Lundin completes Semblana resource

Lundin Mining (LUN-T) discovered the Semblana copper deposit adjacent to its Neves-Corvo mine in Southern Portugal in September last year, and describes it on its website as the “first new massive-sulphide deposit discovery at Neves-Corvo in more than twenty years.”

An initial resource estimate completed at the end of 2011 outlines 6.58 million tonnes grading 3% copper and 24 grams silver per tonne in the inferred category, and the company believes there is potential for width, strike and depth extensions.

Lundin has identified a new zone of high-grade copper sulphides 300 metres to the south of the defined resource that was not included in the initial resource estimate. Step-out hole 42 intercepted 14 metres of sulphides, with a 5-metre interval grading 4.6% copper at a starting depth of 930 metres. Step-out hole 44, about 880 metres to the northeast of 42, returned 8 metres grading 5.2% copper at a starting depth of 920 metres.

The company has made an additional copper discovery 1.4 km south of Semblana and 1.3 km southeast of the Zambujal copper-zinc orebody. Hole 26 returned a 33-metre-thick section of stockwork-type copper sulphides grading 2.2% copper. The hole also included a higher-grade interval of 11 metres with 3.9% copper.

Lundin has drilled 72,450 metres in 75 diamond drill holes at Semblana in total and more drilling is planned this year. One of the highlights of the drill program so far was hole 46B-1, which intercepted 21 metres of massive sulphides grading 6.1% copper, 4% zinc, 1.2% lead, 75 grams silver per tonne and 0.23 gram gold per tonne, including an interval of 5 metres grading 16.0% copper, 10.1% zinc, 1.7% lead, 110 grams silver and 0.37 gram gold.

Neil O’Brien, Lundin’s senior vice-president of exploration and new business development, said in a statement that he believes the copper sulphide discovery at Semblana will lead to a “significantly greater resource, and in turn result in the fast-tracking of the underground development at Neves-Corvo to Semblana.”

“The ongoing exploration program shows much promise,” Tom Meyer, an analyst at Scotia Capital, commented in a note, adding that the initial resource estimate was prepared to “facilitate the Underground Material Handling Study currently underway and expected to be completed in early first-quarter 2012.”

Meyer points out that the Semblana copper deposit adds 9% to the existing Neves-Corvo resource and “biases the copper grade higher.” Meyer has a one-year target on the stock of $7 per share.

Matt Murphy, an analyst at UBS Investment Research, has a one-year target on the stock of $5.50 per share, and said in a note that “exploration upside at the deposit remains.”

Kerry Smith, an analyst at Haywood Securities, has a $6.25 per share target price on the stock. “The current resource at Semblana is equivalent to about two-and-a-half years of mill feed, but the main target in our opinion is the higher-grade zone, which currently averages six-percent copper, while the rest of the resource averages three-percent copper [which is a lower grade than the reserve at Neves],” he revealed in a note to clients. “However, we fully expect that once Lundin gets some development underground into this area, that tighter-spaced drilling from underground will deliver more pods of higher-grade copper ore.”

At presstime Lundin traded at $3.70 per share within a 52-week range of $3.17-$9.31. The company has 582.5 million shares outstanding.

Neves-Corvo is an underground mine 100 km north of Faro in the western part of the Iberian pyrite belt. The mine has been a significant producer of copper since 1989 and began treating zinc ore in 2006.