Lundin Mining Corporation

Phil Wright - Director, President and CEO Marie Inkster - CFO João Carrêlo - EVP and COO Paul Conibear - SVP, Corporate Development

David Charles - JMP Securities Ola Sodermark - Swedbank Market Onno Rutten - UBS Securities Greg Barnes - TD Newcrest Kerry Smith - Hayward Securities David Cotterell - BMO Capital Markets Marcus Almerud - Morgan Stanley Cliff Hale-Sanders - Cormark Securities Christian Kopfer - Nordea Markets Pierre Vaillancourt - Macquarie Capital

Thank you very much operator, and welcome everyone thanks for joining us. I'm conscious that our results have only been out for a short while and so, therefore people might not have had as much time as normal to analyze.

Anyway, I'll try and make it as clear as I can, and chance to ask questions at the end. I have with me on the call today, João Carrêlo our Chief Operating Officer; Marie Inkster our CFO; and Paul Conibear who is our Senior VP of Corporate Development.

They'll help me with questions at the end, once I finish. Well, then I'll turn to the Q2 performance.

I think as most of you are aware, metal prices Q2 this year are somewhere between 30% and 70% stronger than they were a year ago. And we've seen the euro Q2 this year to Q2 last year down some 7% on average.

So those results have been good news for us. Our production recovered well from recession in Q1, our net income is well up.

Net income this quarter contained a number of non-recurring and in part often in items and I've got a slide to show our adjustments for this. So I think just concerned our results include equity earnings from 10-Q of $8.3 million.

Not as high as last quarter and that is largely owing to lower sales. It's a tiny difference, the production was higher than sales and we should capture that up as the year progresses We have also for the first time recognized from an accounting perspective the minority interest in the earnings.

The taking earnings as I am sure many of you are aware are basically a non-cash equity accounted item and I think its interesting to note that the excess overrun facility has been reduced by $26.8 million in the down to $188 million. Looking at progress on projects.

We continue to make a very good progress on our internal projects. The nervous Neves cobalt shaft has been successfully expanded and that's the key to some of our future plans for Neves and the Lombador pre-feasibility study is now complete and the entry of the new copper project was successfully started up during the quarter.

Here's a slide on the normalized earnings. We do have a type tight run news release for the first time that does this.

You say that the number of non-recurring and partially offsetting that in to the quarter and this type will basically set us out. I think most of the adjustment there are pretty self explanatory and as you can see, our results on a normalized basis are well hidden last year and last quarter, is problematic I think repeat till last year, there is something like it $75 million pre-tax difference in pricing adjustments between Q2 this year and Q2 last year and this is really marking just have a big an improvement, they had actually driven in results one year on.

Looking at the adjusted results, one of the things that I think has probably disappointed us is that we did not manage to capture any of the nickel price tag during the quarter. Our earnings for Aguablanca don't reflect the high nickel prices that we sold in the market the March, April, May period.

We had inherited an off-take contract when we bought Rio Narcea and that contract guides to the off-take, a tremendous amount of flexibility regarding quotation of periods and none of Aguablanca's concentrated sales this year have been settled and is effective that is that we reflected in the first quarter positive price adjustment unrealized at $12.4 million and that's been reversed in this Q2 and consequently we had quite a dampening effect on earning this quarter. I think the deficiencies in this contract have really felt during periods of high volatility such as we just experienced.

That contract is now expired and I am very please to say that the new contract that we have put in place addresses all of those issues. We get higher realizations for ourselves from Aguablanca.

We also invest more frequently and there is now fixed quotation period which we means that we would come very close to LME averages right in the last season that we've seen announced as to date. So taking the big difference in price adjustments between the quarters into account, the recovery for Q2, I am quite satisfied with the result that we have got this quarter.

Looking now to financial position, I think the financial position is pretty good now. We had good cash flow in the quarter and the cash flow really is better than what appears here again just reflecting on the fact that we had $26.8 million (inaudible) from Tenke that's going to repay the excess overrun facility that is not reflected here.

So the cash is building and continues to do so. Looking at production, this chart compares Q2 this year with Q2 last year.

First copper's concerns, you can see that what's really been driving CapEx, (inaudible) I am not sure if either you could press release your fund and then maybe a bit of feedback come through. And as far as the effect on copper, you can see we had a lower head grade which is primarily accounting for the difference between last year and this year.

