Executives: Paul Conibear - President and Chief Executive Officer Marie Inkster - Senior Vice President and Chief Financial Officer Steve Gatley - Vice President of Technical

Services
Analysts: Orest Wowkodaw - Scotiabank Matt Murphy - Macquarie George Topping - Industrial Alliance Lawson Winder - Bank of America Merrill Lynch Oscar Cabrera - CIBC Stefan Ioannou - Cormark Securities Alex Terentiew - BMO Capital Markets Matthew Fields - Bank of America Dalton Baretto -

Canaccord
Operator: Good morning, my name is Dan and I will be your conference operator today. At this time, I would like to welcome everyone to the Lundin Mining Q3 2017 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you, Mr.

Paul Conibear, President and CEO. You may begin your conference.

Paul Conibear: Thank you very much, operator. And thank you everybody for joining us today for Lundin Mining's third quarter results. I naturally point you to the cautionary statements, we will be making number of forward-looking comments throughout the course of the presentation.

And at the end of the presentation to assist in answering any questions that you have, we have with us today Marie Inkster, our Senior Vice President and Chief Financial Officer; and Steve Gatley our Vice President of Technical Services. Operating highlights for the quarter, here we are and Eagle, and all of our projects – that all of our operations are advancing on schedule and on budget. Candelaria delivered strong copper production and remains on target to meet full year production and cash cost guidance. Neves-Corvo copper production was less-than-planned due to low recoveries and throughput as result of mine sequencing. Full-year production guidance has consequently been reduced.

Eagle’s nickel production was on plan and the full-year cash cost guidance has been improved on strong copper by-product production and credits. We had really excellent quarter at Eagle. Zinkgruvan production was slightly below plan on mill throughput with low ore stockpile on the surface and the cash cost guidance has been improved due to very good operating performance on cost basis, while production guidance has been marginally lowered. Neves-Corvo zinc plant is running very well and the production guidance however has been lowered to include allowance for some labour action that we’re experiencing at Neves-Corvo. The Zinc Expansion Project which we announced go ahead in July is progressing well, its progressing on schedule and on budget.

Taking look at our revenue breakdown, obviously really dominated by copper, as the copper price has surged ahead. Very positive contributions from zinc and although the percentage of nickel revenue looks relatively small, the Eagles contribution on a gross basis was quite good to the company's bottom line. I'll turn over the next few slides to Marie Inkster for comments on the financial performance of the company year-upon-year and during the quarter.

Marie Inkster: Thanks, Paul. Specifically here looking at the operating earnings increase, we see the impact of the price and price adjustments having the largest impact on the operating earnings.

We saw a better than realized prices than last year for copper and zinc, while our realized price for nickel was relatively consistent with last year. Cost and FX were also in our favour over last year. Moving to the attributable net earnings, here we look at the attributable earnings from continuing operations. This takes into account 80% of the result from Candelaria. We move to - from a loss of nearly $20 million in the prior year third quarter to earnings of $132 million in the current year.

Operating earnings were $177 million greater than last year's Q3 and we saw that was driven by the metal prices. With those higher earnings of course you will have higher taxes. So we see the effect on tax expense moving from a loss to a profit is nearly $50 million increase in the taxes. Looking at the metal prices, copper and zinc were 42% and 34% better respectively than the same quarter of last year and nickel was flat compared to last year's realized price per pound. We saw significant increases in cash flow from operations and cash flow per share.

The cash flow from operations of $250 million comes straight from our cash flow statement and this includes the effective changes in non-cash working capital which was small at $9 million this year, but last year it was more significant negative $43 million range last year. Stripping out those figures to compare apples-to-apples, we see the comparative operating cash flow before the effects of working capital we still have a significant increase over last year. And on a per share basis this is $0.33 per share. More than double that of the same quarter of last year. On the balance sheet.

We ended the quarter with $2.15 billion of cash, $100 million more than at the end of Q2 and 104 – $1.46 billion higher than the $691 million at the end of last years Q3. Our current cash is approximately $2.2 billion and our net cash $1.2 billion. So we issued an early redemption notice to use some of our excess cash. The early redemption will save us 41.5 per year in interest costs and we still have an excess of $1.5 billion of cash and close to $2 billion in liquidity for growth after we do this transaction.

