Shares of Lundin Mining Corporation (TSX:LUN) (Nasdaq Stockholm:LUMI) closed down 9.4% on Monday at $10.27 after announcing that it would need to cut guidance at its copper-gold Candelaria complex in Chile. The guidance for 2021 production was cut to 150,000-155,000 of copper and 85,000-90,000 oz of gold on a 100% basis. The near-term adjustment comes after the company operated in line with forecasts to date during the second quarter of 2021 due to the short-term mining sequence in Phase 10 for the second half of the year.
The reduction hit the company and its shares hard as Candelaria originally accounted for over half of Lundin’s previous forecast 2021 guidance of 275,000-299,000 tonnes of copper and 170-180,000 oz of gold. The company took a hit knocking its market cap down to $7.6 billion
Adding New Precautionary Measures Slowing Output
The Candelaria open pit contains known fault zones, and Lundin Mining (TSX:LUN) (Nasdaq Stockholm:LUMI) is continuously monitoring these areas. Part of the change comes from the need to manage the production risks in a localized area of Phase 10 that, while nominal in volume, could eventually impact activities on lower levels of the site and on the main ramp. Reducing these risks means taking additional precautionary measures, including a wider step out in the area, mining smaller benches and with smaller blasts, and delaying mining immediately below the fault zone to later phases.
The reduction in output is the result of the additional caution during the mining process while in the Phase 10 fault zone areas. The additional measures will affect productivity and result in less ore production from the area over the remainder of 2021. The second half of 2021 is expected to return average copper mill feed grades for the Candelaria Copper Mining Complex of 0.64% from low-grade stockpiled ores. The expected feed grade for the year is 0.59% copper.
Future Guidance Uncertain
Lundin Mining (TSX:LUN) (Nasdaq Stockholm:LUMI) may need to update the outlook for the life-of-mine plan pending the outcome of a review. With these changes in mine sequence creating new impacts for the project, some further guidance may need modification. However, production outlook for the company’s other operations as well as cash-cost guidance will be provided in July along with the second quarter operating results, and these are expected to be generally the same.
The Candelaria mine has been a productive project for the company. In 2019, the company reinvested in the mine fleet to help with efficiency and bring the project into alignment with the company’s overall clean mining goals. The project goes back to 2014 when Lundin Mining (TSX:LUN) (Nasdaq Stockholm:LUMI) acquired an 80% interest and operatorship of the Candelaria Copper Mining Complex in Chile, with the other 20% owned by Sumitomo.