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Lundin: Massive Tenke copper/cobalt mine beating expectations

Lundin Mining's CEO recons the huge Tenke Fungurime copper/cobalt mine in the DRC, operated by Freeport, is beating expectations, while he is also confident on zinc.

Author: Cameron French
Posted: Wednesday , 10 Jun 2009

TORONTO (Reuters) - 

Production at the Tenke-Fungurume copper-cobalt mine in the Democratic Republic of Congo is higher than expected and should end up exceeding long-term forecasts, the chief executive of part-owner Lundin Mining (LUN.TO: Quote) said on Tuesday.

Speaking at an investment conference in Toronto, Lundin CEO Phil Wright also said he expected zinc production at Lundin's Neves-Corvo mine in Portugal to restart in 2011, and he warned the company would not fully replace its mined metal reserves this year due to cutbacks in exploration.

Wright said Tenke -- which is majority-owned and operated by U.S. miner Freeport-McMoRan Copper & Gold (FCX.N: Quote) -- has outperformed expectations since it began shipping copper in April and should eventually outperform its expected long-term potential of annual output of 450,000-500,000 tonnes of copper.

"Today we're running in excess of nameplate capacity," he said. Lundin owns 24.75 percent of the mine.

"I think we're going to see surprises on Tenke to the upside over the next five-10 years."

The terms of ownership of the mine have been somewhat uncertain due to a government review of mining contracts in the DRC that had been expected to wrap up by mid-year.

Wright said the wait for a resolution has been frustrating, but said he didn't expect any change in the ownership structure of the mine.

"You won't see any changes in equity," he said.

Lundin was hurt hard by the crash in metals prices last year, forcing it to suspend nearly all of its zinc production and driving its shares down by more than 90 percent.

The stock was up 12 Canadian cents at C$3.03 on the Toronto Stock Exchange on Tuesday.

The company also agreed last year to be taken over by rival HudBay Minerals (HBM.TO: Quote), then watched the deal collapse after opposition from HudBay shareholders.

Since the deal fell apart, Lundin's shares have more than tripled, due largely to rebounding metals prices and loosening credit markets, which have allowed the company to work at cleaning up its balance sheet.

Wright said he hopes to restart zinc production at the Neves-Corvo mine in Portugal by 2011, as he sees the price of zinc building on its 36 percent gain in the past three months. The metal is still about 66 percent below its record high price, which was hit in late 2006.

"We think that zinc is probably the metal that has been most damaged from the downturn and I think we are going to see a displacement on the upside in terms of price expectations going forward," he said.

Because of the plunge in metals prices and revenue, the company cut its exploration budget, and Wright said he doesn't expect the company to replace mined reserves this year.

Mining companies generally seek, at a minimum, to replace their mined reserves annually.

($1=$1.10 Canadian) (Reporting by Cameron French; editing by Peter Galloway)

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