Lundin Mining Corporation · TSX:LUN
Lundin Mining — Merger or Acquisition (October 2014)
34 slides from Lundin Mining's merger presentation, Oct 6, 2014
Slide 1: Acquisition of Freeport's 80% Interest in the Candelaria Mining Complex
TSX: LUN OMX: LUMI Acquisition of Freeport’s 80% Interest in the Candelaria Mining Complex October 6, 2014 A preliminary short form prospectus containing important information relating to the securities of the Company described in this document has not yet been filed with the securities regulatory a
Slide 2: Cautionary Statements
Cautionary Statements Caution Regarding Forward Looking Information: This presentation contains forward-looking information, including, but not limited to, guidance on estimated annual production and cash costs and information regarding the anticipated completion of the transaction described herein.
Slide 3: Cautionary Statements Continued
Cautionary Statements Continued Caution Regarding Forward Looking Information: The disclosure in this presentation uses mineral reserve and mineral resource classification terms that comply with reporting standards in Canada, and certain mineral resource estimates are made in accordance with Canadia
Slide 4: Presenters
Presenters Presenters PAUL CONIBEAR PRESIDENT & CEO MARIE INKSTER SR. VP & CFO JULIE LEE HARRS SR. VP CORP DEVELOPMENT STEVE GATLEY VP TECHNICAL SERVICES 4
Slide 5: Candelaria Acquisition – A Unique Opportunity
Candelaria Acquisition – A Unique Opportunity • Lundin is acquiring an 80% interest in the high quality Candelaria mining complex from Freeport for $1.8 billion in cash • Total cost of $1.152 billion after upfront payment of $648 million received on sale of 68% of gold and silver stream to Franco-Ne
Slide 6: Candelaria Asset Overview
Candelaria Asset Overview • Candelaria • Large open pit mine with overall mining rate of 270,000tpd (LoM average strip ratio of 2.9:1) • Underground mine – Candelaria Norte (6,000tpd) • 75,000tpd concentrator • Ojos del Salado • Two underground mines – Alcaparrosa (4,000tpd) and Santos (3,800tpd) •
Slide 7: Candelaria − High Quality Asset
Candelaria − High Quality Asset • Within top 20 largest producing copper mines(1) Large, High Quality • Average production for next five years of 139ktpa Cu Producer in Excellent • > 0.5% copper grades with attractive by-product Jurisdiction credits (Au, Ag) Proven Track Record with • Current Minera
Slide 8: Candelaria – Excellent Strategic Fit for Lundin
Candelaria – Excellent Strategic Fit for Lundin Immediately accretive on key operating and financial metrics including cash flow and earnings per share Increases and diversifies copper production making Lundin a top 20 copper producer globally Adds core strength of large open pit capability Delivers
Slide 9: Lundin – Well Diversified Base Metals Producer
Lundin – Well Diversified Base Metals Producer Copper dominant with base metals and geographic diversification (80%) 9
Slide 10: Transaction & Financing Overview
Transaction & Financing Overview 10
Slide 11: Candelaria − Transaction Overview
Candelaria − TransacNon Overview Transaction • Lundin to acquire 80% interest in Candelaria and Ojos del Salado from Freeport • $1.8 billion in cash ($1.15 billion net of streaming agreement), subject to customary adjustments • Contingent consideration calculated as 5.0% of net copper revenues is pa
Slide 12: Candelaria − Transaction Sources & Uses
Candelaria − TransacNon Sources & Uses Sources of Funds Uses of Funds New Transaction Debt $1,000 Purchase Price $1,800 Acquisition Adjustments (2) Stream Agreement $648 $82 (cash & working capital) Equity Financing (1) $600 Repayment of Existing Term Loan $250 Estimated Transaction Costs and $74 Ex
Slide 13: Debt and Precious Metal Stream Financing
Debt and Precious Metal Stream Financing Debt Financing Precious Metals Stream • $1.0 billion of debt expected to be financed • Stream on 68% of gold and silver production with senior secured notes, backstopped by until 720 Koz of gold and 12 Moz of silver committed bridge facility have been deliver
Slide 14: Candelaria Mining Complex Overview
Candelaria Mining Complex Overview 14
Slide 15: Candelaria – Reserve Base Supporting Long Mine Life
Candelaria – Reserve Base Supporting Long Mine Life (1)(2)(3) Mineral Reserves & Resources, 31 Dec 2013 (4) Candelaria Open Pit Reserves • All Mineral Reserves estimated Tonnes Cu Au Ag Category (000s) (%) (g/t) (g/t) using $2.00/lb Cu price (with Open Pit Mine 275,907 0.57% 0.13 2.08 $1,000/oz Au a
Slide 16: Candelaria – Large-Scale, Long-Life Asset
Candelaria – Large-Scale, Long-Life Asset • Average LoM production Total Copper Production (ktpa) – 100% basis 100% 80% 191 126 ktpa Cu 101ktpa Cu 175 174 77koz Au 62koz Au 156 147 1.4Moz Ag 1.1Moz Ag 125 126 • Average Cu production over next 5 years of 139ktpa (100% basis) • 14 year remaining life
Slide 17: Candelaria – Competitive Cost Profile