Paul Conibear: Okay.

Thanks very much, Marie. And you know, the capital allocation obviously the number one question that we get when we talk to shareholders. We put the slide up last quarter and used that again just to remind listeners and the shareholders our number one focus is to grow the company in an accretive manner and with that growth we have excellent opportunities at each of the mines with Brownfield projects and significant exploration programs going at each of those and those programs are going well. Obviously servicing our regular dividend that we started about a year ago and as Marie has noted maintaining a good balance sheet and we think it's been a good accretive move to buy out this $550 million note that we had and we intend to keep our balance sheet very flexible and strong. Moving forward, we are growth oriented.

This has probably been the busiest year that we've had in a long time in regards to looking at potential assets to add to Lundin Mining to give us a strong future. We were very active in three different formal sale processes this year. We stuck very rigorously to our investment criteria and we walked away from all three in fact on putting prices in all three because it didn't meet some of our most important criteria. So we hope other things come up in the near future. We've been busy year-to-date and our intent is to grow the company to both our Brownfield’s expiration and some acquisition.

Taking a look at the details of production guidance, as noted we've been able to improve some of the cash cost guidance from our operations and also adjust when needed to adjust downwards marginally some of the production expectations for the year. So the C1 cash cost guidance has been improved for Eagle and Zinkgruvan and production guidance at Neves-Corvo was lowered in part allowing for the impact of some recent and potential further labour action at the mine. Taking a look at CapEx investment books predominantly sustaining and expansionary you know, staying steady at the last guidance of $490 million. For the year we've made some minor adjustments with a bit more allocated to total capitalized stripping in Candelaria. And we expect to understand a bit on the sustaining capital and Neves-Corvo equal amounts.

I believe through our last quarter we had increased our exploration investment guidance from $65 million to $75 million, it looks like we'll come in around $75 million for the year. Looking ahead as we assemble our budgets for next year expect our exploration effort to be at least $75 million if not more moving forward. So we think we have good growth through the drill bit at all of our operations. Turning to a few comments on each of the mines, Candelaria had a great quarter at $17 per pound, cash operating cost and we're on target to meet full year production guidance there. Lucky taking a look once again at what we can do to enhance the value of this important mine in our portfolio.

We've accelerated the underground mining. We've once again refined the open pit plan taking a 10 or 15 year view where as the last couple of years we're really focused on the next five years. You will see the new plants coming out, like for mine plan for Candelaria towards the end of November or December and you'll get full perspective on the improvements we've been able to make overlay for Candelaria. That will also include updates on our capital reinvestment to reflect the much longer mine life that we have. We have had some good success on receiving expansion of underground production permits for the Candelaria, Candelaria Norte is now operating at about a 8000 tons per day, up significantly from when we started as owners.

We now have permits to go to 14,000 thousand tons a day. Overall in the operation we're operating at least 16,000 times a day from 300 on deposits, two other underground deposits still to be right into the mine plan. We’ve got two sets of studies, as we've been doing the previously announced throughput study to see if we can increase the throughput by 10%, 15%, 20%. We've also been taking a hard look at what we can do just with the incremental plant improvements which will be less capital intensive, but still have good value and we've been modifying the focus of those studies in concert with the improved mine plan that we have over the 10 year production profile in particular. So we hope to have some good positive disclosure on the overall life of mine coming up here in about a month's time.

The big capital investment currently at Candelaria is the Los Diques tailings facility. Its progressing very well. I'll just flip to the photo here in the next slide, maybe doesn't do the size and scale of this project justice, but it's going extremely well when we - when we acquired Candelaria we had allocated using the current estimates at the time about 400 million for this. It looks like will commit about $295 million. We've actually been able to start putting water behind the main embankment to wet the area and we're pretty confident that we'll be able to put tailings into this impoundment [ph] starting sometime in Q1, but certainly at the latest by Q2 next year.

So this has been an extremely safe project. We achieved more than 2 million man hours, 3 million man hours without a lost time incident and we have self performed the majority of us. So quite proud of the achievement from the team down there on this big project. Moving forward to Neves-Corvo, we are continuing to go through complex ores in the short and the medium term, mine sequencing issues, some water quality issues that we have in the hot summer months impacting book throughput and recovery and availability here. On the copper mill, we've performed well on a cost basis propelling through the mill but partly due to the challenges that we had on the metallurgy of the mineral and also allowing for small labour action.

