Fourth Quarter and 2015 Year-End Results February 19, 2016 TSX: LUN OMX: LUMI

Transcription

1 Fourth Quarter and 2015 Year-End Results February 19, 2016 TSX: LUN OMX: LUMI

2 Cautionary Statements Caution Regarding Forward-Looking Information and Non-GAAP Performance Measures This presentation contains forward-looking information, including, but not limited to, guidance on estimated annual production and cash costs. This forward-looking information is not based on historical facts, but rather on current expectations and projections about future events and is subject to risks and uncertainties. Any statements not including historical facts are forwardlooking statements and may be identified by terminology such as believe, budget, continue, can, estimate, expect, intend, likely, should, target, will and any similar expressions. Forward-looking statements involve known and unknown risks and uncertainties, and as such, they are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Potential risks leading to differing results include, without limitation: fluctuation to foreign currency rates, change in commodity prices, industry risks, drilling results, labour disputes or difficulties resulting in labour shortages or interruptions in production, environmental risks, political risks including changes in national or local government legislation, taxation, or regulation, climate and weather related risks, diminishing quantities or grades of reserves, operating or technical difficulties with mining or development activities, and increased costs, delays or suspensions. Readers are cautioned that many of the assumptions on which the Company s forward-looking statements are based are likely to change. Lundin cautions that it does not have any intention to update forward-looking statements as a result of new information, future changes, or otherwise. 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 Management s Discussion and Analysis. This presentation contains certain financial measures such as operating earnings, net debt, normalized earnings, adjusted net earnings, operating cash flow per share and cash costs which have no meaning within generally accepted accounting principles under IFRS and therefore amounts presented may not be comparable to similar data presented by other mining companies. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures or performance prepared in accordance with IFRS. Note: All dollaramounts are in US dollars unless otherwise denoted. 2

3 Participants Presenters and Questions/Answers Paul Conibear Marie Inkster Peter Quinn President & Chief Executive Officer Senior Vice President & Chief Financial Officer Chief Operating Officer 3

4 2015 Full Year Operating Highlights Strong operational and financial results despite a weak metal price environment Copper (Cu) Nickel (Ni) Zinc (Zn) Higher throughput at Candelaria resulted in production and cash costs outperforming guidance Copper production at Neves-Corvo benefitted from higher grades and recoveries. Cash costs were in-line with outlook Nickel (and copper) production at Eagle exceeded expectations. Cash costs were in-line with guidance Aguablanca met production expectations despite suspension of underground mining operations in Q3/15 Lower throughput and recoveries at Neves-Corvo impacted zinc production, significant improvements achieved in Q4/15 Zinc production at Zinkgruvan was a new record due to record ore mined/milled. Cash costs were below guidance 4

5 2015 Revenue Breakdown by Mine and Metal 70% of sales were from Candelaria and Eagle operations 66% of sales were derived from copper Sales Breakdown by Mine Sales Breakdown by Metal Zinkgruvan 9% Aguablanca 4% Gold 6% Lead 3% Other 4% Zinc 9% Neves-Corvo 17% Candelaria 53% Nickel 12% Copper 66% Eagle 17% 5

6 Competitive Cash Costs in 2015 $/lb $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 Copper C1 Cash Cost Curve Candelaria $1.25/lb $0.5 Neves-Corvo Tenke $1.63/lb $0.0 $1.21/lb ($0.5) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $15.0 Nickel C1 Cash Cost Curve $2.50 Zinc C1 Cash Cost Curve $/lb $10.0 $5.0 Eagle $2.02/lb $/lb $2.00 $1.50 $1.00 Zinkgruvan $0.37/lb $0.0 $0.50 ($5.0) 0% 20% 40% 60% 80% 100% $0.00 0% 20% 40% 60% 80% 100% Source: Wood Mackenzie (Q4 2015) * Cash cost curves are based on the expected annual costs for 2016, whereas 2015 annual costs have been highlighted for LUN assets for illustrative purposes. 6