That's really effect of two issues, Lundin, is of head growth which is effective at a higher copper prices here and also we're mining some that as a reserve material in order to rebuild the stock price volume in industrial action in the first three four months of this year. Our estimate looking at the industrial action, it's probably reduced by expected production by somewhere around 10,000 tonnes of copper in the first half of the year, 7,000 in the first quarter and somewhere around 3,000 in the second quarter.

And obviously this copper is not lost, it's basically a deferral as its going to be minding the future and I think what I'm encouraged to that is that the efforts to recover are well underway production in June was above budget levels and again this month we are running above budget. So I think that issue is now well behind us and we continue to try and recover as much as we can this year.

So looking at lead and zinc's concerns year-on-year, we're down totally accounted for about the closure of Galmoy. In fact if we look at the results for zinc moving by our head on a quarter-to-quarter basis, the work I have done to restore their volumes coming out of the first quarter, I think has been very good.

And so a year-on-year basis excluding Galmoy and we are well on zinc and lead production. So, nickel's concern, we had further flooding of the pit in April and to-date we've must have had a lot of claim for Aguablanca and we've seen some losses throughput and that's been made up by some better grades on the nickel.

Looking at cash-cost performance, this chart shows the cash comparison from this year to last year and this quarter to the same quarter last year. It's included on page 12 of our MD&A floating on it doesn't have the presentation up on screen.

Just and what this slide shows is changes in the unit cost including in the cost of sales. This is not a cost reflection during the quarter, this is our cost of sales during the quarter.

And the increase that you're seeing from this year to last year, really relates to two issues. One is that we had higher customer report from the first quarter in terms of our inventories because as the production challenges in the first quarter and secondly seeing some elevated costs as we are implementing recovery plans to recover the production that we would.

This next slide gives you some idea of our present metal exposures. In Q2 of this year 68% of our revenue came from copper and just bear in mind that, that is not including any element that's Tenke, so Tenke is additional on top of that.

So after mining, copper is pretty dominant determinant in terms of our revenue line and zinc is obviously comparatively smaller at this stage but I think not to lose sight of it is that we do have tremendous leverage when the zinc prices do rebound as they are inevitably going to. Base line view on zinc prices is still pretty much unchanged, with now way that the industry can replace capacity at these prices and we may well see a surplus.

I think some estimates are that that surplus might last for a couple of years, but certainly after that we're moving into a deficit situation and I think Lundin is very well placed when that occurs. This slide just looks at metal prices.

As you can see quite mixed but all up and quite volatile during the period. I think you see on this slide the average LME, nickel at 10.15.

And all of our sales during the quarter valued at $8.94 because none of them have circled. So you can see the effect that this contract has had in this period of volatility.

I was just looking at in terms of our operating costs. Mixed performance here, the euros is actually on average 7% weaker against the US dollar, that's good news for us.

Of mixed effect to us, the seg is actually up by 5% because the round in these numbers on the slide don't show it. But the seg was actually shown on the bar graph which obviously increases slightly our cost that's (inaudible) when measured in US dollars.

So looking at results, there's not really a lot that is worth commenting. Looking on this slide, one thing you will notice is that there is a large increase in tax expense; it is $2 million in Q2 of last year, and $31 million in the present quarter.

Of that $13.50 million, $13.6 million relates to a charge for on current taxes or for future taxes. And therefore doesn't really relate to the period.

And some of the other changes accounted for by the fact that we have used up some of our lost carry forwards and other allowances and in addition to last year's expense was really artificially narrowed by some $6.2 million as a result of some non-recurring recoveries that were included in last year. The tax issues covered I think pretty comprehensively on page 11 of the MD&A.

This wonderful chart compares earnings for this quarter to the corresponding quarter last year. You can our sales volume was down, that really related to the Lundin copper production at Neves and Aguablanca.

Just a point I think our inventories at the close of this quarter within the realm of what we consider normal sales were reasonably normal for quarter. Metal prices, you can see according to this workflow of $60 million effective of the price changes, that is masking $75 million difference in pricing adjustments.

So the effective prices on the line between this year and last year has been very larger than what we've shown there because of the effect that there is a difference in pricing adjustments of some $75 million and that really without that we would have seen a pretty substantial change from last year because of the strength of metal prices. As far as cost to concern you can see there the costs are up and quarter-on-quarter $6 million of that or approximately $6 million of that relates to Aguablanca.

