Lundin Mining Corporation (TSX: LUN) (Nasdaq Stockholm: LUMI) is pleased to announce it has entered into a binding purchase agreement with JX Nippon Mining & Metals Corporation and certain of its subsidiaries, to acquire fifty-one percent (51%) of the issued and outstanding equity of SCM Minera Lumina Copper Chile, a wholly owned subsidiary of JX which operates the Caserones copper-molybdenum mine located in Chile. JX will receive upfront cash consideration from Lundin Mining of $800 million, and in addition, $150 million in deferred cash consideration will be payable by Lundin Mining in installments over a six-year period following the closing date. Lundin Mining will also have the right to acquire up to an additional 19% interest in Caserones for $350 million over a five-year period commencing on the first anniversary of the date of closing. Additional details are provided below.

Acquisition Rationale

• Aligned with strategic goals – delivers a large-scale, long-life copper operation with favorable cash flow generation, complementing Lundin Mining’s existing operations and overall copper-dominant portfolio of high-quality base metal mines.
• Enhances copper production profile – increases exposure to a highly desired base metal and on a pro forma basis would have increased Lundin Mining’s 2022 copper production by 50%¹. This will further solidify Lundin Mining’s position as a meaningful copper producer globally.
• Immediate free cash flow contribution – underpinned by competitive cash costs and modest capital expenditures, and significantly accretive to operating cash flow per share metrics.
• Continued balance sheet strength – remains a high priority for Lundin Mining, and financial leverage continues to be low in relation to internal targets and to comparable mining peers. The Company retains healthy liquidity headroom on its $1.75 billion revolving facility after accounting for the upfront cash consideration for the Acquisition.
• Upside opportunities – through expected operational improvements under Lundin Mining’s management, including initiating drill programs. The producing operation comes with a mineral property package in a highly prospective district and Lundin Mining believes significant exploration potential exists.
• Potential synergies – proximity to Lundin Mining’s Candelaria operations (~160 km from Caserones) introduces opportunities to realize additional savings and implement effective supply, logistical and management strategies.
• Chile is a well-established Tier-1 mining jurisdiction – Lundin Mining has made a significant investment in the region and the country, and can leverage its operating experience, as well as local regulatory and community relationships.
• Attractive call option – clear path for Lundin Mining to increase ownership up to 70% and strengthen its presence in a leading copper mining district.
• Strengthening partnerships – JX has extensive operational knowledge, which will help Lundin Mining to realize the full potential of the Caserones mining operation.

Commenting on the transaction, Peter Rockandel, CEO, said, “Upon closing of the Acquisition of Caserones, we add another long-life copper mine of material size and with significant growth potential to our portfolio, in a region in which we have considerable knowledge and experience. The Caserones team has achieved meaningful operational improvements in recent years, and we will work to unlock additional upside through our strong technical resources and existing presence in the region. The initial controlling interest increases our exposure to what we believe is a growing top-tier copper mining district. We retain the option to further increase our ownership over the next few years at an attractive price. The Acquisition further solidifies Lundin Mining’s position as a growing global producer of copper as the world shifts to a lower carbon future.”

Caserones Overview

Caserones is a significant porphyry copper-molybdenum deposit in the Atacama Region (Region III) of the northern Chilean Andean Cordillera, situated between the Maricunga and El Indio belts and is part of the emerging Vicuña copper district. It is located approximately 160 km southeast of Copiapó, 9 km from the border with Argentina, and at an altitude of approximately 4,500 meters above sea level. The operation produces copper and molybdenum concentrates from a traditional open pit mine and conventional sulphide flotation plant, as well as copper cathode from a dump leach, solvent extraction and electrowinning plant. First copper cathode was produced in 2013, followed by copper and molybdenum concentrates in 2014. Climatic conditions and the physiology of the high-cordillera of the Chilean Andes support mining operations throughout the year.

Asset Highlights:

• Mine operations – traditional open-pit truck and shovel operation utilizing thirty-three haul trucks loaded by a combination of two electric rope shovels, two hydraulic shovels, and two large front-end loaders.
• Processing – conventional crush, grind and flotation processing with a nominal capacity of 105 k tonnes per day, producing both copper in concentrates and molybdenum in concentrates, as well as a solvent extraction and electrowinning (SX-EW) plant and leaching facilities for processing oxide and low-grade sulphide ore with a production capacity of 34.5 kt of cathode per year (96 tpd). In 2022, the concentrator plant produced 109.1 kt of copper in concentrate. In addition, 15.1 kt of copper cathodes and 3.1 kt of molybdenum in concentrate was produced.
• Concentrate – clean copper concentrate with minimal impurities. Similarly, molybdenum concentrates meet the quality standards for global sales.
• Operating cash costs² – C1 cash costs of $2.22/lb and all-in sustaining cash costs of $2.54/lb was reported by Caserones for 2022.
• Mineral Reserves and Resources – a “historical estimate” (as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects) for copper Proven and Probable Mineral Reserves of 892.1 Mt at an average grade of 0.33% copper containing approximately 2.9 Mt of copper and historical estimates for copper Measured and Indicated Mineral Resources of 1.595 Bt at an average grade of 0.29% copper containing 4.583 Mt of copper. A qualified person has not done sufficient work to classify these historical estimates as current Mineral Resources or Mineral Reserves and Lundin Mining is not treating the historical estimate as current Mineral Resources or Mineral Reserves. See below for further detail.
• Tailings facility– tailings are managed in two separate facilities. The flotation tailings from the concentrator plant are classified into coarse and fine fractions. The La Brea TSF, located approximately 9 km west of the concentration plant, receives the fines and the coarse fractions are sent to the El Tambo sand stacking facility immediately adjacent to the concentrator plant. Due diligence was performed on the tailings facilities and related infrastructure, led by Lundin Mining’s Technical Services Group.
• High-quality infrastructure – well-established supporting infrastructure includes a 160 km road to Copiapó, access to maritime transportation channels for exporting concentrates and cathodes, a 220 kV power line connection to the national grid, and water rights permitted for operational use.
• Communities and employees – experienced workforce and community relations team in place enabling good relationships with local stakeholders.

