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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Lundin Mining Corporation    LUN   CA5503721063

LUNDIN MINING CORPORATION

(LUN)
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Lundin Mining : 2020 Q3 MD&A and Financial Statements m

10/29/2020 | 05:05am EST

Management's Discussion and Analysis

For the three and nine months ended September 30, 2020

This management's discussion and analysis ("MD&A") has been prepared as of October 28, 2020 and should be read in conjunction with the Company's condensed interim consolidated financial statements for the three and nine months ended September 30, 2020. Those financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. The Company's presentation currency is United States ("US") dollars. Reference herein of $ or USD is to United States dollars, C$ is to Canadian dollars, CLP is to Chilean pesos, BRL is to Brazilian reais, € refers to euros, and SEK is to Swedish kronor.

About Lundin Mining

Lundin Mining Corporation ("Lundin Mining" or the "Company") is a diversified Canadian base metals mining company with operations in Brazil, Chile, Portugal, Sweden, and the United States of America, primarily producing copper, zinc, gold and nickel.

Table of Contents

Highlights ....................................................................................................................................

1

Financial Position ........................................................................................................................

3

Outlook .......................................................................................................................................

4

Selected Quarterly Financial Information...................................................................................

6

Revenue Overview ......................................................................................................................

7

Financial Results .........................................................................................................................

11

Mining Operations ......................................................................................................................

13

Production Overview .............................................................................................................

13

Cash Cost Overview ...............................................................................................................

14

Capital Expenditures..............................................................................................................

15

Candelaria..............................................................................................................................

16

Chapada .................................................................................................................................

18

Eagle ......................................................................................................................................

20

Neves-Corvo ..........................................................................................................................

21

Zinkgruvan .............................................................................................................................

23

Metal Prices, LME Inventories and Smelter Treatment and Refining Charges...........................

24

Liquidity and Financial Condition................................................................................................

25

Related Party Transactions .........................................................................................................

26

Changes in Accounting Policies and Critical Accounting Estimates and Judgments ..................

26

Non-GAAP Performance Measures ............................................................................................

27

Managing Risks ...........................................................................................................................

33

Management's Report on Internal Controls...............................................................................

34

Outstanding Share Data..............................................................................................................

34

Cautionary Statement on Forward-Looking Information

Certain of the statements made and information contained herein is "forward-looking information" within the meaning of applicable Canadian securities laws. All statements other than statements of historical facts included in this document constitute forward-looking information, including but not limited to statements regarding the Company's plans, prospects and business strategies; the Company's guidance on the timing and amount of future production and its expectations regarding the results of operations; expected costs; permitting requirements and timelines; timing and possible outcome of pending litigation or labour disputes; timing for any required repairs and resumption of any interrupted operations; the results of any Feasibility Study, or Mineral Resource and Mineral Reserve estimations, life of mine estimates, and mine and mine closure plans; anticipated market prices of metals, currency exchange rates, and interest rates; the development and implementation of the Company's Responsible Mining Management System; the Company's ability to comply with contractual and permitting or other regulatory requirements; anticipated exploration and development activities at the Company's projects; and the Company's integration of acquisitions and any anticipated benefits thereof. Words such as "believe", "expect", "anticipate", "contemplate", "target", "plan", "goal", "aim", "intend", "continue", "budget", "estimate", "may", "will", "can", "could", "should", "schedule" and similar expressions identify forward-looking statements.

Forward-looking information is necessarily based upon various estimates and assumptions including, without limitation, the expectations and beliefs of management, including that the Company can access financing, appropriate equipment and sufficient labour; assumed and future price of copper, nickel, zinc, gold and other metals; anticipated costs; ability to achieve goals; the prompt and effective integration of acquisitions; that the political environment in which the Company operates will continue to support the development and operation of mining projects; and assumptions related to the factors set forth below. While these factors and assumptions are considered reasonable by Lundin Mining as at the date of this document in light of management's experience and perception of current conditions and expected developments, these statements are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements and undue reliance should not be placed on such statements and information. Such factors include, but are not limited to: volatility and fluctuations in metal and commodity prices; global financial conditions and inflation; risks inherent in mining including but not limited to risks to the environment, industrial accidents, catastrophic equipment failures, unusual or unexpected geological formations or unstable ground conditions, and natural phenomena such as earthquakes, flooding or unusually severe weather; uninsurable risks; changes in the Company's share price, and volatility in the equity markets in general; the threat associated with outbreaks of viruses and infectious diseases, including the novel COVID-19 virus; risks related to negative publicity with respect to the Company or the mining industry in general; reliance on a single asset; potential for the allegation of fraud and corruption involving the Company, its customers, suppliers or employees, or the allegation of improper or discriminatory employment practices, or human rights violations; actual ore mined and/or metal recoveries varying from Mineral Resource and Mineral Reserve estimates, estimates of grade, tonnage, dilution, mine plans and metallurgical and other characteristics; risks associated with the estimation of Mineral Resources and Mineral Reserves and the geology, grade and continuity of mineral deposits including but not limited to models relating thereto; ore processing efficiency; risks inherent in and/or associated with operating in foreign countries and emerging markets; security at the Company's operations; changing taxation regimes; health and safety risks; exploration, development or mining results not being consistent with the Company's expectations; unavailable or inaccessible infrastructure and risks related to ageing infrastructure; counterparty and credit risks and customer concentration; risks related to the environmental regulation and environmental impact of the Company's operations and products and management thereof; exchange rate fluctuations; reliance on third parties and consultants in foreign jurisdictions; community and stakeholder opposition; civil disruption; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; uncertain political and economic environments; litigation; regulatory investigations, enforcement, sanctions and/or related or other litigation; risks associated with the structural stability of waste rock dumps or tailings storage facilities; changes in laws, regulations or policies including but not limited to those related to mining regimes, permitting and approvals, environmental and tailings management, labour, trade relations, and transportation; climate change; compliance with environmental, health and safety laws; enforcing legal rights in foreign jurisdictions; information technology and cybersecurity risks; estimates of future production and operations; estimates of operating, cash and all-in sustaining cost estimates; delays or the inability to obtain, retain or comply with permits; compliance with foreign laws; risks related to mine closure activities and closed and historical sites; challenges or defects in title; the price and availability of key operating supplies or services; historical environmental liabilities and ongoing reclamation obligations; indebtedness; funding requirements and availability of financing; liquidity risks and limited financial resources; risks relating to attracting and retaining of highly skilled employees; risks associated with acquisitions and related integration efforts, including the ability to achieve anticipated benefits, unanticipated difficulties or expenditures relating to integration and diversion of management time on integration; the estimation of asset carrying values; internal controls; competition; dilution; existence of significant shareholders; conflicts of interest; activist shareholders and proxy solicitation matters; risks relating to dividends; risks associated with business arrangements and partners over which the Company does not have full control; and other risks and uncertainties, including but not limited to those described in the "Risks and Uncertainties" section of the Annual Information Form and the "Managing Risks" section of the Company's MD&A for the year ended December 31, 2019, which are available on SEDAR at www.sedar.com under the Company's profile. All of the forward-looking statements made in this document are qualified by these cautionary statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated, forecast or intended and readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking information. Accordingly, there can be no assurance that forward-looking information will prove to be accurate and forward-looking information is not a guarantee of future performance. Readers are advised not to place undue reliance on forward-looking information. The forward-looking information contained herein speaks only as of the date of this document. The Company disclaims any intention or obligation to update or revise forward‐looking information or to explain any material difference between such and subsequent actual events, except as required by applicable law.

Highlights

Operational Performance

All operations continued to effectively manage costs, but metal production was impacted by lower grades and throughput. In addition, while there was no significant impact to production, the Company had two unplanned operational suspensions in the last week of the quarter.

The Company continues to manage and respond to the COVID-19 pandemic and has implemented preventative measures to ensure the safety of its workforce, local communities and other key stakeholders. To date, production disruptions as a result of COVID-19 have been minimal and there has been no significant disruption in the delivery or receipt of goods at our operations.

Candelaria (80% owned): Candelaria produced 35,836 tonnes of copper, and approximately 21 thousand ounces of gold in concentrate on a 100% basis in the quarter. Copper production for the quarter was lower than the prior year quarter primarily due to lower grades. Ore milled during the third quarter of 2020 significantly improved over that achieved in the first two quarters of the year as measures to address variability in ore hardness and mill circuit availabilities began to take hold. Mining is advancing through the areas of Phase 10 which were in proximity to where pit wall displacement issues occurred in Phase 9, without issue. Copper cash costs1 of $1.37/lb for the quarter were better than the prior year comparable quarter largely owing to the impact of favourable foreign exchange.

Chapada (100% owned): Chapada produced 12,990 tonnes of copper and approximately 24 thousand ounces of gold which were lower than the prior year quarter due primarily to lower throughput as a result of expected increase in ore hardness as well as the mill interruption at quarter-end. Processing activities were interrupted on September 27, 2020 when the protection system at the operation's main electrical substation failed after the restoration of an outage, damaging all four SAG and ball mill motors. Two spare motors have since been installed and the operation is currently operating at approximately 30% of its throughput capacity. A return to full production is expected late in the fourth quarter. Despite the late quarter interruption, copper cash costs of $0.21/lb for the quarter were better than expected benefitting from favourable foreign exchange and higher gold by-product prices.

Eagle (100% owned): Eagle produced 4,854 tonnes of nickel and 5,055 tonnes of copper during the quarter. Nickel and copper production was higher than the prior year quarter due to higher grades from Eagle East. By-product credits, aided by rising copper prices, exceeded gross cash costs in the quarter resulting in nickel cash costs of $(0.63)/lb. Gross costs were lower primarily due to treatment and refining charges.

Neves-Corvo(100% owned): Neves-Corvo produced 6,518 tonnes of copper and 15,459 tonnes of zinc for the quarter. Copper and zinc production were lower than the prior year quarter due to lower throughput. A voluntary 5-day suspension of mining and milling operations took place following a fatal accident on September 25, 2020. The Company held safety stand downs at all its operations globally and remains committed to safe production. Copper grades were also lower while zinc grades improved over the prior quarter. Copper cash costs of $1.97/lb for the quarter were higher than the prior year quarter due to lower sales volumes which were partially offset by higher by-product credits from higher zinc prices.

Restart of the Zinc Expansion Project (ZEP) is on track for early 2021. During the third quarter, work continued to prepare the surface and underground construction sites for the restart. Preparation work that is planned for the fourth quarter of 2020 includes ventilation raise work, activities on the SAG mill, including commissioning with waste, and surface conveyor installations.

Zinkgruvan (100% owned): Zinc production of 17,328 tonnes was higher than the prior year quarter due to higher achieved throughput. Lead production of 5,571 tonnes was lower than the prior year quarter due to lower feed grades. Zinc cash costs of $0.55/lb were higher than the prior year quarter as a result of higher per-unit operating costs as well as unfavourable foreign exchange.