I think mostly you will recall that last year Aguablanca was operating on a very limited non-sustainable operating plan because of the dystrophies with the high nickel prices and we were treating oxidized on surface. So obviously we're back to full scale mining operation and as we might clear at the time when we resumed production of Aguablanca we anticipated two year of very high steep ratio.

So fundamentally there is nothing happening at Aguablanca that is different to what we anticipate as far as cost are concerned. And the rest of the changes is really the effect of high cost brought forward from Q1 and inventories that have now been expensed as part of cost to sales and also, some additional money that we are spending in order to be able to recover from some of the challenges in the first quarter.

Looking at Tenke, I'm pleased to say that we are managing to get some more thoughts on our statistics in relation to Tenke and this production sales and the cost information is being shown here now for first time. You can see copper production was in line with nameplate capacity and that was really key spot some issues that occurred during April.

And I think without the issues in April, we would have seen production that was quite a bit high than what we have here. The issues that occurred in April were really, there was nothing unusual for start up at this stage of start up, and we now having hedging occur I don't think that there is anyone who could have dealt with them better than what we Freeport did and is suffice to say now but I think Mill throughput is now performing consistently above desired capacity.

As Freeport has announce in procurement of additional mining equipment, they have advised they are expecting production to increase from manufacturing nameplate capacity. This year is 115,000 tonne to over 130,000 tonnes in 2011.

And they are continuing to address some of the start up in quality issues that remain in the cobalt sector and have concrete plans for implement some corrective actions in order to make two quarters. Cash cost is down $0.79.

This is after bad product credits and I guess from Lundin's point of view as we reported in MD&A. We expect cash cost will benefit in the future, reported talking about higher throughput on the copper side, I think when some of the issues get resolved, as a result of the effects in the cobalt circuit and just on regarding cost reduction efforts that are under so we'll remain optimistic as far as that's concerned.

Looking at the effect of Tenke on us during the quarter, I've mentioned $8.3 million this quarter compared to $17.2 last. Lower sales volume, timing difference and you can see from the production numbers and sales numbers that we solved some 350,000 tonnes of copper less than we produced and that will obviously get picked up just in the non-recourse of event.

We've also seen a 3.2 million effect as a result of recognizing minority interest for the first time and that's recognized during the current quarter because we've now absorbed the accumulated pre-operating period losses. The excess overrun facility is dealt with here.

Stock expansion study is concerned is reported by Freeport, the expansion study work is going to continue into the third quarter 2010. Turning now to Lombador, pre-feasibility study has concluded that Lombador can be economical developed and this is now subject to further study.

Just some of the general parameters of Lombador. We are expecting that it will lift zinc production at Neves from a nominal 50,000 tonnes somewhere around 140,000 tonnes per annum and the capital cost of doing that is, is in the order of around 140 million euros.

We are expecting a startup date during 2013 and at this stage we are expecting cash costs to be in our third quarter based on a normal costing basis. So it is a very low capital cost I think our benchmarking puts us as probably at about or equal to the lowest capital cost expansion that you envision for closing front.

We have commenced the rent we've reported as previously. We are due to reach the 300 level which is some 900 meters below surface in Q1 of 2012.

That's a very significant loss for us and I think that we have probably reaching, by the end of this year I think we will would have pushed the envelop as far as we can in terms of continuing to explore long ago from surface. So this first phase of development on Lombador gets us there and not only into production and with attractive economics, but it, it also gets us down to 300 level approximately where we have plans to put in an exploration drive and I think its only once we get that exploration drive in that we will be able to fully define what we have (inaudible) Lombador shaft which is all we did in this year and Lombador East and also out into Lombador mid-zone we have been getting encouraging the rest.

So turning to outlook. We're holding our guidance with the exception of Tenke.

I'll just point out for everyone as well this note that we are maintaining this for comparability purposes. We're maintaining our cost estimates on a go forward basis still of 140 euro to the US dollar and if we change our estimates every quarter, then it becomes pretty hard to track.

So, in the one that we produced Aguablanca are from, where we stand today, we're probably going to be budget for Aguablanca coming end of August. This year we're doing (inaudible) the pit is taking a tremendous poundings from the very high rainfall that we had in the first four months of this year, and also into December of last year.

And some of you might recall that our pit bottom was inaccessible to us owing to flooding for around half of the time. We started to pick clean up in April.

During that clean up we have identified a number of unstable areas which had some potential to disrupt the main vent systems. We discovered a couple earlier in the year, December and January and those were largely mediated.

