TORONTO Jul 31, 2015 (Thomson StreetEvents) -- Edited Transcript of Lundin Mining Corp earnings conference call or presentation Thursday, July 30, 2015 at 12:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Paul Conibear Lundin Mining Corp. - President and CEO * Marie Inkster Lundin Mining Corp. - SVP and CFO * Steve Gatley Lundin Mining Corp. - VP, Technical Services * Peter Quinn Lundin Mining Corp. - Chief Operating Officer ================================================================================ Conference Call Participants ================================================================================ * Ralph Profitti Credit Suisse - Analyst * David Charles Dundee Securities Corporation - Analyst * Greg Barnes TD Securities - Analyst * Orest Wowkodaw Scotiabank - Analyst * Alain Gabriel Morgan Stanley - Analyst * Oscar Cabrera Bank of America Merrill Lynch - Analyst * Christian Kopfer Nordea Markets - Analyst * Kerry Smith Haywood Securities - Analyst * Gustav Sandstrom Danske Bank - Analyst * Johannes Grunselius Handelsbanken Capital Markets - Analyst * Matthew Fields Bank of America - Analyst * Alex Terentiew Raymond James Limited - Analyst * John Tumazos Very Independent Research - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen. Welcome to the Lundin Mining Q2 2015 results conference call and webcast. I would now like to turn the meeting over to Mr. Paul Conibear, President and Chief Executive Officer. Please go ahead, Mr. Conibear. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [2] -------------------------------------------------------------------------------- Yes, thanks very much, operator, and thank you, everybody, for joining us today as we give Lundin Mining's second quarter 2015 results. I just note we have a cautionary statement here governing the forward-looking statements that are likely to come out in today's presentation. Today, joining me on the call to assist in the presentation is Marie Inkster, our Senior Vice President and Chief Financial Officer. We also have Peter Quinn, who's President of the Candelaria Operations, and I'm pleased to congratulate Peter as he becomes the Chief Operating Officer for the Company. Both he and Paul McRae, our Senior Vice President of Projects, and Steve Gatley, our Vice President of Technical Services, will assist in answering questions at the end of the presentation. Q2 2015 operating highlights, operations performed very well, meeting or exceed expectations almost cross the board. For our copper production, we've been able to increase our guidance, and lower our cost outlook at Candelaria and Neves-Corvo, and, due to excellent operating performance by Freeport at Tenke, guidance has also been improved on copper there. In regards to zinc production from the Company, we largely meet expectations with strong results at Zinkgruvan, partially offset by some weakness in zinc production at Neves-Corvo. On nickel, both Eagle and Aguablanca performed excellently during the quarter, both on costs and on total production. It's noted that all of our mines continue to deliver very, very good profit margins, even in today's weaker metal price environment. Taking a look at quarter by quarter over the last five quarters or so, you can see the significant impact, positive impact that Candelaria and Eagle have brought to copper production at Lundin Mining. Obviously, with Eagle coming on and Aguablanca continuing to perform strongly, we have vaulted up in the amount of nickel that we're producing from the Company. We've been very stable and positive on zinc production quarter by quarter here over the last year and a half. Our lead byproduct production really varies quite a bit, quarter to quarter, depending on what zones we're in and grade. 68% of our sales were from Candelaria and Eagle, and that's basically a year-to-date type of statistic. And 66% of our sales were from copper, with good contributions coming from nickel and increasing contributions coming from zinc. Our year-to-date performance on cash operating costs has been very, very good. We remain very competitive in the marketplace with the copper-producing assets in the Company being in the best half of the cost curve, and two critical assets in the best third. We remain to be in the best quartile for nickel production from both of our assets, and the best quartile in cost competitiveness for Zinkgruvan in zinc. I'll turn the presentation over, briefly, to Marie Inkster to give financial highlights. -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [3] -------------------------------------------------------------------------------- Thanks, Paul. Paul highlighted our revenue breakdown by mine and by metal, which shows a really substantial increase over the same quarter of last year, and that carries through to the operating earnings, which are more than 3 times last year's operating earnings. So, while net income per share is slightly below last year, this was, in large part, due to the additional depreciation that we saw in the income statement, and you can see that it doesn't carry through to the cash flow per share, which is improved considerably over last year. On the normalized earnings, both this year's Q2 and last year's Q2 are fairly clean quarters. We have a ForEx adjustment coming through ad small changes in the portfolio of shares that we still hold. That's a market value change. So, very clean quarters, both this year and last year. On the operating earnings, our operating earnings show a marked improvement, this really illustrates the significant impact of Candelaria, and, to a lesser extent, Eagle on the operating earnings. The European business benefited from their cost savings initiatives and ForEx benefits, but not enough to offset the lower pricing in the quarter, compared to last year. And our financial position, our balance sheet is strong and it has been getting stronger, despite the lower metal price environment we're in at the moment. Our cash improved by over $300 million since year end, and our net debt is under $0.5 billion now. So, a very strong balance sheet and good cash flows from all of our mines. Back to you, Paul. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [4] -------------------------------------------------------------------------------- Okay, thank you. In regards to 2015 outlook on production C1 and capital spend, our guidance has generally been improved across the board. We're raising our copper and lead production guidance, and lowering our copper cost outlook. Zinkgruvan is outperforming. That is offset by lower zinc production at Neves-Corvo, so, we've changed our guidance there on Neves-Corvo zinc a little bit lower. CapEx -- we started the year with a CapEx budget of about $470 million. With the copper price decline in January, we took immediate steps and constrained some of our spending, and we've done so once again. So, we're now down to forecast CapEx, excluding the Tenke contributions, to $350 million now, as compared to $470 million as we started the year. We continue to invest very heavily in exploration, in particular at our existing mines, Candelaria, Neves-Corvo, Eagle, and Zinkgruvan. We started the year with a $75 million budget. We've reduced that to $60 million. We would expect to spend that $60 million, and if we continue to get good drilling results on Eagle East, we'll up that budget. Looking at a little bit more drill-down in detail at each of the operations, I'm starting with Candelaria. Production on a 100% basis was 46,700 tonnes of copper in concentrate. That exceeded expectations. That was a result of higher throughput and recoveries. We have had an excellent start to the year here. I would caution, as we did before, that the second half of the year will be dealing with slightly hard ore, slightly lower grades, slightly lower recoveries. So, we have been able to improve our production guidance a little bit. We'd hope that we'll be at the higher end of the range, as we finish the year, but we're only halfway through. Cash operating costs at Candelaria have been excellent. There's been great restraint there. I think under the new structure that we have in operations, being