Lundin Mining Announces Acquisition of Chapada Copper Mine in Brazil

Lundin Mining Corporation (“Lundin Mining” or the “Company”) is pleased to announce it has entered into a definitive purchase agreement with Yamana Gold Inc. (“Yamana”) to purchase its 100% ownership stake in Mineração Maracá Indústria e Comércio S/A, which owns the Chapada copper-gold mine located in Brazil (“Chapada”), for cash consideration of US$800 million, subject to customary adjustments (the “Acquisition”).

In addition, Yamana will retain a 2.0% net smelter return (NSR) royalty on future gold production from the Suruca gold deposit and receive contingent consideration of up to US$125 million over five years if certain gold price thresholds are met and contingent consideration of US$100 million on potential construction of a pyrite roaster.

Lundin Mining will host a conference call and webcast at 08:30 am ET, 14:30 CET on Monday, April 15, 2019 to discuss the Acquisition. Call details are outlined at the end of this news release.

Acquisition Highlights:

• Furthers Lundin Mining’s strategic goals – acquisition of Chapada delivers high-quality, long-life, expandable copper production at attractive cash costs, complementing our existing portfolio of base metal mines and aligned with our stated strategy.
   
• Immediately accretive on key operating and financial metrics – including earnings, EBITDA and operating cash flow per share. Utilizes balance sheet strength while maintaining low financial leverage and retaining flexibility to act on future opportunities.
   
• Materially increases copper and gold cash flows – increases annual copper production by over 25% and adds approximately 100 koz of gold production at attractive cash costs expected to generate cash flow throughout metal price cycles.
   
• Significant upside opportunities – to increase value leveraging Lundin Mining’s expertise in mine expansions and copper-focused exploration. The producing operation comes with a mineral property package in a highly prospective district and Lundin Mining believes significant exploration potential exists.
   
• Asset diversification – adds stable and expandable production in a well-established mining jurisdiction, maintaining a favourable base metal commodity mix.  

Marie Inkster, President and CEO commented: "The acquisition of Chapada complements Lundin Mining’s existing portfolio of high-quality mines and highlights our focus on disciplined capital allocation to create long-term shareholder value. Chapada is a well-run, established operation with an experienced local workforce. Leveraging our technical expertise, base metals focus and financial strength, we believe further opportunities exist to create meaningful stakeholder value. The addition of Chapada further solidifies Lundin Mining’s position as a leading intermediate base metals producer with high-quality low-cost copper exposure."

Chapada Overview

Located in Brazil’s Goiás State, Chapada is expected to produce approximately 54.5 kt of copper and 100 kozs of gold, or approximately 75 kt of copper equivalent, in 2019 at co-product cash costs of $1.60/lb to $1.80/lb copper and $430/oz gold equivalent based on latest Yamana guidance. In 2018, the operation produced approximately 58.6 kt of copper and 121 koz of gold, or approximately 82 kt of copper equivalent, at co-product cash costs of $1.74/lb and $388/oz gold equivalent, respectively.

Since production commenced in 2007 to the end of 2018, the operation has processed 225 Mt of ore grading 0.38% copper and 0.33 g/t gold, producing approximately 743.5 kt of copper and 1.6 Moz of gold in concentrate. Potential process plant expansions are currently being studied and based on work completed to date by Yamana, a phased approach shows potential to sustain annual production in the range of 68.0 kt to 72.5 kt of copper and 100 koz to 110 koz of gold until at least 2034, as disclosed in Yamana’s fourth quarter and full year 2018 results news release dated February 14, 2019.

The Chapada orebodies are part of a large copper-gold mineralized system located in gently undulating terrain at low elevation, approximately 270 km northwest of the national capital of Brasilia. The operation is connected to the national grid via a private powerline with excess capacity for expansion.

Asset Highlights:

• Mine operations – traditional open-pit truck and shovel operation with a relatively low strip ratio and benefiting from an in-pit crusher. Mine production is currently from three open pits in close proximity. Collectively, these open pits are the Chapada mining area.
   
• Processing – conventional crush, grind and flotation processing producing a gold-rich copper concentrate. The Chapada concentrator is located at the northwest end of the pit rim and is designed to treat sulphide ores at a capacity of approximately 65 ktpd or 23.4 Mtpa. In 2018, the treatment plant processed an average of 63 ktpd with average copper and gold recoveries of 82% and 63% respectively. Plant expansion opportunities to increase the processing rate to a range from 28 Mtpa to 32 Mtpa are currently being studied by Yamana and Lundin Mining intends to evaluate further.
   
• Copper concentrate – clean copper concentrate with significant gold by-product credit. During mine operations, the copper concentrate grade is expected to be between 24% and 25% copper with gold grades between 10 g/t and 15 g/t and silver grades between 40 g/t and 45 g/t.
   
• Operating costs – co-product cash costs are expected to be $1.60/lb to $1.80/lb copper and $430/oz gold equivalent in 2019 based on latest Yamana guidance. Operating costs are tracked and well understood as the mine has been in production since 2007. Life-of-mine average unit operating costs are expected to be $8.03/t processed, consisting of mining, processing, and site general and administrative costs.
   
• Mineral Reserves – Chapada Zone copper Mineral Reserves are estimated by Yamana to be 664.6 Mt at an average grade of 0.25% copper and 0.16 g/t gold, containing approximately 1.68 Mt of copper and 3.48 Moz of gold estimated using a copper price of $3.00/lb and gold price of $1,250/oz. Additional gold Mineral Reserves in the Suruca Zone of 65.2 Mt at an average grade of 0.51 g/t gold, containing 1.06 Moz of gold estimated by Yamana using a gold price of $1,300/oz. The copper Mineral Reserves support a 28-year operational life at the current processing rate of 23.4 Mtpa.
   
• Tailings facility – The tailings storage facility (TSF) is located to the northwest of the Chapada open pit. The TSF is comprised of three dykes, each of which is constructed by the centreline method. The Main Dyke and Dyke III comprise compacted earth fill starter dams that have been subsequently raised using cyclone tailings. Dyke II is an entirely compacted earth fill dam and retains the TSF supernatant water. Due diligence was performed on the TSF and related infrastructure by Lundin Mining’s Technical Services group and independently by a leading third-party consultancy.
   
• Communities and Employees – acquisition of an established operation with a proven track record, high-quality operating team and experienced workforce drawn from local communities.