Lundin Mining 2007 Third Quarter Results
Lundin Mining Corporation (TSX: LUN)(NYSE: LMC)(OMX: LUMI) –
(all amounts are in US Dollars unless otherwise stated)
Three months ended Nine months ended ($000,000′s, September 30, September 30, except per share data) 2007 2006 2007 2006 ————————————————————————– Sales 292.8 98.9 806.6 303.7 EBITDA (i) 142.2 59.2 464.8 178.3 EBITDA, excl. one-time charge (i)(ii) 152.9 59.2 475.5 178.3 Net earnings (iii) 123.1 30.7 336.7 89.4 Basic earnings per share (iv) 0.32 0.25 1.05 0.73 Diluted earnings per share (iv) 0.32 0.25 1.05 0.72 Cash provided by operations 155.6 59.4 316.3 136.5 (i) Non GAAP measure. See Non-GAAP Performance Measures. (ii) On the acquisition of Rio Narcea Gold Mines, Ltd. by Lundin Mining, the Aguablanca concentrate inventory as of July 17, 2007 was recorded at fair value. This resulted in the Company recording a one-time charge of $10.7 million during the third quarter related to the fair value adjustment on this inventory as this inventory was sold. (iii) Net earnings include $77.9 million of gains from the sale of investments in the second and third quarters of 2007. (iv) All figures related to shares and per share data are calculated as if the three-for-one stock split, effective February 5, 2007, occurred at the beginning of the first period presented.
Company Comments
“The Company’s potential for volume growth in the future is significant with major expansion programs in two core assets of the Company. Zinc production will be quadrupled at the Neves-Corvo mine from 2011 onward and production of copper concentrates will begin at the Zinkgruvan mine in 2010. In addition, our interest in the Tenke Fungurume project was consolidated into our assets during the period as well as the Aguablanca nickel-copper mine. We will continue to optimize the performance of operations while also focusing on the development of internal projects and unlocking their value. During the quarter the European vacation periods as well as planned maintenance were completed at the various operations. Nonetheless, processed tonnes of ore at both Neves-Corvo and Zinkgruvan for the nine-month period ended September 30, 2007 were greater than in the comparable period in 2006 and reflects productivity improvements being achieved operationally. Additionally, Aljustrel will start up zinc production during December of this year and will substantially contribute to the Company’s production profile next year. In a step to reduce cost and increase the efficiency of the management team it has been decided to close six of our present offices and relocate our Head Office to Geneva with business development activities remaining in Vancouver.”
Highlights
– The acquisition of Tenke Mining Corp. (“Tenke”) was completed July 3, 2007 following the approval by the shareholders’ of both companies and the Superior Court of Justice of the Province of Ontario. Tenke’s main asset is a 24.75% holding in the Tenke Fungurume project in the Democratic Republic of Congo (“DRC”), which is one of the largest and highest grade, undeveloped copper-cobalt deposits in the world. Work is in progress to develop the deposit into a low-cost open-pit mine and start-up is planned for in 2009. Freeport McMoRan Copper & Gold Inc., through one of its Phelps Dodge subsidiaries, holds a 57.75% interest in Tenke Fungurume and is the operator of the project.
– On July 17, 2007, the Company acquired control of Rio Narcea Gold Mines, Ltd. (“Rio Narcea”). As at August 20, 2007, the final day of Lundin Mining’s amended offer to acquire all the shares and share purchase warrants of Rio Narcea, a total of 158,018,283 shares and 20,099,020 warrants had been tendered, representing 92.9% of the fully diluted shares outstanding. Subsequent to the expiration of the final amended tender offer, the Company undertook a compulsory acquisition transaction under the Canada Business Corporations Act to take up the balance of the shares. The Company, as a majority holder of the share purchase warrants, also approved an amendment to the terms of the indenture governing the warrants, allowing Rio Narcea to redeem all, but not less than all, of those securities. To finance these two transactions, a final payment was made to Computershare Investor Services in mid-October, thereby completing the redemption, by Rio Narcea, of 100% of the share purchase warrants and the acquisition, by the Company, of 100% of the issued and outstanding shares in Rio Narcea.
Concurrent with the offer to purchase Rio Narcea, the Company signed an option agreement with Red Back Mining Inc. for the sale of the Tasiast gold mine for cash consideration of $225 million and the assumption of $53.1 million of debt and hedging contracts. The sale was completed on August 2, 2007.
– Common shares of Lundin Mining commenced trading on the New York Stock Exchange (“NYSE”) on September 20, 2007. With the commencement of trading on the NYSE, the Company’s shares no longer trade on the American Stock Exchange. Lundin’s common shares continue to trade on the Toronto Stock Exchange and in the form of Swedish Depository Receipts on the OMX Nordic Exchange.
– The Company completed its proposed sale of silver contained in concentrate from the Neves-Corvo and Aljustrel mines to Silverstone Resources Corp. (“Silverstone”) on September 28, 2007. Under the terms of the agreement, Lundin received an up-front cash payment from Silverstone of $42.5 million together with 19,656,250 Silverstone common shares, the latter of which are subject to a four-month hold period. Over the life of the agreement, Lundin will also receive cash payments upon delivery of its silver in concentrate to Silverstone in an amount equal to the lesser of (a) $3.90 per ounce of silver contained in concentrate (subject to a 1% annual inflationary adjustment after three years and yearly thereafter) and (b) the then prevailing market price per ounce of silver.
– In early October, the Company announced major expansion plans at the Neves-Corvo mine in Portugal. Production of zinc in concentrate from the Lombador massive sulphide deposit at the Neves-Corvo mine is scheduled to start in 2011 following a feasibility study estimated to be completed in the second half of 2008. Production from this deposit is expected to increase zinc ore production at Neves-Corvo from 400,000 tonnes per annum (“tpa”) to 2.4 million tpa, significantly increasing the Company’s overall annual zinc and lead production.
– In early October, the Company also announced major expansion plans at the Zinkgruvan mine in Sweden. A capital investment is underway to exploit a high grade copper deposit lying adjacent to one of Zinkgruvan’s zinc deposits. By 2010, ore production is expected to increase 33% to 1.2 million tpa with the commencement of copper concentrate production.