7 Financial Highlights % Δ Realized Copper (US$/lb) 1 $2.26 $ % Realized Nickel (US$/lb) 1 $4.79 $ % Realized Zinc (US$/lb) 1 $0.84 $ % Revenue ($US M) $1,702M $951M 79% Operating Earnings ($US M) $712M $304M 134% Net (Loss)/Income ($US M) (attributable) Operating Cash Flow ($US M) ($294M) $113M nmf 2 ($0.41/sh) $0.19/sh ($0.60/sh) $714M $187M 281% $0.72/sh $0.38/sh $0.34/sh Candelaria and Eagle resulted in material year-over-year growth in sales, operating earnings and cash flow from operations Net loss in 2015 due largely to asset impairments as a result of lower metal prices (net loss ex-impairments was $23M, net of tax) Each of our mines operated with good margins despite low metal prices 1. LUN average realized price, including impact of provisional price adjustments. 2. Net income/loss change 2015 vs not meaningful ( nmf ). 7

8 Normalized Earnings Reconciliation $ Millions Net (loss)/earnings attributable to shareholders ($294.1) $112.6 Foreign exchange ($18.5) ($20.3) Mark to market on securities (includes options) $3.3 $1.4 Realized loss on sale of securities - $4.9 Insurance proceeds - ($3.7) Attributable impairment (assets and goodwill) $286.7 $47.1 Corporate development (Candelaria) - $25.8 Community development agreement (Tierra Amarilla) $7.0 - Tax (on above items) ($12.5) ($17.0) Tax valuation allowance adjustments $ Adjusted net earnings attributable to shareholders $38.0 $150.8 Adjusted earnings per share $0.05 $0.25 8

9 Operating Earnings More Than Doubled in 2015 Operating earnings improved significantly when compared to 2014 due to contributions from Candelaria and Eagle, as well as foreign exchange ( and SEK) Partially offsetting results were lower realized metal prices and price adjustments from European operations $ $600 $500 $USM $400 $ $ $100 $0 YTD Dec 2014 Volume Price & Adj. Cost FX and Other Candelaria Eagle YTD Dec

10 Balance Sheet Remains Strong Cash position has improved by $382M from $175M (2014) to $557M (2015) Net debt YTD as of Feb. 18, 2016 was ~$458M US$ (Millions) December 31, 2015 Cash and Cash Equivalents $557 Net Debt 1 $441 Revolving Credit Facility (Undrawn) $350 $600 Cash and Cash Equivalents $US M $300 $0 $507 $550 $557 $355 $175 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 1. The Company s senior secured notes are comprised of: $550 million at 7.5% due in 2020, and $445 million at 7.875% due in

11 2016 Production and Cash Cost Guidance Metal and Mines Production (Tonnes) 1 C1 Cash Costs 2 Copper Nickel Zinc Candelaria (80%) 118, ,000 $1.55/lb Eagle 20,000 23,000 Neves-Corvo 50,000 55,000 $1.65/lb Zinkgruvan 3,500 4,000 Tenke (@24%) 3 54,000 $1.32/lb Total attributable 245, ,000 Eagle 21,000 24,000 $2.25/lb Total 21,000 24,000 Neves-Corvo 65,000 70,000 Zinkgruvan 80,000 85,000 $0.45/lb Total 145, ,000 Production and cost outlook is unchanged from Jan. 21, 2016 (ex-tenke) 2016 expected cash costs reflect cost reduction plans at all operations to help offset impact of the current low metal price environment 1. Production guidance is based on certain estimates and assumptions, including but not limited to; mineral resources and reserves, geological formations, grade and continuity of deposits and metallurgical characteristics. 2. Cash costs remain dependent upon exchange rates (forecast at /USD:1.10, USD/SEK:8.50, USD/CLP:700) and metal prices (forecast at Cu: $2.05/lb, Ni: $4.15/lb, Zn: $0.70/lb, Pb: $0.70/lb, Au: $1,100/oz, Ag: $15.00/oz). 3. Freeport has provided 2016 sales and cash costs guidance. Tenke s 2016 production is assumed to approximate sales guidance. Tenke s 2016 cash costs assume a cobalt price of $10.00/lb. 11