1 This is a non-GAAP measure - see page 27 of this MD&A for discussion of non-GAAP measures.

1

Total production

(Contained metal in

YTD

2020

Total

2019

concentrate)

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Copper (t)ab

188,896

61,444

65,285

62,167

235,498

67,131

74,560

47,685

46,122

Zinc (t)

101,316

32,787

31,582

36,947

151,515

38,925

35,028

37,116

40,446

Gold (koz)b

128

45

44

39

142

43

58

21

20

Nickel (t)

11,809

4,854

3,380

3,575

13,494

2,651

3,232

3,398

4,213

a - Candelaria's production is on a 100% basis.

b - Chapada results included are for the Company's ownership period.

Financial Performance

  • Gross profit for the quarter ended September 30, 2020 was $199.3 million, an increase of $70.7 million compared to the prior year quarter. The increase was primarily due to higher realized metal prices and price adjustments ($81.0 million), partially offset by lower sales volumes ($9.1 million).
    On a year-to-date basis, gross profit was $318.8 million, an increase of $23.8 million over the prior year comparative period due to the acquisition of Chapada in July 2019 ($81.2 million) and favourable foreign exchange ($51.5 million), partially offset by lower metal prices and price adjustments ($46.6 million) and higher depreciation ($67.6 million).
  • Net earnings for the quarter ended September 30, 2020 were $133.6 million, an increase of $101.5 million compared to the prior year quarter. The increase was attributable to higher gross profit, lower finance costs and lower income taxes.
    On a year-to-date basis, net earnings were $68.3 million, a decrease of $16.1 million from the prior year comparative period as lower general exploration and business development expenses, higher foreign exchange gains of $38.9 million and lower finance costs were more than offset by higher income taxes from the inclusion of Chapada mine.
  • Adjusted earnings1 for the quarter were $106.4 million, an increase of $80.8 million over the prior year quarter due mainly to higher gross profit. On a year-to-date basis, adjusted earnings were $120.0 million, $42.5 million higher than the prior year primarily due to higher gross profit, foreign exchange gains and lower finance and general exploration and business development costs.

Corporate Updates

  • On September 8, 2020, the Company reported its Mineral Resource and Mineral Reserve estimates as at June 30, 2020. On a consolidated and attributable basis, estimated contained metal in the Proven and Probable Mineral Reserve categories totalled 5,518 kt of copper, 3,123 kt of zinc, 100 kt of nickel, 936 kt of lead and 6.9 million ounces of gold.
  • On September 25, 2020, the Company reported that a fatal accident occurred at its Neves-Corvo mine in Portugal. The incident occurred during underground mining operations. No other personnel were injured in the incident and the scene has been secured. Operations were temporarily suspended.
  • On September 27, 2020, the Company announced that processing activities have been interrupted at the Chapada mine in Brazil. The operation suffered a power outage in the morning of September 27, 2020 and when power was restored, the protection system at the operation's main electrical substation failed, resulting in significant damage to all four SAG and ball mill motors. In addition to assessing a staged resumption of

1 This is a non-GAAP measure - see page 27 of this MD&A for discussion of non-GAAP measures.

2

processing, the Company will be bringing forward planned maintenance and refocusing mining on waste removal and development activities.

  • On October 7, 2020, the Company reported that mediation with Candelaria's Mine Workers Union, which represents approximately 350 workers, ended without an agreement thereby putting the Union in a legal position to strike.
    On October 18, 2020, the Company announced that despite mediation with the Candelaria AOS Union, the parties had failed to reach an agreement and Candelaria AOS Union could legally be on strike commencing October 20, 2020.
    Both the Mine Workers Union and the AOS Union are currently on strike and, as a result, Candelaria operations are temporarily suspended. Critical works continue to be executed to protect required onsite personnel, the operation and the environment.

Financial Position and Financing

  • Cash and cash equivalents of $222.0 million as at September 30, 2020 decreased by $62.0 million during the quarter. Cash flow from operations of $272.2 million was used to invest in capital expenditures ($89.8 million), pay shareholder dividends ($22.3 million) and the derivative liability related to the Chapada acquisition ($25.0 million), as well as make distributions to non-controlling interests ($26.0 million). The Company also repaid approximately $160.0 million in debt on a net basis, including $145.0 million on its revolving credit facility.
    On a year-to-date basis, cash and cash equivalents decreased by $28.6 million as cash flow from operations of $393.2 million was more than offset by capital expenditure of $331.0 million and cash flow used in financing activities of $80.7 million.
  • Net debt1 of $124.0 million as at September 30, 2020 reflects an increase of $63.8 million since December 31, 2019. Operating cash flow of $393.2 million for the first nine months of 2020 was offset by capital investment ($331.0 million), dividend payments to shareholders ($64.9 million), distributions paid to non-controlling interests of $26.0 million and the negative effect of foreign exchange on cash of $23.0 million.
  • As of October 28, 2020, the Company had a cash and net debt balance of approximately $280.0 million and $65.0 million, respectively.

1 These are a non-GAAP measure - see page 27 of this MD&A for discussion of non-GAAP measures.

3

Outlook

Candelaria's guidance was withdrawn on October 18, 2020 to reflect the temporary suspension of operations due to the current labour action. Guidance for Chapada assumes 60 days of production at approximately 30% capacity following the mill interruption at the end of September. Metal production guidance for Neves-Corvo has been updated and tightened to reflect the impact of lower grades and ore availability to date and expectations for the fourth quarter.

Cash costs at Chapada and Eagle have been better than expected due to continued favourable by-product metal prices and, at Chapada, favourable foreign exchange; accordingly, cash cost guidance for these two operations has been reduced.

While the Company has not experienced significant disruptions to production, shipments of concentrate, or its supply chain due to COVID-19, we caution that a localized outbreak at the operations may require the need to implement increased isolation and containment measures which could impact production, delay maintenance activities or disrupt supply chains. Given the uncertainty of the duration and magnitude of the impact of COVID- 19, production and cash cost estimates are subject to a higher than normal degree of uncertainty. The guidance below does not reflect any potential for additional suspensions or other significant disruption to operations due to COVID-19.

2020 Production and Cash Cost

Previous Guidancea

Revised Guidance

(contained metal in concentrate)

Tonnes

C1 Cost

Tonnes

C1 Costb

Copper (t)

Candelaria (100%)

145,000 - 155,000

$1.35/lb

N/A

N/A

Chapada

51,000 - 56,000

$0.65/lb

45,000 - 50,000

$0.55/lbd

Eagle

17,000 - 19,000

17,000 - 19,000

Neves-Corvo

35,000 - 40,000

$2.10/lb

32,000 - 34,000

$2.10/lbc

Zinkgruvan

3,000 - 4,000

3,000 - 4,000

Total

251,000 - 274,000

Zinc (t)

Neves-Corvo

70,000 - 75,000

70,000 - 72,000

Zinkgruvan

72,000 - 77,000

$0.60/lb

72,000 - 74,000

$0.60/lbc

Total

142,000 - 152,000

Gold (oz)

Candelaria (100%)

80,000 - 90,000

N/A

Chapada

85,000 - 90,000

80,000 - 85,000

Total

165,000 - 180,000

Nickel (t)

Eagle

15,000 - 18,000

$0.85/lb

15,000 - 18,000

$0.50/lb

a. Guidance as outlined in the Management's Discussion and Analysis for the three and six months ended June 30, 2020. Chapada's guidance was subsequently withdrawn on September 27, 2020. Candelaria's guidance was subsequently withdrawn on October 18, 2020.

b. Cash costs are based on various assumptions and estimates, including but not limited to; production volumes, as noted above, commodity prices (Cu: $3.00/lb, Zn: $1.10/lb, Ni: $6.50/lb, Pb: $0.85/lb, Au: $1,900/oz.), foreign exchange rates (€/USD:1.20, USD/SEK:8.50, USD/BRL:5.00) and operating costs, for the remainder of 2020.

c. Silver production at Zinkgruvan and Neves-Corvo is subject to streaming agreements, and cash costs are calculated based on receipt of approximately $4.40/oz and $4.30/oz, respectively, on silver sales.

d. Chapada cash costs are calculated on a by-product basis and do not include the effects of copper stream agreements. Effects of copper stream agreements are reflected in copper revenue and will impact realized revenue per pound.

4

2020 Capital Expenditure Guidance

Candelaria's guidance for capital expenditures has been withdrawn reflecting the temporary suspension of operations due to the current labour action. Guidance for the other operations remains unchanged from previous guidance.

($ millions)

Guidance

Sustaining Capital

Candelaria (100% basis)

N/A

Chapada

40

Eagle

15

Neves-Corvo

55

Zinkgruvan

45

Zinc Expansion Project (Neves-Corvo)

65

2020 Exploration Investment Guidance

Planned exploration expenditures of $35.0 million in 2020 remain unchanged from guidance in the previous quarter. Planned expenditures for 2020 are focused on supporting in-mine and near-mine targets at our operations including $15.0 million at Candelaria, $6.0 million at Zinkgruvan, $6.0 million at Chapada, and $2.0 million at Neves-Corvo.

5

Selected Quarterly Financial Information1

Three months ended

Nine months ended

($ millions, except share and per share amounts)

September 30,

September 30,

2020

2019

2020

2019

Revenue

600.7

538.7

1,512.0

1,324.4

Cost of goods sold:

Production costs

(279.4)

(293.9)

(831.1)

(754.8)

Depreciation, depletion and amortization

(122.0)

(116.2)

(362.1)

(274.6)

Gross profit

199.3

128.6

318.8

294.9

Net earnings attributable to:

122.4

49.6

Lundin Mining shareholders

26.4

70.2

Non-controlling interests

11.2

5.7

18.7

14.1

Net earnings

133.6

32.1

68.3

84.4

Adjusted earnings 3

106.4

25.6

120.0

77.5

Adjusted EBITDA3

300.3

224.3

622.1

476.9

Cash flow from operations

272.2

111.6

393.2

378.2

Adjusted operating cash flow 3

262.0

155.0

468.9

344.1

Capital expenditures4

89.8

165.0

331.0

525.7

Per share amounts:

Basic and diluted earnings per share

attributable to shareholders

0.17

0.04

0.07

0.10

Adjusted earnings per share3

0.14

0.03

0.16

0.11

Adjusted operating cash flow per share3

0.36

0.21

0.64

0.47

Dividends declared (C$/share)

0.04

0.03

0.12

0.09

September 30,

December 31,

Total assets

2020

2019

6,972.3

6,917.2

Total debt and lease liabilities

344.2

308.5

Net debt3

124.0

60.2

Summary of Quarterly Results1,2,5

($ millions, except per share data)

Q3-20

Q2-20

Q1-20

Q4-19

Q3-19

Q2-19

Q1-19

Q4-18

Revenue

600.7

533.3

378.0

568.4

538.7

369.3

416.4

407.7

Cost of goods sold

(401.4)

(391.2)

(400.7)

(422.9)

(410.1)

(344.1)

(275.2)

(335.7)

Gross profit (loss)

199.3

142.1

(22.7)

145.5

128.6

25.1

141.2

72.0

Net earnings (loss)

133.6

48.3

(113.6)

104.8

32.1

(8.6)

60.9

31.8

- attributable to shareholders

122.4

38.7

(111.5)

97.0

26.4

(7.8)

51.7

28.8

EPS - Basic and diluted

0.17

0.05

(0.15)

0.13

0.04

(0.01)

0.07

0.04

Cash flow from operations

272.2

37.6

83.4

186.4

111.6

204.5

62.1

44.2

Adjusted operating cash flow per share

0.36

0.24

0.04

0.28

0.21

0.07

0.19

0.16

Capital expenditures4

89.8

100.2

141.1

139.6

165.0

178.7

182.0

234.1

  1. Except where otherwise noted, financial data has been prepared in accordance with IFRS as issued by the IASB. Upon the adoption of new standards, the Company has elected not to restate comparative periods presented.
  2. Results reflect the inclusion of Chapada for the period of Lundin Mining's ownership.
  3. These are non-GAAP measures please see 27 of this MD&A for discussion of non-GAAP measures.
  4. Capital expenditures are reported on a cash basis, as presented in the consolidated statement of cash flows.
  5. The sum of quarterly amounts may differ from year-to-date results due to rounding.

