Lundin Mining Corporation

Paul Conibear - President and CEO Marie Inkster - SVP and Chief Financial Officer Steve Gatley - VP, Technical Services

Matt Murphy - UBS David Charles - Dundee Capital Markets Orest Wowkodaw - Scotiabank Gustav Sandstrom - Danske Bank Alain Gabriel - Morgan Stanley Christian Kopfer - Nordea Markets Steve Bristol - RBC Capital Markets Oscar Cabrera - Bank of America Greg Barnes - TD Securities Kerry Smith - Haywood Securities Jatinder Goel - Citigroup Cliff Hale-Sanders - Cormark Securities Ralph Profiti - Credit Suisse Gary Lampard - Canaccord Genuity

Thanks very much, operator, and thank you everybody for joining Lundin Mining on our first quarter 2015 results call. Joining me this morning to assist with the presentation is Marie Inkster, our Senior Vice President and Chief Financial Officer.

Also at the end of the presentation we’ll be doing a Q&A period. And we have Paul McRae who’s our Senior Vice President of Projects and Steve Gatley, who’s our Vice President of Technical Services; they’re both intimately involved in transition management of Candelaria and here to assist in answering questions at the end.

We had an excellent first quarter of 2015. And I think the two new assets that we brought into the company over the last two years have really proven their value and really contributing to the bottom line for the company.

All of our assets did perform well, both on a cost basis and a production basis. Copper production achieved a new quarterly record for Lundin Mining and exceeded the guidance that we’d given on annual basis.

Zinc production met expectations, supported by higher zinc rates from the Lombador deposit at Neves-Corvo. Nickel production achieved a new quarterly record for Lundin Mining, exceeded expectations in part because of Eagle which had excellent throughput grades and recoveries but also Aguablanca which continued open pitting, contributed as well.

Cash costs outperformed expectations. Annual guidance has been improved at all operations with the exception of Candelaria and Eagle.

And the costs guidance on those two operations will be reviewed and updated as appropriate at the end of Q2, once we have a couple of quarters of operating stats under our belt there. Taking a look at the total sales of metal from our own operations here, this does include the 20% of Candelaria attributable to partner Sumitomo here.

But obviously you can see in Q1 of this year, the contribution that Eagle is making to copper and nickel and Candelaria making to copper. Eagle started up as a new operation for the company in early September of last year, bringing on copper and nickel.

And since November 3rd, we’ve been attributing the copper productions in Candelaria. So you can see we have a whole quarter now for production and excellent performance from both those mines.

Zinc performed as expected from both Neves-Corvo and from Zinkgruvan. If you take a look year-upon-year, obviously the two new mines in the portfolio; there’s been a dramatic change in our copper production and our nickel production.

But you can see we’ve also improved zinc production year-upon-year from the contributions in particular from Neves-Corvo. The addition of Eagle and Candelaria is pretty evident in all of the stats that you’ll see from Q1.

72% of our sales were from those new assets. The strategy that we embarked upon in mid-2011 to reestablish copper as the dominant metal being produced from a poly-metallic base metals company like Lundin Mining has been successful.

67% of our sales in Q1 were from copper with very good contributions from nickel and increasing contributions from zinc. We can also see obviously that in very low risk jurisdictions in the Americas makes up the predominant amount of revenue in the company account.

Adding those two assets in, I want just to add gross volume of production or revenue as they are better margin assets. You can see where they’ve placed us on the cost curve here on slide number eight.

And we remain very, very competitive in particular in nickel and zinc down at the very low end of our cost curve with Aguablanca, Eagle and Zinkgruvan and very, very competitive with our copper operations with Tenke supporting being in the best third of copper production as well. I will turnover a few of these slides to Marie Inkster, CFO for financial highlights.

Looking at the Q1 2015 financial highlights, you can see that contribution. The revenues, we have just over $0.5 billion or 3.5 times time’s last year’s revenues despite the lower metal prices during the quarter.

Our operating earnings, again more than six times last year and income of $0.10 per share is five times last year’s, $0.02 per share. Our net debt notably is reduced by a $180 million from the yearend balance; it was $649 million at the end of the year and that down again this week to $630 million approximately.

Looking at our production and cash cost guidance. Our production guidance is held or improved for all metals.

Our cash cost guidance is improved at four of the operations. As Paul mentioned, for Eagle having only one quarter at full production and at Candelaria where we’re working on our revised mine plan, we’ll have an update with the Q2 results.

But both of those mines are performing very well and we would not anticipate any increases. Moving on to our normalized earnings, the only thing that causes any kind of volatility there this quarter is the ForEx, and removing the after tax effect of that results in $0.08 per share on a normalized earnings basis compared to $0.02 last year.

And going on to the operating earnings again, looking at this you can clearly see the contribution the Candelaria Eagle have made, a significant impact here listing the operating earnings with Candelaria contributing almost 60% of the operating earnings for the quarter and Eagle further 20%. So, I’ll turn it back to Paul now to look at the operations and outlook.