Candelaria – Competitive Cost Profile • Competitive C1 cash cost position of Copper C1 Cash Costs (US$/lb)(1) $1.69/lb LoM average prior to precious metals stream adjustment $2.14 $2.06 $1.93 • Significant precious metals by-products $1.88 (Au, Ag) $1.89 $1.80 $1.69 • Magnetite credit from sale of t
Slide 18: Candelaria – Open Pit
Candelaria – Open Pit • Iron Oxide Copper and Gold deposit Material Mined (ore & waste) 270 ktpd (IOCG) with chalcopyrite and magnetite Milled Ore 66 ktpd Average Remaining LoM • Conventional owner operated, drill Copper Grade 0.57% Cu and blast, load and haul open pit LoM Strip Ratio (ex. Stockpile
Slide 19: Underground Mines With Exploration Potential
Underground Mines With Exploration Potential • Three underground mines • Candelaria Norte (6,000tpd) • Alcaparrosa (4,000tpd) • Santos (3,800tpd) • All underground mining with sub-level open stoping • Large vertical stopes • All mining operations by contractors • Good geotechnical conditions • Ongoi
Slide 20: Candelaria Complex − Processing Facilities
Candelaria Complex − Processing FaciliNes Candelaria and Ojos Processing Plants Candelaria Plant (2 lines) 25mtpa Pedro Aguirre (PAC) Plant 1.4mtpa • Two conventional crush/grind floatation plants Copper Recovery ≈92% • Quality concentrate production: Gold Recovery ≈75% • High grade concentrate with
Slide 21: Candelaria – Tailings
Candelaria – Tailings Potential Total Tailings Capacity (with required permits and land position) • Existing tailings management = 6 billion tonnes facility (“TMF”) has permitted capacity to 2017 • Permitting for new Los Diques tailings storage underway as a part of “Candelaria 2030” with EIA submit
Slide 22: Candelaria – Excellent Infrastructure and Capacity
Candelaria – Excellent Infrastructure and Capacity 100%-Owned Port with Excess Capacity: • Punta Padrones port facility located ~100km from mine • Storage capacity of 45,000 wmt • Significant spare capacity: currently ship a maximum of 600k wmt per year– max capacity of 3.5M wmt per year Low Cost Gr
Slide 23: Corporate Citizenship
Corporate Citizenship Lundin is committed to becoming a valuable and long standing resident of the Copiapo region: • We aim to create sustainable value from our presence in host communities wherever we operate • Lundin’s reputation as a good corporate citizen is critical to our long-term success Can
Slide 24: Lundin Pro-Forma
Lundin Pro-Forma 24
Slide 25: Enhances Lundin's Copper Exposure
Enhances Lundin's Copper Exposure Impact to Copper Production (kt) Impact to Copper 2P Reserves (Mt) Candelaria (80%) Lundin Standalone Candelaria (80%) Lundin Standalone 350 4.5 Percentage Increase over 2013: +103% +129% 4.0 300 3.7 267 3.5 250 237 3.0 1.6 200 139 2.5 125 2.0 150 2.0 1.6 117 112 1.
Slide 26: Enhances Lundin's Financial Metrics
Enhances Lundin's Financial Metrics Impact to H1 2014 Op. Cash Flow1 (US$M) Impact to H1 2014 Earnings (US$M) Candelaria (80%) Lundin Standalone Candelaria (80%) Lundin Standalone $250 Percentage Increase: +147% $150 Percentage Increase: +137% $208 $126 $200 $120 $150 $124 $90 $73 $124 $73 $100 $60
Slide 27: Increases Geographic Diversification
Increases Geographic Diversification 2015E Attributable Cu Eq. Production by Country (1)(2)(3) Current Pro Forma Spain Spain 6% Sweden 4% Sweden USA 10% 15% 28% Chile 33% DRC 15% DRC 23% Portugal Portugal 19% USA 28% 19% Chile becomes Lundin’s largest producing region (1) Based on midpoint of 2015E
Slide 28: Well-Diversified Base Metals Exposure
Well-Diversified Base Metals Exposure 2015E Attributable Cu Eq. Production by Commodity (1)(2)(3) Current Pro Forma Lead Cobalt Lead Cobalt 4% 3% 3% 5% Zinc 13% Zinc 19% Copper 46% Nickel 17% Copper 64% Nickel 26% Enhanced copper exposure and strong leverage to nickel and zinc maintained (1) Based o
Slide 29: Lundin – with Candelaria
Lundin – with Candelaria Enhances earnings and cash flow on a per share basis with the addition of an established, large scale, low risk operation Diversifies geographic and base metals portfolio; provides added copper exposure while maintaining excellent leverage to zinc and nickel Further strength
Slide 30: Questions & Answers
TSX: LUN OMX: LUMI Questions & Answers
Slide 31: Appendix
Appendix 31
Slide 32: Combined Mineral Reserves
Combined Mineral Reserves Note: Refer to slide 15 for Candelaria’s Mineral Reserve statement details o Lundin wholly-owned operations as of 30 June 2014, Tenke Fungurume and Candelaria as at 31 December 2013. o Except as noted below, Mineral Reserves have been calculated using metal prices of $2.50/
Slide 33: Combined Mineral Resources - Copper
Combined Mineral Resources - Copper Note: Refer to slide 15 for Candelaria’s Mineral Reserve statement 33 o Lundin wholly-owned operations as of 30 June 2014, Tenke Fungurume and Candelaria as at 31 December 2013.
Slide 34: Combined Mineral Resources - Continued
Combined Mineral Resources - Continued Note: Refer to slide 15 for Candelaria’s Mineral Reserve statement 34 o Lundin wholly-owned operations as of 30 June 2014, Tenke Fungurume and Candelaria as at 31 December 2013.