We're being I hope conservative on the copper production guidance, but definitely down from what we planned at the beginning of the year. The zinc expansion project is going very well. We announced approval of that project, I believe at July €260 million investment about $300 million CapEx there. Early days but it's starting out well. We've got about two kilometres of underground development done now, 1.3 kilometres for that is critical path on the main conveyor ramps.

We had a very efficient permitting process to improve the EIA with the Portuguese government which took only six months from the time to submittal. We're now going through the detailed construction permit phase which is called RECAPE [ph] there and we hope to have those RECAPE permits approved and no later than Q1 and be able to start the surface construction of the extended plant. We are on track to double zinc production and getting up to normally 180,000 tons of zinc production capacity to the expanded facilities there in the second half of 2019, ideal time given where our zinc price is and where it's heading. Moving up to Zinkgruvan. We had excellent cash operating cost performance there in the quarter at $0.30 a pound on a zinc basis, that has enabled us to improve the guidance the C1 guidance to $0.35 a pound zinc based on year-to-date performance.

The production has been slightly below plan overall due to mill throughput and we extended that mill which went on line in about April, but we're still catching up on underground feed capacity up there and on the stockpile that we need. This is [indiscernible] milling circuit which means you don't have balls in the grinding mill, so you need to have a fairly large stockpile of a lot of different gradation of size on surface. We went through that stockpile lower than the normal inventory that it keep or catching up there. But consequently I hope we've been conservative here, but we are guiding a little bit lower than the original forecast for zinc production at Zinkgruvan. Exploration is very active on the site drilling in three or four areas and we've got 3 new projects, drilling projects all Greenfield’s.

So it takes a while, but we continue to invest in all of our mines in Brownfield’s exploration. Eagle mine. We were there last week with our quarterly meetings. Beautiful part of the world and an extremely well-run mine. Eagle had another great quarter.

They're having an excellent year-to-date. We had cash operating costs in the quarter of $0.63 to pound nickel, not only benefiting of course from a very strong copper price which gives us a good copper credit there, but there – their performance I think we hit record recoveries and we're hitting record concentrate grades there. So a well-run performing well and despite continued weak nickel price we have very, very good margins here. Given the performance year-to-date, we've been able to improve our C1 cash operating cost guidance down to a $1.10 from a $1.36. Eagle East project going very well.

We spend about $20 million year-to-date on that $10 million more I think will be incurred in Q4. I just go to a sketch here, the lower part of the slide that you're looking at here on the left is the Eagle mine, we are currently mining out of and we are about 31% advanced on the ramp. We expect to have the exploitation mining permit in hand towards year end here. That's reminding us the deposit, and the second set of permits that we need amendments on are related to our tailing disposal, mill operation and water treatment discharge. At the mill those permits we think the dialogue is going very well with the regulator, but they're going through a very thorough process there and we now expect to have the mill amended permits in Q1 possibly Q2 next year.

They are not on the critical path as we step. Ending off an update on the softer side and critical side and increasingly more important side of our business on responsible mining. Our health and safety performance I think at the company is excellent. Four years in a row we have hit new safety records, I think this year we're on track to perform our safety targets and have the best safest year ever at Lundin Mining. We benchmark ourselves against about 25 other companies on our safety record, we are in the best 20%.

And we continue to raise the bar higher each year. Environmental performance in the quarter was good. We did have a tailing sign [ph] break at Neves-Corvo very briefly and that was looked after with no environmental damage at all. We increased our disclosure every year. I think the sustainability report that we put out mid-year this year was the best ever we've had and we’ll continue to increase our transparency and disclosure and set higher targets on the environment footprint and consciences mining.

And all of our operations, community relations at all of our sites are good. Obviously we always strive to make them better and we’ll continue to be more strategic with our social investments at each site and next year expect slightly increased social investments across the board. That wraps up an update on the company and our performance year-to-date and for the quarter. And operator, I'd be pleased to turn it over to the audience for Q&A.

Operator: [Operator Instructions] Your first question comes from the line of Orest Wowkodaw with Scotiabank.

Please go ahead.

Orest Wowkodaw: Hi. Good morning, guys. I wanted to get some more color on what's going on at Neves-Corvo. Obviously it's been a tough year.