Thanks, Marie. Candelaria, obviously off to a great start here with ourselves as new owners of this excellent asset.

The production in the last couple of months of 2014 was good with very good throughput and decent grades, good recoveries. And the team at Candelaria has continued on with that excellent performance in Q1 through to April so far, Q2 to date here.

There is a very large fault called the Lar fault that goes right through the middle of the Candelaria open pit. And when we’re near that fault, there is a lot of very fractured material, which enables the mill to outperform on throughput.

Because of the fault and the geologic events that made the mineralization, we also get a little bit of grade increase along that faulting area. So we had great throughput in Q1; we had very good grades and very good metallurgical recoveries.

For a combination of events, the cash costs netting out at $1.20 per pound of copper that’s net of the byproduct credits of gold and silver, with the contribution we get from Franco-Nevada deal there, cash costs were better than excepted. A bunch of factors there, mining costs were lower.

We have very, very high truck availability right now. We got a lot of trucks part that we’re not using, which is great for the bottom line.

Milling costs were favorable. Diesel prices were down, which is well known.

And the Chilean peso was weak, which also contributed to a good bottom line, including the high production levels. A number of callers in today will be aware that there was a very devastating flood event, rainfall event, more than 130 rainfall occurred right at the end of March.

And the Copiapo Valley is a river system that goes from the Argentine border for about 200 kilometers all the way to the coast. The Candelaria mine is perched on hill, alongside this river valley and there was a just horrible flood went through there, devastating a lot of communities.

Our production was affected right at the end of March, but fortunately not in a very meaningful way. But the communities in the area of the mine were devastated.

There was a lot a loss of life. 25% of our employees have had very severe damage to their homes.

So Candelaria Lundin Mining is contributing very significantly to disaster relief there. We spent more than $5 million over the last six weeks in that contribution and we intend to continue that commitment over the next couple of years in rebuilding a systems program which we’ll provide further details on once it gets better defined there.

One of the effects of this big flood is the effects on Copiapo; it’s a city of 200,000 people and good part of the city was flood including the government offices. We have quite an important permitting process which is going on, it’s well advanced for new a tailings facility to renew the permits to operate this mine, which are due to be renewed in 2017, we need to facility up and running.

The government offices were flooded. We hope that they open in next week.

We didn’t submit electronically, the electronic filing on what call the XR3 responses to the government questions on March 24. So, we did submit on time, the government does have some delays in reviewing those but have promised the highest priority on review of our permits.

You would have seen a press release that we came out with in early April on two new deposits, reserves of Damiana and Susana. We have very aggressively drilled those.

We’ve got ten rigs drilling underground now. We bought another 42 million tons of good grade reserves in there.

We expect some good upside as we continue to drill on those two deposits and on the three other underground deposits that are currently being mined there. So, both for Franco-Nevada, who have a gold and silver stream on Candelaria and for ourselves as majority shareholders of this asset there I think there is really good upside coming as we continue to aggressively explore and refine our mine plans.

The intent is to publish a new five year plan along with our Q3 results which should we expect come out on or about the 29th of July. Turning to Eagle and we’ve got picture of high grade face that we’re mining just recently there; and I think the picture says a thousand words.

This massive sulfide, we’re currently processing around 5% nickel and between 3% and 5% copper into the mill at very high tonnages, very good recoveries. So, it’s really starting out as good as or better than we planned here with very good grade reconciliation; better recoveries, especially on copper than we expected and very good concentrate qualities.

We produced 7.3 tons of nickel in the quarter and more than 6,000 tons of copper, more copper than we expected. We’ve got into a high grade area.

And because of the copper is reported as a byproduct credit, we had particularly good C1 cost of the $1.45 on volume recoveries and the high copper credit there, even though the compare prices were low. So obviously, nickel prices have been under pressure but today’s nickel prices, we make excellent margins at this mine, contributing to our bottom line.

Neves-Corvo had a very good first quarter for the year. They picked up on copper production and had good zinc production at the end of Q4 2014 and started out the year very, very well.

One of the issues that we’ve had as we gotten to increased volumes of stock works in copper mining over the last few years was the drift and fill mining method that we use there is quite labor and equipment intensive. And we’ve been trialing a more bulk mining methods in some of those stockworks stopes in copper.

And I think we are starting to see the results of it. We also got into some higher grade areas in Zambujal deposit, one of the other deposits, so good grades; better than average grades for the year; and bulk mining I think has also helped bring our cost down.

Obviously the weak euro is good for the bottom line and we have very good zinc production coming there as planned. We continue to progress the feasibility study for the potential doubling of zinc production and that’s study is now scheduled for completion in mid 2015.