6

Revenue Overview

Sales Volumes by Payable Metal

(Contained metal in

2020

2019

concentrate)

Total

Q3

Q2

Q1

Total

Q4

Q3

Q2

Q1

Copper (tonnes)

106,609

34,713

Candelaria (100%)

34,130

37,766

139,051

34,564

42,276

31,138

31,073

Chapada1

36,153

11,220

13,446

11,487

29,884

16,127

13,757

-

-

Eagle

12,799

4,732

3,668

4,399

12,767

2,819

2,615

4,286

3,047

Neves-Corvo

26,091

6,892

11,471

7,728

41,252

11,311

12,343

9,888

7,710

Zinkgruvan

2,382

929

910

543

2,673

779

981

913

-

184,034

58,486

63,625

61,923

225,627

65,600

71,972

46,225

41,830

Zinc (tonnes)

45,523

14,563

Neves-Corvo

15,896

15,064

59,143

14,713

14,567

14,466

15,397

Zinkgruvan

39,751

15,002

10,465

14,284

67,463

19,314

12,657

19,466

16,026

85,274

29,565

26,361

29,348

126,606

34,027

27,224

33,932

31,423

Gold (000 oz)

62

21

Candelaria (100%)

19

22

83

20

25

19

19

Chapada1

58

18

23

17

55

28

27

-

-

120

39

42

39

138

48

52

19

19

Nickel (tonnes)

8,767

3,539

Eagle

2,419

2,809

10,682

3,167

1,889

3,935

1,691

Lead (tonnes)

3,401

794

Neves-Corvo

1,309

1,298

4,591

1,210

792

1,313

1,276

Zinkgruvan

18,081

6,352

5,705

6,024

23,875

9,518

4,684

5,799

3,874

21,482

7,146

7,014

7,322

28,466

10,728

5,476

7,112

5,150

Silver (000 oz)

847

254

Candelaria (100%)

272

321

1,152

275

342

252

283

Chapada1

91

26

31

34

119

67

52

-

-

Eagle

58

16

22

20

72

12

22

25

13

Neves-Corvo

620

170

270

180

801

189

185

201

226

Zinkgruvan

1,217

441

427

349

1,594

571

335

460

228

2,833

907

1,022

904

3,738

1,114

936

938

750

1. Chapada's sales volumes are presented for the period of Lundin Mining's ownership.

7

Revenue Analysis1

Three months ended September 30,

Nine months ended September 30,

by Mine

2020

2019

Change

2020

2019

Change

($ thousands)

$

%

$

%

$

$

%

$

%

$

Candelaria (100%)

280,417

47

249,930

46

30,487

708,521

47

661,268

50

47,253

Chapada

113,586

19

114,867

21

(1,281)

311,832

21

114,867

9

196,965

Eagle

91,314

15

53,717

10

37,597

191,340

13

159,337

12

32,003

Neves-Corvo

69,287

12

86,009

16

(16,722)

196,252

13

248,675

19

(52,423)

Zinkgruvan

46,069

7

34,192

7

11,877

104,032

6

140,203

10

(36,171)

600,673

538,715

61,958

1,511,977

1,324,350

187,627

Three months ended September 30,

Nine months ended September 30,

by Metal

2020

2019

Change

2020

2019

Change

($ thousands)

$

%

$

%

$

$

%

$

%

$

Copper

396,592

66

366,077

68

30,515

1,016,611

67

859,120

65

157,491

Zinc

51,890

9

44,119

8

7,771

119,114

8

186,472

14

(67,358)

Gold

68,038

11

68,161

13

(123)

194,267

13

114,622

9

79,645

Nickel

54,788

9

39,175

7

15,613

109,252

7

98,352

7

10,900

Lead

11,197

2

10,842

2

355

29,546

2

33,045

2

(3,499)

Silver

11,568

2

7,868

2

3,700

31,201

2

24,665

2

6,536

Other

6,600

1

2,473

-

4,127

11,986

1

8,074

1

3,912

600,673

538,715

61,958

1,511,977

1,324,350

187,627

1. Chapada's revenues are for the period of Lundin Mining's ownership.

Revenue for the quarter ended September 30, 2020 increased in comparison to the third quarter of the prior year mainly due to higher realized metal prices.

On a year-to-date basis, revenue was also higher than the prior year comparable period due mainly to the addition of the Chapada mine acquired in July 2019 ($198.2 million) and lower treatment and refining charges ($30.3 million), partially offset by the effects of lower metal price and price adjustments ($46.6 million).

Revenue from gold and silver for the three and nine months ended September 30, 2020 includes the partial recognition of an upfront purchase price on the sale of precious metals streams for Candelaria, Neves-Corvo and Zinkgruvan, as well as the cash proceeds which amount to $412/oz for gold and between $4.12/oz and $4.40/oz for silver.

Revenue from copper for the three and nine months ended September 30, 2020 includes the recognition of deferred revenue from the copper streams acquired with the Chapada mine, as well as the cash proceeds of 30% of the market price of copper sold.

Revenue is recorded using the metal price received for sales that settle during the reporting period. For sales that have not been settled, an estimate is used based on the expected month of settlement and the forward price of the metal at the end of the reporting period. The difference between the estimate and the final price received is recognized by adjusting revenue in the period in which the sale is settled. Settlement dates can range from one to six months after shipment.

8

Provisionally valued revenue as of September 30, 2020

Metal

Payable metal

Valued at $ per lb/oz

Copper

50,868 t

$3.03

/lb

Zinc

12,890 t

$1.08

/lb

Gold

32,140 oz

$1,891

/oz

Nickel

1,535 t

$6.57

/lb

Quarterly Reconciliation of Realized Prices

Three months ended September 30, 2020

($ thousands)

Copper

Zinc

Gold

Nickel

Total

Current period sales1

385,901

69,784

75,713

52,875

584,273

Prior period price adjustments

31,590

3,435

2,790

1,991

39,806

417,491

73,219

78,503

54,866

624,079

Other metal sales

45,772

Copper stream cash effect

(2,851)

Gold stream cash effect

(19,634)

Less: Treatment & refining charges

(46,693)

Total Revenue

600,673

Payable Metal

58,486

t

29,565

t

39

koz

3,539

t

Current period sales1, 2

$2.99

$1.07

$1,910

$6.78

Prior period adjustments

0.25

0.05

70

0.25

Realized prices

$3.24

/lb

$1.12

/lb

$1,980

/oz

$7.03

/lb

Three months ended September 30, 2019

Copper

Zinc

Gold

Nickel

Total

Current period sales1

412,419

65,332

63,447

32,356

573,554

Prior period price adjustments

(13,263)

(4,230)

1,001

12,340

(4,152)

399,156

61,102

64,448

44,696

569,402

Other metal sales

44,247

Copper stream cash effect

(1,047)

Gold stream cash effect

(16,551)

Less: Treatment & refining charges

(57,336)

Total Revenue

538,715

Payable Metal

71,972 t

27,224 t

52 koz

1,889 t

Current period sales1,2

$2.60

$1.09

$1,220

$7.77

Prior period adjustments

(0.08)

(0.07)

19

2.96

Realized prices

$2.52 /lb

$1.02 /lb

$1,239

/oz

$10.73 /lb

  1. Includes provisional price adjustments on current period sales.
  2. The realized price for copper inclusive of the impact of streaming agreements for 2020 is $2.97/lb (2019: $2.59/lb). The realized price for gold inclusive of the impact of streaming agreements for 2020 is $1,402koz (2019: $902/koz).

9

Year-to-Date Reconciliation of Realized Prices

Nine months ended September 30, 2020

($ thousands)

Copper

Zinc

Gold

Nickel

Total

Current period sales1

1,124,143

184,499

218,996

120,506

1,648,144

Prior period price adjustments

(39,944)

(8,081)

1,120

(12,148)

(59,053)

1,084,199

176,418

220,116

108,358

1,589,091

Other metal sales

123,670

Copper stream cash effect

(9,328)

Gold stream cash effect

(54,152)

Less: Treatment & refining charges

(137,304)

Total Revenue

1,511,977

Payable Metal

184,034

t

85,274

t

120

koz

8,767

t

Current period sales1, 2

$2.77

$0.98

$1,822

$6.23

Prior period adjustments

(0.10)

(0.04)

9

(0.62)

Realized prices

$2.67

/lb

$0.94

/lb

$1,832

/oz

$5.61

/lb

Nine months ended September 30, 20193

Copper

Zinc

Gold

Nickel

Total

Current period sales1

925,447

235,665

125,513

111,644

1,398,269

Prior period price adjustments

10,856

774

4,083

13,365

29,078

936,303

236,439

129,596

125,009

1,427,347

Other metal sales

95,161

Cooper stream cash effect

(1,047)

Gold stream cash effect

(39,109)

Less: Treatment & refining charges

(158,002)

Total Revenue

1,324,350

Payable Metal

160,027 t

92,579 t

90 koz

7,515 t

Current period sales1, 2

$2.62

$1.15

$1,395

$6.74

Prior period adjustments

0.03

0.01

45

0.81

Realized prices

$2.65 /lb

$1.16 /lb

$1,440 /oz

$7.55 /lb

  1. Includes provisional price adjustments on current period sales.
  2. The realized price for copper inclusive of the impact of streaming agreements for 2020 is $2.75/lb (2019: $2.62). The realized price for gold inclusive of the impact of streaming agreements for 2020 is $1,374/oz (2019: $960/oz).
  3. Results reflect the inclusion of Chapada for the period of Lundin Mining's ownership.

10

Financial Results

Production Costs

Production costs for the quarter ended September 30, 2020 were $14.5 million lower than the prior year quarter as a result of the effects of favourable foreign exchange rates. On a year-to-date basis production costs were $76.3 million higher than the prior year period due primarily to the inclusion of production costs from the Chapada mine acquired in July 2019.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization expense increased for the quarter and nine months ended September 30, 2020 compared to the prior year periods. The increase was primarily attributable to increased amortization of deferred stripping at Candelaria of Phase 10, higher sales volumes at Eagle and, for the nine months, the inclusion of Chapada ($22.4 million).

