Lundin Acquiring Interest in Serbian Copper-Gold Project

Lundin Mining has entered into an agreement with an affiliate of Freeport-McMoRan to purchase an interest in Freeport’s stake in the Timok project in Serbia. Freeport currently holds a 55% interest in the project and is the operator; Reservoir Minerals holds the remaining 45%. Upon the delivery of a feasibility study, Freeport can earn an additional 20% interest. Consideration for Lundin’s purchase totals $262.5 million payable in stages upon the achievement of key development milestones.

The Timok project hosts the high-grade Cukaru Peki copper-gold deposit, located approximately 6 km south of the famous, century-old RTB Bor copper-gold mining/smelting complex. The region has a rich mining history, necessary infrastructure, and a skilled workforce.

The Cukaru Peki deposit is characterized by an Upper Zone that hosts high-grade massive and semi-massive sulphide mineralization and a Lower Zone of porphyry-style mineralization. Under the purchase agreement and subject to a right of first refusal on the part of Reservoir, Lundin will acquire 100% of Freeport’s interest in the Upper Zone and 28% of Freeport’s interest in the Lower Zone.

The Upper Zone currently has an inferred resource of 65.3 million mt grading 2.6% copper and 1.5 g/mt gold. No resources have yet been determined for the Lower Zone. Current planning calls for the Upper Zone to be developed first, while drilling and other project development work continues for the Lower Zone.

Lundin President and CEO Paul Conibear said, “This high-quality copper/gold project fits ideally within our overall asset base of operations in the Americas and Europe. This transaction enables the existing Freeport/Reservoir partnership to leverage our proven underground base metals development, construction, and operating skill sets to advance the Timok project into operation in a timely manner. The Timok project is expected to enhance the company’s long-term copper growth pipeline, while preserving our strong balance sheet.”

As part of the transaction, Lundin will be appointed as operator of the Timok project until the occurrence of certain events, and Lundin will advance the development of both the Upper and Lower Zones in accordance with approved budgets and work programs. Until the delivery of a feasibility study, Lundin will fund 100% of the Upper Zone development costs, as well as $20 million of agreed Lower Zone work. Lundin and Freeport will fund 28% and 72% of all other Lower Zone development costs, respectively.

After the delivery of a feasibility study, Lundin and Reservoir will be responsible for funding the development of the Upper Zone on a pro rata basis (75%/25%, respectively) and each will be entitled to its pro rata share of economic benefits of the Upper Zone. Freeport, Reservoir, and Lundin will be responsible for funding of the development of the Lower Zone on a pro rata basis (54%/25%/21%, respectively) and each will be entitled to its pro rata share of economic benefits of the Lower Zone.