I'm curious when you think that operation starts turning the corner with respect to the copper circuit on both throughput and recoveries and grade?

Paul Conibear: Yes, I think - I mean, we're just finalizing our budgets and an update of our kind of our 3 year look ahead. So it'll be I guess about 4 or 5 weeks or so before that will come out or so. You know, I don't want to get into too many specifics. But looking ahead on trends you know, we're in tougher parts of the ore body and you know, Steve you comment as well here. But I would expect you know, we'll have some tricky metallurgy over the next couple of years until we get through some of these phases.

Steve, you maybe we want to comment on trends there, you've got a good knowledge of these ore bodies.

Steve Gatley: Yeah. So we've discussed this before and we're paying a little bit of a price for some of the cash preservation and reduction in development in ‘15 and ‘16 and that's resulted in delayed access to the two types of mineralization we have there. We have the clean and the lower grade soft wet [ph] type mineralization and then we have the high grade that’s much more complex massive sulphide mineralization. As Paul mentioned we are developing our budgets for next year.

That includes accelerated development that will give us more faces in all those areas due to - during 2018 and beyond. We also continue to refine our mining methods to balance higher productivity, lower cost bulks stopes which inevitably come with higher dilution against more selective drift and fill stopes but which come with a higher cost. As you may have noticed that the recovery was particularly Paul during Q3, that is a trend that we've seen on an annual basis. When you get extreme summer temperatures and it was extreme in Portugal this year as you may be aware. The hot water actually has an impact on recovery and the plan.

Paul has mentioned, but we do have a new water treatment plant being commissioned as we speak. And we have this go with other copper plant modifications will improve recovery going forward.

Orest Wowkodaw: Okay. But I guess I'm - what I'm not understanding is sort of what is changed from say the 3 year guidance you would have put out in December of last year specifically in Neves?

Paul Conibear: Yeah. I think I mean, water chemistry is definitely something we've been struggling with, what we're getting is - and it's been it's been progressive.

This used to have a great big conventional tailings pond with a big body of water in it and now you know it's all salt paste tailings. We built a great big water pond to try to improve the water chemistry and store water. Also to go through the summer months, but you got a lot of buildup in Gypsum. Now that we basically almost have a zero discharge closed loop and that's definitely affecting metallurgical recovery, it's also plugging all the plant lines. This is common where you have a lot of gypsum and a lot of mines around the world that have this challenge.

You know, as the as they get older and as you have zero discharge that affects the copper metallurgy. So we've been working on that putting in water treatment plant, hasn’t affect the zinc circuit as much, metallurgy is different there. And you know I think honestly Orest I think we've underestimated the complexity of you know, the ores. This is relatively speaking old copper mine now, best was always mine first. So the cleaner higher grade massive sulphides and cleaner you know, stock works they went up to those first.

So we probably have underestimated some of the complexities and analogy. But we're working on them and you know where you know we intend to get our copper recoveries back up towards the 80% range but it will take time.

Orest Wowkodaw: Okay. And just finally, is it fair to say then that there could be downside risk to the 18, 19 Neves-Corvo copper guidance that you would put out last December based on what you're experiencing right now?

Paul Conibear: Yes. I think that's fair to say, yeah.

Orest Wowkodaw: Okay. Thank you.

Operator: Your next question comes from the line of Matt Murphy with Macquarie. Please go ahead.

Matt Murphy: Morning.

Quick question from me on just your comment on some of the deals you've been looking at and the fact that you didn't even put prices in, it would it be fair to say that these assets are failing on your quality criteria rather than valuation?

Paul Conibear: Not necessarily, I got to be careful what I say and certainly won't divulge what they were, but tube copper and one was zinc poly metallic. One of the copper ones we walked away because of quality. You know, we were pretty certain there were other factors there, but pretty certain that would you know, land in Q4, the curtail 4 and that's not where we want to be, also had some water in likely community issues. The second one would walk away from was you know maybe some potential fatal flaws on water supply tailings and connected to community. And third one at the end of the day was probably just too small and seller expectations on price unrealistic.

Matt Murphy: Got it. Okay, thanks for the color.

Paul Conibear: Thank you.

Operator: Your next question comes from the line of George Topping with Industrial Alliance. Please go ahead.