Depreciation by operation

Three months ended September 30,

Nine months ended September 30,

($ thousands)

2020

2019

Change

2020

2019

Change

Candelaria

71,309

69,261

2,048

210,443

155,022

55,421

Chapada

9,305

17,299

(7,994)

31,735

17,299

14,436

Eagle

17,707

10,261

7,446

53,613

40,577

13,036

Neves-Corvo

13,299

12,908

391

40,892

38,306

2,586

Zinkgruvan

9,864

6,033

3,831

24,107

22,063

2,044

Other

473

441

32

1,346

1,333

13

121,957

116,203

5,754

362,136

274,600

87,536

1. Chapada's depreciation is presented for the period of Lundin Mining's ownership.

Loss from Equity Investment in Associate

In the fourth quarter of 2019, the Company's joint venture, Freeport Cobalt, sold its interest in the cobalt refinery and related cobalt precursor business. In the prior nine-month period ended September 30, 2019, a loss of $11.5 million was recognized, due mainly to inventory revaluations as a result of lower cobalt prices.

General Exploration and Business Development

General exploration and business development expenses for the three and nine months ended September 30, 2020 decreased against the prior year comparable periods by $5.3 million and $25.4 million, respectively, due primarily to delayed surface exploration drilling and geophysical work at Neves-Corvo and Zinkgruvan. Drilling activity at Chapada increased significantly with the addition of more drill rigs in the third quarter with COVID-19 related health and safety measures in place; this program is currently on track to meet the target of 40,000 metres. Exploration drilling at Candelaria has primarily focused along known mineralized trends within the underground workings.

Finance Income and Costs

Net finance costs decreased by $12.1 million comparing the current quarter to the prior year quarter due mainly to increased interest income and lower interest expense from long-term debt resulting from lower interest rates in the current quarter.

For the nine months ended September 30, 2020 net finance costs increased by $10.9 million over the prior year comparable periods primarily due to higher interest expense from deferred revenue and lower interest income.

11

Other Income and Expenses

Net other income for the nine months ended September 30, 2020 was $14.5 million, compared to net other expense of $5.6 million in the prior year to date period. The higher other income in the current year period reflects higher foreign exchange gains of $39.0 million partially offset by higher negative revaluation of the derivative asset and liability. Net other expense for the three months ended September 30, 2020 was comparable to the prior year quarter.

Foreign exchange gains and losses recorded in other income and expenses relate to working capital denominated in foreign currencies that were held by the Company. Period end exchange rates having a meaningful impact on foreign exchange recorded at September 30, 2020 were as follows:

September 30, 2020

June 30, 2020

December 31, 2019

Chilean Peso

$1.00:CLP784

$1.00:CLP813

$1.00:CLP749

Euro

$1.17:€1.00

$1.12:€1.00

$1.12:€1.00

Brazilian Real

$1.00:BRL5.64

$1.00:BRL5.48

$1.00:BRL4.03

Swedish Kroner

$1.00:SEK8.99

$1.00:SEK9.35

$1.00:SEK9.32

Income Taxes

Income taxes by mine

Income tax expense (recovery)

Three months ended September 30,

Nine months ended September 30,

($ thousands)

2020

2019

Change

2020

2019

Change

Candelaria

19,011

7,727

11,284

39,219

11,106

28,113

Chapada1

24,094

26,981

(2,887)

129,813

26,981

102,832

Eagle

1,777

772

1,005

1,694

(1,137)

2,831

Neves-Corvo

(13,235)

193

(13,428)

(19,455)

(322)

(19,133)

Zinkgruvan

(89)

3,548

(3,637)

(312)

12,802

(13,114)

Other

1,769

6,536

(4,767)

11,612

22,004

(10,392)

33,327

45,757

(12,430)

162,571

71,434

91,137

1. Chapada's Income tax is presented for the period of Lundin Mining's ownership.

Income taxes by classification

Income tax expense

Three months ended September 30,

Nine months ended September 30,

($ thousands)

2020

2019

Change

2020

2019

Change

Current income tax (recovery) expense

(11,464)

29,046

(40,510)

24,370

60,438

(36,068)

Deferred income tax

44,791

16,711

28,080

138,201

10,996

127,205

33,327

45,757

(12,430)

162,571

71,434

91,137

Income tax expense for the three months ended September 30, 2020 was lower than the prior year quarter due to the tax refund of $14.3 million received by Somincor from a favourable ruling on a tax dispute and lower taxable earnings at Zinkgruvan, partially offset by higher taxable earnings at Candelaria. During the quarter, the Company partially reversed the write-down of recoverable taxes in Chile recorded in first quarter of 2020 of $13.6 million to $8.2 million due to changes in distribution plans (Q3 2019 - nil).

Income tax expense for the nine months ended September 30, 2020 was higher than the prior year comparable period due primarily to the acquisition of Chapada mine in July 2019. Included in Chapada's taxes is a non-cash expense of $80.1 million arising from the revaluation of non-monetary assets in BRL to USD. In addition, higher taxable earnings at Candelaria were partially offset by lower taxable earnings at Zinkgruvan and Somincor, as well as a $4.5 million tax recovery from prior periods in Chile and the $14.3 million tax refund in Somincor.

12

Mining Operations

Production Overview

(Contained metal in

Total

2020

2019

Q2

Q1

concentrate)

Q3

Q2

Q1

Total

Q4

Q3

Copper (tonnes)

107,193

35,836

Candelaria (100%)

35,060

36,297

146,330

39,221

40,698

33,633

32,778

Chapada1

38,670

12,990

13,799

11,881

30,529

12,884

17,645

-

-

Eagle

13,535

5,055

4,102

4,378

14,297

3,626

3,042

3,732

3,897

Neves-Corvo

26,152

6,518

10,559

9,075

41,436

10,898

12,055

9,615

8,868

Zinkgruvan

3,346

1,045

1,765

536

2,906

502

1,120

705

579

188,896

61,444

65,285

62,167

235,498

67,131

74,560

47,685

46,122

Zinc (tonnes)

52,393

Neves-Corvo

15,459

18,986

17,948

73,202

17,946

18,232

18,251

18,773

Zinkgruvan

48,923

17,328

12,596

18,999

78,313

20,979

16,796

18,865

21,673

101,316

32,787

31,582

36,947

151,515

38,925

35,028

37,116

40,446

Gold (000 oz)

63

21

Candelaria (100%)

21

21

88

23

24

21

20

Chapada1

65

24

23

18

54

20

34

-

-

128

45

44

39

142

43

58

21

20

Nickel (tonnes)

11,809

4,854

Eagle

3,380

3,575

13,494

2,651

3,232

3,398

4,213

Lead (tonnes)

3,787

Neves-Corvo

760

1,559

1,468

5,474

1,365

1,106

1,350

1,653

Zinkgruvan

17,383

5,571

3,799

8,013

27,703

9,361

6,291

6,219

5,832

21,170

6,331

5,358

9,481

33,177

10,726

7,397

7,569

7,485

Silver (000 oz)

919

Candelaria (100%)

283

305

331

1,305

337

355

292

321

Chapada1

187

61

69

57

144

63

81

-

-

Eagle

103

33

35

35

143

31

40

45

27

Neves-Corvo

1,137

281

479

377

1,706

385

431

392

498

Zinkgruvan

1,550

499

389

662

2,464

724

630

631

479

3,896

1,157

1,277

1,462

5,762

1,540

1,537

1,360

1,325

1. Chapada's production results are for the period of Lundin Mining's ownership.

13

Cash Cost Overview

Three months ended September 30,

Nine months ended September 30,

($/lb)

2020

2019

2020

2019

Candelaria (cost/lb Cu)

1.73

1.66

Gross cost

1.67

1.86

By-product1

(0.36)

(0.28)

(0.32)

(0.26)

Net Cash Cost

1.37

1.39

1.34

1.60

All-In Sustaining Cost2

2.05

2.49

2.14

3.10

Chapada (cost/lb Cu)3

1.73

1.77

Gross cost

1.69

1.69

By-product

(1.52)

(1.34)

(1.33)

(1.34)

Net Cash Cost

0.21

0.35

0.44

0.35

All-In Sustaining Cost

0.73

0.62

0.85

0.62

Eagle (cost/lb Ni)

Gross cost

4.05

6.74

4.76

6.22

By-product

(4.68)

(3.49)

(4.25)

(3.68)

Net Cash Cost

(0.63)

3.25

0.51

2.54

All-In Sustaining Cost

0.54

4.37

2.02

3.38

Neves-Corvo (cost/lb Cu)

3.73

3.13

Gross cost

2.55

2.97

By-product

(1.76)

(0.95)

(1.18)

(1.45)

Net Cash Cost

1.97

1.60

1.95

1.52

All-In Sustaining Cost

2.93

2.35

2.77

2.27

Zinkgruvan (cost/lb Zn)

Gross cost

1.10

0.97

1.04

0.80

By-product

(0.55)

(0.55)

(0.50)

(0.38)

Net Cash Cost

0.55

0.42

0.54

0.42

All-In Sustaining Cost

0.74

0.70

0.83

0.67

  1. By-productis after related treatment and refining charges.
  2. All-inSustaining Cost ("AISC") is a non-GAAP measure - see page 27 of this MD&A for discussion of non-GAAP measures.
  3. Chapada's cash cost and AISC is for the period of Lundin's ownership.

14

Capital Expenditures1,2

Three months ended September 30,

by Mine

2020

2019

Capitalized

Total

Capitalized

($ thousands)

Sustaining

Expansionary

Interest

Sustaining

Expansionary

Interest

Total

Candelaria

49,534

-

-

49,534

80,773

-

-

80,773

Chapada

7,959

-

-

7,959

12,342

-

-

12,342

Eagle

1,283

-

-

1,283

1,577

8,846

126

10,549

Neves-Corvo

12,217

11,210

838

24,265

17,238

36,735

545

54,518

Zinkgruvan

6,677

-

-

6,677

6,696

-

-

6,696

Other

55

-

-

55

72

-

-

72

77,725

11,210

838

89,773

118,698

45,581

671

164,950

Nine months ended September 30,

by Mine

2020

2019

Capitalized

Total

Capitalized

($ thousands)

Sustaining

Expansionary

Interest

Sustaining

Expansionary

Interest

Total

Candelaria

179,729

-

-

179,729

313,665

-

-

313,665

Chapada3

19,987

-

-

19,987

12,342

-

-

12,342

8,928

Eagle

8,928

-

-

4,751

25,818

126

30,695

Neves-Corvo

39,748

56,867

1,289

97,904

41,635

100,579

545

142,759

Zinkgruvan

24,182

-

-

24,182

26,053

-

-

26,053

Other

270

-

-

270

150

-

-

150

272,844

56,867

1,289

331,000

398,596

126,397

671

525,664

  1. Capital expenditures are reported on a cash basis, as presented in the consolidated statement of cash flows.
  2. Sustaining and expansionary capital expenditures are non-GAAP measures - see page 27 of this MD&A for discussion of non-GAAP measures.
  3. Chapada's capital expenditures are presented for the period of Lundin Mining's ownership.