12 2016 Capital Expenditure and Exploration Guidance Capital Expenditures 1 ($ millions) 2016 Total Capitalized Stripping 2 35 Los Diques Tailings Capex 3 70 Other Sustaining Capex 15 Total Candelaria (100% Basis) 120 Total Eagle 10 Total Neves-Corvo 55 Total Zinkgruvan 35 Total Capital Costs $ 220 Capital expenditures for 2016 expected to be $220M Exploration expenditures in 2016 are expected to total $40M including: $18M at Eagle East and $17M at Candelaria 1. Excludes capitalized interest. 2. During the production phase, waste stripping costs which provide probable future economic benefits and improved access to the orebody are capitalized to mineral properties. The Company capitalizes waste costs when experienced strip ratios are above the average planned strip ratio for each open pit phase under development. 3. The Los Diques project capex is based on project review estimates completed in 2015 which assumed a USD/CLP exchange rate of

13 Operational Overview and Outlook Eagle (100%) Neves-Corvo (100%) Candelaria (80%) Zinkgruvan (100%) Tenke Fungurume (24%) 13

14 Candelaria (Cu/Au/Ag), Chile Atacama Province, Region III, approximately 20 km south of Copiapó 14

15 Candelaria 2015 Results and Outlook Copper production of 145 kt (80%) exceeded expectations due largely to higher throughput Copper cash costs of $1.25/lb were better than guidance Due to cost reduction efforts, operational efficiencies, lower diesel prices, and FX Five year production plan has been significantly improved compared to acquisition basis Candelaria 2030 Los Diques tailings project advancing on budget and on schedule Key construction permits advancing per plan Total project costs of ~$325M, with $70M to be spent this year Location Chile Ownership 80% 2016 Production Guidance (80%) 118, ,000 t Cu 2016 Cost Guidance $1.55/lb Cu Expected Mine Life Production (k tonnes, 100% basis) years Cu 39.8 Q1-15 Q2-15 Q3-15 Q4-15 Copper Cash Cost (right axis) $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 Cash Cost ($/lb Cu) 15

16 Eagle Mine (Ni/Cu), Michigan, U.S.A. 50 km northwest of Marquette in the Upper Peninsula of Michigan 16

17 Eagle 2015 Results and Outlook Ni (27 kt) & Cu (24 kt) production targets exceeded due to mill outperformance Nickel cash costs of $2.02/lb in first quartile Outlook consistent with original plans Eagle East drilling advancing - high priority Six rigs drilling step-out and infill Eagle East remains open Location Michigan, USA Ownership 100% 2016 Production Guidance 21,000 24,000 t Ni 20,000 23,000 t Cu 2016 Cost Guidance $2.25/lb Ni Mine Life Production (k tonnes) years $3.00 $2.80 $2.60 $2.40 $2.20 $2.00 $1.80 $1.60 $1.40 $1.20 Cash Cost ($/lb Ni) 0.0 Q1-15 Q2-15 Q3-15 Q4-15 $1.00 Nickel Copper Cash Cost (right axis) 17

18 Neves-Corvo (Cu/Zn), Portugal Situated 220 km southeast of Lisbon 18

19 Neves-Corvo 2015 Results and Outlook Copper (56 kt) and zinc (62 kt) production targets achieved Higher copper grades and recoveries Zinc plant performance improved Copper cash costs in-line at $1.63/lb Location Portugal Ownership 100% 2016 Production Guidance 50,000 55,000 t Cu 65,000 70,000 t Zn 2016 Cost Guidance $1.65/lb Cu Mine Life +10 years Cu + Zn Copper production maintained at >50 ktpa with significant zinc credit expected Feasibility Study for zinc expansion completed in 2015 Investment decision deferred but permitting advancing (critical path) Potential to double production under improving zinc price environment Production (k tonnes) $ $ $2.00 $1.80 $1.60 $1.40 $1.20 Q1-15 Q2-15 Q3-15 Q4-15 Copper Zinc Cash Cost (right axis) Cash Cost ($/lb Cu) 19

