Extending Neves-Coro adds $100m to NPV: Lundin

Extending the Neves-Coro mine in Portugal will add $100 million to the net present value (NPV) and push the life of the mine into 2026, Lundin Mining (TSX:LUN) said today.

The company released the feasibility results for Lombador Phase 1, which plans to exploit the uppper portions of the Lombador zinc/copper ore bodies.

“The Lombador project is of strategic value to Lundin Mining and is a natural extension to the existing Neves-Corvo mine. This study confirms the company’s view that the Lombador Phase I project can be developed into a successful and profitable expansion to the existing operations,” said Lundin CEO Paul Connibear, who noted the combined Neves-Corl/Lombador measured and indicated rsource is one of the largest undeveloped zinc resources in the world.

Lundin says it expects to spend 164 million euros in capital costs for the expansion, about half of which is for underground operations. Underground ore extraction is expected to begin in late 2014 and continue until 2026.

Lombador Phase I Feasibility Study

The zinc-copper rich Lombador orebodies are located immediately to the north-east of the existing Neves-Corvo mine workings and lie below the bottom of the mine’s existing extraction infrastructure at depths between 700 metres and 1,200 metres below surface. The objective of the Phase I study was to define an economically accretive project to exploit upper portions of the Lombador ore bodies, not only to enhance the overall financial performance of Neves-Corvo but to facilitate underground exploration of the extensive Lombador area mineralization serving further expansions.

The Lombador Phase I project is an expansion to the current Neves-Corvo operations and comprises:

• Copper and zinc production from the upper 300 metres of primarily the Lombador South orebody;
• Mine deepening by a new haulage ramp extending 300 m below the existing lowest extraction level.
• Extraction of up to 1.1 million tonnes per annum (“Mtpa”) of zinc ore and 0.5Mtpa of copper ore. In combination with the existing Neves-Corvo operations, the study base mine plan has ore production peaking at 3.7 million tonnes of copper and zinc ores in 2019;
• Zinc recoveries are expected to average 80% and copper recoveries average 87% from Lombador ore.
• Expansion of the existing zinc plant ore processing capacity from 1.0Mtpa to 2.5Mtpa, with nominal zinc metal production increasing from 50,000 tpa to a peak of approximately 150,000 tpa (averaging 112,000 tpa over the study base life of mine);
• Expansion of surface infrastructure necessary for the increased mine and processing capacity;
• The development of an exploration drift at the lower level of the Lombador Phase I mineralization to better define footwall copper mineralisation and to explore the deeper Lombador East and North (Phase II) deposits, both of which remain open at depth.

Lombador Phase I Overview

Some key features of the Lombador Phase I Feasibility Study include:

• The use of a bulk optimised bench and fill mining method on three new mining levels to process a total 8.8Mt of zinc ore at an average grade of 7.9% Zn.
• The use of existing drift and fill mining methods to produce a total of 4.1Mt of copper ore at an average grade of 1.9% Cu.
• Expansion of the existing zinc plant to 2.5Mtpa capacity. The study is based on the plant being commissioned in the second half of 2013, and being fed with zinc ores from existing Neves-Corvo orebodies until Lombador production commences. The copper plant will retain its current capacity of 2.5Mtpa.
• The study assumes Lombador Phase I underground ore production commences in late 2014 and continues until 2026, a total of 12 years.
• The total initial capital cost estimate for the project is € 164 million, of which approximately 50% is underground expenditure. The estimate is at an accuracy of 10-15%, is in 2011 euros and includes a contingency allowance of approximately 10%.
• Sustaining capital until 2026 totals € 99M, of which € 77M is for underground mine development.
• Average operating costs for the incremental Lombador production are estimated to be € 34/t mined.
• Average C1 cash costs for the incremental Lombador production are estimated as $0.56/lb zinc (Lombador copper credits applied to zinc), and places the project in the third quartile of zinc producers.
• The above Phase I study base mine plan of 8.8 million tonnes of Lombador zinc ore and 4.1 million tonnes of copper ore represents only partial exploitation of the overall Lombador deposit mineralization, which is the target of Phase II development studies just started. Overall Lombador measured and indicated resources are 46.1 million tonnes of 6.69% zinc and 8.6 million tonnes of 2.11% copper.

Read the full press release.  To view the map associated with this release, please click http://media3.marketwire.com/docs/0908lun.pdf.