15

Candelaria (Chile)

Operating Statistics

Total

2020

2019

(100% Basis)

Q3

Q2

Q1

Total

Q4

Q3

Q2

Q1

Ore mined (000s tonnes)

26,143

8,977

9,085

8,081

28,753

10,067

9,329

5,620

3,737

Ore milled (000s tonnes)

18,851

7,040

6,104

5,707

26,287

6,336

6,295

6,450

7,206

Grade

0.61

0.55

Copper (%)

0.62

0.67

0.60

0.66

0.70

0.57

0.49

Gold (g/t)

0.14

0.13

0.14

0.15

0.14

0.15

0.16

0.14

0.11

Recovery

93.6

92.6

Copper (%)

93.5

94.7

92.3

92.8

92.9

91.4

91.9

Gold (%)

74.0

75.1

74.0

73.0

72.1

74.4

71.8

70.6

70.5

Production (contained metal)

107,193

35,836

Copper (tonnes)

35,060

36,297

146,330

39,221

40,698

33,633

32,778

Gold (000 oz)

63

21

21

21

88

23

24

21

20

Silver (000 oz)

919

283

305

331

1,305

337

355

292

321

Revenue ($000s)

708,521

280,417

255,132

172,972

896,283

235,015

249,930

178,677

232,661

Gross profit ($000s)

143,270

88,511

71,544

(16,785)

180,650

57,989

42,612

1,390

78,659

Cash cost ($ per pound copper)

1.34

1.37

1.36

1.31

1.54

1.38

1.39

1.86

1.62

AISC ($ per pound copper)

2.14

2.05

2.10

2.26

2.88

2.22

2.49

3.73

3.30

Gross Profit

Gross profit for the three months ended September 30, 2020 was higher than the prior year comparable period primarily due to higher realized metal prices as well as the positive effects of foreign exchange.

Gross profit for the nine months ended September 30, 2020 was higher than the prior year comparable period due to favourable foreign exchange, higher realized metal prices, partially offset by higher depreciation expense.

Production

Copper production for the three months ended September 30, 2020 was lower than the prior year quarter largely attributable to lower grades. On a year-to-date basis, copper production was comparable to the prior year period as improved grades and recoveries offset the effects of lower throughput in the first half of the year.

Gold production for the three months ended September 30, 2020 was lower than the prior year quarter due to lower grades. On a year-to-date basis, gold production was lower than the prior year comparable period due to lower throughput in the first half of the year, partially offset by improved recoveries.

Ore milled during the third quarter of 2020 significantly improved over that achieved in the first two quarters of the year as measures to address variability in ore hardness and mill circuit availabilities began to take hold. Third quarter mill throughput averaged over 76,500 tonnes per day and was impacted by planned maintenance in early August. Mill throughput averaged over 80,500 tonnes per day in September as mining progressed deeper in Phase 10 of the open pit and operational hours in the mill improved. Efforts to further improve mine-to-mill performance and increase mill circuit availabilities continue.

Mining is advancing without issue and is now through the areas of Phase 10 which were in proximity to where pit wall displacement issues occurred in Phase 9.

Full year production guidance for Candelaria has been withdrawn, reflecting temporary suspension of operations during the fourth quarter of 2020 due to the current labour action.

Cash Costs

Copper cash costs for the three and nine months ended September 30, 2020 were lower than cash costs in the prior year comparable periods. The decrease was largely due to the favourable impact of foreign exchange as well as higher by-product credits.

16

As a result of the ongoing labour action, Candelaria's cash cost guidance has been withdrawn.

All-in sustaining costs for the three and nine months ended September 30, 2020 were lower than those of the corresponding periods in 2019 due to lower cash costs and lower sustaining capital expenditure.

For the nine months ended September 30, 2020, approximately 41,000 oz of gold and 580,000 oz of silver were subject to terms of a streaming agreement in which $412/oz and $4.12/oz were received for gold and silver, respectively.

Projects

The Candelaria Mill Optimization Program ("CMOP") achieved substantial completion in the first half of 2020, with the exception of the replacement of the fourth and last ball mill motor. The installation of the final ball mill motor remains scheduled for January 2021.

17

Chapada (Brazil)

Operating Statistics1

Total

2020

2019

Q3

Q2

Q1

Total

Q4

Q3

Q2

Q1

Ore mined (000s tonnes)

23,811

7,831

7,528

8,452

18,240

7,592

10,648

-

-

Ore milled (000s tonnes)

15,574

4,808

5,278

5,488

11,911

5,731

6,180

-

-

Grade

0.29

0.31

Copper (%)

0.30

0.27

0.31

0.27

0.34

-

-

Gold (g/t)

0.23

0.25

0.23

0.20

0.24

0.20

0.28

-

-

Recovery

85.0

87.7

Copper (%)

86.1

80.9

82.7

81.6

83.7

-

-

Gold (%)

58.2

62.7

60.0

51.0

59.4

57.0

61.0

-

-

Production (contained metal)

38,670

12,990

Copper (tonnes)

13,799

11,881

30,529

12,884

17,645

-

-

Gold (000 oz)

65

24

23

18

54

20

34

-

-

Silver (000 oz)

187

61

69

57

144

63

81

-

-

Revenue ($000s)

311,832

113,586

114,125

84,121

248,011

133,144

114,867

-

-

Gross profit ($000s)

143,711

62,558

59,320

21,833

104,445

56,581

47,864

-

-

Cash cost ($ per pound copper)

0.44

0.21

0.21

0.92

0.58

0.77

0.35

-

-

AISC ($ per pound copper)

0.85

0.73

0.64

1.22

0.97

1.28

0.62

-

-

1. Operating results are for the period of Lundin Mining's ownership.

Gross Profit

Gross profit for the three months ended September 30, 2020 was greater than the prior year comparable period driven by higher realized metal prices as well as lower depreciation partially offset by lower sales volumes.

Gross profit for the nine months ended September 30, 2020 was higher due to the acquisition of the mine in July 2019. Additionally, higher than expected realized metal prices and favourable foreign exchange rates contributed to the gross profit increase.

Production

The production of both copper and gold for the third quarter of 2020 was lower than the prior year quarter due primarily to lower throughput as a result of expected increase in ore hardness.

The production of both copper and gold was in-line with expectations for the nine months ended September 30, 2020 as lower throughput was largely offset by higher recoveries.

Processing activities at Chapada were interrupted by an unplanned power outage on September 27th, 2020. When power was restored, the protection system of the main electrical substation failed, resulting in damage to the mill's four motors. Two spare motors have been installed on the SAG mill in early October allowing resumption of milling at approximately 30% while repairs of the other motors are actioned.

Crusher and conveyor maintenance is underway and will be completed while mine operations will focus on building run of mine ore stocks and waste removal. The Company anticipates a step-change increase to full production during the fourth quarter as the two outstanding motors become available and are installed.

Chapada full year production guidance has been reinstated, reflecting the staged resumption of processing. Copper production is expected to be 45,000 - 50,000 tonnes (previously 51,000 - 56,000 tonnes) and gold production is expected to be 80,000 - 85,000 ounces (previously 85,000 - 90,000 ounces).

Cash Costs

Copper cash costs for the three months ended September 30, 2020 were lower than the same period in the prior year. This difference was driven by strong gold prices resulting in higher by-product credits as well as the impact of favourable foreign exchange.

18

Copper cash costs for the nine months ended September 30, 2020 were better than expected, benefitting primarily from favourable foreign exchange rates, as well as strong by-product credits.

As a result, despite lower expected metal sales, full year cash cost guidance has improved to $0.55/lb of copper from $0.65/lb.

AISC for the three months ended September 30, 2020 was lower than the prior year comparable period as a result of lower cash costs. AISC for the nine months ended September 30, 2020 was better than expected due to lower cash costs and lower sustaining capital expenditures.

Projects

The Company is continuing to evaluate conceptual options for long-term mine and plant expansion. Study work progressed during the third quarter and is being completed in parallel with exploration efforts, largely focused on near-mine targets, with results to be incorporated in any future expansionary plans.

Exploration drilling is on track to complete the planned 40,000 metres for this year. During the third quarter, 12,648 metres of drilling were completed, for a total of 22,459 metres year-to-date.

19

Eagle (USA)

Operating Statistics

Total

2020

2019

Q3

Q2

Q1

Total

Q4

Q3

Q2

Q1

Ore mined (000s tonnes)

554

180

185

189

748

194

197

192

165

Ore milled (000s tonnes)

556

179

183

194

747

191

197

194

165

Grade

2.5

3.2

Nickel (%)

2.2

2.2

2.2

1.7

2.0

2.1

3.0

Copper (%)

2.5

2.9

2.3

2.4

2.0

2.0

1.6

2.0

2.4

Recovery

83.6

84.3

Nickel (%)

82.5

83.9

82.1

80.5

80.4

81.3

85.0

Copper (%)

96.7

97.2

96.6

96.3

96.0

95.3

95.5

95.7

97.6

Production (contained metal)

11,809

4,854

Nickel (tonnes)

3,380

3,575

13,494

2,651

3,232

3,398

4,213

Copper (tonnes)

13,535

5,055

4,102

4,378

14,297

3,626

3,042

3,732

3,897

Revenue ($000s)

191,340

91,314

52,689

47,337

212,929

53,592

53,717

59,412

46,208

Gross profit (loss) ($000s)

31,608

36,634

3,762

(8,788)

35,987

(1,021)

19,350

(800)

18,458

Cash cost ($ per pound nickel)

0.51

(0.63)

1.13

1.43

2.84

3.53

3.25

3.14

0.37

AISC ($ per pound nickel)

2.02

0.54

2.48

3.50

3.74

4.53

4.37

3.65

1.65

Gross Profit

Gross profit for the three months ended September 30, 2020 was higher than the prior year quarter due primarily to higher sales volumes and lower treatment and refining charges, partially offset by lower nickel price and price adjustments.

On a year-to-date basis, gross profit was lower than the prior year comparative period due to lower realized metal prices and higher depreciation, partially offset by lower treatment and refining costs.

Production

Nickel and copper production for the three months and year-to-date ended September 30, 2020 was higher than the prior year comparable periods due to increased mining in high-grade Eagle East in the current year.

Full year production guidance for nickel and copper is well positioned to meet previous guidance.

Cash Costs

Nickel cash costs for the three and nine months ended September 30, 2020 were significantly lower than the cash costs reported in the prior year comparable periods. The decrease in cash costs is primarily due to lower treatment and refining charges as well as higher by-product credits. On a year-to-date basis, increased nickel sales volume also contributed to the lower cash cost.

As a result of continued favourable copper by-product prices, cash cost guidance has been reduced from $0.85/lb to $0.50/lb.

All-in sustaining costs for the three and nine months ended September 30, 2020 were also lower than those of the corresponding periods in 2019, as a result of lower cash costs.