That would take us, if we go ahead with that expansion to Brownfield expansion which takes up to normally 150,000 tons of zinc production; this year’s guidance is in the range 70,000 tons. Zinkgruvan had a good solid first quarter as expected.

The cash cost of $0.42 per pound, higher than the annual guidance that we started the year with the $0.38 but that’s in particular because that C1 calculation relies on the assumptions we make on byproduct credits. We have a lot of lead that we produce here and some copper, so lead price was down, copper price was down.

So, C1 costs were up a little bit despite the weak Swedish kroner but when you look at our forecast for the balance of the year, our assumptions on metal prices and exchange rate, we’ve been able to improve our guidance a little bit to $0.35 and we’ll reassess as the year goes by and maybe be able to do it but better than that. Aguablanca, the open pit was scheduled to close last November.

We didn’t have much rain in December. We kept it open till the end of December.

We had very little rain over the winter here, so we kept the pit open until last week and consequently we had very good production and very low costs there. As we got to the bottom of the pit, there is almost no waste stripping.

So that’s all contributed to a $0.91 a pound of nickel as the cash operating costs, way better than expected because we continue to open pit. The pit is done now.

We have a very large stockpile of better than average grades, 500,000 tons in stockpile. And as we transition to underground mining, which will be ramped up to full capacity before year end; we’ll be using that stockpile to help supplement feed to the mill.

And because of the open pitting that we did in Q1 and the grades and production profile we predict for the balance of the year, we’ve been able to improve our guidance from $5 a pound nickel down to $3.75. And again we’ll re assess at the end of Q2 on that.

So a small mine but very good margins there for the company. Tenke, Freeport as operator reported Tenke statistics last week.

And once again, Tenke’s been very impressive with its production. The power issues that have been experienced historically were not as bad.

Freeport are managing very well through that. They’ve been able to improve their cash cost guidance to $1.26 per pound of copper, so first cortile operation.

We have reduced our forecast of cash back to Lundin Mining to $20 million from the previous $30 million to 40 million, based on lower copper price expectations but obviously we’ll reassess that quarter-upon –quarter. There is a very significant spend of the free cash flow on big acid plant which is advancing very well on schedule.

The second big acid plant is scheduled for completion into production in 2016; we’re spending aggressively on that, trying to bring it on as quickly as possible because it will contribute to improved cash operating costs; more than 20% of the asset we use we buy from third parties at fairly high cost. So, that’s advancing and Tenke is great shape under the very good operatorship of Freeport.

Lundin Mining’s priorities for this year, is obviously to continue to ensure that there is a very smooth transition of ownership from Freeport to Lundin Mining on Candelaria. We’ve got a very aggressive exploration program not only at Campbell area but companywide; we’re making a good progress at Eagle on Eagle East, having good results at both Zinkgruvan and Neves-Corvo with underground drilling there and drilling a couple of new properties, one in Peru; one in Turkey.

So, pretty active; largest exploration budget the company’s had. Our priorities for this year are on the existing assets, enhancing those operations and exploring and hoping to be able to increase company value through our own drill bits.

So, operator, I would like to turn the call over to Q&A please.

Just a question on your comments on that Lar fault in the Candelaria pit, I’m just wondering how extensive the fractured zone is and how long you could be in some of that good ore for?

Probably we’re the wrong guys on the call to answer that in detail Matt. I mean it’s a big structure; it’s been part of the open pit; and they scheduled the phasing of the pits around it.

The second half of the year will be at harder ore, less fractured ore, so consequently, we’re maintaining our guidance to this point; we’ll see where we are at the end of Q2.

And then just one on accounting, in note 16 of your financial statements; just wondering what the other income, $22 million roughly was?

That will be outlined in statements; it’s mostly ForEx. To the statement that identifies the other income.

Just maybe to ask Matt’s question in another way; if I remember correctly, you’re going to give us the updated optimized schedule for Candelaria in July. And you clearly hit it out of the park at Candelaria in Q1.

So, how do you think we should deal with the change in the mine plan, let’s say from the middle of the year or at least your guidance on the mine plan and the fact that you’re well ahead of schedule based on the first quarter?

First, either Paul McRae or Steve, could you put your phone on mute please, as there’s an echo. We’ve only got really one quarter under our belt here on Candelaria, we’ve started out really strong and Q2 starting out strong.

You’re going to have to wait for us to get homework done here and we have a lot of drilling information coming in every month now. We’ll have a cut off pretty soon here on that drilling information and then be working long hours to update our mine plans.

Go by our guidance that we’ve got for now and we are hoping to come out with very positive improvements at the end of Q2, so at the end of July.

Maybe just one more question, if I could. Your tone on the zinc expansion at Neves-Corvo seems to be a little bit more positive than where it was at the end of Q4.

Can you give us any insight of what your views are on whether that project will be given the go ahead or not? Zinc prices this morning at $1.04, I think I remember that you said that if it was in the range of I suppose of $1.10, then this thing was almost a given to go ahead.