– Significant activity took place during the quarter on the Ozernoe Project in southeastern Siberia in preparation for construction work and final feasibility. A compilation of all technical data for final work on the bankable feasibility study for engaging all independent contract services was completed; ongoing drilling during the quarter continues to favourably support the original geological determinations; a supply of potable water was established and the construction camp and power line installation, now underway, is expected to be completed by the end of the fourth quarter. The Kholoy River bridge, critical to accommodating the delivery of materials and supplies to the site, was also completed during the quarter.
– Construction of the second copper grinding and flotation line at the Neves-Corvo mine was completed and the circuit commissioned in October. This new circuit can now treat copper slag or copper ores at a rate of up to 100 tonnes per hour.
– Total ore mined at the Company’s operations was 11% greater in the third quarter of 2007 as compared with the same period in 2006. Excluding the Storliden production, copper production was up 11% over the same period a year earlier while zinc, lead and nickel production were relatively stable.
– Both the SIPTU and TEEU unions at Galmoy reached labour agreements with management, and it is expected that production output will return to higher levels.
– Production start-up at the Aljustrel zinc-lead-silver mine, delayed due to the late delivery of some equipment for the ore processing facilities, is scheduled to commence in the latter half of the fourth quarter 2007.
– Lundin Mining Corp. is pleased to announce the appointment of John Andreatidis as Managing Director of Somincor S.A., with immediate effect. John, 41 and an Australian citizen, graduated in Metallurgy from the University of Queensland, Australia in 1987 and subsequently completed an MSc in Engineering Science from the same university in 2001. John joined Somincor as Principal Metallurgist in October of 2006 and brings 20 years of experience within the base metals industry having played key roles in a number of operations with his previous employers, the BHP Billiton Group and Mount Isa Mines Limited.
Selected Financial Information Three months ended Nine months ended September 30, September 30, ($000′s) 2007 2006 2007 2006 ————————————————————————– Sales $292,757 $98,941 $806,612 $303,657 Cost of sales (124,135) (35,364) (284,343) (109,706) Accretion of asset retirement obligations (2,485) – (4,753) – Exploration and project investigation (11,356) (1,700) (24,499) (5,352) Administration and other expenses (12,576) (2,700) (28,265) (10,308) ————————————– EBITDA (i) 142,205 59,177 464,752 178,291 Depreciation of property, plant and equipment (15,750) (5,382) (42,782) (14,783) Amortization of mining rights (31,683) (9,410) (76,404) (27,272) ————————————– EBIT (i) 94,772 44,385 345,566 136,236 Losses on derivative instruments (ii) (18,234) (4,963) (51,416) (14,864) Gain on sale of investments 27,452 – 77,890 – Net interest and other financial items (3,543) 1,137 (6,278) (188) ————————————– EBT (i) 100,447 40,559 365,762 121,184 Tax and non-controlling interest 22,653 (9,822) (29,046) (31,825) ————————————– Net earnings for the period $123,100 $30,737 $336,716 $89,359 ————————————– ————————————– Operating Cash Flow $155,646 $59,381 $316,338 $136,500 Capital Expenditures $ 73,358 $ 6,621 $150,554 $ 19,780 (i) Non GAAP measures – see Non-GAAP Performance Measures (ii) Includes realized and unrealized result on derivatives Key Financial Data (i) Three months ended Nine months ended September 30, September 30, 2007 2006 2007 2006 ————————————————– Shareholders’ equity/share, US$ (i) $10.38 $ 2.85 $10.38 $ 2.85 Basic earnings/share, US$ $ 0.32 $ 0.25 $ 1.05 $ 0.73 Diluted earnings/share, US$ $ 0.32 $ 0.25 $ 1.05 $ 0.72 Dividends Nil Nil Nil Nil Equity ratio (i) 76.3% 64.1% 76.3% 64.1% Basic weighted average number of shares outstanding 389,832,910 122,611,905 321,101,335 122,305,179 Diluted weighted average number of shares outstanding 390,021,171 123,566,265 321,695,537 123,407,811 Number of shares outstanding at period end 392,380,271 122,724,993 392,380,271 122,724,993 NOTE: All figures related to shares and per share data are calculated as if the three-for-one stock split, effective February 5, 2007, occurred at the beginning of the first period presented. (i) Non-GAAP measures – Shareholders’ equity per share is defined as shareholders’ equity divided by total number of shares outstanding at end of period. Equity ratio is defined as shareholders’ equity divided by total assets at the end of period.
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Amounts are expressed in United States dollars, unless otherwise indicated)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2007 and 2006
This Management’s Discussion and Analysis (“MD&A”) of Lundin Mining Corporation (“Lundin Mining” or the “Company”) has been prepared for the three months and nine months ended September 30, 2007 and is dated November 9, 2007. It is intended to supplement and complement the accompanying unaudited interim consolidated financial statements and notes thereto for the third quarter ended September 30, 2007.
Please also refer to the cautionary statement of forward-looking information at the end of the MD&A. Additional information relating to the Company is available on the SEDAR website at www.sedar.com. All the financial information in this MD&A has been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and all dollar amounts in the tables are expressed in thousands of US dollars, unless otherwise noted.
Overview
Lundin Mining is a Canadian-based international mining company that owns and operates the Zinkgruvan zinc/lead/silver mine in Sweden, the Galmoy zinc/lead mine in Ireland, the Neves-Corvo copper/zinc mine in Portugal, and the Aguablanca nickel/copper mine in Spain. Additionally, the Company owns the Storliden copper/zinc mine in Sweden, which is operated by Boliden AB, as well as the Aljustrel zinc/lead/silver mine in Portugal, which is scheduled to begin production in the fourth quarter of 2007. The Company also has a 49% interest in the Ozernoe project in Russia, one of the largest undeveloped zinc/lead projects in the world and a 24.75% interest in Tenke Fungurume, a major copper-cobalt project in the Democratic Republic of Congo (“DRC”).
Recent Developments and Highlights
Earnings for the Third Quarter
The Company had net earnings for the three months ended September 30, 2007 were $123.1 million or $0.32 per share on sales of $292.8 million compared to net earnings of $30.7 million or $0.25 per share on sales of $98.9 million for the same period in 2006. Higher net earnings and sales for the third quarter were due primarily to the addition of the Neves-Corvo mine, which was acquired in the fourth quarter of 2006, a $27.5 million gain from the sale of investments, and a reduction of the corporate tax rate in Portugal which translated into a recovery of future income taxes during the quarter.
Tender Offer for Rio Narcea Gold Mines, Ltd.