20

Neves-Corvo (Portugal)

Operating Statistics

2020

2019

Total

Q2

Q1

Total

Q4

Q3

Q2

Q1

Q3

Ore mined, copper (000 tonnes)

1,921

566

715

640

2,702

686

699

628

689

Ore mined, zinc (000 tonnes)

800

242

272

286

1,153

290

284

283

296

Ore milled, copper (000 tonnes)

1,938

565

734

639

2,679

681

702

626

670

Ore milled, zinc (000 tonnes)

810

240

286

284

1,137

286

285

280

286

Grade

1.7

1.5

Copper (%)

1.8

1.8

2.0

2.1

2.1

2.0

1.7

Zinc (%)

8.3

8.4

8.5

8.0

7.9

7.8

7.8

7.9

8.0

Recovery

79.2

78.4

Copper (%)

81.3

77.4

78.3

77.9

80.6

75.8

79.3

Zinc (%)

76.8

75.9

76.7

77.7

78.8

78.0

80.2

78.6

78.3

Production (contained metal)

26,152

6,518

Copper (tonnes)

10,559

9,075

41,436

10,898

12,055

9,615

8,868

Zinc (tonnes)

52,393

15,459

18,986

17,948

73,202

17,946

18,232

18,251

18,773

Lead (tonnes)

3,787

760

1,559

1,468

5,474

1,365

1,106

1,350

1,653

Silver (000 oz)

1,137

281

479

377

1,706

385

431

392

498

Revenue ($000s)

196,252

69,287

81,188

45,777

337,167

88,492

86,009

77,519

85,147

Gross profit (loss) ($000s)

(10,673)

2,954

6,299

(19,926)

42,896

8,772

11,546

3,834

18,744

Cash cost (€ per pound copper)

1.74

1.69

1.58

2.03

1.42

1.61

1.44

1.68

0.81

Cash cost ($ per pound copper)

1.95

1.97

1.75

2.24

1.59

1.78

1.60

1.88

0.92

AISC ($ per pound copper)

2.77

2.93

2.32

3.28

2.38

2.65

2.35

2.60

1.72

Gross Profit

Gross profit for the three months ended September 30, 2020 was lower than the comparable period in 2019 due to lower sales volumes and negative foreign exchange effects partially offset by higher metal price and price adjustments.

In the nine months ended September 30, 2020, a gross loss was recorded compared to a gross profit in the comparable period primarily driven by lower sales volumes and realized zinc prices.

Production

Copper production for the three and nine months ended September 30, 2020 was lower than the prior year comparable periods due to lower throughput and grades.

Zinc production for the three and nine months ended September 30, 2020 was lower than the prior year comparable periods due to lower throughput partially offset by higher grades.

Copper production guidance has been reduced to 32,000 - 34,000 tonnes (from 35,000 - 40,000 tonnes) while zinc production is expected to meet previous guidance.

A fatal accident occurred on September 25th, 2020 during underground mining operations. The mine was voluntarily suspended for five days. Relevant authorities were informed and the Company has undertaken both an internal and a third party investigation.

Cash Costs

Copper cash costs for the three months and year-to-date period ended September 30, 2020 were higher than those of the corresponding periods in 2019. The increase is a result of lower sales volumes, and the impact of unfavourable foreign exchange, partially offset by higher by-product credits.

Despite the reduced copper production guidance, full year copper cash cost guidance of $2.10/lb remains unchanged.

21

All-in sustaining costs for the three and nine months ended September 30, 2020 were higher than the corresponding period in 2019 due to higher cash costs as well as higher sustaining capital expenditures.

Projects

Restart of ZEP is on track for early 2021. During the third quarter, work continued to prepare the surface and underground construction sites for the restart. Preparation work that is planned for the fourth quarter of 2020 includes ventilation raise work, activities on the SAG mill, including commissioning with waste, and surface conveyor installations.

Timing of restart will ultimately be dependent on public health restrictions and recommendations, as well as the Company's internal policies, in order to safeguard and protect the workforce from the spread of COVID-19. If current safety requirements for social distancing and other personnel limitations remain in place in 2021 it is anticipated that the project would mobilize a smaller number of contractors than originally planned with an extended schedule in order to take the project forward. The Company aims to reinstate 2021 and 2022 production guidance for Neves-Corvo, including contribution from the ZEP, in its annual guidance update in late November of this year.

The 2020 capital expenditure estimate of $65 million and total project expenditure of €360.0 million ($430.0 million) remains unchanged from previous guidance.

22

Zinkgruvan (Sweden)

Operating Statistics

Total

2020

2019

Q3

Q2

Q1

Total

Q4

Q3

Q2

Q1

Ore mined, zinc (000 tonnes)

885

282

279

324

1,138

336

230

303

269

Ore mined, copper (000 tonnes)

186

61

81

44

182

28

65

37

52

Ore milled, zinc (000 tonnes)

884

316

239

329

1,120

322

254

292

252

Ore milled, copper (000 tonnes)

181

62

98

21

178

26

63

48

41

Grade

6.2

6.2

Zinc (%)

5.9

6.4

7.6

7.1

7.2

7.2

9.3

Lead (%)

2.5

2.3

2.0

2.9

3.1

3.5

3.1

2.7

2.9

Copper (%)

2.2

2.0

2.1

2.8

1.8

2.2

1.9

1.7

1.6

Recovery

89.6

88.8

Zinc (%)

89.5

90.4

91.5

91.7

92.2

89.7

92.5

Lead (%)

79.9

77.0

78.1

83.0

80.9

83.0

80.8

80.0

78.6

Copper (%)

85.2

83.3

84.8

90.6

89.1

89.6

90.8

86.0

89.1

Production (contained metal)

48,923

17,328

Zinc (tonnes)

12,596

18,999

78,313

20,979

16,796

18,865

21,673

Lead (tonnes)

17,383

5,571

3,799

8,013

27,703

9,361

6,291

6,219

5,832

Copper (tonnes)

3,346

1,045

1,765

536

2,906

502

1,120

705

579

Silver (000 oz)

1,550

499

389

662

2,464

724

630

631

479

Revenue ($000s)

104,032

46,069

30,185

27,778

198,323

58,120

34,192

53,643

52,368

Gross profit ($000s)

14,107

9,665

2,239

2,203

81,341

23,928

8,557

21,873

26,983

Cash cost (SEK per pound zinc)

5.08

4.90

5.50

4.96

3.69

2.95

4.02

3.88

4.08

Cash cost ($ per pound zinc)

0.54

0.55

0.56

0.51

0.39

0.31

0.42

0.41

0.44

AISC ($ per pound zinc)

0.83

0.74

1.03

0.79

0.65

0.62

0.70

0.63

0.69

Gross Profit

Gross profit for the three months ended September 30, 2020 was higher than the comparable period in 2019. The increase was largely attributable to higher sales volumes and higher realized metal prices partially offset by the negative impacts of foreign exchange.

Gross profit for the nine months ended September 30, 2020 was lower than the prior year comparable period, largely attributable to lower zinc sales volumes and realized zinc prices and higher treatment and refining charges.

Production

Zinc production for the three months ended September 30, 2020 was higher than the prior year comparable period due to higher throughput achieved in the quarter, partially offset by lower grades. On a year-to-date basis, zinc production was lower than the comparable period in 2019. As previously disclosed, ground conditions encountered in certain high-grade stopes in the first quarter of 2020 resulted in a change in mine sequencing, which has deferred production from these areas into the fourth quarter of 2020 and first quarter of 2021. Lead production for the three and nine months ended September 30, 2020 was lower than the prior year comparable periods as a result of lower head grades. Full year production guidance for zinc has been tightened to reflect results to date.

Cash Costs

Zinkgruvan's cash costs for the three months ended September 30, 2020 were higher than the prior year comparable period largely due to higher per unit operating costs as well as unfavourable foreign exchange rates. Cash costs for the nine months ended September 30, 2020 were higher than the prior year comparable period due to lower sales volumes, which were partially offset by higher by-product credits.

Full year zinc cash cost guidance of $0.60/lb is unchanged.

All-in sustaining costs for the three and nine months ended September 30, 2020 were higher than those reported in the corresponding periods in 2019 due to higher cash costs.

23

Metal Prices, LME Inventories and Smelter Treatment and Refining Charges

The average metal prices for copper, zinc, gold and nickel for the third quarter 2020 were higher than the average prices for the second quarter by; 22% copper, 19% zinc, 12% gold and 16% nickel. The prices for copper, zinc, gold and nickel increased throughout the third quarter with increasing demand in China.

(Average LME Price)

Three months ended September 30,

Nine months ended September 30,

2020

2019

Change

2020

2019

Change

Copper

US$/pound

2.96

2.63

12%

2.65

2.74

-3%

US$/tonne

6,519

5,802

5,849

6,040

Zinc

US$/pound

1.06

1.07

-1%

0.97

1.18

-18%

US$/tonne

2,335

2,348

2,145

2,600

Gold

US$/ounce

1,909

1,472

30%

1,735

1,364

27%

Nickel

US$/pound

6.45

7.05

-9%

5.93

6.09

-3%

US$/tonne

14,210

15,540

13,068

13,424

LME inventories for zinc and nickel increased during the third quarter of 2020 by 75% and 1%, respectively while the LME inventory for copper decreased by 24% during the same period.

During the third quarter of 2020 the treatment charges ("TC") and refining charges ("RC") in the spot market for copper concentrates between miners and commodity traders decreased slowly from an average spot TC during June of $39 per dmt of concentrate and a spot RC of $0.039 per lb of payable copper to a spot TC of $37 per dmt of concentrate and a spot RC of $0.037 per lb of payable copper during September 2020. Also, the spot terms at which Chinese copper smelters were prepared to buy decreased through the quarter from a TC of $51 per dmt of concentrate and a RC of $0.051 per payable lb of copper over June to a TC of $49 per dmt of concentrate and a RC of $0.049 per payable lb of copper at the end of September. The terms for annual contracts for copper concentrates for 2020 were reached in November 2019 at a TC of $62 per dmt with a RC of $0.062 per payable lb of copper.

The spot TC, delivered China, for zinc concentrates during the second quarter of 2020 decreased from $170 per dmt, flat, at the end of June to $115 per dmt, flat, by the end of the third quarter, on limited supply of zinc concentrates due to mine closures in Latin America caused by the pandemic. At the end of March, there had been a reported settlement in the negotiations between a mine and smelters for annual contracts for zinc concentrates at a level of $299.75 per dmt, flat.

The Company's nickel concentrate production from Eagle is sold under several long-term contracts at terms inline with market conditions. Gold production from Chapada and Candelaria is sold at terms in-line with market conditions for copper concentrates.

24

Liquidity and Capital Resources

As at September 30, 2020, the Company had cash and cash equivalents of $222.0 million. With the ongoing COVID- 19 pandemic, there is still uncertainty in the marketplace, as well as potential risks to production, supply chain, delivery of concentrates, commodity prices and many other variables. However, the Company continues to expect to be able to fund all its contractual commitments and obligations through operating cash flow generated, cash on hand and available debt facilities.