Could you comment on that?

I wouldn’t say so much to give them a go ahead, Dave. But it is true that we’ll assess the economics of this project between $1 and $10 zinc as sort of our line of sight and obviously stress test it below that.

Obviously the other factor is what kind of assumption we make on exchange rate on euro. Some of the big banks are forecasting it going to parity, others are less optimistic.

So, we need to get the homework done on CapEx Dave; that’s really the key. And we’re literally working on the CapEx estimates right now.

And we’ve got another three months of work to get that done. So, I don’t want to give any kind of innuendo on whether that project is going to go ahead or not.

We’ll have a total resource of 115 million tons of zinc at Neves-Corvo on a Brownfield situation. We’re only mining 1.2 million tons a year, so we’re very motivated to try to get better value from that resource but the numbers need to make sense.

And we need to look at how that capital investment would compete and stack up against other things at Candelaria and elsewhere.

My question is really around costs. Your cash costs at Candelaria, Neves and Eagle in the first quarter are significantly below your revised guidance numbers for the year.

I’m just trying to get a sense of what you’re assuming in these new guidance numbers. For instance, I realize the first quarter was a really good operating quarter, but does the guidance for the rest of the year assume this continual reduction in diesel and FX rates and so forth?

Well Marie, do you want to go ahead now and I’ll...

Yes, I guess, I mean in Q1 we talked about a targeted cost reduction plan that we put into place and some of those things are deferrals. I think you’ll find the biggest impact from diesel perspective would be at Candelaria where of course with the open pit, we have much between probably 10% to 15% of the cost at $100 of barrel would have been diesel.

So that has the significance effect. We haven’t updated that cast cost yet.

And the European operations, is not as pronounced; it’s under 5% the impact of diesel. So, those things, we’ve built in to the costs.

We also had really good throughputs, really good grades and we are not counting on that continuing, multiplying by four the production. So, we do see that the cost from this quarter, we’re not anticipating that they’re going to be repeated for the remainder of the year.

Our estimates on our byproducts maybe a little conservative, our lead and zinc, if you look at the assumptions we’re using are a little bit lower. So that will help us out.

But in terms of diesel in the European operations, it’s not a big factor. At Aguablanca, of course, we’re moving to underground mining; that’s the big change for the operation; we’re also moving to non-stockpiles, which is lower.

There will be some re-handling there, so the cost will be bit higher and in this quarter; we’re mining in the bottom of the pit and there is not going to be any strip there. So of course the cash cost will benefit from that.

So, while I think that the operations will continue to perform very well, I think this is a very good quarter. Paul, I don’t know if you have anything to add to that.

Obviously, we do our projections update from every quarter and there from detailed mine plans month by month, each mine for the balance of the year; we put a few elements in there for the unknown. Mother Nature can throw some twist at you, positive and negative, but generally relay on our guidance.

And we’ve tried to be clear that because it’s only one full quarter of steady state operations for Eagle that we’re super pleased with the results there. But we don’t want to prorate that forward for the balance for the year until we have at least six months of stats in hand for Eagle and really the same for Candelaria, cautioning that we’re going to be in the harder ore, slightly lower grade ore, more stripping the back half of the year and more sustaining capital spend, once we get the permits in place for the tailings, will be what we determine a sustaining capital spend there.

It’s going to be -- we expect a really good year even at today’s metal prices. But on those two new operations, we want to get a bit more data before we revise our guidance.

It sounds like their cost in the second quarter, even though they’ll be higher than the first quarter, might still be much better than they would be in the second half of the year. Is that fair?

Well, April is almost done here and we’re starting out well in April.

Getting back to Candelaria, the operating costs at Candelaria, does that take into account the full mine production of 8.6 million tons or is that only attributable to the milled production? That’s my first question.

You’re talking about the C1 or $1.20?

No, I’m talking about the actual operating costs. Is that accounted for the full costs associated with the mining or is that mainly -- or is that somehow accounted for only the mixed of the product of the operation?

The mine part in Candelaria was significantly higher; that’s why I’m asking.

Well, that’s the entire operating cost of mine mill and G&A and transport of concentrate to the port and operations of the port and the infrastructure. Is your question around how are we treating sustained capital in stripping?

No. It’s really just a question, given that you have such high -- I mean the mine production was quite much higher than the milled production, that’s why I’m asking if the actual cash costs might go even lower if this milled production is the same as mine production for the coming couple of quarters.

We’d probably have to go and analyze that and get back to you Gustav.

Some of that goes to a long-term and a short-term stockpile and that would be inventoried.

We’ve got about 90 million tons of stockpile material, which we call low grade, which is I don’t know 0.36 or something like that. So, there’ll be a cut off from the mine where -- and I don’t know the numbers, x amount goes to waste, x volume will go to this low grade stockpile and the rest goes to the mill.

