Acquisition of Majority Interest in Copper-Molybdenum mine TORONTO, July 13, 2023 /CNW/ - (TSX: LUN) (Nasdaq Stockholm: LUMI) Lundin Mining Corporation ("Lundin Mining" or the "Company") is pleased to announce the closing of the acquisition of fifty-one percent (51%) of the issued and outstanding equity of SCM Minera Lumina Copper Chile ("Lumina Copper"), which owns the Caserones copper-molybdenum mine ("Caserones'") located in Chile, from JX Metals Corporation and certain of its subsidiaries (collectively, "JX"), as previously announced on March 27, 2023 (the "Acquisition"). Additionally, the Company is pleased to announce it has obtained commitments for a three-year term loan ("Term Loan") in a principal amount of $800 million, with an additional $400 million accordion available upon receipt of additional binding commitments and closing of up to an additional nineteen (19%) interest in Lumina Copper and satisfaction of relevant conditions precedent. The Term Loan is subject to the execution and delivery of definitive documentation in form and substance satisfactory to the Company and the Term Loan lenders and satisfaction of relevant conditions precedent.
Chief Executive Officer, Peter Rockandel, commented "With the addition of Caserones, Lundin Mining adds another long-life copper mine of meaningful size with significant growth potential to our portfolio of high-quality assets. The Caserones team has achieved material operational improvements in recent years, and I am confident that we will unlock additional upside through our considerable knowledge, experience, and existing presence in the region. The Caserones acquisition further solidifies Lundin Mining as a significant contributor to Chile in the Atacama Region and as a growing global producer of copper as the world shifts to a lower carbon future. On a proforma basis including Caserones, Lundin Mining's operations produced over 191,000 tonnes of copper in the first half of this year."
Teitur Poulsen, Senior Vice President and Chief Financial Officer, added "Lundin Mining's cash-generation potential has further increased with the addition of Caserones. To that end, it is very pleasing to see Lumina Copper generate approximately $120 million under the Acquisition lock-box in the first six months of the year and to end June with a cash position of over $150 million on a 100% basis. In conjunction with the Caserones acquisition, the Company has received $800 million in Term Loan commitments from our existing lenders as well as from three new banks at competitive terms, demonstrating that this Acquisition has also been accretive from a credit perspective. The new $800 million Term Loan, combined with the existing $1.75 billion revolving facility, will ensure that the Company retains a strong funding position with significant liquidity headroom as we continue progressing Josemaria and other growth projects within the portfolio."
The Company paid an aggregate of approximately $800 million in cash consideration at closing. Remaining deferred cash consideration of $150 million will be payable in installments over the sixyear period following the closing date. Lundin Mining also has the right to acquire up to an additional 19% interest in Lumina Copper for $350 million over a five-year period commencing on the first anniversary of the date of closing.
Technical Report for Caserones as Standalone Operation
A technical report for the Caserones mine titled "Caserones Mining Operation, Chile, NI 43-101 Technical Report on the Caserones Mining Operation" (the "Technical Report") has been prepared and filed today in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects and is available for review under the Company's profile on SEDAR (www.sedar.com) and on the Company's website (www.lundinmining.com).
The Company believes that many opportunities exist to improve upon the life-of-mine plan presented in the Technical Report. Proximity to Lundin Mining's Candelaria operation, approximately 160 km from Caserones, and Josemaria project, approximately 20 km from Caserones, introduce clear opportunities to realize additional savings and implement effective supply, logistical and management strategies not yet reflected in the life-of-mine plan. Further, Lundin Mining believes significant exploration potential exists within the over 58,500 hectares of the Caserones land package in the highly prospective Vicua District.
Caserones Production & Guidance
Caserones produced 69,704 t of copper and 2,393 t of molybdenum in the first half of 2023 on a 100% basis. Copper production was comprised of 61,333 t of copper in concentrate and 8,371 t of copper cathodes.
Production guidance for the second half of 2023 is 60,00065,000 t of copper and 1,500-2,000 t of molybdenum on a 100% basis. Caserones 2023 copper and molybdenum production are expected to be weighted to the first half of the year primarily due to seasonal winter weather operating considerations typically experienced during the third quarter. Implied full-year 2023 production guidance may differ from estimates contained in the Technical Report primarily given results achieved year-to-date and refinement of near-term plans compared to the Technical Report overall effective date of December 31, 2022. Annual production guidance for Caserones on a 100% basis for both 2024 and 2025 is 110,000-120,000 t of copper and 1,500-2,500 t of molybdenum.
Cash cost1 for the second half of 2023 is forecast to be $2.30/lb – $2.45/lb of copper, after by-product credits, assuming an average price of $20/lb molybdenum.
Caserones' capital expenditures for the second half of 2023 are forecast to total $110 million on a 100% basis. Of this, capitalized waste stripping and mine development are forecast to be approximately $45 million, mine and mill capital expenditures are forecast to be $30 million, and $25 million is estimated for capitalized tailings storage facilities costs.