On July 17, 2007, the Company acquired control of Rio Narcea Gold Mines, Ltd. (“Rio Narcea”). As at August 20, 2007, the final day of Lundin Mining’s amended offer to acquire all the shares and share purchase warrants of Rio Narcea, a total of 158,018,283 shares and 20,099,020 warrants had been tendered, representing 92.9% of the fully diluted shares outstanding. Subsequent to the expiration of the final amended tender offer to acquire all the shares and share purchase warrants, the Company undertook a compulsory acquisition transaction under the Canada Business Corporations Act to take up the balance of the shares. The Company, as a majority holder of the share purchase warrants, also approved an amendment to the terms of the indenture governing the warrants, allowing Rio Narcea to redeem all, but not less than all, of those securities. To finance these two transactions, a final payment was made to Computershare Investor Services in mid October, thereby completing the redemption, by Rio Narcea, of 100% of the share purchase warrants and the acquisition, by the Company, of 100% of the issued and outstanding shares in Rio Narcea.
Concurrent with the offer to purchase Rio Narcea, the Company signed an option agreement with Red Back Mining Inc. for the sale of the Tasiast gold mine for cash consideration of $225 million and the assumption of $53.1 million of debt and hedging contracts. The sale was completed on August 2, 2007.
Completed the Acquisition of Tenke Mining Corp. (“Tenke”)
The acquisition of Tenke Mining Corp. (“Tenke”) was completed July 3, 2007 following the approval by the shareholders’ of both companies and the Superior Court of Justice of the Province of Ontario. Tenke’s main asset is a 24.75% holding in the Tenke Fungurume project in the Democratic Republic of Congo (“DRC”), which is one of the largest and highest grade, undeveloped copper-cobalt deposits in the world. Work is in progress to develop the deposit into a low-cost open-pit mine and start-up is planned for in 2009. Freeport McMoRan Copper & Gold Inc., through one of its Phelps Dodge subsidiaries, holds a 57.75% interest in Tenke Fungurume and is the operator of the project.
Listing on the New York Stock Exchange
Common shares of Lundin Mining commenced trading on the New York Stock Exchange (“NYSE”) on September 20, 2007. With the commencement of trading on the NYSE, the Company’s shares no longer trade on the American Stock Exchange. Lundin’s common shares continue to trade on the Toronto Stock Exchange and in the form of Swedish Depository Receipts on the OMX Nordic Exchange.
Sale of Silver Production from Neves-Corvo and Aljustrel
On September 28, 2007, the Company completed its proposed sale of silver contained in concentrate from its Neves-Corvo and Aljustrel mines to Silverstone Resources Corp (“Silverstone”). Under the terms of the agreement, the Company received an upfront cash payment of $42.5 million and 19,656,250 common shares of Silverstone valued at Cdn$2.36 per share. Upon delivery of its silver in concentrate to Silverstone, the Company will receive the lower of $3.90 per ounce of silver (subject to a 1% annual inflationary adjustment after three years and yearly thereafter) or the then prevailing market price per ounce of silver.
Gain of $27.5 million From Sale of Investment
During the third quarter of 2007, the Company disposed of an investment acquired during the year for strategic purposes. The proceeds from the sale were $186.6 million for a pre-tax gain of $27.5 million.
Summary of Operations Metal Produced(i) Three months ended Nine months ended September 30, September 30, 2007 2006 2007 2006 ————————————————————————– Copper (tonnes) Neves-Corvo 20,585 18,300 64,865 59,951 Storliden 550 3,046 3,248 8,499 Aguablanca 1,519 1,697 4,733 4,840 ——————————————————— Total 22,654 23,043 72,846 73,290 Zinc (tonnes) Neves-Corvo 5,904 3,018 18,145 3,018 Zinkgruvan 16,745 15,374 50,823 56,159 Storliden 1,823 8,220 11,374 22,096 Galmoy 11,920 16,750 34,494 46,582 ——————————————————— Total 36,392 43,362 114,836 127,855 Lead (tonnes) Zinkgruvan 6,630 7,373 25,937 23,197 Galmoy 3,276 3,376 8,253 10,457 ——————————————————— Total 9,906 10,749 34,190 33,654 Nickel (tonnes) Aguablanca 1,579 1,542 4,940 4,763 Silver (ounces) Neves-Corvo 211,287 153,278 635,650 494,591 Zinkgruvan 388,276 432,400 1,319,279 1,285,156 Galmoy 26,601 28,106 68,368 114,654 ——————————————————— Total 626,164 613,784 2,023,297 1,894,401 (i) 100% of 2006 and 2007 metal production at Neves-Corvo and Aguablanca is included for comparative purposes only. This does not, however, represent Lundin Mining’s actual ownership during the period. EuroZinc Mining (owner of Neves-Corvo) completed a merger with Lundin Mining in October 2006 and Lundin acquired Rio Narcea (owner of Aguablanca) on July 17, 2007. Metal Sold and Payable(i) Three months ended Nine months ended September 30, September 30, 2007 2006 2007 2006 ————————————————————————– Copper (tonnes) Neves-Corvo 18,764 17,140 61,532 55,643 Storliden 522 2,642 3,081 7,456 Aguablanca 1,436 1,250 4,162 3,820 ——————————————————— Total 20,722 21,032 68,775 66,919 Zinc (tonnes) Neves-Corvo 6,168 1,479 14,911 1,479 Zinkgruvan 15,274 13,038 43,363 47,716 Storliden 1,550 6,989 9,669 18,787 Galmoy 10,445 14,136 29,112 39,346 ——————————————————— Total 33,437 35,642 97,055 107,328 Lead (tonnes) Zinkgruvan 5,284 6,791 22,918 22,469 Galmoy 2,766 3,262 7,215 10,790 ——————————————————— Total 8,050 10,053 30,133 33,259 Nickel (tonnes) Aguablanca 1,570 1,255 4,991 4,046 Silver (ounces) Neves-Corvo 135,960 88,069 412,880 298,144 Zinkgruvan 306,048 398,814 1,160,895 1,244,734 Galmoy 14,002 26,722 42,109 113,197 ——————————————————— Total 456,010 513,605 1,615,884 1,656,075 (i) 100% of 2006 and 2007 metal sales at Neves-Corvo and Aguablanca is included for comparative purposes only. This does not, however, represent Lundin Mining’s actual ownership during the period. EuroZinc Mining (owner of Neves-Corvo) completed a merger with Lundin Mining in October 2006 and Lundin Mining acquired Rio Narcea (owner of Aguablanca) on July 17, 2007. Selected Quarterly Financial Information ($000′s, except Three Months Ended per share data) 30-Sep-07 30-Jun-07 31-Mar-07 31-Dec-06 ————————————————————————— Sales $292,757 $319,935 $193,920 $236,072 Net earnings 123,100 159,908 53,708 63,590 Earnings per share, basic (i) 0.32 0.56 0.19 0.28 Earnings per share, diluted (i) $ 0.32 $ 0.56 $ 0.19 $ 0.27 ($000′s, except Three Months Ended per share data) 30-Sep-06 30-Jun-06 31-Mar-06 31-Dec-05 ————————————————————————— Sales $ 98,941 $112,918 $ 91,798 $ 63,820 Net earnings 30,737 37,161 21,461 14,221 Earnings per share, basic (i) 0.25 0.30 0.18 0.12 Earnings per share, diluted (i) $ 0.25 $ 0.30 $ 0.17 $ 0.12 (i) The earnings per share (basic and diluted) is determined separately for each quarter. Consequently, the sum of the quarterly amounts may differ from the year to date amount disclosed in the unaudited interim consolidated financial statements as a result of using different weighted average numbers of shares outstanding. All share related information (i.e. earnings per share) are calculated as if the three-for-one stock split, which was effective February 5, 2007, had occurred at the beginning of the earliest period presented (October 1, 2005).
