all senior executive positions are in place. As we approach 2024, Lundin Mining is strategically, operationally, and financially, in a strong position to continue to deliver on our plans and execute on the next phase of growth. On a personal note, as this is my last quarter as CEO, I would like to thank all our employees, partners and stakeholders for their dedication, hard work and support, all of which have been integral to our current and future success. I am extremely proud of what the team has been able to accomplish during my tenure as CEO.”

Third Quarter Highlights

• Copper Production: The Company achieved consolidated production of 89,942 tonnes of copper, a new quarterly record.
• Other Production: During the quarter a total of 49,774 tonnes of zinc, 4,290 tonnes of nickel and approximately 35,000 ounces of gold were produced. A quarterly zinc production record was achieved as the zinc expansion project (“ZEP”) at Neves-Corvo ramps up and a full quarter of operation from the sequential flotation project at Zinkgruvan was realized.
• Revenue: $992.2 million in the quarter.
• Adjusted Earnings: Net loss attributable to shareholders of the Company was $3.0 million ($0.00 per share). Adjusted earnings attributable to shareholders of the Company¹ was $85.6 million ($0.11 per share).
• Adjusted EBITDA: Adjusted earnings before interest, taxes, depreciation and amortization¹ of $415.1 million in the third quarter.
• Cash Generation: Cash provided by operating activities was $303.8 million and cash and cash equivalents at September 30, 2023 was $357.3 million. Adjusted operating cash flow¹ was $316.5 million ($0.41 per share), after removing the impact of working capital. Free cash flow¹ was $71.1 million.
• Caserones Acquisition: Completed the acquisition of 51% of the Caserones copper-molybdeum mine on July 13, 2023, adding another long-life asset in a tier one jurisdiction. The Company anticipates initial annual synergies from supply chain and service contracts between Caserones and Candelaria to be $20 million to $30 million per year.
• Term Loan: To fund the Caserones acquisition, the Company obtained a term loan in July 2023 of a principal amount of $800.0 million with an additional $400.0 million accordion option maturing in July 2026. As at September 30, 2023, the Company had a net debt¹ balance of $1,158.9 million.
• CEO Succession: Peter Rockandel, the current Chief Executive Officer announced that he will be stepping down from the role of CEO and from the Board of Directors as of December 31, 2023. Those responsibilities will be assumed by Jack Lundin, current President, and former Director of the Company.
• Outlook: Revised annual production guidance, including an increase in copper production from 296,000 – 325,000 tonnes to 305,000 – 325,000 tonnes. Cash cost guidance was lowered at Caserones and Eagle and increased at Candelaria. Annual capital expenditure guidance is lower by $30 million.

Summary Financial Results

Quarter Ended September 30, 2023

• The Company generated revenue of $992.2 million, gross profit of $197.3 million and adjusted EBITDA of $415.1 million (Q3 2022 – $202.4 million).
• Net loss attributable to shareholders of the Company was $3.0 million ($0.00 per share) in the third quarter, impacted by higher interest expense, non-cash unrealized losses on derivative contracts and increased deferred tax expense as a result of the enactment of the mining royalty law in Chile⁴.
• Adjusted earnings attributable to shareholders of the Company for the quarter of $85.6 million ($0.11 per share attributable to shareholders of the Company) were $49.5 million higher than the prior year quarter after adjusting for the non-cash revaluation of derivative contracts, fair value adjustments relating to the Caserones acquisition and deferred tax relating to the mining royalty rate change⁴, among other things.
• Cash and cash equivalents as at September 30, 2023 were $357.3 million. Cash generated from operations of $303.8 million during the quarter was used to fund investing activities of $908.8 million. Investing activities in the third quarter included $648.6 million net cash paid at closing for the acquisition of Caserones, consisting of $796.6 million upfront cash consideration after adjustments, net of $148 million cash and cash equivalents held by SCM Minera Lumina Copper Chile at closing on a 100% basis.
• Free cash flow of $71.1 million was $234.3 million higher than the prior year comparable period and benefited from the inclusion of production from Caserones, combined with higher realized copper prices and higher overall changes in working capital.
• As at November 1, 2023, the Company had cash and net debt balances of approximately $368.6 million and $1,137.6 million, respectively.