George Topping: Great. Thank you. Hello, everyone. So Paul, could you give us more details on the main employee demands versus what the management are offering over at Neves for the strike?

Paul Conibear: Yeah, this one really caught us by surprise George. There is - to be a little bit careful what I say, there's a political movement.

The Communist Party is very dominant, has historically been very dominant in regards to unions and labor in Portugal. And there is a country wide movement. The issues we're having at Neves-Corvo are not specific to at Neves-Corvo, it was another 12 industrial businesses that are undergoing the same pressure from the unions which is politically motivated by one particular party. And my understanding is that the - this political party is looking for 31.5 hour work week and the abolishment of seven days a week at industrial operations, they’d like to go to Monday to Friday. So you know, that's obviously not on for any mining operation or any - any continuous manufacturing or automobile business or anything.

So it completely caught us by surprise. And this came up I guess probably in the last eight weeks. Fortunately this system of strikes at least currently in Portugal is you know, the unions have a meeting, they give you advance notice. They actually tell you the periods and for how long they're going to go on strike. So we had I think about 4 day strike.

We were able to get some you know, workers into the mine. But you know, pretty quickly you know production slow down and stopped. And November, we had another five days expected of disruption and possibly we'll have another four or five six days or something, they haven't given specifics in December.

George Topping: Right. And the plant - the plant is fully shut down as well, it can't run on stockpiles?

Paul Conibear: Well, we have stockpiles, but this a - this is the kind of metallurgy that we don't have stockpiles on surface very long they oxidize, so we run to those pretty quickly.

George Topping: I see. Okay. Next would be on Candelaria that the production increases you're talking about, I know there is – you’re going to release more information in November. But do you have a timeframe for when you would expect to start to see the increased production come through complete those projects?

Paul Conibear: Yeah, that would be premature for me to do any forward looking thoughts on that George.

George Topping: Okay.

Fair enough. And then just lastly you know, with the changes in finance policies in Europe, did you look at euro hedging at all?

Paul Conibear: We have worked out that the last time that we got advice from one of the big banks they were saying euro was going to parity. Good thing we didn't do it then.

Marie Inkster: We have looked at it more recently actually and when we approved the project we did look at some euro call option, as we do with Candelaria and the price was actually quite excessive. And when we were looking at you know, trying to protect 115 when the euro was 111, it would have cost us the equivalent of going exposed at a $1.20.

So looking at the forward curves we felt we could take the risk on it being under a $1.20.

George Topping: So that no hedging plan on the euro for now?

Marie Inkster: No we purchased some euros in advance and looking at where its suppose to go, it wasn't compelling, the cost of the hedging was quite high.

George Topping: Got it. Great. Thank you.

Operator: Your next question comes from the line of Lawson Winder with Bank of America Merrill Lynch. Please go ahead.

Lawson Winder: Hi, Paul, Marie, Steve, good morning. Just quickly on the labor contract that you guys signed in Chile, just two aspect to that, was there any wage increase associated with that. And then secondly, can you give us an idea of sort of the magnitude of the cash bonus on signing and whether or not that will have any like onetime impacts in Q4 cash cost there? Thanks.

Paul Conibear: Marie?

Marie Inkster: Yes. We have signed up with three of the unions and there was an impact on cash flow and on expense both in Q3 and Q4, you'll see some impact of that. And in terms of the per person, the total compensation per person and it was mixed between a combination of signing bonuses, retention bonuses, special bonuses, loans, it all came up to about 20,000 per person and about a 3,000 staff loan per person, so that's recoverable through salary deductions over the term. There's a retention bonus in that initial 20,000 on signing, which is about 14, 15,000 per person and not is earned over time. So if they quit during the time of the next two years we've got some portion of that clawed back from their severance payment.

But all in all, the total of the - what we expect to have to pay for contracts and this includes a supervisor group that we haven't yet agreed with, probably will about [Technical Difficult] most of that cash impacts will be in 2017. But the expense will be split between 2017 and ‘18. So the expense would have been - the remainder for next year. And then the cash flow you'll see most of that coming through some of it this year, some of it next year. But the majority this year.

Lawson Winder: Okay. So in terms of like the baseline wage increase, it sounds like there might not have been much I mean, it sounds like the increase is…

Marie Inkster: 2% - 2% for about a thousand people.