Cash flow from operations for the quarter ended September 30, 2020 was $272.2 million, an increase of $160.6 million in comparison to the $111.6 million reported in the prior year quarter. The increase was primarily attributable to the comparative change in non-cash working capital ($53.6 million) and higher gross profit before depreciation. On a year-to-date basis cash flow from operations was $15.0 million higher than the prior year due primarily to higher gross profit before depreciation partially offset by a comparative change in non-cash working capital ($109.8 million).

Cash flow used in investing activities decreased when compared to the prior year quarter and the prior year-to- date period. The decrease was primarily due to the acquisition of Chapada in the third quarter of 2019. Additionally, there were lower capital investments reflecting the completion of some major projects at Candelaria, the temporary suspension of ZEP and capital expenditure deferrals initiated in the first quarter.

Cash flow used in financing activities increased by $482.9 million compared to the prior year quarter due to a net repayment of financing, payment of contingent consideration and distributions to non-controlling interests. In the prior year quarter, proceeds from financing were received for the acquisition of the Chapada mine. On a year-to- date basis cash flow used in financing activities also increased compared to the prior year period by $342.6 million. This is due to the higher financing proceeds in the prior year to facilitate the acquisition of the Chapada mine.

Capital Resources

As at September 30, 2020, the Company had $344.2 million of debt and lease liabilities.

As at September 30, 2020, the Company had $200.0 million drawn on its credit facility, $100.0 million in outstanding term loans and $8.6 million of equipment financing. The Company has approximately $580.0 million available for drawdown on its credit facility.

During the third quarter of 2020, the Company purchased 0.6 million shares for total consideration of $3.7 million under its Normal Course Issuer Bid. For the nine months ended September 30, 2020, 2.2 million shares were purchased for total consideration of $11.1 million. All of the common shares purchased have been cancelled.

Contractual Obligations, Commitments and Contingencies

The Company has contractual obligations and capital commitments as described in the Note 19 "Commitments and Contingencies" in the Company's Condensed Interim Consolidated Financial Statements. From time to time, the Company may also be involved in legal proceedings that arise in the ordinary course of its business.

Financial Instruments

The Company does not currently utilize complex financial instruments in hedging metal price, foreign exchange or interest rate exposure. Any hedging activity requires approval of the Company's Board of Directors. The Company will not hold or issue derivative instruments for speculation or trading purposes.

For details of the Company's financial instruments refer to Note 18 of the Company's Condensed Interim Consolidated Financial Statements.

25

Sensitivities

Revenue and cost of goods sold are affected by certain external factors including fluctuations in metal prices and changes in exchange rates between the €, the SEK, the CLP, the BRL and the $.

The following table illustrates the sensitivity of the Company's risk on final settlement of its provisionally priced revenues:

Provisional price on

Effect on Revenue

Metal

Payable Metal

September 30, 2020

Change

($millions)

Copper

50,868 t

$3.03/lb

+/- 10%

+/- $34.0

Zinc

12,890 t

$1.08/lb

+/- 10%

+/- $3.1

Gold

32,140 oz

$1,891/oz

+/- 10%

+/- $6.1

Nickel

1,535 t

$6.57/lb

+/- 10%

+/- $2.2

The following table presents the Company's sensitivity to certain currencies and the impact of exchange rates, against the US dollar, on cost of goods sold:

Three months ended

Nine months ended

September 30, 2020

September 30, 2020

Currency

Change

($millions)

($millions)

Chilean peso

+/-10%

+/-$9.0

+/-$26.3

Euro

+/-10%

+/-$6.8

+/-$17.7

Swedish krona

+/-10%

+/-$3.4

+/-$7.3

Brazilian real

+/-10%

+/-$2.9

+/-$10.6

Related Party Transactions

The Company may enter into related party transactions that are in the normal course of business and on an arm's length basis. Related party disclosures can be found in Note 21 of the Company's September 30, 2020 Condensed Interim Consolidated Financial Statements.

Changes in Accounting Policies and Critical Accounting Estimates and Judgments

The Company describes its significant accounting policies as well as any changes in accounting policies in Note 2 "Basis of Presentation and Significant Accounting Policies" of the September 30, 2020 Condensed Interim Consolidated Financial Statements. No significant changes in accounting policies have occurred.

26

Non-GAAP Performance Measures

The Company uses certain performance measures in its analysis. These performance measures have no meaning within generally accepted accounting principles under IFRS and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The following are non-GAAP measures that the Company uses as key performance indicators.

Net Debt

Net debt is a performance measure used by the Company to assess its financial position. Net debt is defined as cash and cash equivalents, less debt and lease liabilities, excluding deferred financing fees and can be reconciled as follows:

($thousands)

September 30, 2020

June 30, 2020 December 31, 2019

Current portion of debt and lease liabilities

116,460

127,616

80,782

Debt and lease liabilities

227,725

374,349

227,767

344,185

501,965

308,549

Deferred financing fees (netted in above)

1,781

1,938

2,238

345,966

503,903

310,787

Cash and cash equivalents

(221,964)

(283,940)

(250,563)

Net debt

124,002

219,963

60,224

Adjusted Operating Cash Flow and Adjusted Operating Cash Flow per Share

Adjusted operating cash flow is a performance measure used by the Company to assess its ability to generate cash from its operations, while also taking into consideration changes in the number of outstanding shares of the Company. Adjusted operating cash flow is defined as cash provided by operating activities, excluding changes in non-cash working capital items. Adjusted operating cash flow per share is adjusted operating cash flow divided by the basic weighted average number of shares outstanding.

Adjusted operating cash flow and adjusted operating cash flow per share can be reconciled to cash provided by operating activities as follows:

Three months ended

Nine months ended

($thousands, except share and per share amounts)

September 30,

September 30,

2020

2019

2020

2019

Cash provided by operating activities

272,201

111,593

393,223

378,202

Changes in non-cash working capital items

(10,187)

43,418

75,643

(34,131)

Adjusted operating cash flow

262,014

155,011

468,866

344,071

Weighted average common shares outstanding

733,825,007

735,149,783

733,981,090

735,447,121

Adjusted operating cash flow per share

0.36

0.21

0.64

0.47

27

Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share

Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted earnings and adjusted earnings per share are non-GAAP measures. These measures are presented to provide additional information to investors and other stakeholders on the Company's underlying operational performance. Certain items have been excluded from adjusted EBITDA and adjusted earnings such as unrealized foreign exchange and revaluation gains and losses, impairment charges and reversals, gain or loss on debt settlement, interest on tax refunds and assessments, litigations, settlements and other items that do not represent the Company's current and on-going operations and are not necessarily indicative of future operating results.

Adjusted EBITDA can be reconciled to the Company's Consolidated Statement of Earnings as follows:

Three months ended

Nine months ended

September 30,

September 30,

($thousands)

2020

2019

2020

2019

Net earnings

133,595

32,050

68,285

84,373

Add back:

121,957

362,136

Depreciation, depletion and amortization

116,203

274,600

Finance income and costs

6,785

18,875

38,221

27,281

Income taxes

33,327

45,757

162,571

71,434

295,664

212,885

631,213

457,688

Unrealized foreign exchange

1,396

(12,378)

(36,477)

(13,241)

Unrealized revaluation loss on derivative asset/liability

5,553

21,534

23,217

21,172

Revaluation of marketable securities

(624)

777

(71)

196

(Income) loss from investment in associates

(1,034)

868

(2,980)

11,515

Project standby and suspension costs

-

-

6,341

-

Other

(677)

633

841

(412)

Total adjustments - EBITDA

4,614

11,434

(9,129)

19,230

Adjusted EBITDA

300,278

224,319

622,084

476,918

28

Adjusted earnings and adjusted earnings per share can be reconciled to the Company's Consolidated Statement of Earnings as follows:

Three months ended

Nine months ended

September 30,

September 30,

($thousands, except share and per share amounts)

2020

2019

2020

2019

Net earnings attributable to:

122,355

49,599

Lundin Mining shareholders

26,367

70,240

Add back:

4,614

(9,129)

Total adjustments - EBITDA

11,434

19,230

Tax effect on adjustments

(453)

3,865

10,609

4,175

Deferred tax arising from foreign exchange translation

4,483

(15,600)

80,145

(15,600)

Tax asset revaluations

(5,388)

-

8,174

-

Prior period tax refund and interest

(19,161)

-

(19,161)

-

Other

(50)

(449)

(194)

(535)

Total adjustments

(15,955)

(750)

70,444

7,270

Adjusted earnings

106,400

25,617

120,043

77,510

Weighted average number of shares outstanding:

733,825,007

733,981,090

Basic

735,149,783

735,447,121

Diluted

735,514,039

735,149,783

734,981,419

735,447,121

Basic and diluted earnings per share attributable to Lundin Mining shareholders:

Net earnings

0.17

0.04

0.07

0.10

Total adjustments

(0.03)

(0.01)

0.09

0.01

Adjusted earnings per share

0.14

0.03

0.16

0.11

29

Capital Expenditures

Identifying capital expenditures, on a cash basis, using a sustaining or expansionary classification provides management with a better understanding of costs required to maintain existing operations, and costs required for future growth of existing or new assets.

  • Sustaining capital expenditures - Expenditures which maintain existing operations and sustain production levels.
  • Expansionary capital expenditures - Expenditures which increase current or future production capacity, cash flow or earnings potential.

Where an expenditure both maintains and expands current operations, classification would be based on the primary decision for which the expenditure is being made. Sustaining and expansionary capital expenditures are reported excluding capitalized interest.

Cash Cost per Pound

Copper, zinc and nickel cash costs per pound are key performance measures that management uses to monitor performance. Management uses these statistics to assess how well the Company's producing mines are performing and to assess overall efficiency and effectiveness of the mining operations. Cash cost is not an IFRS measure and, although it is calculated according to accepted industry practice, the Company's disclosed cash costs may not be directly comparable to other base metal producers.

  • Cash cost per pound, gross - Total cash costs directly attributable to mining operations, excluding any allocation of upfront streaming proceeds or capital expenditures for deferred stripping, are divided by the sales volume of the primary metal to arrive at gross cash cost per pound. As this measure is not impacted by fluctuations in sales of by-product metals, it is generally more consistent across periods.
  • Cash cost per pound, net of by-products- Credits for by-products sales are deducted from total cash costs directly attributable to mining operations. By-product revenue is adjusted for the terms of streaming agreements, but excludes any deferred revenue from the allocation of upfront cash received. The net cash costs are divided by the sales volume of the primary metal to arrive at net cash cost per pound. The inclusion of by-product credits provides a broader economic measurement, incorporating the benefit of other metals extracted in the production of the primary metal.

All-in Sustaining Cost (AISC) per Pound

AISC per pound is an extension of the cash cost per pound measure discussed above and is also a key performance measure that management uses to monitor performance. Management uses this measure to analyze margins achieved on existing assets while sustaining and maintaining production at current levels. Expansionary capital and certain exploration costs are excluded from this definition as these are costs typically incurred to extend mine life or materially increase the productive capacity of existing assets, or for new operations. Corporate general and administrative expenses have also been excluded from the all-in sustaining cost measure, as any attribution of these costs to an operating site would not necessarily be reflective of costs directly attributable to the administration of the site.