able to lower the cost profile of this mine, and that's something that we should be able to continue with in the future. Obviously, we benefited from the weaker Chilean peso and lower fuel prices. That's helped. In aggregate, we have improved our production guidance up to 140,000 tonnes of copper for the year for the year on 100% -- or 80% basis, and $1.35 cash operating cost, lower than we started the year with. A couple major milestones that we have achieved at Candelaria here in the first basically eight months of ownership by Lundin Mining. The biggest milestone was the successful approval of what we call the Candelaria 2030 project, which is keeping the mine open until at least then. We've got approval of the EIA, a process which Freeport started in September of 2013. So, delighted to get that milestone behind us, and that opens the doors for us to commence very shortly early works on power line and road relocation and progressing with the sectoral permits to do the big dam construction, which we would expect to start in earnest in the second half of next year. We have updated the capital cost estimates for the entire Los Diques dam project. We're currently standing at about $325 million spend, including contingency, and that's expected to be between 2016, 2017, and 2018 spend. Another key components of our acquisition strategy when we got hold of Candelaria was to do whatever we could to improve the production profile in the first five years of the mine. We acquired the asset knowing that there was a big pre-strip requires to push the pit back to get at more high grade. That required the use of lower-grade stockpile material, which was causing a dip in production, in particular in '16, '17, and '18. You could see in the red and blue bars at the bottom of -- this graphic's on page 16 of the slide presentation -- that we've taken most of that dip out, and we've taken, on an average basis over those four years, production, which was expected to be about 122,000 tonnes of copper, up to 154,000. So, we're quite pleased with that result of drilling exploration, converting resource to reserves, and taken those reserves and improving mine plan. Turning to Eagle, a great start to its first full year of production, with nine, 10 months of production behind us now with this new mine. Nickel production was in line with expectations, as was copper production. We're actually ahead of things a little bit year to date, but we're going to maintain our guidance, both on production and cost, as this is a new mine and quarter to quarter there could be variations. We, obviously, were influenced a little bit by lower copper credit. As a result, our cash operating costs for the quarter came in at $2.15. But year to date, this is remaining well below $2, and we're maintaining our cash cost guidance of $2 a pound per nickel produced for this year. A big milestone at Eagle was the high-grade drill intercepts that we've published results on. I have not seen drill core like this since Voisey's Bay. So, we're very excited about that high-grade intercept. It's a couple of kilometers over from the Eagle mine, and it's about 1.2 kilometers deep, but those grades are outstanding, not only high nickel grades, high copper grades, but very good PGMs. So, we've got two drill rigs working on Eagle East, and we've extended the budget. Moving to Neves-Corvo, a very strong quarter in copper production. Very good production of copper year to date, with cash operating costs of $1.43 per pound obviously being -- benefiting from the weaker euro, but also our byproduct credit prices were lower. So, overall, their execution has been very good on copper. We have had some challenges in the zinc mill towards the end of Q2 and the beginning of Q3 here with some lower recoveries that we're working on, but in aggregate we're able to probably predict we'll be at the higher end of our copper production on guidance, and we've been more conservative now on zinc expectations from the mine for this year. We have substantially completed the zinc expansion project study for Neves-Corvo. We worked on this for the last year and a half. The study contemplates taking total production of zinc up to 165,000 tonnes per annum at a peak. That's adding another 90,000 tonnes, so, that's a good-sized zinc mine on its own. There's a zinc lead byproduct. There's silver that comes along with that, as well. The scope of this project would be to de-bottleneck the shaft from 4.5 million tonnes current capacity to 5.6 million tonnes, double the size of the zinc plant, and then, obviously, expand other infrastructure, water treatment, tailings plan, and paste backfill. Estimated CapEx on a euro basis EUR245 million for that expansion, and that money to be spent over two, two and a half years. So, from time of a positive decision to advance to turning on the switches on the mill, about two-year schedule. Given the tough metal markets we're in right now, and the need to, I think, improve recoveries and make some changes in the existing zinc plant, we have deferred a decision, an investment decision, on the zinc expansion. I think we're favorably disposed to expanding zinc significantly here, and following this roadmap, but we're going to defer the timing of that decision, and reassess later this year a we see how zinc and copper markets progress. Turning to Zinkgruvan, again, thy continue to out perform quarterly on either the mill or underground. I think the significant investments we've made in the paste backfill system over the last couple years are really bearing some fruit now. We have revised the underground mining method in the deeper parts of the mine, and this has caused the mine to outperform the mill now, and we had some record production of ore delivered to surface, so very good on that. We're pushed up a little bit on the C1 to $0.43. We'd started the year at a guidance, I think, of $0.38 and got more optimistic and improved that to $0.35 and reverted back to $40 now just because of weak byproduct credit prices, being lead and copper, which we'd expect to be weak for the balance of the year. Aguablanca -- we kept the open pit open until into April, and that has resulted in extremely favorable margins here, because there was very, very little pre-strip as we finished the open pit, and then we've reverted to underground mining. We have had some permitting issues crop up unexpectedly there. An agency weighed in with some mandate which we hadn't expected, so, we're responding to that. We have a very good stockpile of more than 400,000 tonnes of good-grade material, which will keep the mill producing at full capacity until into beginning of Q4, at least until October. We hope to get approval of this mini EIA that we put in on the conversion of the mining method from open pit to underground before then, but if that is delayed, we'll have to suspend milling operations, and we'll advise the market accordingly when that happens. Turning to Tenke, Freeport have operated again exceedingly well for the first half of this year. Lukas, Marie and I visited Tenke about, I guess, six or seven weeks ago. It's probably the best that the operations have looked that I've seen them in the first six years of operation there. We'll likely have a record in cobalt production. Obviously, copper production is very competitive here at just over $1 a pound of copper produced. There's a big acid plant project, which is progressing very well, on schedule, on budget, and despite the weaker copper prices, I think with the good production that Freeport's done there, and some cost restraints, we'll probably expect a little bit better cash back to Lundin Mining than we had last guided. We have $17 million in hand, year to date, and now we're guiding $20 million to possibly closer to $30 million back from Tenke this year. That's an update of Lundin Mining's performance in Q2, and year to date. I think we're very pleased with the high quality assets that we have, with our diversified asset base, both geographically and commodity wise. We're now producing in excess of 500,000 tonnes of base metals from the Company, with a good life of mine ahead, at all assets, all material assets. Very strong free cash flows, even in a tougher metal price environment. Five out of six of our assets are producing with an operating margin of better than 50%, which I think in any market is good, and in a tough market is remarkable, and I think that's a credit to the operations that we have and how they're being run. That, in aggregate, has contributed to a very conservative balance sheet year to date, and positioning us very well in the years ahead. So, I'd be happy, operator, now to open up the presentation to Q&A. Hello, operator? Could you open it up to Q&A, please? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions). Your first question comes from the line of Ralph Profitti from Credit Suisse. Your line is open. -------------------------------------------------------------------------------- Ralph Profitti, Credit Suisse - Analyst [2] -------------------------------------------------------------------------------- Paul, at today's zinc and lead prices, does the expansion study meet your investment criteria? I'm just wondering if this deferral of a go-ahead is more sort of an opportunistic approach to capture returns. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [3] -------------------------------------------------------------------------------- Yes, whether -- Ralph, whether they -- today's spot prices are high or low, we would never make investment decisions based on that. We take a forward-looking view on that with some degree of conservatism. And zinc, by far, outpacing lead in any kind of decision there. The kind of criteria that we've been looking for is to have a base case which has better than a 12% rate of return at $1 zinc, and, obviously, a prudent assumption on exchange rates, call it, let's say, $1.15 euro. So, those kinds of criteria, if you look forwards, the zinc project, to me, looks pretty favorable, but we've budgeted this year for, I think, 74% or 75% zinc recovery, for barely getting that year to date. All the test work that we've done as a basis for the zinc expansion study shows that it's possible with improved flotation circuit to get better than 80% recovery, but I think we need to get the existing plant working better than it is today, and see how markets improve before we jump into a EUR245 million investment. -------------------------------------------------------------------------------- Ralph Profitti, Credit Suisse - Analyst [4] -------------------------------------------------------------------------------- Understood. Helpful. Second question, can you help me to get a sense of how much of value you think could be hidden in under-utilized port capacity at Candelaria? And what is your long-term strategy on the ownership of that part of the infrastructure? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [5] -------------------------------------------------------------------------------- Yes, I'm not going to speculate on potential values at all, Ralph. Our priority this year has been to do what we said we'd do, which is progress the EIA as the number one priority, to strengthen community relationships, which we have done. To drill aggressively and improve the production profile over the first five years. So, we're well advanced in all of those critical initiatives, and I think there's great value to be added in the future from the port, and from our desalination plant, and the corridor that we have that goes into the heart of a copper producing area in Region III, but I didn't want to distract people from those other priorities, and infrastructure is something we'll look at next year. And we'll make no rash decisions on the port utilization until we have a better idea of our own asset base, and what our drilling results will bring. So, the port's only used 20% of the time, but it's, I think, going to sit that way for a while until we've got a long-term strategy. We certainly have no intent to sell the asset. I think it's a core asset, part of what we've acquired, and we'll step carefully into considering third-party access to that, looking at our own access needs first. -------------------------------------------------------------------------------- Ralph Profitti, Credit Suisse - Analyst [6] -------------------------------------------------------------------------------- Great, thank you. That's of great help. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [7] -------------------------------------------------------------------------------- Yes, thank you. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Your next question comes from the line of David Charles from Dundee Capital Markets. David, your line is open. -------------------------------------------------------------------------------- David Charles, Dundee Securities Corporation - Analyst [9] -------------------------------------------------------------------------------- Yes, good morning, Paul. My question was basically answered on Lombador, so, I'll ask one on Candelaria. Obviously, very nice expansion profile you put out last night. I'm just wondering, when the 43-101 comes out in September, I think, will there be copper production increases 2019? I'm just wondering, you've given us a little bit of a picture of what happens over the next four or five years. I'm just wondering, does that take away from what happens after 2019? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [10] -------------------------------------------------------------------------------- Yes. We won't give too much of a forward-looking comment, but I'll let Steve Gatley, who's managing that process, respond. -------------------------------------------------------------------------------- Steve Gatley, Lundin Mining Corp. - VP, Technical Services [11] -------------------------------------------------------------------------------- Yes, David, we will see improvements beyond 2019. Paul's talked about our drilling program. We have been able to convert resources into reserves. That's seen some rephasing in the open pit, but, probably more critically, extension, significant extension, of the underground mine lives, particularly at Candelaria Norte where we have got the Susana and Damiana ore bodies. So, that higher-grade underground material replaces the low-grade WIP or stockpile material, and allows increased metal production going forward. -------------------------------------------------------------------------------- David Charles, Dundee Securities Corporation - Analyst [12] -------------------------------------------------------------------------------- And, given that these are underground operations, will there be a big CapEx that will -- or a CapEx related to the development of these zones that would have a significant impact, do you think? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [13] -------------------------------------------------------------------------------- Peter, do you want to respond that? -------------------------------------------------------------------------------- Peter Quinn, Lundin Mining Corp. - Chief Operating Officer [14] -------------------------------------------------------------------------------- Yes. I'll make the comment there, David, that as this stage we're still evaluating what will happen beyond 2019 with the underground mines, so, there's two means of exploiting Damiana-Susana in the future. Both of those are still being looked at. There will be some capital involved, but I couldn't put a firm number to that today until after the technical report's completed in the future. -------------------------------------------------------------------------------- David Charles, Dundee Securities Corporation - Analyst [15] -------------------------------------------------------------------------------- Excellent. Thank you very much. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [16] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Your next question comes from the line of Greg Barnes from TD Securities. Greg, your line is open. -------------------------------------------------------------------------------- Greg Barnes, TD Securities - Analyst [18] -------------------------------------------------------------------------------- Yes, thank you. Paul, in the discussion around the Neves-Corvo zinc expansion, you mentioned one of the issues is the plant stability. What do you mean by that? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [19] -------------------------------------------------------------------------------- Yes. Maybe, Steve, do you want to address that? -------------------------------------------------------------------------------- Steve Gatley, Lundin Mining Corp. - VP, Technical Services [20] -------------------------------------------------------------------------------- I can try and address that, Paul. Since the mine swapped a year or two ago from conventional sub-acreage tailings disposal to paste backfill, we've -- we have less water in our system, and that's led to a change in the water chemistry. That does have an impact on the zinc plant performance. Zinc flotation in these types of ore bodies is very sensitive to water chemistry. Also, recently, believe it or not, the water temperature in the circuit has been exceptionally high, and that has an impact on the reagents in the plant. We've also introduced the Lombador ore body, which has a subtly different minerality to the other ore bodies at Neves, the other zinc-rich bodies. It has higher lead, as you will have seen from our production. So, we're working on the minerality, and the process control in the plant needs further optimization. So, we have a team working on that now, and we would hope to have some improvements towards the end of this year. -------------------------------------------------------------------------------- Greg Barnes, TD Securities - Analyst [21] -------------------------------------------------------------------------------- So, what are zinc recoveries right now? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [22] -------------------------------------------------------------------------------- Well, we've done, what, 73.9 year to date, something like that, just under 74. -------------------------------------------------------------------------------- Greg Barnes, TD Securities - Analyst [23] -------------------------------------------------------------------------------- Okay, and the target's to get to what? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [24] -------------------------------------------------------------------------------- Well, if we go ahead and with the zinc expansion, which is improving flotation, resin time, and that sort of thing, the targets are about 80%. -------------------------------------------------------------------------------- Greg Barnes, TD Securities - Analyst [25] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [26] -------------------------------------------------------------------------------- But that takes, obviously, capital investment. So, there's -- I think there's some low-hanging fruit we can deal with right now with minimal capital investment in the existing plant, and we're working on, as Steve noted, the water treatment and other things in the plant. But we've taken a step to be more conservative on guidance this year until those things are in place. -------------------------------------------------------------------------------- Greg Barnes, TD Securities - Analyst [27] -------------------------------------------------------------------------------- Okay, got you. Thanks, Paul. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [28] -------------------------------------------------------------------------------- Yes. Thank you. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- Your next question comes from the line of Orest Wowkodaw from Scotia Bank. Orest, your line is open. -------------------------------------------------------------------------------- Orest Wowkodaw, Scotiabank - Analyst [30] -------------------------------------------------------------------------------- Metal prices are weak, but you're still generating a fair amount of cash. I'm just wondering where your head might be at in terms of bringing in a dividend, whether that thought has been postponed, given the environment, or whether that's still something you're considering? Thank you. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [31] -------------------------------------------------------------------------------- Orest, it has been postponed. We discussed it at length with the Board, as we had committed to do this week as we reviewed our results. We're going to reassess once we see Q3 results in. The Company is definitely favorably disposed to bringing in a modest regular dividend, but I don't think the timing's right here in this market. -------------------------------------------------------------------------------- Orest Wowkodaw, Scotiabank - Analyst [32] -------------------------------------------------------------------------------- Okay. And would the same thinking be out there in terms of M&A opportunities with equity valuations really beat up right now? Do you see this as an opportunistic time to maybe add some more assets to the portfolio? Or is it -- or do you see the Company sort of bearing down to fight through this copper price environment? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [33] -------------------------------------------------------------------------------- Well, we have the balance sheet to do something, but I don't see any targets out there, to be honest. And we're always opportunistic in the Lundin world for that, but -- and Julie and her team and Neil and his team continue to monitor drill results from juniors and the stuff that might be coming out of majors, but we haven't seen anything that I think would be value-added. There's sets of assets that are out there, and we'll see what the pricing comes in when others put in their bids, not us. We wouldn't expect to be doing any other M&A this year, but if something new comes up that's special, we'll look at it. -------------------------------------------------------------------------------- Orest Wowkodaw, Scotiabank - Analyst [34] -------------------------------------------------------------------------------- Okay. Thanks very much, Paul. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- Your next question comes from the line of Alain Gabriel with Morgan Stanley. Alain, your line is open. -------------------------------------------------------------------------------- Alain Gabriel, Morgan Stanley - Analyst [36] -------------------------------------------------------------------------------- Yes, hi. Hi, good morning, everyone. My question is on Candelaria. So, I'm going to establish those are good prospects for increasing the output beyond 2019. But how should we think about the life of mine? Are you still comfortable in your capability of extending the life of mine beyond the 15 years that you've highlighted in your presentation? Thank you. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [37] -------------------------------------------------------------------------------- Maybe I'll ask Peter to respond here. You're going to have to wait about six weeks or so for the technical report to come out with the detail, but, Peter, do you want to comment on your view of the asset? -------------------------------------------------------------------------------- Peter Quinn, Lundin Mining Corp. - Chief Operating Officer [38] -------------------------------------------------------------------------------- Yes, I'd comment there a line about the life of mine beyond the 15 years currently in the land process. There is definitely potential there associated with underground ore bodies, but, as Paul commented, quite a bit of drilling and still a lot of life of mine, mine planning activities to undertake before we'd be anywhere close to making commitments beyond 2030. -------------------------------------------------------------------------------- Alain Gabriel, Morgan Stanley - Analyst [39] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Your next question comes from the line of Oscar Cabrera with Bank of America Merrill Lynch. Oscar, your line is open. -------------------------------------------------------------------------------- Oscar Cabrera, Bank of America Merrill Lynch - Analyst [41] -------------------------------------------------------------------------------- Thank you, operator. Good morning, everyone. Paul, just on Candelaria, if I recall correctly, the construction of the tailings for Los Diques was expected to begin at the end of last year. So, with the delays and the CapEx seems to be similar and your -- and the new mine plan seems to be similar to the previous CapEx. Is there anything to do there, or are we still on time to get the required tailings capacity you need for 2017? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [42] -------------------------------------------------------------------------------- Yes. Peter, do you want to comment on that? -------------------------------------------------------------------------------- Peter Quinn, Lundin Mining Corp. - Chief Operating Officer [43] -------------------------------------------------------------------------------- Yes. In regards to Los Diques, in essence, the answer to your question is we're still on time. Overall, with the acquisition of the asset by Lundin, and I'm going to step back a little bit to Freeport, if you looked at the original Freeport schedule, the EIA process has probably delayed us to the point of about six months beyond what we thought would happen with the permitting effort. That has not yet rolled over into any real impact in the construction schedule. -------------------------------------------------------------------------------- Oscar Cabrera, Bank of America Merrill Lynch - Analyst [44] -------------------------------------------------------------------------------- Okay, good to hear. Thanks. And then, on Neves-Corvo, the -- can you just please clarify, the 24 months after the decision has been taken, does that assume that you have the permits? Or, if not, how long have you factored in there for additional permits? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [45] -------------------------------------------------------------------------------- Yes, it really depends on when -- I mean, we intend to advance the permitting process now. And the permitting process in Portugal in the past has been pretty straightforward. It's a brown fields expansion, but we're not going to take anything for granted. Things do evolve and change, so, we're starting the permitting process now, but really the 24 months assumes that there isn't any kind of a regulatory delay. It would definitely be possible to advance it in parallel. They kind of have a stage process there in the past, where there's sort of an approval in principle given, and then as you advance detailed design, you may additional technical submissions, and approvals come through. But we might take a bit more of a conservative approach this time. -------------------------------------------------------------------------------- Oscar Cabrera, Bank of America Merrill Lynch - Analyst [46] -------------------------------------------------------------------------------- Great. And then, last thing, if I may, on the $245 million CapEx, would you be able to just break it down in terms of how much goes to the -- how much goes to the hoist, and the expanded mill or other things that you -- -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [47] -------------------------------------------------------------------------------- Yes. Just a correction there, Oscar, it's EUR245 million. Paul McRae, do you want to just comment on a rough breakdown between surface and sub-surface? Paul McRae: Yes, Paul. Approximately 60% of that capital will be spent underground, and that would include the shaft upgrade, as well. Does that answer your question? -------------------------------------------------------------------------------- Oscar Cabrera, Bank of America Merrill Lynch - Analyst [48] -------------------------------------------------------------------------------- Yes. No, it does. Thank you. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- Your next question comes from the line of Christian Kopfer from Nordea. Christian, your line is open. -------------------------------------------------------------------------------- Christian Kopfer, Nordea Markets - Analyst [50] -------------------------------------------------------------------------------- Thanks, operator. Good morning. Just to follow up on the CapEx, taking down CapEx once more for 2015, down to, I think it was $350 million, is it reasonable to expect that this $40 million that you spend less this year, should we add some to 2016? Or is it a sustainable lower CapEx level that you have managed to come down to? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [51] -------------------------------------------------------------------------------- A lot of the CapEx we've -- has been deferred. A lot of it's sustaining capital deferred to 2016 and some to 2017. There are some capital savings, for sure, that we've accomplished, but the majority of it is just deferral, stuff that we can defer without risking any production over the first five years. That was part of the criteria for deferral. So, nice-to-haves. Marie, do you want to comment a little bit more some of that? There are some savings. -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [52] -------------------------------------------------------------------------------- Yes, there are some savings. The big one is in deferred stripping. So, at the beginning of the year, we would have estimated the deferred stripped component for this year would be $160 million. That's come down to about $105 million. So -- and in the new release for Candelaria, you would have seen the detail going forward. So, that is some savings that won't be just pushed into the next year. It's different phasing. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [53] -------------------------------------------------------------------------------- Yes, and, Peter, maybe if you want to comment on equipment availability, and rebuilding savings at Candelaria? -------------------------------------------------------------------------------- Peter Quinn, Lundin Mining Corp. - Chief Operating Officer [54] -------------------------------------------------------------------------------- Yes. We're seeing an outstanding result this year with equipment availability and use of available time, especially with the haulage fleet at Candelaria. So, we've got a number of trucks currently parked, not required to make the mine plan. So, that's a cost saving there for us. Further, under Freeport, there was a truck rebuild program throughout the Americas mines, which now, as part of Lundin Mining, is no longer applicable. So, we've taken those truck rebuilds out of the CapEx. -------------------------------------------------------------------------------- Christian Kopfer, Nordea Markets - Analyst [55] -------------------------------------------------------------------------------- Okay, thank you very much. That's very helpful. Thanks. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- Your next question comes from the line of Kerry Smith with Haywood Securities. Kerry, your line is open. -------------------------------------------------------------------------------- Kerry Smith, Haywood Securities - Analyst [57] -------------------------------------------------------------------------------- Thanks, operator. Paul or Peter, for the $325 million for the tailings at Candelaria over that three-year period, what would the rough percentage be by year, in terms of the CapEx spend? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [58] -------------------------------------------------------------------------------- I think, Kerry, that's broken out in the press release there for three years, and then a 2019 figure, which is -- I can't remember -- -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [59] -------------------------------------------------------------------------------- $50 million. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [60] -------------------------------------------------------------------------------- $50 million is the allocation for sustaining. So, we're basically deeming the project complete at the end of 2018, and then into sort of operating phase sustaining capital with that $50 million. -------------------------------------------------------------------------------- Kerry Smith, Haywood Securities - Analyst [61] -------------------------------------------------------------------------------- Okay, right. Actually, I see it here now. Okay, thanks. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [62] -------------------------------------------------------------------------------- Yes, and when the 43-101 comes out, you'll see ongoing sustaining capital for tailings and other items, of course, for dam raises as they progress over time. -------------------------------------------------------------------------------- Kerry Smith, Haywood Securities - Analyst [63] -------------------------------------------------------------------------------- Right, perfect. Okay, great. Thanks, Paul. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [64] -------------------------------------------------------------------------------- Yes, don't assume that tailings investment at Candelaria goes to zero in 2020. -------------------------------------------------------------------------------- Kerry Smith, Haywood Securities - Analyst [65] -------------------------------------------------------------------------------- Right. Right. -------------------------------------------------------------------------------- Operator [66] -------------------------------------------------------------------------------- Your next question comes from the line of David Charles with Dundee Capital Markets. David, your line is open. -------------------------------------------------------------------------------- David Charles, Dundee Securities Corporation - Analyst [67] -------------------------------------------------------------------------------- Yes, Paul, it's me again. Just a quick question on Candelaria. I mean, clearly, your performance in the first six months has well exceeded, I would say, probably your expectations, and definitely the prior Freeport mine plan, which you insisted that we all use. I'm just wondering, how close we are to the end of the good news? I mean, you seem to -- the first quarter better cost was extremely low, the second quarter, production was maybe not much lower, but cost, again, was extremely low. You're guiding towards $1.35 for the year, but I'm just wondering when you look at the mine, at the moment, given the first six months' experience, do you think we can get below that again, going forward, or does it need a significant change, let's say, in the Chilean peso to get you there? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [68] -------------------------------------------------------------------------------- Yes, I don't want to speculate on that. We're, obviously, going to continue to be a little bit conservative, maybe less conservative quarter by quarter as we understand the asset and the numbers better, but we've improved our production guidance, improved our cost forecast there. I think if we continue to be particularly successful in underground higher-grade discovery, that will make a difference. There's -- we think that our guidance is prudent here. We do expect harder ore and lower grades and lower recoveries the second half of the year. So, on a production basis -- and the Chilean peso, it may get stronger, it may get weaker, but it usually moves in lockstep with copper price. So, it's not like our European operations or Swedish operations where the currency can get weaker and we're still selling in US dollars, and the metal price is independent of those currencies. So, we do expect there'd be some more positive milestones, especially from drilling at Candelaria. I think that's the biggest thing moving forwards here in the near term. Any additional comment there, Peter? -------------------------------------------------------------------------------- Peter Quinn, Lundin Mining Corp. - Chief Operating Officer [69] -------------------------------------------------------------------------------- No, Paul. I think you covered that perfectly. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [70] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- David Charles, Dundee Securities Corporation - Analyst [71] -------------------------------------------------------------------------------- And maybe if I could get you to commit on something different? I mean, obviously, we've experienced a dramatic drop, at least in copper prices, and other commodity prices. Do you have any comment on that? I mean, there's a big investment bank saying copper won't be higher than $2.50 for the next four years. Do you have a view there, and could you make some comments on the outlook for the copper business? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [72] -------------------------------------------------------------------------------- Yes, I guess I predominantly have to look to the supply side, which is something we can understand. We don't have banks of economists evaluating demand like some of the big banks, but you can go to one or two big banks and they're complete copper bears, and you can go to some other big banks, equally as competent, and see a different view. It's -- we're planning sort of $2.70, I guess, for the balance of the year. We've put our forecast for the balance of the year, and we'll reassess in October what we think the three-to-five-year view would be, but I think you do need to be a little bit more conservative on copper price for the next two or three years, and for the next one to two years be even more conservative than some of the views a few months ago on nickel. And I think zinc is probably the commodity which will have the biggest upside soonest, and we're well positioned for that. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- Your next question comes from the line of Gustav Sandstrom at Danske Bank. Gustav, your line is open. -------------------------------------------------------------------------------- Gustav Sandstrom, Danske Bank - Analyst [74] -------------------------------------------------------------------------------- Thank you, operator. Just a quick question on your balance sheet. Could you elaborate a bit on the maneuverability you've got with the potential repayment on your senior secured notes, and is that something you're looking into? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [75] -------------------------------------------------------------------------------- Marie? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [76] -------------------------------------------------------------------------------- We're not looking into an early repayment at this stage. The 2020 note is a non-call 3, and the 2022 is a non-call 4, so we could buy back our notes in the market, which is an alternative, but there's no plan to do that right now. -------------------------------------------------------------------------------- Gustav Sandstrom, Danske Bank - Analyst [77] -------------------------------------------------------------------------------- All right, thanks. And one more question on Tenke. Obviously, you have that acid plant buildout now, which is quite expensive, but if you had no such commitment this year, what would your run rate cash distribution from Tenke be in current price environment, roughly? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [78] -------------------------------------------------------------------------------- Well, the acid plant is sort of $300 million or $350 million. 