Lawson Winder: Got you. Okay. Thanks very much.

Marie Inkster: Yes.

Operator: Your next question comes from the line of Oscar Cabrera with CIBC. Please go ahead.

Oscar Cabrera: Thank you, operator. Good morning, everyone.

Paul, just interested in the first comments on Neves-Corvo, with regard to cash preservation in 2015 and ‘16 and then accelerated development in ‘19. Could you quantify those for us?

Paul Conibear: I don't have you know, the exact numbers off the top of my head Oscar, but I mean you know historically we've been - you know if you go back and take a look at sustaining capital at Neves-Corvo sort of range between as for $70 million to $90 million a year. I forget the exact numbers for you know ‘15 and ’16, but probably in the $40 million to $50 million range, this year again, I guess we're looking at what about $40 million. So you know, I think a minimum size sort of on a copper or equivalent basis 50,000 tons a year. Small things take as much effort as big things.

And you know I think one of the criteria that has been able to evolve over time is as you know where's our sweet spot or sweet spot will probably be 159,000 tons of copper production here in size range. And with the balance sheet we have now where we always were looking at things incrementally in the past. You know, we could look at something transformational, but I don't know what that would be, as I think that's very elusive. And the last criteria which again we can be more flexible on now because of the stage and strength of the company, as what stage assets are in the past, you know before we [indiscernible] before we did Candelaria, they really need to be cash flowing or have quite a bit of confidence we could be cash flowing within sort of four or five years if it was a project. We have the strength now I think to take you know, a longer term view, if an exciting project came up.

Oscar Cabrera: Okay. Exciting project, but Greenfield project?

Paul Conibear: We're open to all phases and also with something that was in the early days and Greenfield you know, and if it looked like it was going to have any size we might partner. We're not looking at anything like that right now.

Oscar Cabrera: Okay. Great.

Thank you very much.

Operator: And your next question comes from the line of Stefan Ioannou from Cormark Securities. Stefan, your line is open.

Stefan Ioannou: Great. Thanks very much.

Most of my questions have been asked. But just curious, I think how long do you think you will take to sort of get the mining in the stockpile caught up to sort of start feeding the you know the mill at sort of that new plus 10% capacity range?

Paul Conibear: I think we should be - better be there in Q1.

Stefan Ioannou: Okay. So it's coming pretty quick. Okay.

And then just in the presentation you mentioned at Los Diques, the Los Diques is down you're looking, phase two and three lists, could maybe just give us some guidance on sort of timelines and costs for those activities?

Paul Conibear: We're off - we're already well advanced on that.

Stefan Ioannou: Yes.

Paul Conibear: So it's kind of being absorbed in the…

Stefan Ioannou: Okay…

Paul Conibear: Existing Los Diques budgets. But there will be money spent next year. You know when the forecast that we've done because we changed the pit sequencing and the strip ratios and everything you'll see that detail in about five weeks.

But you know, when we take a look at I guess - so I don't know whether three or four year view by advancing the phases two and three now. It's actually our shortest waste fall. And over that several year period you know we're sort advancing for 60 million you know, by advancing now if you took I think a five year view.

Stefan Ioannou: Okay, Okay, good. Thanks very much guys.

Paul Conibear: Thank you.

Operator: Your next question comes from the line of Alex Terentiew from BMO Capital Markets. Alex, your line is open,

Alex Terentiew: Hi, good morning. Just a couple of questions on Eagle and also Candelaria. So Eagle, you guys have been getting some pretty good great grades there, good - very good recoveries as well.

You know the expectation was for grades to trend a bit lower, but it doesn’t seem like we're seeing it is much of that as we expected. You know what's happening there, is it just better grades than you planned or is there some change in understanding of the deposit or different mine plan and any color would be helpful?

Paul Conibear: Yeah, before year-to-date there has been a little bit of change in sequencing. I think this year we had some ground problems in one area, so we moved over to another area of higher grade than in the plan. I think we're back on plan now. You know, we've been pleasantly surprised I guess since we started mining three years.

We're getting better copper grades than we were in the original model by a little bit. And certainly because the recoveries have been you know excellent that's really made a difference. We're way above our original base plans on nickel recovery and always achieving high copper recovery. So you know that produces more metal.