So maybe that’s -- maybe the volumes into the stockpile are what you talking about. Maybe offline, Gustav, we’ll get hold of you and go through that and get the right people on the phone from the mine, if we need to.

And a question on G&A, the G&A level now is about bang on target, the same it was a year ago, despite that you’ve added quite significant to your portfolio. Is this G&A level sustainable?

We’re doing a little bit of hiring. There is a lot of tired people here.

I think we probably could have staffed up a little bit more corporately before we got on to Candelaria but we intend to run our corporate G&A as lean as we can. We’re staffing up a bit in finance and IT, a little bit in HR, but you’re talking one or two or three people.

So, generally we try to push our G&A down to the mine sites. So, if you’re doing comparables to some of our peers, normally you’ll see us probably lower corporate G&A.

Any other comments Marie on that?

In Q1, we also put bit of a moratorium on nonessential travel and we did some cost reductions on G&A.

Yes. That’s true.

Paul, I just have a couple of small question for you. So, it looks like you are much more comfortable with the underlying operations at the moment.

How does this affect your thinking around M&A in the current environment? And the second question is, are we still on track for you to present to the Board an introductory dividend in July this year?

Thank you.

Our priority is as stated at the end of the last year. So, this year’s priority is on ensuring our existing assets are performing really well.

I think each one of them has got some upside, obviously with two new assets and there we need to get on top of them and try to tweak them where we can. Our largest exploration budget ever and we’re expecting some good returns from that.

So we don’t have any plans for M&A. This is focused to the whole team including our corporate development team focused on Candelaria and supporting that type of thing.

So that’s -- I hope I answered the first part of your question. Second part on the dividend, I think it will be at the right time to be a good maturing step for Lundin Mining to bring in a dividend.

If and when we bring one in, it will all be a board decision although it will start at a modest scale. And we are on track to discuss the dividend with the dividend policy with the Board.

In July we just had our Board meeting on Q2 results and we discussed dividend. I can’t speak for the Board; we’ll have to wait to till we’ve done the homework presented at and the board will make a decision.

Just to follow up on Candelaria, I was a little bit puzzled with the accounting in Candelaria. Among the numbers that you are including in depreciation, are all those non-cash?

Yes. They’re non-cash; they would have been amounts that were capitalized in previous years.

And on CapEx, for Candelaria, I think you’re spending some $245 million this year for 2016 and 2017; are those still in line with your original plan at around $100 million per year?

We don’t -- so first off on our CapEx spend on Candelaria we will back and loaded second half of the year; so we will get permits in place for tailings; we’ll talk on that project. We don’t have any better numbers out publicly for 2016 and 2017 on capital spend other than, than was in the table in the 43-101 report that we put out on Candelaria at the time of acquisition.

But as noted, we are updating the mine plan and doing a significant amount of work on that. And when we come out at the end of July with that at least five year plan, we are trying for life of mine and hopeful to have that done by then; we’ll certainly update the sustaining capital, project capital expectations in that mine plan.

But I don’t want to try to imply that the numbers are going to be above or below or anything other than the once that we’ve put out in the 43-101 report till we have that work done.

And then finally for me on payable metals in Eagle, I think you recorded some 80% payables in copper and 74% on nickel. Are those representative for the quarters ahead or are you expecting those numbers to increase?

Well, it varies depending on the customer as to what payables we get. So we will see a change in customer mix but I can’t comment as to the payables.

But it’s not that you are expecting some structural improvement in payables or so the next quarter?

I think as far as modeling asset value there, my advice at this stage, again because we only have really just a few months of stats out there is, go to the Eagle 4-3101 report on the summary terms that were put in as a basis as we started the asset for nickel and copper in aggregate. We’re expecting in the combination of the client base for the concentrates, so we’re expecting to be at those levels or maybe be slightly better.

I was just wondering, are you seeing a slowing down in your cash flow generation? One month into Q2, net debt has only been reduced $20 million versus a reduction of $180 million in Q1.

I was wondering if that has to do with less cash flow generation or more spending that’s going on in the quarter?

Well, there is nothing in particular that I can point to. I mean the operations are performing well, are continuing to do well.

You’ll have variations depending on shipping schedules at certain operations, working capital will vary. So, you will see a dip where we pay, say interest payments or dividends to partners -- but we will continue to generate good cash flow for the remainder of the year.

And then just on the Candelaria mine plan, I just want to confirm, you said July 29, 2015, is that the date of the Q2 results, is that all happening exactly in time?

Yes, plus minus a day; I think it’s that week that we intend; normally we try to get it out on the Wednesday night?

The last Wednesday of the month.

Yes, last Wednesday of the month and that’s partly tied to Freeport normally releasing a week before.

So that updated technical report will be with the financials for the quarter?