Transaction Overview

The purchase price for the Acquisition will be paid in cash and will consist of an upfront payment of $800 million subject to any adjustments from the effective locked box date of December 31, 2022, until closing. The remainder of the cash consideration, of $150 million shall be paid to JX as follows: (A) $50 million shall be paid in five installments of $10 million on the anniversary of the transaction closing date in each of 2024, 2025, 2026, 2027 and 2028; and (B) $100 million shall be paid on the anniversary of the closing date in 2029, subject to certain adjustments as provided for in the purchase agreement.

The Acquisition is based on Lumina Copper containing zero debt and zero cash as of the locked box date of December 31, 2022. The purchase price is expected to be funded from Lundin Mining’s revolving credit facility.

Lundin Mining will also have the right to acquire up to an additional 19% interest in Caserones for $350 million, which would bring total ownership to a maximum of 70%. Lundin Mining will be permitted to exercise the call option (in increments or its entirety) one time per calendar quarter during the subsequent five-year period beginning on the one year anniversary of the closing date.

Lundin Mining and JX shall each be entitled to a percentage of the copper production from the Caserones mine equal to their respective percentage share ownership.

The Acquisition has been unanimously approved by the Board of Directors of both the Company and JX and is expected to close in the third or fourth quarter 2023 subject to typical closing conditions, including third-party and requisite regulatory approvals. The transaction does not require shareholder approval of either party.

Historical Estimates – April 2021³

The historical estimates for Caserones are presented in the table below.

The reported historical estimates above are based on the Caserones block model prepared by Golder Associates S.A. (Golder) during 2018. The resource model update followed the 2017 infill drilling campaign. The estimation of the grades was carried out by means of Ordinary Kriging and using GIL (Geological Information Limit).

The historical estimates do not use categories as defined in CIM Definition Standards. The Lumina Copper Annual Reports include an annual “reserve statement” with no accompanying qualifying attributes or supporting assumptions given. The most recent reserve statement is from Lumina Copper’s 2020 Annual Report and does not provide the detailed assumptions for the estimation of its reported “reserves” but does state “ore reserves are estimates of the amount of ore that can be economically and legally extracted from the company’s mining properties”. As Caserones is an active mining operation with production history, the Company believes that the historical estimates are relevant in that they provide a general basis for establishing the mineralized material and historical production statements. However, the historical estimates should not be relied upon until verified by a qualified person. Compilation, review, and independent verification by qualified persons of geological, engineering, metallurgical, economic, and other data that support ongoing mining operations will be required before the historical estimate can be verified as current.  This reserve statement predates the Company’s acquisition of its interest in Caserones and is therefore considered to be a historical reserve estimate. A qualified person has not done sufficient work to classify these historical estimates as current Mineral Resources or Mineral Reserves and Lundin Mining is not treating the historical estimate as current Mineral Resources or Mineral Reserves.

Lundin Mining is currently undertaking the work to prepare current estimates and expects to announce a current estimate and file a technical report for Caserones on its SEDAR profile in due course following this announcement. The technical report is expected to contain current Mineral Resource and Mineral Reserve estimates and other relevant information related to the Caserones mine.

Advisors and Counsel

Scotiabank acted as financial advisor to Lundin Mining and delivered an opinion to Lundin Mining’s Board of Directors as to the fairness, from a financial point of view, of the consideration to be paid by Lundin Mining in the transaction. Lundin Mining retained Cassels Brock & Blackwell LLP as Canadian legal advisors, Paul, Weiss, Rifkind, Wharton & Garrison LLP as US legal advisors, and Bofill Mir Abogados and Bofill Escobar Silva Abogados as Chilean legal advisors in connection with the transaction.

Technical Information

The qualified person for the scientific and technical information contained herein is Jeremy Weyland, P.Eng., Director, Studies. Mr. Weyland, who is a “qualified person” as defined under NI 43-101, has reviewed and approved the technical information in this news release.

About Lundin Mining

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