Steve Gatley: Paul, has said we infill, drill the ore body because it's so rich and quite close census [ph] once we’ve down there.

And if you look at the detail on our statement we issued in September you will see that we very fractionally increase the size of the ore body if you take out the depletion. So that's contributing as well. But over the life of the mind we will deposit, we will see the grades decline over time until Eagle East comes into production in 2020.

Alex Terentiew: Okay. Thank you.

And then just lastly Candelaria, I recall last quarter you guys talking about moving to South mining from contractor Candelaria north. Has that started yet? And if it has, have you’ve seen any benefits you expected?

Steve Gatley: It's in progress for the first step was a purchase of five big underground home park. So you know, bills haven't arrived yet. They're arriving imminently So, we're taking over underground mining. We’ve got three contractors there.

So we're just focused on one of the mines now and taking it over slowly in stages and that will be I think become more evident next year.

Alex Terentiew: Okay, great. And then just lastly on Candelaria, you talked a little bit there you have permits to go to 14000 tons a day and you guys are now 8 or 8.5. Can you raise your underground mining rate, say next year or over the next few quarters and displace some low grade open pit or stockpile or is there a bunch of underground you know development capital spending that's needed before you can do that?

Paul Conibear: There are huge amounts of underground development because of the geometry of the ore bodies kind of in our case got a lot of development. As we head towards [indiscernible] that's where some more underground development will be required and you'll see some of that coming up in our new life of mine plan which will - you get that detail in December.

Alex Terentiew: All right. Great. Thanks, guys.

Operator: Your next question comes from the line of Matthew Fields with Bank of America. Please go ahead.

Matthew Fields: Everyone is just looking at it this morning and since you closed the acquisition of Candelaria on November 3rd 2014 your stocks has almost doubled, which kind of blows away all your peers. So at the same time you've now with this latest announcement cut your debt load in half and generated a ton of free cash flow over the same period. So well done.

Paul Conibear: Thank you.

Matthew Fields: I guess everybody wants to know where we go from here with you know, over $2 million of cash sort of burning a hole in your pocket.

You talked about some of your criteria for acquisitions with Oscar, so I appreciate that. You know given your set of tools available to you between M&A, investing internally, further reducing debt or sort of more dividends and buybacks, can you tell us where your head might be at on sort of how to use - that allocate that capital as you think most effectively?

Paul Conibear: I guess, I'm not sure what more I can say kind of specific criteria, but you know if you take a look ahead in the three to - three to five years from today what our vision is for Lundin Mining is you know we want to bolt ourselves up in capability and depth and you know ideally add you know a couple more really solid profitable assets to our companies who are running six or seven mines, I think would be an ideal size to give us some more core strength that you know, we're on the edge of project execution, tactical depth, diversity in the mines we have and the locations we're in. We're currently producing about 400,000 tons of metal, obviously copper dominant. You know, I think an ideal size would be over 600,000 tons of metal, so 6, 7, 800,000 you know spread over the next three to five years to get there. You know I think that and staying away from fourth quarter core trial assets that you may have to drip feed during the bottom of the cycle, we don't want to have assets like that.

So you know, it's not - money is not burning a hole in the pocket. We're very patient and I think we've proven we've been patient in the past. So we're going to steadily continuously look at opportunities, be disciplined but we would like to grow.

Matthew Fields: So it sounds like M&A is sort of your preferred route of capital allocation at this point?

Paul Conibear: Yes, significant component. I mean, it's not huge dollars, but something if you can't buy you have to find.

So you know we've been progressively increasing and even at the bottom of the market we still had very big drill budgets and they produce good returns. If you take a look at what we've achieved in you know through the drill better Candelaria when we bought Candelaria we had – there was Steve 13 vehicles in numbers?

Steve Gatley: At Candelaria, I think we've been particularly successful at acquisition we have 13 million tons of underground reserve and today that stands at 90 million tons of underground reserve and it's on the - on the back of that reserve increase that we can contemplate expansions of Candelaria and Norte Candelaria and so and as we mentioned its 14,000 tons a day, we now have licenses for that – we about to start studying can we go bigger still, because we expect those reserves to increase. And you talk about our success since the acquisition of Candelaria, if you include the depletion both copper and gold are up 68%, metal containing reserves since acquisition, that represents about 1.4 million tons of copper and over a million ounces of gold. So we've been very successful with the drill that Paul mentioned.