No, we’re going to staffs as we can to get new mine plans out and updated cost estimates, sustaining CapEx and everything, at least for sort of a three to five year plan out at the end of July. And then if there is a material change in our information compared to what’s been published in the past, then we’ll scramble within the 45 days to get a new technical report.

Okay. Thank you.

So that would be early September, mid September, if it’s necessary to put out new technical report.

Paul, I guess the efforts from the tired people are really paying off. Congratulations on the strong results.

I want to get back to the capital allocation question. I’m not interested in this year or next year, but just how management is looking at your projects you have in your pipeline compared to dividend policy, and if you can just put context around that please?

Yes, I mean we would hope to be able to do both. If you certainly -- if you’re looking at Brownfield opportunities that we continue to study whether it’s the zinc expansion at Neves-Corvo or optimization of mine plans and a lot more underground investment of Candelaria.

I mean these things ultimately kind of compete on return but I think there is a large number of our shareholders would like the company to get the point where we’re issuing dividend and consequently management favors coming out with the dividend at the right time but modestly, so that we can continue to have capital for growth when good opportunities, value adds present themselves; in parallel, not one at the sake of the other.

And then, going back to the cost question, I want to focus on your European operations and have an idea of how sustainable the new cost guidance that you put in is. So, would you say that most of these improvements at Neves-Corvo and Zinkgruvan were exchange driven or the cost programs that you have in place have also helped in lowering costs?

Certainly an overriding factor has been weaker exchange rate. The kroner, I can’t remember we started the year with budgeting was 7 or something, 8.25 or weaker, and we started the year with maybe 1.3 on the euro to the dollar and it’s 1.10 or weaker so that is really helping.

But I’m going to quote some numbers at Neves-Corvo here, year-upon-year on a euro basis per ton to the mill we’ve come in slightly under budget each year, making a tighter budget. So, the operational performance improvements that we are making at that complex operation are showing measureable benefits.

It is becoming more competitive front. We’re now trialing bulk mining in maybe 25% or so of the stopes, copper stopes and stockworks.

Instead of 15 or 20 blasts for given volume, we’ve got one or two blasts, to get more dilution. So it’s going to take a while to hit the stats but we’re really pressing for improved mining methods, improved efficiencies and it is showing up in the bottom line on euro basis, local currency basis and to the operations.

On Candelaria, your 1.55 a pound for the year, what is the gross cost assumption that you’re making for 2015?

I mean without a credit from byproducts?

Yes.

I’m not sure if I have that number. John, do you know that number off the top of your head?

I mean on the results, we had in Q1, I guess $0.19 was the gold credit on $1.20, so that came up to on $1.39. We have to go back and probably get back to you Oscar.

I think when we originally published stats on life of mine -- the gold credit is normally kind of 10%?

Yes. See, what I’m trying to get at is your comment earlier on that you haven’t really factored the lower diesel costs, so you mentioned 10% to 15% on diesel costs previously.

That was at $100 barrel oil.

So, what have you seen on site, have you seen changes in diesel? What I’m getting at is that there are some countries where diesel prices are -- have been subsidized, so they’re actually going up as opposed to going down.

So, have you been able to get an idea of what the benefit could be?

Yes. We know the benefit Oscar.

In the budget, we probably have about $60 million budgeted for fuel at a $100 a barrel. So, if you move that down to $50, than you’d get half of that fact.

So for the quarter, we did see that flow through the operation and we had about a $7.5 million of benefit from that and that’s about $0.05 a pound I think. So, there is a definite benefit from the diesel.

Paul, is it fair to say that this permit for the new tailings to happen is dragging on the process?

No, I mean, the office that processes the thing has been filled with mud here for the last five weeks. That’s obviously delaying when they could get on.

But the data was filed electronically. So we’re assuming that the authorities are reviewing it; they’re going through the formal process.

We have factored in that we hope to get the permits in place mid this year. So, it’s possible that will still hold despite the flood.

So you think you’re still on track for that. What has to be done next on their part or your part then?

Well, they have to come back and confirm that all of the questions that they had asked have been answered successfully and there’s a bunch of agencies that contribute to this, what we [indiscernible] and they vote on whether the EIA is granted or whether there is some more questions that need to be clarified.

Okay.

What the EIA is clarified, then there is a couple other agencies that award construction permits. And some of those involve the dam; some involve infrastructure and other things.

We are allocating significant funds for the balance of this year. When we get the permits, we’ll jump on the project.

On Tenke, we haven’t talked about that yet. The new acid plant that’s going in, finished next year obviously will be a benefit to cost.

Can you give us an idea what the benefit will be?

Yes, I can’t really --I’d really have to leave that to Freeport, as operator, to give kind of numbers there. But we currently have an acid plant which is producing an order of magnitude of about, 800 or some odd tons a day of acid.

We’re buying another 200 to 300 tons a day at very, very high costs. This new acid plant will bring in I think another 1,400 tons a day on top of the 800.