One of these areas which we only discovered pretty late in May has compelled us to really think quite seriously about bringing forward our next push back. We're only paying to do push back number three in 2011.

So, it appears now that we will probably bring that forward to late August or September. So we're going to be in a situation where we are on budget at the end of August and probably produce nothing for September And I think that decision is fun made, but it's pretty likely and as a consequence we've taken that into account, in terms of looking at our outlook.

Put it in perspective, we've got a five year mine life with Aguablanca. This pushback was going to be done next year within our five year envelope anyway.

So effectively lastly we'll see a reduction in metal as for this year, it's really just a deferral and this is not again, lost production to us. I think it's been mentioned in the ND&A, we've also had notification of some possible volume industrial action commences at the end of this month.

And I think really just as a precaution of taking these two items into account, we've reduced our guidance with Aguablanca and unlike we did before famous that this is the guidance that we are giving plus or minus 5%. And, my question here is we're dealing with very geo mechanical issues that are not entirely possible to know them and also the trade and industrial actions.

So we're a bit cautious on this. Again, maybe just to put some perspective on this, I think our large operations are running well.

We are maintaining our guidance in respect of those. We obviously still aiming to try and pick up as much as we can between now and end off the year and I think the revenue affected the change in Aguablanca is revenue affect in line is going to be less than 10 million or so and is the deferral.

So, no really no huge change as far as (inaudible). We're still considering an early restart of zinc at Nevis but having said that I think looking at the way zinc prices are something that we're finding hugely compelling although we can make cash at these numbers.

I think we're probably just as likely to possibly use that capacity for additional copper production using light grade copper. We've reduced CapEx that is entirely related to a reduction of Tenke.

We've guided for the year of Tenke between 40 and a 100. We are now guiding 40 and as a consequence, we expect our CapEx to see it come down under 200.

We have had something of an increase in explorations and there's a number of reasons for that. We are doing a bit more near a mine at Neves.

We have defined a couple of quite interesting, copper, gold prospect in the Spanish side of the Pyrite Belt in North Morena region and we are presently testing nodes. And we are also encouraged by the continuing results we're getting and put properly in Ireland and so there's a little bit more as far as Ireland's concerned.

Just a note at the end of July our cap and colors on copper has expired and at this stage we have no derivatives and we presently had not planned for any. Outlook as far as the market's concerned who knows I mean I think our view is that we've developed so its still likely to remain high during the rest of the year, and our feeling is that there will be improving asset thereafter.

So I guess in summary for the quarter, I think we had a pretty solid recovery during the quarter. Major operations are running well and our cash continues to grow and we are pretty active in terms of continuing to look for the opportunities.

So with that thank you very much. Happy to open it up to questions and over to you operator.

Yes, good morning Phil. I am just trying to understand what's exactly going on at Augarita.

Maybe first off, can you confirm that your realized price in the quarter for the nickel sales was $8.94?

I think, I'm just looking to Marie here that our proxy during the quarter was mark-to-market effectively that has been with the quarter, so $8.94 is what the closing sounds going to be.

Maybe just so I can understand, you didn't have any final settlement, do you expect that you'll get final settlements on those sales sometime later this year or now that you have changed the contract, is it but a same off-taker or is it another off-taker and if you switch to a new off-taker does that mean that you have an issue which are prior off taker, I'm just trying to understand what's going on?

No, there's not probably in terms of settlements, there was a flexibility in terms of the quotational period but that could be nominated and it was contingent a number of things. There is not problem in terms of settlement advice in fact this is the same off-taker but the contract now has really dealt quite differently with Q3 periods and you should see us getting pretty close to LME averages now.

So, its very likely that that $12 million that reversed this quarter will reverse again sometime in the future when those contracts settled?

Well, it depends at what price we settle. We were provisionally priced at the end of the quarter $94 depends what the nickel prices in the settlement period.

If it's above $94 we'll get more, if it's below we'll get less.

Can you give us some idea, how many terms are involved in this?

Its in the MD&A (inaudible) I think it's somewhere around 2,000 tonnes just from memory and I'd be very surprised if there is anything that doesn't settle this quarter.

Is Ola Sodermark, Swedbank Market. I have third question on tax rate.

What tax rate goes onto use when we're doing our forecast ahead?

