Lundin Mining Corp.
(LUN-T) C$10.52
Slowing the Pace on the Josemaria Project
Event
We have updated our model/forecasts following the release of Q1/23 results.
Impact: NEUTRAL
LUN is moderating the pace of progress on its Josemaria project as it conducts trade-off studies to explore potential areas where infrastructure synergies between the project and the Caserones mine could bring benefits to both operations. Spending on Josemaria during Q1/23 was ~$84 million, below the expected rate of ~$100 million per quarter for this year.
Provincial and federal elections will be held in Argentina this year and this will impact the pace of progress on stability agreement negotiations for the project. Management noted that while there is a working document, there is no schedule for ongoing discussions nor a time frame to complete an agreement. The Argentine general election will be held on October 22; as a result we expect that more concrete discussions on a stability agreement are unlikely until much later this year. We expect that any conclusive agreement is unlikely until H1/24 at the earliest.
LUN is also progressing potential partnership discussions for Josemaria with the aim of bringing in a major miner as larger partner and a trading house as smaller partner - similar to joint ventures at other large copper mines in South America. Again, we would expect that finalization of a JV structure would be likely post the upcoming Argentine election cycle and possibly the conclusion of a stability agreement. On a 100% basis, our current 10%-NPV for the Josemaria project is ~$890 million (basis LT copper at $3.75/lb). In Exhibit 1, we have summarized a number of sensitivities on our 10% NPV assuming various LT copper prices, and capex/opex scenarios.
LUN management expects to close the acquisition of a 51% interest in the Caserones mine in early Q3/23 and release an NI 43-101 technical report simultaneously. To this point, we have not included Caserones in our forecasts.
TD Investment Conclusion
We are maintaining our HOLD recommendation and C$11.00 target price.