And from the original decision making, it had a pretty good payback just on the current production levels. It should definitely benefit our C1 costs at Tenke but I’ve to leave it to Freeport to comment on numbers.

Paul, at Candelaria, are you expecting that the grade profile is going to come off as you get into this harder ore in the back half of the year or would the grade be roughly constant for the year?

I think the grades are off a little bit the second half of the year. And then at least in the original mine plan, the Freeport mine plan, as this year progresses and 2016, ‘17, ‘18, as you do the big pre-strip and push back on the phases 9 and 10, as we’re dedicating trucks to the push back and original mine plan, we’re also moving some of the slow grade stock pile material into fill the mill, which is 0.36 as compared to sort of 0.5 -- 0.55, 0.6 that comes from the tips.

So, the original plan, yes, harder ore, lower grades, that was reflected in the original, three year plan that we put out on Candelaria. Our initiative here is to we’re drilling aggressively on underground, we want to supplement higher grade ore in there, we have done some pit improvements, optimization also that improve the grades and hopefully lessen the strip, but that’s the data that will come out at the end of July.

I apologize if this is in the technical report, but I can’t remember. Does the technical report show in ‘16, ‘17, ‘18 the percentage of ore coming from the low grade stockpile or does it just give you kind of a gross?

I don’t know; I’m not sure.

It’s Steve here, it does show the withdrawal from the wet stockpile and I’d also mention that the technical report shows for example, the outcome that also mine being exhausted this year with what reduced the grade and as you know with our new mine plan, we expect that mine life to continue.

On your unit cost at Candelaria, on a per ton basis in local currency and pesos, how have those costs changed since or have they changed since you’ve taken over from the Freeport numbers that you would have had the privilege of seeing that we haven’t seen? I just wonder if the trend has been slightly better or slightly lower cost per ton or slightly higher cost per ton or flat?

Well, it has been slightly lower carry and not due to some of the factors like the fuel and also Freeport was on a centralized maintenance program, so we’ve done a different maintenance schedule which has brought some of the cost down. And also we have some of the trucks that were lower utilized, we’ve parked them.

So, we are able to bring the cost down a little bit.

And then Marie, just so I’m clear, your guidance for the cash cost for Candelaria for the rest of the year, is that based on $100 oil?

155 was based on $100.

Okay. So, you haven’t changed that.

Got you; perfect. Thank you.

Just two questions from my side. Firstly, on acquisitions, Paul, is it a view that the price tag owned assets which you might be interested in wont’ be significantly higher when you go back to the market maybe in 2017, as you said in your previous quarterly presentation that you probably won’t acquire anything in 2015 or even 2016 or do you think that it will be a burden on the balance or will it be a distraction if you do something prior to that timeline?

And secondly, just a quick one on -- can you remind us on when the next labor negotiations are due at Candelaria? Thank you.

Yes. So, to the last first, labor negotiations in 2016, later 2016; I thing I’ve tried to make it clear, our focus for the company this year is on existing assets.

So, we’ve got an aggressive drill program. We hope our next mine is when we find or expansions from explorations success.

And I can’t speculate couple years out whether assets will be more favorably prices or less favorably priced. There hasn’t been much out there for sale; it could be value added even over the last couple of years.

So, that’s one of the reasons why we fix standard our exploration programs; sometimes you have to go find it yourself.

I got a statement and then a couple of quick questions. On the cost guidance that you presented, I just wanted to make sure I heard this right.

Obviously we’re going to get updates on Candelaria and Eagle, but based on your Q1 results and your guidance for the full year, it would suggest the three quarters to come in the rest of the year are going to be materially higher, like in the order of 30% to 40% but the degree of conservatism seems exceptionally high, unless there’s something else behind the scene. The two real questions that I have are first on CapEx, obviously you’re seeing the benefits of FX rates in the costs side of things, why haven’t we seen any adjustment in CapEx spending for the year, or is that something that we’ll see as the year progresses?

And then, just one more question on Candelaria. Obviously depreciation relative to our expectations was a fair bit higher and it’s all related to deferred stripping.

My understanding prior to this was Freeport was expensing the bulk of the stripping cost. Just wondering where that deferred stripping account came from and if that level of depreciation should be sustained going forward?

Just on overall, I mean these are two new assets for us and we’re super pleased obviously with the results. We always expected these assets to really perform well.

But because they are new within our portfolio, I hope it would be seen as being reasonable that we’re conservative on our guidance, on the guidance that came out with the beginning of the year. And we don’t want to change that either direction prematurely.

I think probably conservative on both by keeping it where we are but let’s get six months of daily on these two new assets but there is certainly nothing hidden behind the scenes on those. We’ve got mine plans in detail month-by-month and we know where the assets are expected to go on grades, recoveries, costs etcetera.