Corporate Highlights

• Candelaria EIA: A new Environmental Impact Assessment (“EIA”) was granted at Candelaria for the extension of operations from 2030 to 2040.
• Exploration: Exploration programs continue at our existing assets while new exploration drilling campaigns are underway at Caserones and Josemaria. Drilling at Caserones will be the largest exploration program since the mine began operation in 2013. The initial phase of the drill program is expected to be over 10,000 meters and results are expected in H1 2024.
• Copper Mark: Caserones has achieved the Copper Mark at its operations, a designation that highlights the Company’s commitment to sustainable mining practices.
• Josemaria Project: The Company continues to derisk and advance the Josemaria project through optimization and trade off studies. These studies will continue into 2024.
• Senior Leadership Appointments: The corporate office move to Vancouver has been completed. The Company is pleased to announce the following executive appointments, Peter Brady has been hired as General Counsel, Ricardo Checura as Vice President, Health and Safety and Nathan Monash as Vice President, Sustainability.

Outlook

Production and cash cost guidance for 2023 is updated from that disclosed in the Company’s Management’s Discussion and Analysis for the three and six months ended June 30, 2023.

Most production guidance ranges are tightening and improving, with the lower end of the range increasing for copper, nickel and gold. Cash cost guidance is lower for Caserones and Eagle driven by higher production volumes and by-product credits, and increasing for Candelaria, reflecting higher operating costs. Production continues to be weighted to the second half of the year, notably at Chapada due to the first half seasonal operating conditions and forecast grade and recovery profiles.

2023 Production and Cash Cost Guidance

As a result of re-phasing several projects at Neves-Corvo and Zinkgruvan, capital expenditure guidance is lower by an additional $30 million for 2023. As disclosed in the Company’s Management’s Discussion and Analysis for the three and six months ended June 30, 2023, capital spend guidance at Josemaria was previously lowered to $350 million for 2023 due to foreign exchange, a delay in planned equipment deliveries and reduced activities.

2023 Capital Expenditure

2023 Exploration Investment Guidance

Total exploration expenditures are on target to be $45.0 million in 2023, unchanged from previous guidance.

Operational Performance

Total Production

Candelaria (80% owned): Candelaria produced 34,275 tonnes of copper and approximately 20,000 ounces of gold in concentrate on a 100% basis in the quarter. Copper production was lower than the prior year quarter primarily due to lower grades partially offset by higher throughput. Gold production was lower than the prior year quarter due to lower grades and recoveries. Current quarter production costs and copper cash cost of $2.19/lb were higher than the prior year quarter largely owing to higher contractor and maintenance costs and unfavorable foreign exchange. Cash cost was further impacted by lower sales volumes.

Caserones (51% owned): In the three months ended September 30, 2023 Caserones produced 34,427 tonnes of copper and 1,321 tonnes of molybdenum on a 100% basis, of which 29,821 tonnes of copper and 1,096 tonnes of molybdenum were produced from the acquisition closing date of July 13. Copper and molybdenum production were higher than planned due to increased throughput and recoveries. Production costs in the quarter were negatively impacted by the recognition of fair market value adjustments to inventory due to the acquisition. Copper cash cost of $1.60/lb benefited from higher than planned production and by-product credits.

Chapada (100% owned): Chapada produced 12,286 tonnes of copper and approximately 15,000 ounces of gold in concentrate in the quarter. Copper and gold production was lower than the prior year quarter primarily due to lower throughput and grades. Production costs were lower than the prior year quarter due to lower sales volumes. Copper cash cost of $2.28/lb for the quarter increased from the prior year quarter due to lower sales volumes, unfavorable foreign exchange variances, and lower by-product credits and production.