Results of Operations
Summary
The Company had net earnings for the three months ended September 30, 2007 of $123.1 million or $0.32 per share on sales of $292.8 million compared to net earnings of $30.7 million or $0.25 per share on sales of $98.9 million for the same period in 2006. Higher net earnings and sales for the third quarter were due primarily to the addition of the Neves-Corvo mine, which was acquired in the fourth quarter of 2006, a $27.5 million gain from the sale of investments, and a reduction of the corporate tax rate in Portugal which translated into a recovery of future income taxes during the quarter. Cash flow from operations for the quarter was $155.6 million as compared with $59.4 million for the same period in 2006.
Net earnings for the nine months ended September 30, 2007 were $336.7 million or $1.05 per share on sales of $806.6 million as compared with sales and net earnings of $303.7 million and $89.4 million, respectively, for the same period in 2006. Cash flow from operations for the nine month period in 2007 was $316.3 million as compared with $136.5 million for the same period in 2006.
Sales
Total sales increased 196% or $193.9 million in the third quarter to $292.8 million as compared with $98.9 million for the same period in 2006. This increase was due primarily to the addition of the Neves-Corvo and Aguablanca mines, added in the fourth quarter of 2006 and the third quarter of 2007, respectively.
Year-to-date, total sales were $806.6 million in 2007 as compared with $303.7 million for the same period in 2006, the result of both the additional operations as discussed above as well as higher realized metal prices.
Cost of Sales
Cost of sales increased 251% or $88.7 million in the third quarter to $124.1 million compared with cost of sales of $35.4 million for the same period in 2006. This increase was primarily due to the costs associated with the increased sales added from the Neves-Corvo and Aguablanca mines, combined with a continued weakening of the US dollar against both the Euro and the Swedish Kronor.
Year-to-date, cost of sales were $284.3 million as compared with $109.7 million for the same period in 2006.
Accretion of Asset Retirement Obligations
Accretion of asset retirement obligation during the third quarter was $2.5 million compared to $Nil for the same period in 2006. The increase was due primarily to the addition of the Neves-Corvo and Aljustrel mines acquired in the fourth quarter of 2006 as well as the Aguablanca mine acquired in the third quarter of 2007. Additionally, the increase was also attributable to the commencement of provisions beginning in 2007 for future site restoration costs at both the Galmoy and Zinkgruvan mines.
Year-to-date, accretion of asset retirement obligations were $4.8 million compared to $Nil for same period in 2006.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization increased 220% or $32.6 million to $47.4 million for the third quarter 2007 as compared with $14.8 million for the same period in 2006. This increase was due primarily to the addition of the Neves-Corvo and Aguablanca mines. The depreciation, depletion and amortization on the mining assets from the Neves-Corvo and Aguablanca mines were based on the new fair values allocated to each of the respective mining assets acquired in accordance with CICA Handbook Section 1581 “Business Combinations”.
Year-to-date, depreciation, depletion and amortization were $119.2 million as compared with $42.1 million for same period in 2006. The amount of depreciation, depletion and amortization increased in the third quarter of 2007 over the prior two periods in the current year as a result of the addition of the Aguablanca operations.
General Exploration and Project Investigation
General exploration and project investigation costs increased $9.7 million to $11.4 million in the third quarter 2007 compared to $1.7 million during the same period in 2006. A significant portion of this increase relates to continued drilling and exploration activities at the Company’s Portuguese mining concessions and higher exploration activities in Sweden and Ireland. Please refer to the exploration activities section for further detail.
Year-to-date, exploration and project investigation costs totaled $24.5 million as compared with $5.4 million for the same period in 2006. The Company spent $13.9 million on exploration in Portugal, $6.6 million in Sweden, $2.6 million in Ireland and $1.4 million in Spain.
Selling, General and Administration
Selling, general and administration costs were $6.2 million in the third quarter 2007 as compared with $3.1 million during the same period in 2006. This increase was due primarily to the costs associated with the Sarbanes Oxley (“SOX”) compliance project, higher travel costs, costs associated with the listing on the New York Stock Exchange as well as the additional personnel and administrative costs associated with the recent mergers and acquisitions.
Year-to-date, selling, general and administration costs were $18.9 million as compared with $8.2 million for the same period in 2006.
Stock Based Compensation
Stock based compensation costs were $6.3 million in the third quarter 2007, the bulk of which relates to a comprehensive grant of stock options to key personnel. Additionally, the vesting of options granted in previous periods contributed to the overall amount.
Year-to-date, stock based compensation costs were $9.4 million as compared with $2.1 million for the same period in 2006.
Foreign Exchange Losses
Foreign exchange losses increased in the third quarter of 2007 to $4.0 million as compared with a gain of $0.1 million for the same period in 2006. Foreign exchange losses were due primarily to the holding of significant US denominated cash and trade accounts receivable balances at the Company’s Neves-Corvo and Aguablanca mines where the functional currency is the Euro. The US currency continued its decline against all major currencies during the third quarter.