So yes, we are probably conservative on Eagle and Candelaria but I don’t want to give any innuendo on how much we need more data. On capital spend, I’m not sure if I completely understood the question, Cliff, but we did come out with a restrained program which we announced as soon as the copper price took a big dip.

That is money that we will have to spend, most of it; so we’ve deferred it into 2016 or maybe some into 2017. If metal prices were rebound back towards what our budget numbers were, we’ll reinstate some of that and take back up that capital spend because it is required ultimately.

Paul. Before you go on, on that, why have we not seen your spending in Chilean pesos and what have you, any benefit in lowering the U.S.

dollar coated capital rate, given where you’re spending the actual money, because of the FX rates?

Well we did take $80 million out of our CapEx spend at the end of February; we announced the reduction already.

And quite a bit of that was FX, change in FX assumption at all the mines and not just pesos but euros and kroner, so all. So, that was in the savings where we cut from 480 down to 400, so some of that significant amount was ForEx.

You got a question on depreciation, Marie.

Yes, I guess the deferred stripping is something we’ve been trying to educate people about since we came out with our guidance in December as to what our CapEx would be. And I guess it’s the expectations some people have kind of gotten it whereas others haven’t.

And we will try to do better job. I think we broke out some information in the MD&A to try to help that.

As to stripping, the guidance that I can give you now is in respect of Phase 9 where we are mining right now; we have about, say $300 million that’s allocated to the mineralized material in Phase 9. Phase 9 will be mined out probably between now and 2018.

So you’re going to see that come back in. And then each year, we’ll put up a stripping number; usually it’s three to four years that will come back into income after the strip is completed.

So, we’ve been trying to give additional guidance on this but expect that the amortization will be high for Candelaria.

Just on that, was that a change from the acquisition price and when you reallocated on the cost side of Candelaria? Obviously when you first bought it, I can’t remember the exact numbers, about tiny cash cost to you, by adjusting for the accounting treatment, it went to $1.55.

Where did that account come from, might be from the sourced depreciation or is this just...

Well, Freeport is the U.S. GAAP filer and under U.S.

GAAP there is no concept of deferred stripping. Under IFRS, which Canadian and other international filers, you have to defer your stripping and expense that in the period where the mineralized material will be produced.

So, it is the difference in accounting policy. As to cash flow, we put it as CapEx, it’s CapEx and our cash flow.

So either way if you’re looking at an NAV, the cash flow at the end of the year will be the same but it’s just little difference in where it goes in the mode.

Two related to zinc at Neves. Firstly, with respect to the zinc expansion study, are we going to get an updated resource from Lombador or will that continue to be amalgamated into the entire Neves-Corvo resource; and will that be the primary source of the ore feed for the expansion?

Then my second question is what grades are you currently getting out of this 50% zinc ore feed that you’re feeding it at Neves mill?

I can answer some of your question. Again, we may have to get back to you with little bit more, getting the right person on phone here.

But the Lombador is probably contributing -- I’m going to guess about 50% of the feed to the mill right now. I think what were average grades for the quarter were probably I don’t, in the high sevens or something like that.

John is checking here; 8.5 in total and Lombador normally ranges between probably 7 and 9 or 7 and 10, on zinc grades and about 1.5% or 2% lead. The majority of the zinc expansion study targets Lombador Phase 2.

So, the bulk of the additional mineralization will coming from Lombador. And we normally publish our reserves and resources the first week of September.

So we plan to do that again this year and we’ll have kind of a normal level of breakdown wherever resources are when we come out with the results of the Lombador study, there will be disclosure in there, which ore bodies it comes from.

My question is on 10-K and the cash distribution. You’ve dropped your guidance for what you’re expecting this year.

Could you give us a bit more color about the reason for that? What were the new and the old commodity prices behind guidance; and is there anything else that’s impacting your expectation there?

Freeport have their own numbers and forecasts and everything and Lundin Mining to our shareholders, we put own price tags on things. And we started out the year with $3 or above the expectations on corporate price and we didn’t achieve that at Tenke for the quarter, it’s less than that although the capital spend is middle of the year and backend loaded.

So I think our forecasts are kind of based on 2.70; is it, Marie?

It’s correct.

Yes, for the balance of the year. There is a pretty significant capital spend on the acid plan and that’s where -- that combined with the -- we’re going aggressively at the acid plant to get it up and running as quick as possible.

But predominantly, it’s copper price related why we’ve reduced our guidance on cash back.

Okay. And so simply, it’s just $3 a pound dropped to $2.70 a pound, that’s the bulk of the reason?

Yes and there are the cobalt assumptions in there too. Cobalt price realization is less than we budgeted at the beginning of the year too.

Okay. Alright, thanks very much.

Thank Gary. And thank you everybody.

We’ve had a great quarter. We’re going to work hard to replicate but we started out well with the new two assets.

And I thank you for your questions.