Eagle (100% owned): During the quarter Eagle produced 4,290 tonnes of nickel and 3,245 tonnes of copper which were lower than the prior year quarter due to lower planned grades. Production costs were higher than the comparable prior year quarter due to inflationary contractual cost increases. Nickel cash cost in the quarter of $2.07/lb was higher than the prior year quarter primarily due to lower by-product credits and higher production costs.

Neves-Corvo (100% owned): Neves-Corvo produced 9,016 tonnes of copper and 25,807 tonnes of zinc in the quarter. Copper production was higher than in the prior year quarter due to higher throughput, grades and recoveries. Zinc production was higher than in the prior year quarter primarily due to increased grades and recoveries driven by the Zinc Expansion Project (“ZEP”). Production costs during the quarter were lower than the prior year quarter despite higher sales, primarily due to reduced electricity costs. Current quarter copper cash cost per pound of $2.27/lb was lower than the prior year quarter primarily as a result of lower input costs and benefited from higher production and sales.

Zinkgruvan (100% owned): Zinc production of 23,967 tonnes and lead production of 8,643 tonnes were higher than the prior year quarter primarily due to higher throughput and grades. Copper production of 1,299 tonnes was lower than the prior year quarter due to lower throughput. Production costs were higher than the prior year quarter primarily due to higher sales volumes. Zinc cash cost per pound of $0.28/lb during the quarter was higher than the prior year quarter primarily as a result of lower by-product costs per pound and higher treatment and refining charges.

Senior Leadership Appointments

The Company is pleased to announce the executive appointments of Peter Brady as General Counsel, Ricardo Checura as Vice President, Health and Safety, and Nathan Monash as Vice President, Sustainability.

Peter Brady
General Counsel

Mr. Brady has joined Lundin Mining’s Executive Leadership Team as General Counsel. He has over 20 years of experience in industry and private practice working with major international mining companies. Prior to joining Lundin Mining, he most recently was Chief Legal & Governance Officer with Vale Base Metals, responsible for advising their senior leadership team on all legal and business risk, compliance, and corporate governance matters. Previous to Vale Base Metals, he was a Partner at McCarthy Tetrault. Mr. Brady holds a Bachelor of Laws from Queen’s University and a Master of Arts in Environmental Law from the University of Windsor.

Ricardo Checura
Vice President Health and Safety

Mr. Checura was previously at BHP Inc, where he spent the past 12 years in various leadership roles, most recently as Head of Risk Operations. He was a member of BHP’s Global Risk Leadership Team and managed the risk management activities of their Global Operating Assets. Prior to his most recent role, Ricardo served as their Head of Safety – Minerals Americas between 2018 to 2021. Mr. Checura’s experience also includes implementing Fatal Risk Management from his previous roles in the mining industry. Ricardo holds a Bachelor of Science in Engineering from the University of Concepción and a Master of Business Administration from the University of Chile.

Nathan Monash
Vice President, Sustainability

Mr. Monash has joined Lundin Mining’s Senior Leadership Team as Vice President, Sustainability. He has over 20 years of experience in the mining sector, developing and integrating sustainability strategy and governance structures and advising operations on community relations, local government relations, human rights and communications. Prior to joining Lundin Mining, he most recently led Lundin Gold’s sustainability activities during the construction and operation of the Fruta del Norte mine in Ecuador and prior to that led AngloGold Ashanti’s sustainability efforts in the Americas. Nathan has also worked with International Finance Corporation, guiding extractive industry clients on the structure and implementation of sustainable development strategies, and spent several years with the World Economic Forum where he worked closely with leaders from business, academia and government to identify and address key economic, social and environmental issues facing the mining and metals industry. Mr. Monash holds a Bachelor of Science in Biology from McGill University and a Master of Arts from the Fletcher School at Tufts University.

About Lundin Mining

Lundin Mining is a diversified Canadian base metals mining company with projects and operations in Argentina, Brazil, Chile, Portugal, Sweden and the United States of America, primarily producing copper, zinc, molybdenum, gold and nickel.