20 Zinkgruvan (Zn/Pb/Cu), Sweden Situated 200 km southwest of Stockholm 20

21 Zinkgruvan 2015 Results and Outlook Zinc production of 83 kt a new record Mine ore production and plant throughput at record highs Zinc cash costs of $0.37/lb below guidance due to favourable FX Location Sweden Ownership 100% 2016 Production Guidance 80,000 85,000 t Zn 3,500-4,000 t Cu 2016 Cost Guidance $0.45/lb Zn Mine Life +10 years Costs remained in first quartile Low-cost brownfield project to increase mill capacity by ~10% Project to commence in H Production (k tonnes) $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 Cash Cost ($/lb Zn) $8M investment in 2016 with project completion expected by end Q1-15 Q2-15 Q3-15 Q4-15 $0.10 $- Zinc Cash Cost (right axis) 21

22 Tenke Fungurume (Cu/Co), DRC Situated 175 km northwest of Lubumbashi 22

23 Tenke 2015 Results and Outlook Copper production of 49 kt (attributable) mostly in-line with guidance Cash costs of $1.21/lb affected by lower cobalt by-product credits Location Democratic Republic of Congo Ownership 24% 2016 Production Guidance (attributable share) 54,000 t Cu 2016 Costs 1 $1.32/lb Cu Expected Mine Life +40 years Cash distributions of $33M including $8M received from Freeport Cobalt Second sulphuric acid plant scheduled to be fully commissioned in H Cash distributions of $30-$40M expected in 2016, at current metal prices Production (k tonnes, 100% basis) Q1-15 Q2-15 Q3-15 Q4-15 $2.50 $2.30 $2.10 $1.90 $1.70 $1.50 $1.30 $1.10 $0.90 $0.70 Cash Cost ($/lb Cu) Copper Cobalt Cash Cost (right axis) 1. Freeport projects 2016 cash costs to approximate $1.32/lb of copper, based on current sales volume and cost estimates and assuming an average cobalt price of $10.00/lb. 23

24 Lundin Mining Well Positioned in Any Market High quality, competitively positioned mines Diversified base metals and geographic asset base Meaningful production scale Strong cash flows with focus on preservation of margins Conservative balance sheet with low leverage ratios 24

25 NI Compliance Unless otherwise indicated, Lundin Mining Corporation has prepared the technical information in this presentation ( Technical Information ) based on information contained in the technical reports and news releases (collectively the Disclosure Documents ) available under Lundin Mining Corp. s company profile on SEDAR at Each Disclosure Document was prepared by or under the supervision of a qualified person (a Qualified Person ) as defined in National Instrument Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ( NI ). For readers to fully understand the information in this presentation, they should read the Technical Reports (available on in their entirety, including all qualifications, assumptions and exclusions that relate to the information set out in this presentation which qualifies the Technical Information. Readers are advised that mineral resources that are not mineral reserves do not have demonstrated economic viability. The Disclosure Documents are each intended to be read as a whole, and sections should not be read or relied upon out of context. The Technical Information is subject to the assumptions and qualifications contained in the Disclosure Documents. The technical information in this presentation has been prepared in accordance with Canadian regulatory requirements set out in National Instrument Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ("NI ") and reviewed by Stephen Gatley, Vice President - Technical Services of the Company, a "Qualified Person" under NI Mr. Gatley has verified the data disclosed in this presentation and no limitations were imposed on his verification process. Mineral Reserves and Resources are shown on a 100 percent basis for each mine. The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Mineral Reserves. All estimates, with the exception of Tenke Fungurume, are prepared as at June 30, The Tenke Fungurume estimate is dated December 31, Estimates for all majority owned operations are prepared by or under the supervision of a Qualified Person as defined in National Instrument , or have been audited by independent Qualified Persons on behalf of Lundin Mining. Tenke Proven and Probable Mineral Reserves are estimated by the operator Freeport-McMoRan Copper & Gold Inc., and are prepared to SEC standards and are reviewed by Lundin Mining's independent Qualified Persons. Unless indicated otherwise in the Notes on Mineral Resource and Reserve Table in Lundin Mining s news release on August 31, 2015, Mineral Reserves have been calculated using metal prices of US$2.75/lb copper, US$1.00/lb zinc, US$1.00/lb lead, US$8.50/lb nickel, US1,000/oz gold and exchange rates of EUR/US$ 1.25, US$/SEK 7.50 and Chilean Peso/US$

26 TSX: LUN OMX: LUMI