Lundin Mining's Chapada copper-gold expansion plans to crystallize this year

After pandemic-related delays in March 2020, drilling at Lundin Mining Corp.'s Chapada copper-gold mine in Brazil ramped up quickly enough to have exploration drilling exceed expectations and hit 42,000 meters in the second half of the year, and the company is considering expanding the operation, President and CEO Marie Inkster said.

Chapada's annual processing capacity is about 24 million tonnes, and Lundin Mining is considering scenarios to potentially double throughput rates.

On a Feb. 19 earnings call, Inkster said Lundin plans to drill 60,000 meters at Chapada in 2021 and bring expansion options to the company's board of directors at a midyear internal review ahead of a public update.

"We would like to have something in the back end of the year. But I don't want to make any promises that we can't keep if we're not ready then," Inkster said, noting that the update might come in early 2022 instead.

How long it will take to permit an expansion is unclear, Lundin COO Peter Richardson said, noting lengthened permitting timelines in Brazil. "It's a little bit early to say," Richardson said. "It all depends on what alternative is chosen at the end of the day."

Commenting on permitting timelines in South America more generally, Inkster noted that environmental impact assessments used to take about 24 months in Chile but now take closer to 36 months. At the Brazilian Chapada operation, which Lundin bought from Yamana Gold Inc. in 2019 for US$800 million, Inkster said permitting would "probably be less than half of that."

Inkster also commented on the type of projects Lundin considers attractive targets, saying the company would only look at properties producing at least about 50,000 tonnes of copper equivalent annually.

"The reason for that is that an operation takes an equal amount of management time and effort, if it's 20,000 tonnes or if it's 200,000 tonnes," she said. "We don't want to be in a position where we have 15 mines and 10 of them offer you 5% of your [net asset value]."

As for mine life, Inkster said Lundin typically considers 15 years a minimum, in part to ensure operations catch higher pricing in a cyclical business.

"We've been below our long-term copper price for almost the last 10 years," she said. "And so if you have a short mine life and you invest at a long-term pricing, you may not make your money back ... if you can't ride at least one or two of the cycles."

Lundin recently boosted its dividend by 50% to 6 Canadian cents per share as its attributable net earnings climbed to US$119.2 million in the fourth quarter of 2020 from US$97.0 million in the prior-year period.

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