Year-to-date, foreign exchange losses totaled $15.7 million compared with $2.7 million for the same period in 2006.
Losses on Derivative Instruments
Losses on derivative instruments are comprised of realized and unrealized gains and losses from marking-to-market the Company’s outstanding metal forward sales and metal options contracts. The net loss on derivative contracts during the third quarter was $18.2 million compared with a net loss of $5.0 million for the same period in 2006, the increase the result of the rise in the price of lead and the punitive impact on the Company’s outstanding lead hedging. The figure for the current period is comprised of a realized loss of $18.0 million and an unrealized mark-to-market loss of $0.2 million.
Year-to-date, losses on derivative instruments totaled $51.4 million compared with $14.9 million for the same period in 2006. As noted above, the year-over-year increase is largely the result of the rising price of lead throughout 2007 coupled with additional lead hedging during the second quarter of 2007.
Current Income Taxes
Current income tax provision increased $22.1 million to $22.7 million for the third quarter 2007 compared with $0.6 million for the same period in 2006. The bulk of the increase relates to the taxable income from the Neves-Corvo mine, which was not part of the operating results of the Company until the fourth quarter of 2006. Additionally, there was a tax expense of $4.6 million during the current quarter related to the disposition of the available-for-sale securities.
Year-to-date, the current income tax expense was $86.3 million compared with a current income tax expense of $22.7 million for the same period in 2006. Driving the year-over-year increase is the provision related to earnings from the Neves-Corvo mine combined with gains of $77.9 million on the sale of investments during 2007.
Future Income Tax Recovery
Future income tax recovery for the third quarter of 2007 was $45.4 million compared with a tax expense of $9.2 million for the same period in 2006. This reversal was due primarily to the substantially-enacted tax rate change in the 2008 tax rate for Portugal from 21.5% down to 16.5%, resulting in a recovery in the current period.
Year-to-date, the future income tax recovery was $57.2 million compared with a future income tax expense of $8.9 million for the same period in 2006.
Operations Neves-Corvo Mine Three months ended Nine months ended September 30, September 30, (100% OF PRODUCTION) 2007 2006 2007 2006 ————————————————————————– Ore mined (tonnes – includes copper and zinc plants) 640,612 533,060 1,894,947 1,515,657 Ore milled (tonnes – includes copper and zinc plants) 637,642 539,121 1,895,307 1,548,991 ————————————————————————– Grade per tonne Copper (%) 4.5 4.5 4.7 4.6 Zinc (%) 7.9 8.0 7.9 8.0 ————————————————————————– Recoveries Copper (%) 84 88 86 89 Zinc (%) 76 50 78 50 ————————————————————————– Production (metal contained) Copper (tonnes) 20,585 18,300 64,865 59,951 Zinc (tonnes) 5,904 3,018 18,145 3,018 Silver (ounces) 211,287 153,278 635,650 494,591 Sales(i) $160,620 $133,092 $474,515 $390,490 (ii)Cash cost per pound of payable copper sold $0.90 $0.82 $0.76 $0.84 ————————————————————————– (i) The 2006 comparative figures were from EuroZinc’s third quarter 2006 Management’s Discussion and Analysis (ii) Cash cost per pound of payable copper sold is the sum of direct cash costs and inventory changes less by-product credits and profit-based royalties. See Non-GAAP Performance Measures.
Ownership
The Company merged with EuroZinc Mining, which was the 100% owner of the Neves-Corvo mine, on October 31, 2006 and the EuroZinc operating results were consolidated into the financial statements of the Company from November 1, 2006.
In order to provide comparable data, the 2006 production figures and financial data are presented for the three and nine months ended September 30, 2006. However, results from the Neves-Corvo operation have only been included in the Company’s operating results from November 1, 2006.
Production
A total of 640,612 tonnes were mined in the third quarter, an increase of 107,552 tonnes or 20% over the same period in 2006. This result includes a full mine maintenance and refurbishment shutdown of 11 days which was completed in July, 2007. The increased extraction and throughput rates were achieved via the productivity gains that have been realised at the mine. Production of copper metal for the first nine months of 2007 was 8% higher than in the same period in 2006. Production of contained zinc was 5,904 tonnes for the third quarter, being 95% greater than for the same period in 2006 with the zinc plant operating as planned.
The cash cost per pound of payable copper metal sold during the third quarter of 2007 increased 10% to $0.90 compared to the same period in 2006. The cash cost per pound of payable copper metal sold for the first nine months of 2007 was 10% less than for the corresponding period in 2006 due primarily to the increased zinc by-product credits and the improved productivity which aided in offsetting the rising costs of consumables.
Construction of the second copper grinding and flotation line was completed and the circuit commissioned in October. This new circuit can now treat copper slag or copper ores at a rate of up to 100 tonnes per hour.
Zinkgruvan Mine Three months ended Nine months ended September 30, September 30, (100% OF PRODUCTION) 2007 2006 2007 2006 ————————————————————————– Ore mined (tonnes) 174,214 183,003 616,975 547,300 Ore milled (tonnes) 171,453 188,169 637,611 561,636 ————————————————————————– Grades per tonne Zinc (%) 10.4 8.8 8.5 10.7 Lead (%) 4.4 4.4 4.6 4.7 Silver (g/t) 93 93 87 95 ————————————————————————– Recoveries Zinc (%) 94 92 94 94 Lead (%) 88 89 88 88 Silver (g/t) 75 77 77 75 ————————————————————————– Production (metal contained) Zinc (tonnes) 16,745 15,374 50,823 56,159 Lead (tonnes) 6,630 7,373 25,937 23,197 Silver (oz) 388,276 432,400 1,319,279 1,285,156 Sales $52,028 $35,806 $159,948 $135,356 (i)Cash cost per pound of payable zinc sold $0.17 $0.55 $0.22 $0.50 ————————————————————————– (i) Cash cost per pound of payable zinc sold is the sum of direct cash costs and inventory changes less by-product credits and revenue-based royalties. See Non-GAAP Performance Measures.
Production
A total of 174,214 tonnes of ore were mined during the third quarter 2007, which represents a 4.8% decrease as compared to the same period in 2006. The decrease in throughput was primarily due to lower mining rates in two stoping sections that were restricted by an increase in oversize and premature closure of blast holes.
Notwithstanding the short-term affect on production, the two-week planned maintenance program in July was executed successfully.