30% of that is being indirectly funded by Lundin Mining, so, that would bring another $100 million or something to us, if that spend wasn't there. -------------------------------------------------------------------------------- Gustav Sandstrom, Danske Bank - Analyst [79] -------------------------------------------------------------------------------- Perfect. Thank you. -------------------------------------------------------------------------------- Operator [80] -------------------------------------------------------------------------------- Your next question comes from the line of Johannes Grunselius from Handelsbanken. Johannes, your line is open. -------------------------------------------------------------------------------- Johannes Grunselius, Handelsbanken Capital Markets - Analyst [81] -------------------------------------------------------------------------------- Okay, thank you very much. Hi, everyone. I have a question on the results from Tenke. In your own books, I think you booked something like $9 million over the quarter, a similar number as in Q1. I was also wondering about the Q1 number here, because if I look into the Freeport numbers, if we take Q2, for instance, they did $104 million operating earnings for Tenke, and I think there is 30% corporate tax on that one. So, I come to a higher number than what you reported in your books. Can you help me there? Has there been any sort of accounting changes over the last few quarters, please? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [82] -------------------------------------------------------------------------------- There is a difference, but it hasn't changed. We've treated it the same for some time, and we always will have a little bit less. There are two things that affect it now. One is the -- when Lundin Mining took over Tenke Mining, we did a bump-up of the asset, and so, we depreciate that over time, and that comes off our share of the earnings. So, we do have a fair value bump on the property that's being amortized. And then the other thing, since the purchase of the Freeport cobalt operation, any of the inter-company income between Freeport Cobalt and Tenke is eliminated in the Tenke line for us. So, those two things have an impact. -------------------------------------------------------------------------------- Johannes Grunselius, Handelsbanken Capital Markets - Analyst [83] -------------------------------------------------------------------------------- Yes, sure. But if I take the elimination on Freeport Cobalt, I think that was minus 1 in Q2, so that means that Tenke contributed with 11 or something like that. So, but the difference, then, is accounting in depreciation changes, or depreciation differences between the companies, or --? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [84] -------------------------------------------------------------------------------- Yes, and you -- the difference in the profit elimination isn't just the minus 1 that the cobalt operations would have made on an accounting basis. It's the profit that Tenke would have made on their sales to Freeport Cobalt. So, it's a bit more than that. -------------------------------------------------------------------------------- Johannes Grunselius, Handelsbanken Capital Markets - Analyst [85] -------------------------------------------------------------------------------- Okay, got you. Got you. In other words, what you book, your $9 million, is a sort of -- that's underestimating the real earnings contribution, right? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [86] -------------------------------------------------------------------------------- Well, it's eliminating the inter-company. So -- -------------------------------------------------------------------------------- Johannes Grunselius, Handelsbanken Capital Markets - Analyst [87] -------------------------------------------------------------------------------- Okay. And my second question is on what you write about Aguablanca. It's not a super-important asset for you, but, nevertheless, you're telling us that there is some permitting complexity there. Can you get some -- shed some color there, please? And are you expecting to lose any volumes next year due to this? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [88] -------------------------------------------------------------------------------- It's not complex. An agency that had not been involved in the approvals before has come and asked for a mini EIA on the impact of going from open pit to underground. We didn't expect that request because we'd got two approvals from the mining authority two years in a row, so -- but we respect the request. We have an EIA, which is substantially complete, which has been prepared by Golder's. It'll be submitted next week. They have a statutory period of four months to review and approve, but it's government, they may or may not do it in that period of time. If they don't do it in that period of time, we'll have run out of stockpiles, and we'll have to suspend milling. So, if and when that occurs, we'll update our guidance. I don't want to give any kind of a forward-looking speculation on that, but Aguablanca has been a profitable operation, but it doesn't move the needle for Lundin Mining. So, it won't be a material impact if there is a problem. -------------------------------------------------------------------------------- Johannes Grunselius, Handelsbanken Capital Markets - Analyst [89] -------------------------------------------------------------------------------- All right. Okay, thank you. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [90] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [91] -------------------------------------------------------------------------------- Your next question comes from the line of Matthew Fields with Bank of America. Matthew, your line is open. -------------------------------------------------------------------------------- Matthew Fields, Bank of America - Analyst [92] -------------------------------------------------------------------------------- Hey, everyone. I just wanted to ask about some cash items. You generated a strong amount of cash from working capital in the first half. Are we going to see a reversal of that in the back half, or what do you think about sort of receivables and inventories and -- over the balance of 2015? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [93] -------------------------------------------------------------------------------- Well, our working capital does fluctuate quite a bit. I mean, where it'll be at a point in time, we have a general idea. I can say that we're going to continue to generate positive cash flows, regardless of where the working capital balance goes. It will have some tos and fros, but we're continuing to generate positive cash flows. So, it'll swing from quarter to quarter and usually Q3 is a lull, but with the addition of Candelaria, I don't expect that Q3 would be as much of a lull as we've seen before with just the European operations. So, it'll -- it'll have some tos and fros, but generally it should be fairly consistent, and we'll continue to produce positive cash flows. -------------------------------------------------------------------------------- Matthew Fields, Bank of America - Analyst [94] -------------------------------------------------------------------------------- So, from working capital for the entire year, you think it's relative neutral? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [95] -------------------------------------------------------------------------------- Yes, I wouldn't expect any big, huge swings. I mean, it does come and go. It's a big balance, and it depends on the timing of shipments. So, if a couple of boats are late, or there's a storm in the Baltic, then shipments don't get off, and stuff gets pushed into the next quarter. So, we don't have -- other than -- at Candelaria we have fairly regular shipments that would keep the balances stable, but in other places with lead we might only have one or two shipments a month from Zinkgruvan with -- it just depends on the timing of the shipments. -------------------------------------------------------------------------------- Matthew Fields, Bank of America - Analyst [96] -------------------------------------------------------------------------------- Okay. And then, with your revised CapEx guidance of $350 million, it looks like we've had $140 million to date for the first half, so is it right to think about a pretty significant pickup in spending in the back half? And can you (inaudible) sort of the timing of the spend there? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [97] -------------------------------------------------------------------------------- Well, our guidance is for the $350 million, so we do expect that, particularly now that we have our environmental approvals at Candelaria, we'll be spending on the early works, some of the surface works for that. So, you will see a pickup of that in the second half of the year. So, go with our guidance of $350 million. -------------------------------------------------------------------------------- Matthew Fields, Bank of America - Analyst [98] -------------------------------------------------------------------------------- Okay. And then lastly, you -- y'all have the revolver, $350 million, that matures in 2017. Have you started to think about what you would like to do in terms of extending that, and maybe increasing it? What's the right level of maturity for that, and sort of the size of commitments that you'd feel comfortable with, given the new operating profile? -------------------------------------------------------------------------------- Marie Inkster, Lundin Mining Corp. - SVP and CFO [99] -------------------------------------------------------------------------------- Yes. Well, that revolver actually has an evergreen clause. So, it can be renewed fairly easily on an annual basis. The bank group is very supportive and we've talked to them on an ongoing basis, and they're quite happy and willing and we have a number of banks that are eager to come into the syndicate if we did want to upsize it. We don't have a need right now for that. I'd like to see where we go in the next little while on what are the next steps in our growth, and when those decisions are made, then the capital should be structured accordingly. -------------------------------------------------------------------------------- Matthew Fields, Bank of America - Analyst [100] -------------------------------------------------------------------------------- Okay. Thanks very much. -------------------------------------------------------------------------------- Operator [101] -------------------------------------------------------------------------------- Your next question comes from the line of Alex Terentiew from Raymond James. Alex, your line is open. -------------------------------------------------------------------------------- Alex Terentiew, Raymond James Limited - Analyst [102] -------------------------------------------------------------------------------- Good morning, guys. I've just got a quick question on Neves-Corvo. You give us some CapEx estimates and production guidance, but I was wondering, from an operating cost perspective, what do you see changing there with the zinc output -- or sorry, with the expansion. I mean, not on a cost per pound basis, but more on a cost per tonne. Should we see some improvements there, or how do you see that evolving? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [103] -------------------------------------------------------------------------------- Alex, probably not a dramatic change in cost per tonne. These guys have been making improvements, despite going deeper into the various five or six ore bodies that we're mining there now. Where we were probably mining at EUR55 a tonne to the mill, we're probably now around EUR49 to EUR51. That's been assisted, in part, by the bulk mining that we're able to do in the big zinc stopes in Lombador. It's also been assisted by bulk mining methods that we have started to trial and introducing in a greater percentage in copper stockwork stopes. So, all this has helped bring our cost profile down to that EUR49/EUR50 per tonne milled level. Obviously, if we go up in tonnage, sizably, with the zinc expansion, you can spread your G&A over that. We wouldn't increase our G&A. In fact, we'd get some economies and productivity just from employee usage and a lot more bulk mining. But there's not going to be a big, dramatic change. -------------------------------------------------------------------------------- Alex Terentiew, Raymond James Limited - Analyst [104] -------------------------------------------------------------------------------- Okay, that's good. Thank you. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [105] -------------------------------------------------------------------------------- Because we do get deeper. -------------------------------------------------------------------------------- Operator [106] -------------------------------------------------------------------------------- Your next question comes from the line of John Tumazos from Very Independent Research. John, your line is open. -------------------------------------------------------------------------------- John Tumazos, Very Independent Research - Analyst [107] -------------------------------------------------------------------------------- Concerning Eagle, in the original measured resource there's 1.77 million metric tonnes that combined 8.8% nickel/cobalt/copper. Could you tell us a little bit about when that will be accessed and scheduled? It's a little exciting that it's 3% more than the other reserves and resources? And concerning the Eagle East discovery, will it require a separate shaft and development and what do you think the time table will be to transition from drilling to getting close enough to kiss the rock? -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [108] -------------------------------------------------------------------------------- On the first part, as far as the -- I guess, the sequencing of the reserve into the mill, we're actually starting with the highest grade first. So, this year, next year, the first three years, take the highest grades, nickel-focused, and then declining production from them, because we do start with the best first. We actually have tried to reverse the mine plan, given the weaker nickel price, but there's really not that much flexibility in the deposit to do that. We could have gone to the top of the deposit and mined lower grades, but that would take development cost to get there. So, we are using the best first, strategically. As far as Eagle East, it's really too early to speculate on what Eagle East might be. The grades are remarkable but we've only got four or five holes into them, John. We have the ability to drive a ramp down to there to assist in exploration, once we get more comfortable with the volumes that are available, and that could be done with relatively simple permitting, because it's for exploration, and coming off existing ramps. But on the concept of whether a shaft would be warranted, compared to connecting it to existing underground infrastructure, we need to know a lot more about volume potential there. So, too early to say, but we're drilling aggressively and hope to have a better flavor for that by year end. -------------------------------------------------------------------------------- John Tumazos, Very Independent Research - Analyst [109] -------------------------------------------------------------------------------- Thank you and congratulations. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [110] -------------------------------------------------------------------------------- Yes, thanks, John. -------------------------------------------------------------------------------- Operator [111] -------------------------------------------------------------------------------- This concludes our question-and-answer session. I would now like to turn the call over to Mr. Conibear for closing remarks. -------------------------------------------------------------------------------- Paul Conibear, Lundin Mining Corp. - President and CEO [112] -------------------------------------------------------------------------------- Okay. Thanks very much, operator, and thank you, everybody, for attending our call today, and look forward to speaking to you at the end of Q3. The session's over. Thanks. -------------------------------------------------------------------------------- Operator [113] -------------------------------------------------------------------------------- This concludes today's conference call. You may now disconnect.
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