Yes, the tax rate is looking a bit strange this quarter just because of the anomalous things that happened but (inaudible) the tax rate that was increased by 2.5% such that the tax rate there is 29% now up from 26.5%. In Sweden, the tax rate is 30%.

We have losses there, we shouldn't be paying much cash taxes in Sweden. In Spain we have pretty much exhausted our loss carried forward and so we'll be paying tax at a rate of 30% on Aguablanca income.

Okay so the tax rate for Portugal is 29% going forward?

That's the rate at which we pay cash taxes. There is some tax engineering there that takes our effective rate down a little bit, but we do pay tax at that rate.

First of all quickly on that Aguablanca contract, a new one. You say substantially better terms.

Does that include less of an aggressive type participation flaws because of previous contact, that's quite aggressive participation?

We get a better realization for our product under the new contract and we got under the previous one.

And then quickly on Lombador. Do you think production profile, good numbers let's say by 2013, between the 50,000 initial run rates and getting up to the 140,000.

Is that step change only occurring in your view in 2013 or could we see some early preproduction benefits out of Lombador already in 2011- 2012?

I've used the word nominal 50 and nominal 140 Onno, because the plant capacity is perhaps a little above that. So it really comes down more to shaft capacity mining sequence what we move.

I think if I were modeling, I'd probably count on $50,000 starting up from next year. And I would count on the incremental starting up during 2013.

So, I wouldn't model the full 140 for 2013. I would allow a start up period.

It's not a lot for us because this is the same sort of material that we're accustomed to using. So there is really not a start up which, it's just a question of building up the stock price, and with the underground development and everything.

So, 2014 you can count on that I think in full and I'd probably take a graduation up during 2013.

Okay perfect, and then lastly $140 million CapEx, is that purely for the mine or does that include the zinc plant expansion that would be required to handle that much zinc?

Yes, it includes the expansion as the new grinding circuit that we're supplementing. We're obviously spending some money now to grow it up to the $50,000 coming year of contingent and there is some additional money in the plant, but most of it is in terms of just normal underground development.

And (inaudible).

Would you switch over the copper and the zinc circuits essentially; the zinc will start becomes a major volume or is it really expanding the zinc circuits keeping the copper circuit as is and hoping that you extend the copper mine life on a continuous basis?

That's a present basis. We do have the option in the future as you correctly point out.

To switch those plants over and I think that's a decision, where we are with Lombador other than I think you probably got a idea is that we've done all of our drilling from surface. There is a limit to how much we know, so the key thing for us was to get down now to the old body and start.

So, we're starting off on this basis. I think once we get down to that underground exploration, we can then develop a much clearer idea in terms of what the full development scale is for Nevis and clearly one of the alternatives at that stage is to look at switching two plants over, because they are both very flexible.

I'll apologize ahead of time. So its on Lombador again, but the 140,000 tonnes of zinc.

I guess that implies 90,000 tonnes from Lombador itself. What kind of ore tonnes would you be lifting at that rate?

Greg you know the thing we dealt through this on an incremental basis, because the ore that will come from Nevis and the ore that will come from Lombador will change over the period as we go forward. The grades at Lombador are generally higher than the grades at Nevis.

So the 50,000 tonne capacity, when we start up, will all be coming from Nevis. But in future, some of that 50,000 tonne will also come from Lombador as that makes sense because we'll just be getting a better grade from doing that down there.

Now in terms of ore tonnes, I think we're looking in the order of, if you would have worked on sort of a nominal number, incremental number, I guess rather than anything else, probably is around million tonnes, would be better, we'd be looking?

A million tonnes of ore from Lombador itself?

Well, incremental tonnes getting addition through what we've effect.

So the shaft capacity, once you've completed the expansion will be 4.5 million tonnes?

The shaft capacity is done. We expanded that during June that all the works done.

Its about 4.5, 4.6 million tonnes and the jobs gone very well and the shaft is operating beautifully as I understand it. Joao?

It's 4.6 million tonnes and the capacity we have now in the chart. So basically just change of the skips, and the breaking system and installation of balance rope and it sort of it's operating very efficiently at the moment.

Phil, could you just breakout the 140 million euros into sort of big blocks of capital just to give me sense as to where that 140 euros would get spent in the broad sense?

Carrying the broad sense I'll probably do that when we do the feasibility study. I mean the majority of it is in terms of mine equipment?

So mine equipment…

Yes mine development, mine equipment, so mine development, some more about equipment with mine development is the majority of it.