The zinc ore grade improved during the third quarter due to ore contribution from Nygruvan 950 stope 260, which is higher in zinc than the average for the mine.
The cash cost per pound of payable zinc metal sold during the third
quarter of 2007 decreased to $0.17 per pound compared to $0.55 per pound
for the same period in 2006. This decrease in cash cost was due
primarily to increased lead sales, lower 2007 treatment charges and
improved productivity, which aided in offsetting the rising cost of
consumables.
Cash cost per pound of payable zinc metal for the nine months of 2007
decreased 56% to $0.22 per pound coompared to $0.50 per pound for the
corresponding period in 2007.
Storliden Mine Three months ended Nine months ended September 30, September 30, (100% OF PRODUCTION) 2007 2006 2007 2006 ————————————————————————– Ore mined (tonnes) 53,365 85,400 209,363 258,200 Ore milled (tonnes) 56,193 107,920 196,778 269,775 ————————————————————————– Grades per tonne Copper (%) 1.1 3.1 1.8 3.5 Zinc (%) 3.7 8.5 6.3 9.1 ————————————————————————– Recoveries Copper (%) 91 91 91 91 Zinc (%) 89 90 92 91 ————————————————————————– Production (metal contained) Copper (tonnes) 550 3,046 3,248 8,499 Zinc (tonnes) 1,823 8,220 11,374 22,096 Sales $9,179 $28,992 $48,395 $87,022 (i)Cash cost per pound of payable zinc sold $(0.25) $(0.53) $(0.14) $(0.37) ————————————————————————– (i) Cash cost per pound of payable zinc sold is the sum of direct cash costs and inventory changes less by-product credits and revenue-based royalties. See Non-GAAP Performance Measures.
Production
It is expected that production activities at this operation will be extended to the end of the first quarter of 2008 as an additional 50,000 tonnes of ore has been identified outside the delineated reserve in the Lower West and Upper East areas of the mine.
Ore mined during the third quarter of 2007 was 53,365 tonnes as compared with 85,400 tonnes in the third quarter of 2006.
A total of 56,193 tonnes of ore was milled during the third quarter, representing a decrease of 48% compared to the same period in the previous year while the year to date comparison indicates a reduction of 27%. However, 27,000 tonnes more than originally budgeted have been milled year to date.
As the operation draws nearer to closure, copper and zinc grades, as well as ore throughput are expected to decline.
The cash cost of payable zinc sold was negative $0.25 per pound for the third quarter 2007 compared to negative $0.53 per pound for the same period in 2006. Copper and zinc head grades continue to be significantly lower this quarter when compared with the prior year.
The closure of the mine is scheduled for the second quarter 2008. Total costs for the closure of the operations are expected to be less than $400,000 and the corresponding provision has already been made.
Galmoy Mine Three months ended Nine months ended September 30, September 30, (100% OF PRODUCTION) 2007 2006 2007 2006 ————————————————————————– Ore mined (tonnes) 111,226 157,263 319,413 446,481 Ore milled (tonnes) 104,709 154,625 321,140 456,506 ————————————————————————– Grades per tonne Zinc (%) 13.8 13.0 13.1 12.3 Lead (%) 4.1 3.2 3.5 3.5 ————————————————————————– Recoveries Zinc (%) 82 84 82 82 Lead (%) 77 69 74 66 ————————————————————————– Production (metal contained) Zinc (tonnes) 11,920 16,750 34,494 46,582 Lead (tonnes) 3,276 3,376 8,253 10,457 Silver (ounces) 26,601 28,106 68,368 114,654 Sales $29,480 $32,870 $82,119 $81,154 Cash cost per pound of payable zinc sold(i) $0.65 $0.87 $0.89 $0.80 ————————————————————————– (i) Cash cost per pound of payable zinc sold is the sum of direct cash costs and inventory changes less by-product credits and profit-based royalties. See Non-GAAP Performance Measures.
Production
Ore mined during the third quarter of 2007 was 111,226 tonnes as compared with 157,263 tonnes in the same period in 2006. The decrease was primarily due to the distraction created by a protracted wage increase negotiation with the unions and stope scheduling challenges generated by volume shortfalls and setting delays in the backfilling operations. The former was recently resolved and management expects normal production levels to resume. A technical solution is being sought to accelerate backfill setting times and thus re-establish optimum stoping sequences.
The ore milled for the quarter was 104,709 tonnes as compared to 154,625 tonnes in the same period in 2006. The shortfall was due to a lower than planned output from the mine, and industrial action by the concentrate trucking firm’s employees which caused unplanned mill downtime as the concentrate load-out bays were not being cleared. Zinc recovery was 82% for the quarter, slightly lower than the corresponding quarter in 2006. Lead recovery at 77% was significantly higher than the same period in 2006 due to lead circuit improvements.
The zinc head grade was 13.8% for the quarter as compared to 13.0% for the corresponding quarter in the previous year. Ore throughput is expected to increase during the fourth quarter of 2007.
The cash cost per pound of payable zinc sold was $0.65 per pound for the quarter 2007 as compared to $0.87 per pound for the same period in 2006. This decrease was due to higher by-product credits for lead but was partially offset by higher operating costs as a result of low productivity compared with the same quarter in 2006.
Aguablanca Mine Three months ended Nine months ended September 30, September 30, (100% OF PRODUCTION) 2007 2006(i) 2007 2006(i) ————————————————————————– Ore mined (tonnes) 438,012 319,020 1,286,980 1,066,064 Ore milled (tonnes) 433,178 374,963 1,262,852 1,049,374 ————————————————————————– Grades per tonne Nickel (%) 0.5 0.6 0.5 0.6 Copper (%) 0.4 0.5 0.4 0.5 ————————————————————————– Recoveries Nickel (%) 77 68 76 72 Copper (%) 92 88 91 90 ————————————————————————– Production (metal contained) Nickel (tonnes) 1,579 1,542 4,940 4,763 Copper (tonnes) 1,519 1,697 4,733 4,840 Sales $41,343 $59,087 $150,128 $159,776 Cash cost per pound of payable nickel sold(ii) $8.10 $5.54 $7.94 $3.85 ————————————————————————– (i) The 2006 comparative figures were from Rio Narcea’s third quarter 2006 Management’s Discussion and Analysis while the 2007 year-to-date figures incorporate amounts disclosed in Rio Narcea’s second quarter 2007 Management’s Discussion and Analysis. (ii) Cash cost per pound of payable nickel sold is the sum of direct cash costs and inventory changes less by-product credits and profit-based royalties. See Non-GAAP Performance Measures.