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| 1 Cash cost is non-GAAP measures. Please refer to the Company's discussion of non-GAAP and other performance measures in its Management's Discussion and Analysis for the three months ended March 31, 2023. |
Commitments for New $800 Million Term Loan
The Company has received commitments from ten lenders for a new Term Loan in a principal amount of $800 million, which it expects to use to refinance the drawdown under the existing $1.75 billion revolving credit facility which was used to fund the upfront cash consideration of the Acquisition. The commitments remain subject to the execution and delivery of definitive documentation in form and substance satisfactory to the Company and the Term Loan lenders and the satisfaction of applicable conditions precedent. It is expected that the Term Loan will have a term of three years from closing thereof, and provide for an additional $400 million non-committed accordion, which would become available upon receipt of additional binding commitments and closing of up to an additional nineteen percent (19%) interest in Lumina Copper and satisfaction of applicable conditions precedent.
It is expected that the Term Loan will bear interest on US dollar denominated drawn funds at an annual rate equal to the Term Secured Overnight Financing Rate plus a credit spread adjustment plus an applicable margin of 1.60% to 2.65%, depending upon the Company's net leverage ratio. It is expected that the Term Loan will be unsecured, save and except for a charge over certain assets in the United States of America, and will have similar covenants to the Company's existing $1.75 billion revolving credit facility.
Upon execution, the Term Loan agreement will be available for review under the Company's profile on SEDAR (www.sedar.com).
Caserones Mineral Resource & Mineral Reserve Estimates
Mineral Resources and Mineral Reserves are reported on a 100% basis (Lundin Mining holds a 51% interest) using the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (the "2014 CIM Definition Standards") and have an effective date of December 31, 2022. The Mineral Resource estimate is based on 1,045 core and reverse circulation drillholes totaling 175,280 m and includes all drilling completed up until the end of 2017.
Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves have not demonstrated economic viability. The Qualified Person responsible for the Mineral Resource estimate is Mr. Paul Daigle, P.Geo., Associate Principal Geologist with AGP Mining Consultants Inc.
Mineral Resource Statement, effective December 31, 2022
| | Grade | | Contained Metal |
| Category | Million
Tonnes | CuT
% | Mo
% | | CuT
kt | Mo
kt |
| Measured | 173 | 0.36 | 0.012 | | 617 | 21 |
| Indicated | 850 | 0.30 | 0.010 | | 2,532 | 84 |
| Measured & Indicated | 1,023 | 0.31 | 0.010 | | 3,150 | 105 |
| Inferred | 121 | 0.26 | 0.012 | | 317 | 14 |
| Notes: |
| 1. | All figures are rounded to reflect the relative accuracy of the estimate. |
| 2. | Totals may not sum due to rounding as required by reporting guidelines. |
| 3. | Open pit mineral resources are reported within an optimized constraining shell. |
| 4. | Open pit cut-off grade is 0.13% CuT. |
The basis for the Mineral Reserve estimate is the ore grade material contained within a set of operational phase designs currently being used at Caserones to guide mining operations. The Qualified Person responsible for the Mineral Reserves estimate is Mr. Kirk Hanson, P.E., Principal Mining Engineer with AGP Mining Consultants Inc.
Mineral Reserve Statement, effective December 31, 2022
| | Grade | | Contained Metal | |
| Category | Million
Tonnes | CuT
% | Mo
% | | CuT
kt | Mo
kt | |
| Proven | 144 | 0.36 | 0.016 | | 518 | 13 | |
| Probable | 706 | 0.29 | 0.013 | | 2,036 | 63 | |
| Total Reserves | 850 | 0.30 | 0.014 | | 2,554 | 76 | |
| Notes: |
| 1. | The Mineral Reserves have an effective date of December 31, 2022 and are reported at the point of delivery to the process plant. The Qualified Person responsible for the estimate is Mr. Kirk Hanson, P.E., Principal Mining Engineer with AGP. |
| 2. | Mineral Reserves are reported within a design pit based on optimized Lerchs–Grossmann pit shell. Input parameters include the following: long term copper price of US$3.65/lb and long term molybdenum price of US$11.45/lb; a 2.88% net smelter return (NSR) royalty rate; average life-of-mine (LOM) mining cost of US$2.32/t mined, average LOM copper concentrate processing cost of US$8.20/t processed, average LOM general and administrative (G&A) costs of US$3.83/t processed and average desalinated water cost of $0.75/t processed; average LOM molybdenum concentrate processing cost of US$24.93/t of concentrate; average LOM dump leach cost of $1.47/t placed; bench face angles that range from 60–70º; fixed metallurgical recoveries of 82.7%, 53.7%, and 60% for copper concentrate, copper dump leach, and molybdenum concentrate respectively. Cut-off grades are based on block values with positive value blocks classified as ore. Dilution and ore loss are accounted for in the resource model blocks, and no additional ore loss or dilution is applied. |
| 3. | Mineral Reserves are presented on a 100% basis. MLCC owns the project. LMC beneficially holds a 51% interest in MLCC and JX beneficially holds the remaining 49% interest in MLCC. |
| 4. | Tonnages are metric tonnes rounded to the nearest 100,000. Copper grade is rounded to the nearest 0.01 % copper. CuT (kt) are estimates of metal contained in tonnages and do not include allowances for processing losses. Contained copper is reported as kilo tonnes, rounded to the nearest 1,000. |
| 5. | Rounding of tonnes and contained metal content as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal content. |
Technical Information
The Qualified Person responsible for the scientific and technical information contained herein is Arman Barha, P.Eng., Vice President, Technical Services of the Company. Mr. Barha, who is a "qualified person" as defined under NI 43-101, has reviewed and approved the technical information in this news release. For additional information, including with respect to data verification and exploration information, see the Technical Report.