And in that 140 million euros, I assume the expansion of the existing same circuit there right?

It's incremental on top of the existing expansion, correct.

So does just run through over a 140 million does not assume you're switching over the zinc and copper circuit then?

Absolutely not, now we're putting a logic growing circuit at the front end on the zinc plant and will be running it through the zinc plant.

And then excess Lombador would be by define, right? You're not assuming a new shaft on this number, right?

No, we are not.

You are not. Okay.

We've increased our capacity of the shaft, we've increased our capacity on some of the underground haulages and we will be accessing it through the decline that's presently gone down into the operation. My view is the shaft consideration are still sits in our future and but we just don't have the information yet to know exactly what Lombador is.

So until we gets some more drill information, I think it's premature for us yet to make a decision in terms of expand these shaft capacity or new shaft. So I think that question will be revisited some three years down the track.

I'm going to ask one of those annoying questions, will be the lower CapEx guidance at Tenke, can I read through that in saying that anything about negotiations of Freeport market having with the government?

I think for those annoying questions I'll get Paul to pick that right now.

I think as Freeport and ourselves have noted, the (inaudible) aren't done yet. If they hadn't been done and (inaudible) with that, earlier in the second quarter, our spend for the year would have been higher.

There are a number of scenarios which are being looked at, which inevitably, we assume that we're taking into account the current situation that is hard to view. Its not (inaudible) although they are still in very constructive construction (inaudible) there, in order to make another major investments that are instantly in the country that we lodge (inaudible) compared to the successful behind this.

But we are looking at a number of scenarios in expansion, Freeport as mentioned has a 50% of stake as the base rates are and others above and even below their rate. So until those decisions are made, the amount of capital spent going into Tenke this year.

And a big payments (inaudible). They are pretty aggressively, lets bury some program in the areas on the additional mining footprint which are their production of as Freeport has guided and just normal on going with (inaudible).

I guess Freeport made a couple of comments on their call regarding that and it kind of sounded like Richard was having better conversations with the government or they were kind of on hold I suppose while they're doing their celebrations on being an independent country, if you want to call it.

Yes, if you're looking for additional comments, I think a bit hard for me, its best (inaudible) to color on that. We maintain a very (inaudible) biologic regarding that, between the government and Tenke partners.

And Phil if I may, just in terms of Lombador, there'll be somewhat incremental increase in copper as well, not just zinc. Big increase in zinc, there will be some in copper and lead as well?

They will. The lead is one of the issues that we'll be continuing to look at in relation to the feasibility study phase.

We're doing a bit more metal testing. I think ultimately we'll have the capacity to extract lead and ultimately the fund, the commerce is not going to be done in the lab, but it's going to be done when we start mining.

So, we've seen higher lead grades in Lombardo than we do elsewhere in Neves. And as a consequence, I think that we feel there is pretty reasonable prospect of getting lead out.

And yes it's going to be copper. We're presently updating, the pre-freeze was done on 2008 resulting in losses.

And we've had quite a lot of copper drilling successes at that stage. So one of the things in the freeze is also picking up, the latest drilling that we have.

I think we have a pretty strong feeling that there is more copper down there than we can identify, trying to drill 250,000 euro holes from surface. And so once we get some decent underground drilling we're expecting that we will continue to drill up coppers with that also.

Yes, there will be more copper coming from Lombardo.

Two questions, first regarding Neves-Corvo and the throughput that you are putting through. What you had in Q2 was some 650,000 tonnes which is roughly what you had in previous quarters and a quite dramatic increase in Q1 even though you had the spillover effects from the strike.

What kind of level should we expect going forward and also in terms of zinc, is this the level we should also expect for the rest of the year?

Mark as I think its clear I could probably answer that. If I refer you to our outlook we expect to produce 77,000 tonnes of copper this year and 6,000 tonnes of zinc and what I really want to get sort of drawn into forecasting too many levels as far as our production is concerned.

So that's a target we've been working to and we continue to see if we can do better than, but at this stage I am comfortable with those numbers.

My second question is just regarding the CapEx in Lombador, the 140 million; when do you expect to start building? So when should we see (inaudible)?

Will it be? Would you start building this next year and then go to 2013 or later than that and when do you expect to be done with the feasibility study?

Okay the feasibility we are expecting to complete Q1 next year. There are some long-lead items involved in expansion for Lombador and that are primarily middle items and there is a chance that we might be making some commitments likely this year and not even waiting for the feasibility study.