Ownership
The Company purchased Rio Narcea Gold Mines, Ltd. (100% owner of the Aguablanca mine) on July 17, 2007 and the Rio Narcea operating results were consolidated into the financial statements of the Company from that date onwards.
In order to provide comparable data, the 2006 and 2007 production figures and financial data are presented for the three and nine months ended September 30, 2006 and 2007. However, results from the Aguablanca operation have only been included in the Company’s operating results from July 17, 2007.
Production
Ore mined during the third quarter 2007 was 438,012 tonnes or 37% higher than ore mined during the same period in 2006. The increase is due to the significant improvement in the treatment plant feed rate which constrained mine production during 2006. Waste extracted during the third quarter of 2007 was 3.04 million tonnes or 58% higher than waste extracted during the same period in 2006. Year to date the waste removal is behind schedule and a concerted effort is being made together with the mining contractor to recover the shortfall.
Ore milled during the quarter was 433,178 tonnes or 16% higher than in the same period in 2006. The increased ore production is largely due to higher plant availability, which in turn can be attributed to the implementation of a preventive maintenance plan and the optimization of the crushing area of the plant. Nickel and copper recoveries for the third quarter 2007 were 76.9% and 92%, respectively, or 13% and 4.2%, respectively, higher than in the same quarter of 2006, mainly due to an optimization of the flotation process. Nickel concentrate grade for the third quarter of 2007 was 7.07% or 11.3% higher than for the same period in 2006, for the same reason.
Nickel and copper production during the third quarter of 2007 were 1,579 tonnes and 1,519 tonnes, respectively, or 2.4% higher and 10.4% lower than for the same period of 2006. Improvements in both ore processing and metal recoveries partially compensated for lower ore feed grades.
The cash cost per pound of payable nickel sold was $8.10 per pound for the third quarter of 2007 compared to $5.54 per pound for the same period in 2006. On a year to date basis cash costs increased by 106% compared to the same period in 2006. The increases mentioned are the result of higher mine costs due to the planned increase to the strip ratio, combined with higher nickel prices that pushed treatment charges higher as per the price participation clause in the existing agreement with the smelter.
Mine Development and Project Highlights
Ozernoe Project
Activity on the Ozernoe zinc/lead open pit project in south-eastern Siberia increased significantly during the third quarter. A report on past data and prefeasibility studies was completed to form the basis for negotiations with consulting firms and contractors identified to perform final feasibility study work. Work on the feasibility study continued with the objective of completing feasibility work prior to the end of 2008. Work on an oxide study also continued by various parties from Australia, the St. Petersburg Institute, and the Russian partner’s (Metals of Eastern Siberia Resources) geologic team. This study is expected to continue into the first half of 2008. The project independent consulting firms, funding partners and Ozerny GOK (OzGOK) personnel met in a formal planning session on key feasibility and TEO (Russian feasibility equivalent) activities and target milestones. Project work is proceeding with the objective of being in full production by 2012 as a major lead/zinc producer.
The next phase of in-fill drilling is being prepared as assay results from the previous phase became available. Assay results received to date from independent laboratories compare favourably with site assay determination methods.
Pit geotechnical and water well drilling advanced and a series of four water well holes were drilled to locate a potable water resource. Three of these holes provided positive results in terms of quantity and quality of water and will be used for water supply prior to year end. Additional water well drilling is planned for future process plant water supply.
Construction of temporary facilities and local infrastructure improvements continued on the camp, local power lines and bridge installation. The construction camp is expected to be completed and occupied prior to year end, the power line installation was nearing completion at the end of the quarter, and approval for the new substation installation at Gunda is expected in the fourth quarter and the bridge over the Kholoy River was completed.
Base line environmental data collection was advanced and environmental and a social impact program scope, including budgets and resources, were refined in preparation for advancement of these studies in the fourth quarter and in parallel to the feasibility study work.
Aljustrel
Critical processing equipment that had been delayed in delivery is now being installed and it is planned to commence with zinc concentrate production by the latter half of the fourth quarter.
The Moinho mine can supply ore to the mill and mining activities to date have generated a zinc ore stockpile of approximately 100,000 tonnes for processing. In addition there are substantial stockpiles of copper and zinc ores from the Moinho mine that have been trucked to the Neves-Corvo operations.
Tenke Fungurume Project
Under the direction of operating partner Freeport McMoran, through one of its Phelps Dodge subsidiaries, detailed engineering and procurement surpassed the 50% completion point at the end of the third quarter. As well, construction work is ramping up on the project in Katanga Province, located in the south of the Democratic Republic of Congo (“DRC”).
Construction activities during the quarter focused on plant site and ancillary shop area civil works and road access improvements. Civil works progressed on a 24 hour seven days a week schedule to ensure major plant earthworks were completed ahead of the November start of the rainy season. Expansion of the construction camp continued in phases to support the more than 1000 construction and support staff now on the project. Permanent housing installation also advanced with more than 500 houses now under construction.
A concrete installation contractor mobilized with a crushing plant and batch plant on site and concrete works have started. A second contractor is being mobilized to further advance the project schedule.
Purchased plant equipment storage customs clearance warehouses are under construction. Preparations were also made for tank platework erection contractor mobilization in the fourth quarter.
Exploration drilling (infill and stepout) progressed at the Kwatebala, Fwalu and Goma deposits with approximately 5000 meters being drilled per month. A major concession exploration drilling program to support plant expansion plans was defined and approved for commencement in the fourth quarter. Total concession drilling for 2007 is expected to be in approximately 50,000 meters.
Subsequent to the installation of DRC’s newly elected government, a formal review process commenced during the third quarter whereby a government commission, aided by international observers are reviewing mining agreements signed over the last several years as the country progressed through the peace and transitional government process. As part of the review process, a government commission team was received by the Tenke Fungurume project and a successful site visit was conducted. The overall review process is expected to be complete prior to year end.
Social program activities were extensive during the quarter, including completion of 25% of the fresh water wells planned for more than 40 villages in the region. Three primary schools sponsored by the project are now fully operational, agricultural and anti-malarial programs, and more than 20 small enterprise businesses (brick making, wire fence manufacturing, and aggregate production) are fully mobilized to improve regional social conditions.