Paul Conibear: That's why we continue to highlight – we like to explore and we think Brownfield’s opportunity at all four mines is continues to be above average.

But obviously on top of that we would like to add another couple assets if we can find things that’s better.

Matthew Fields: And then lastly when you talked about your sort of preference for copper and you probably stay away from nickel. You didn't mention precious metals. This is one of gold or precious metal operations be on the radar?

Paul Conibear: While they are nice when they come along for the ride. But you know as you know, it's a pretty competitive for a lot, more gold companies out there.

There are very few base metals companies. I mean, we have - in my time here at Lundin Mining we've never gone elected pure gold project, and nor have we - nor have we ever seriously looked at a gold dominant you know copper gold.

Matthew Fields: Okay. Well, thanks very much and well done again.

Paul Conibear: Thank you.

Operator: And your final question comes from the line of Dalton Baretto from Canaccord. Please go ahead.

Dalton Baretto: Hey. Good morning, guys. Most of my questions have an answered.

But maybe just a few quick housekeeping questions on Candelaria. First of all, looking at the run rate it averaged about 80,000 tons a day - lower than typical. Just wondering why that was?

Paul Conibear: I mean you know, quarter-to-quarter depending where we're operating in the pit and depending on how much low grade stockpile we move and that ore is a lot harder. So I mean throughput that mill can range from 60,000 tons of day to a 100,000 tons of day. It obviously doesn't do that day in day out.

But you know over a periods of a month or something you can get those fluctuations depending on the hardness of ore. Steve, I don’t know if any other comments there. We may have – we did have plant maintenance, so I can't get into the statistics of when we're down for you know no re-liners and things like that or you know cut for maintenance that may have factored into the 80 number.

Steve Gatley: Yeah. It's primarily hardness related.

Paul, as you mentioned one thing to note the underground ore tends to be harder because it's deeper. You may have noticed in Q4 last year we did over 8 million tons in the quarter. Last week we were mining around the so-called [indiscernible] which runs through the center of the pit there the ore has been fracted [ph] and is softer and therefore we are able to increase throughput. So you will see and if you look to [indiscernible] reports slight annual variations in throughput that's driven by ore hardness.

Dalton Baretto: Understood.

That's great guys. And then just on the CapEx guidance, the Candelaria, the CapEx guidance for the year implies a pretty big slug in Q4, is most of that just the [indiscernible] brought forward?

Paul Conibear: Sorry can you - I didn't hear the complete question.

Dalton Baretto: Okay, sorry. The CapEx guidance at Candelaria, the full year CapEx guidance of $335 million does implies about $150 million in Q4. Just wondering is a lot of that related [indiscernible] phase two and three been brought forward or underground development what's driving that?

Marie Inkster: There are a few things driving that, if you recall we updated the guidance for a new investment in capital, so trucks and those are lump sum payment.

So we anticipate some of those. And also there is quite a push right now at the final stages before commissioning of Los Diques. So we have a lot of personnel on site. So it's a combination of those.

Paul Conibear: [indiscernible] in their forecast can they spend the money.

But they seriously can and we don't want them to understand on that, we want them to keep progress at schedule.

Dalton Baretto: Okay, great. And maybe just one last question. There's a line in the MD&A that says that there are permit approvals to [indiscernible] as well as the smaller meltdown and you need them by the end of the year. What happens if you don't get them by the end of the year?

Paul Conibear: That's a good question.

[indiscernible] going to admit is just entering election 3. And so the processing of some of these things has slowed down. We're expediting at all levels in all of the - at the local regional and federal level there where that these are normal course two or three year normal course renewals. We've always got these things sometimes it's just been in the nick of time. So I think we've all got them.

You know we - you know we're pressing to get them. I think we'll be okay.

Dalton Baretto: Okay, great. That’s all from me. Thanks, guys.

Paul Conibear: Yeah. Well, thank you very much for listening in to our call. I know there's lots of other reporters here for the analysts you probably have much more calls in 10 minutes. I look forward to speaking with you all again as we present our year end results. Thank you.

Operator: Thank you everyone for attending today. This will conclude today's call. And you may now disconnect.