So we're just looking at critical part at the moment to decide what is governing that and what we should be spending in advance, generally speaking particularly with mills. There is a very standard practice where most can be ordered and you get increasing amount of cancellation fees if anything particularly goes wrong.

So I don't think you should expect much this year. You will start to see it building up from next year.

Of course we're advancing the length at the moment. So as far as our rent development is concerned that's ongoing as we speak.

We are mobilizing up on that to make sure that we can push that forward and get down to that 300 level as soon as we can.

Okay and then just going back to Neves-Corvo, the increased shaft capacity, will we see you using any of that before Lombador or will that simply be waiting?

No, I think we have capacity now in the shaft, we have capacity in the plants and the beauty we have it, never ceases depending on prices and we have a lot more flexibility than much doesn't minds us seeing up and therefore we can decide as we go forward how best to use it, but I think you'll find that for most mine manages that it sit around and leave their capacity unutilized. So I'll refer to exactly may we'll be looking at using some of their capacity for lower grade copper which at present prices, we can treat at and above what our normal mine plant would have been.

Just another one those annoying questions on Tenke. And you can have they'll be to answer it, but with the election coming up in 2011, is there any concern on your part that the government officials may just want to put this off until beyond the election timeframe.

This was to make any real concrete decisions, and just another question before you answer that one. From the Lundin perspective obviously investing in Tenke is a great world class opportunity and Lombador looks very attractive at this point.

But should we look at other opportunities for Lundin to grow via M&A so that you actually have full control over some of these projects as opposed to being no at Freeport's back in call, I guess the (inaudible).

Let me just answer the second one first and Paul then you can take the first, I guess I firstly, I don't think I feel that we at Freeport's beck and call. I mean I think we have an excellent working relationship with Freeport, they are very good partners.

We try very hard to be the same and in terms of the size of the opportunity at Tenke, I think you could probably count on the fact that we are not in a position to go and acquire Freeport interest in Tenke and I think you can probably see that our interest is not up for acquisition but someone else. So, but from the point of view of your question in terms of broader corporate development, yes we obviously are very actively looking for new opportunities and we don't set out for the preset to decide we will not do something unless we control it.

I think we have a flexible model that looks at each opportunity on its side and decides how appropriate to do it. And I'll have to say with the SX-EW plant such as Tenke's and I have to say with quite honestly Freeport is a better operator of that plant and we could be Freeport is one of the largest operators of SX-EW in the world.

If you want to see world class operations you got to see this. So I'm happy having them as a partner even if we are their beck and call.

Other issue Paul, you go.

Yes, its pretty hard just to especially on when your elections are going to be sometime next year is what we have expected, because we don't know details on same capital, we speculate how that might or might not affect operations like Tenke. We are pressing on to maximize the efficiency of Tenke and expand it prudently as we can.

All of them will come and go.

Just a follow-up question some more. My questions have been more or less been answered but looking at just to clarify the production guidance for this year, does that include any of the earlier start ramp up of 25,000 tonnes in Neves?

No it doesn't.

And also on the depreciation, is the second quarter representative for the next couple of quarters?

The depreciation is based on your, its over proven improbable, so given production was slightly lower, I would expect it to be a touch higher in the future quarters.

Okay, that's all?

You have your electors and just got a off whatever you're modeling production to be really expensive on the units of production basis.

Just wondering if you could provide your best estimate on when you may be driving cash flow from 10-K?

I think it's obviously something is contingent from the metal prices, but I think we've previously guided that we expect somewhere around Q3 next year and you know what we seen so far is consistent with that.

I may have missed it but in terms of the cobalt output this year, what's the outlook on that?

You didn't mention it wasn't there. Sorry don't worry about that, now look we've reported cobalt on an actual basis regarding as far as copper is concerned, but I think generally speaking, our view is that there is some issues to be soft in the cobalt circuit, but we don't see any impediments to achievement or exceeding the cobalt name-plate capacities moving forward.

Paul, I don't know if you want to add anything to that.

You know its been reported previously the capacity of cobalt in hydroxide contained metals capacity is 3,000 to 6,000 tonnes per annum. I think it was last week's guidance that we had expected it to be above that for the year.

I think their guidance was above nine.

All right operator thanks, thanks very much for attending guys and follow-up questions we are happy to take. Thank you very much operator.