Good process was made on negotiations with a consortium of banks for project debt financing during the quarter with the intent to have debt facility drawdown in place by year end. Construction is currently being funded with cash provided 70:30 respectively by Freeport and Lundin Mining and will continue so until debt financing is in place. In a subsequent event, the project operator, Freeport, announced that projected capital costs are expected to exceed the direct cost budget of $650 million. Freeport has advised its partners that costs could approach $900 million as a result of scope changes and a general escalation of costs for construction projects worldwide.
The project is progressing towards copper and cobalt production in the first half of 2009.
Neves-Corvo – Lombador Zinc Project
During the third quarter, an internal study was conducted to support a request for a capital investment to develop the Lombador underground zinc deposit, which is directly adjacent to the Neves-Corvo mine in Portugal to significantly expand the Company’s zinc production in three years. Capital to conduct the completion of a final feasibility study was approved.
Zinkgruvan Copper Project
Zinkgruvan staff prepared for and received permission from the Lundin Mining Board for a capital investment to exploit a high grade copper deposit lying adjacent to one of Zinkgruvan’s zinc deposits in Sweden. In addition to facilitating copper production, this expansion is intended to improve zinc mining flexibility.
Exploration Highlights, Third Quarter 2007
Portugal
Neves-Corvo Near-Mine Exploration (copper-zinc)
A total of 6,531 metres in six deep exploration drill holes was carried out during the third quarter near to the Neves-Corvo mine. Exploration efforts continued to focus on the world-class Lombador deposit at Neves-Corvo with the 2007 program objectives of producing an NI43-101 compliant indicated resource and to increase the size of the inferred resource. Highlights of the drilling this quarter included a 58 metre intersection of massive sulphides grading 8.7% zinc and 2.6% lead. Additionally, a down-dip, step-out drill hole intersected the second thickest section of massive sulphides (92 metres) ever encountered at Lombador that contained a 67 metre (est. true thickness) interval grading 8.0% zinc and 2.9% lead that is also underlain by a 16 metres thick zone of feeder-style stringer sulphide mineralization grading 3.9% copper. This high-grade zone of zinc-copper mineralization is completely open down-dip and along strike. Another large step-out drill hole located 220 metres along strike is currently in progress.
Aljustrel Near-Mine Exploration (copper-zinc)
Nine drill holes were completed on the Aljustrel Mine Lease for a total of 6,480 metres. The drilling was successful in expanding the known boundaries of the Feitais deposit and upgrading a portion of the existing inferred resource to indicated category.
Portugal Greenfields Exploration (copper-zinc)
The Bell Geospace FTG airborne gravity system began a large survey that includes the Aljustrel and Neves Corvo mine areas. Crone Geophysics continues to test prospective ground gravity targets with their deep-penetrating SQUID time-domain electromagnetic (“TEM”) geophysical survey system. One very interesting coincident gravity-TEM anomaly has been detected and is planned to be drill-tested this year.
Spain
Aquablanca Ni Deposit
A total of 4,955 metres was completed within 19 drill holes near to the main deposit in the third quarter. The focal point for exploration efforts has been the E-W trending, steeply plunging sulphide mineralization within the Deep Body which lies adjacent to and beneath the main deposit. Infill and step-out drilling this quarter has doubled the strike extent of the Deep Body to at least 200 metres with the dip extent varying from 50 metres in the west to 150 metres in the east where the body still remains open. High nickel plus copper grades within the mineralization have been confirmed by the drilling. The actual results will be announced once all assays are returned.
Ossa Morena Regional Ni Program
Drilling was focused in the third quarter on the Argallon and Cortegana nickel properties which are located within a 65 kilometres radius of the Aguablanca mine. At Argallon a total of 1,098 metres was drilled in 6 holes with all holes encountering broad intervals of weakly disseminated sulphide mineralization at the contact between an ultramafic intrusion and meta-troctolitic gabbros – a favourable geological setting for magmatic-type massive sulphide Ni-Cu-PGM mineralization. At Cortegana a total of 552 metres was drilled in two holes; both holes intersecting weakly disseminated sulphides and one hole intersecting a wide interval of weakly disseminated sulphide mineralization containing thinner, more sulphide-rich zones. These drill results are similar to results from holes drilled at the periphery of the Aguablanca deposit and may represent a broad disseminated halo associated with more concentrated nickel sulphide mineralization. A high-resolution, helicopter-borne, time-domain electromagnetic survey (“VTEM”) was initiated at the end of the quarter that will cover the Aquablanca mine area, the Argallon and Cortegana project areas as well as three other selected areas that are prospective for nickel-copper deposits.
Toral Project (zinc-lead-silver)
Exploration drilling at this project located in northwest Spain continued in the third quarter with the completion of three drill holes and the start of a fourth hole for a total of 1,210 metres drilled during the quarter. Results of this drilling continues to confirm the historical results, indicating that the sulphide mineralization narrows up-dip into these shallower zones hosted by a more silicified, less favourable rock. Drill-testing beneath the historical resource will resume next quarter.
Ireland
Galmoy near-mine exploration (zinc-lead)
A total of 1,092 metres in 9 drill holes was completed in the mine license and an additional 7,211 metres of exploration drilling were completed in 65 drill holes by six drill rigs within the Galmoy license block this quarter. Exploration continues to focus on identifying new zones of resource-grade mineralization that can extend the current life of the mine. Delineation drilling of resource grade mineralization at the recently discovered M-Zone continued in the quarter with three additional holes intersecting high-grade zinc mineralization. The M-Zone is located near to the mill site (although approximately 100 metres below surface) and is within 200 metres of open workings in the CW orebody. Drill-testing in the fourth quarter will focus on delineating the M-Zone westward beneath the mill site. Nonetheless the drilling to date has not significantly extended the life of mine.
Sweden
Zinkgruvan near-mine exploration (zinc-lead-silver)
Seven holes were drilled totaling 2,704 metres with four drill rigs. Directional drill-testing of the deep Dalby zone, located beneath the western part of the Zinkgruvan mine, continued in the third quarter. High-grade zinc-lead-silver mineralization (assays pending) was encountered over a 4 metre interval in the first deviation hole at a vertical depth of 1137 metres and another interesting zone of zinc mineralization was encountered 65 metres into the hanging wall of the mine ore horizon. Drilling of the Finnafalet target, to the east of the Dalby area, has intersected Zinkgruvan mine stratigraphy which provides encouragement for dis