Cash rich Lundin in acquisition mode

Vancouver With over US$400 million in the treasury, Lundin Mining (LUN-T, LMC-A, LUMI-S) says it remains in an acquisition mode with an eye on long life assets that it hopes to add to base metal operations in Sweden, Portugal and Ireland.

By the end of the year, we may have at least one or two more announcements, said Lundin chief executive officer Colin Benner during a conference call with analysts to discuss the companys 2006 fourth quarter results.

Buoyed by its recent merger with EuroZinc Mining, Lundin reported a profit of US$63.6 million in the fourth quarter ended Dec., 31, 2006 or 28 a share, on sales of US$236.1 million.

That was up from $14.2 million or 12 a share on sales of US$63.8 million in the same period last year.

Lundin shares rose by 1 to $12.60 on the Toronto Stock Exchange, on February 22, the day its fourth quarter results were released.

By merging with EuroZinc, Lundin added two Portuguese mines the Neves-Corvo, and Aljustrel (which is set to reopen this year) to its portfolio of assets.

After finalizing the acquisition of a 49% stake in the Ozernoe zinc project in the Republic of Buryatia, Russia, the company said work to construct an open pit zinc-lead-silver mine has begun. The preliminary estimate for production startup is 2009.

Lundin is developing Ozernoe after recently striking deal with IFC Metropol, a Russian financial institution with interests in both financial and industrial spheres. IFC holds the other 51% stake in the joint venture.

Having agreed to commit US$125 million for its 49% stake, Lundin said a preliminary assessment of the project contemplates development as an open pit mine, based on 157 million tonnes of indicated resources, grading 5.2% zinc and 1.0% lead.

Meanwhile, operations at the Galmoy mine in Ireland were brought to a standstill recently by the death of mine fitter, Michael Joyce, who fell through a safety railing while working near the crusher. After sustaining serious head injuries, he died on February 18.

The company said employees at Galmoy have also been distracted by delays in negotiations with the union, a process which has been ongoing since June 2006.

Looking ahead, Lundin said the outlook for metal prices this year is mixed. It said the low LME inventory for zinc and lead and the growth in demand for these metals, particularly from Asia, is expected to continue, and it anticipates zinc and lead prices will remain high during 2007.

“The demand for copper has slowed and the LME inventory has increased. We expect that the fundamentals for copper will not be as strong as the fundamentals for zinc going forward in 2007,” the company said. “Nonetheless, we expect the price of copper to stay at historically high levels throughout the year, it said.

Lundin expects the operational performance of all its mines to improve during 2007 from 2006.

It said the overall production of contained zinc will increase with the addition of the Aljustrel zinc production in September and increased output from Neves-Corvo and the Zinkgruvan mine in central Sweden,.

In 2006 combined production of metal in concentrate from mines in Sweden, Portugal and Ireland amounted to 89,218 tonnes of copper, 171,293 tonnes of zinc, 45,106 tonnes of lead metal, and 2.5 million oz of silver.