30

Cash and All-in Sustaining Costs can be reconciled to the Company's production costs as follows:

Three months ended September 30, 2020

Operations

Candelaria

Chapada

Eagle

Neves-Corvo

Zinkgruvan

Total

($000s, unless otherwise noted)

(Cu)

(Cu)

(Ni)

(Cu)

(Zn)

Sales volumes (Contained metal in concentrate):

Tonnes

34,713

11,220

3,539

6,892

15,002

Pounds (000s)

76,529

24,736

7,802

15,194

33,074

Production costs

279,373

Less: Royalties and other

(10,109)

269,264

Deduct: By-product credits

(146,095)

Add: Treatment and refining charges

30,110

Cash cost

104,811

5,221

(4,934)

29,974

18,207

153,279

Cash cost per pound ($/lb)

1.37

0.21

(0.63)

1.97

0.55

Add: Sustaining capital expenditure

49,534

7,959

1,283

12,217

6,677

Royalties

-

2,927

5,459

510

-

Interest expense

1,022

1,110

313

78

(82)

Leases & other

1,763

768

2,131

1,786

(390)

All-in sustaining cost

157,130

17,985

4,252

44,565

24,412

AISC per pound ($/lb)

2.05

0.73

0.54

2.93

0.74

Three months ended September 30, 2019

Operations

Candelaria

Chapada

Eagle

Neves-Corvo

Zinkgruvan

Total

($000s, unless otherwise noted)

(Cu)

(Cu)

(Ni)

(Cu)

(Zn)

Sales volumes (Contained metal in concentrate):

Tonnes

42,276

13,757

1,889

12,343

12,657

Pounds (000s)

93,203

30,329

4,165

27,212

27,904

Production costs

293,899

Less: Royalties and other

(7,439)

286,460

Deduct: By-product credits

(121,973)

Add: Treatment and refining charges

44,759

Cash cost

129,970

10,621

13,517

43,442

11,696

209,246

Cash cost per pound ($/lb)

1.39

0.35

3.25

1.60

0.42

Add: Sustaining capital expenditure

99,565

3,530

2,240

18,018

7,489

Royalties

-

3,017

1,568

1,446

-

Interest expense

1,412

1,294

503

(198)

70

Leases & other

785

293

388

1,161

298

All-in sustaining cost

231,732

18,755

18,216

63,869

19,553

AISC per pound ($/lb)

2.49

0.62

4.37

2.35

0.70

31

Nine months ended September 30, 2020

Operations

Candelaria

Chapada

Eagle

Neves-Corvo

Zinkgruvan

($000s, unless otherwise noted)

(Cu)

(Cu)

(Ni)

(Cu)

(Zn)

Total

Sales volumes (Contained metal in concentrate):

Tonnes

106,609

36,153

8,767

26,091

39,751

Pounds (000s)

235,032

79,704

19,328

57,521

87,636

Production costs

831,082

Less: Royalties and other

(27,215)

803,867

Deduct: By-product credits

(373,242)

Add: Treatment and refining charges

89,385

Cash cost

315,590

34,781

9,937

112,354

47,348

520,010

Cash cost per pound ($/lb)

1.34

0.44

0.51

1.95

0.54

Add: Sustaining capital expenditure

179,729

19,987

8,928

39,748

24,182

Royalties

-

7,874

13,200

1,821

-

Interest expense

3,202

3,327

938

226

47

Leases & other

5,096

1,926

6,014

4,963

1,544

All-in sustaining cost

503,617

67,895

39,017

159,112

73,121

AISC per pound ($/lb)

2.14

0.85

2.02

2.77

0.83

Nine months ended September 30, 2019

Operations

Candelaria

Chapada1

Eagle

Neves-Corvo

Zinkgruvan

($000s, unless otherwise noted)

(Cu)

(Cu)

(Ni)

(Cu)

(Zn)

Total

Sales volumes (Contained metal in concentrate):

Tonnes

104,487

13,757

7,515

29,941

48,149

Pounds (000s)

230,354

30,329

16,568

66,009

106,150

Production cost

754,807

Less: Royalties and other

(14,116)

740,691

Deduct: By-product credits

(298,453)

Add: Treatment and refining charges

124,084

Cash cost

368,551

10,621

42,102

100,104

44,944

566,322

Cash cost per pound ($/lb)

1.60

0.35

2.54

1.52

0.42

Add: Sustaining capital expenditure

338,629

3,530

6,069

42,566

24,816

Royalties

-

3,017

5,322

3,447

-

Interest expense

366

21

264

91

69

Leases & other

6,472

1,566

2,236

3,586

1,052

All-in sustaining cost

714,018

18,755

55,993

149,794

70,881

AISC per pound ($/lb)

3.10

0.62

3.38

2.27

0.67

1. Chapada's cash cost and AISC are presented for the period of Lundin Mining's ownership.

32

Managing Risks

Risks and Uncertainties

The Company's business activities are subject to a variety and wide range of inherent risks and uncertainties. Any of these risks could have an adverse effect on the Company, its business and prospects, and could cause actual outcomes and results to differ materially from those described in forward-looking statements relating to the Company.

By their nature, exploration and mining activities present a variety of inherent hazards and associated health and safety risks that cannot be eliminated. Workers involved in the Company's operations are subject to many of these risks. Exposure to these risks could result in occupational illness or health issues, personal injury, and loss of life, and/or facility and workforce evacuation. Even though robust health and safety controls and risk mitigation measures are in place across the Company's mines, an accident occurred underground at the Neves-Corvo Mine in Portugal in September 2020 that resulted in a loss of life. A root cause investigation of the accident is being undertaken. While every effort is made to control and eliminate the potential for accidents of this type, should they occur, they may adversely affect the Company's reputation, business, future operations, and could result in litigation and/or fines and penalties.

The mining industry is subject to numerous significant and inherent risks and hazards that cannot be eliminated, including the potential for equipment failure, and/or disruption to power and water supply. In the third quarter, activities at the Chapada Mine were interrupted by a power outage resulting in significant damage to the mine's SAG and ball mill motors. This in turn resulted in a corresponding business interruption and reduced processing rates.

Changes in the relationship between Lundin Mining and its employees and contractors may have an adverse effect on its business, results of operations and financial condition. A prolonged labour disruption could have an adverse effect on the Company's ability to achieve its objectives. On October 8, 2020 members of the Candelaria Mine Workers Union commenced a legal strike after the Company and the Union failed to reach an agreement following mediation. On October 20, 2020, members of the Candelaria AOS Union also commenced a legal strike. On the same day operations at the Candelaria mine and mill were temporarily suspended to ensure the safety of the Candelaria workforce. While the Company is committed to responsible, respectful, and fair negotiations with its workers and is continuously seeking opportunities for dialogue with the unions, there can be no assurance that such negotiations will be successful, and even if successful will not result in longer-term impacts on the Company's labour relations.

As a result of the ongoing global COVID-19 pandemic, and the apparent emergence of a second wave of outbreak, increased levels of volatility have continued to adversely impact the economies and financial markets of many countries. Should increased levels of volatility continue or in the event of a rapid destabilization of global economic conditions, it may result in a material adverse effect on commodity prices, demand for metals, availability of credit, investor confidence, and general financial market liquidity, all of which may adversely affect the Company's business and the market price of the Company's securities. In addition, there may not be an adequate response to the emergence of a second wave of the disease, resulting in potentially significant economic and social impacts, including workforce health and safety, labour shortages and shutdowns, delays and disruption in supply chains, social unrest, government or regulatory actions or inactions (including but not limited to permanent changes in taxation or policies), decreased demand or the inability to sell and deliver concentrates and resulting commodities, declines in the price of commodities, delays in permitting or approvals, governmental disruptions or other unknown but potentially significant impacts. Given the global nature of the Company's operations, the Company may not be able to accurately predict which operations will be impacted. Any outbreak or threat of an outbreak of a contagion or epidemic disease could have a material adverse effect on the Company, its business and operational results.

For a detailed discussion on Lundin Mining's risks, refer to the "Risks and Uncertainties" section of the Company's most recently filed Annual Information Form ("AIF").

33

Management's Report on Internal Controls

Disclosure controls and procedures ("DCP")

DCP have been designed to provide reasonable assurance that all material information related to the Company is identified and communicated on a timely basis. Management of the Company, under the supervision of the President and Chief Executive Officer and the Chief Financial Officer, is responsible for the design and operation of DCP.

Internal control over financial reporting ("ICFR")

The Company's ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. However, due to inherent limitations ICFR may not prevent or detect all misstatements and fraud. Management will continue to monitor the effectiveness of its ICFR and may make modifications from time to time as considered necessary.

Control Framework

Management assesses the effectiveness of the Company's ICFR using the Internal Control - Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission ('COSO').

Changes in ICFR

There have been no changes in the Company's ICFR during the three-month period ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's financial reporting.

Outstanding Share Data

As at October 28, 2020, the Company has 733,692,965 common shares issued and outstanding, and 12,193,230 stock options and 2,621,500 share units outstanding under the Company's incentive plans.

Other Information

Additional information regarding the Company is included in the Company's AIF which is filed with the Canadian securities regulators. A copy of the Company's AIF can be obtained on SEDAR (www.sedar.com) or on the Company's website (www.lundinmining.com).

34

Condensed Interim Consolidated Financial Statements of

Lundin Mining Corporation

September 30, 2020 (Unaudited)

LUNDIN MINING CORPORATION

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

(Unaudited - in thousands of US dollars)

2020

2019

ASSETS

$

221,964

Cash and cash equivalents (Note 3)

$

250,563

Trade and other receivables (Note 4)

366,124

335,782

Income taxes receivable

60,682

52,523

Inventories (Note 5)

220,924

216,503

Other current assets

14,824

14,330

Total current assets

884,518

869,701

Restricted cash

47,806

47,666

Long-term inventory (Note 5)

661,473

550,561

Other non-current assets

7,706

7,970

Mineral properties, plant and equipment (Note 6)

5,033,954

5,065,556

Investment in associate

25,920

28,957

Deferred tax assets (Note 17)

64,657

104,627

Goodwill

246,311

242,208

6,087,827

6,047,545

Total assets

$

6,972,345

$

6,917,246

LIABILITIES

$

296,214

Trade and other payables (Note 7)

$

370,067

Income taxes payable

63,580

66,825

Current portion of debt and lease liabilities (Note 8)

116,460

80,782

Current portion of deferred revenue (Note 9)

85,512

83,960

Current portion of reclamation and other closure provisions (Note 10)

2,406

3,735

Total current liabilities

564,172

605,369

Debt and lease liabilities (Note 8)

227,725

227,767

Deferred revenue (Note 9)

653,717

674,186

Reclamation and other closure provisions (Note 10)

408,653

380,049

Other long-term liabilities

78,207

84,837

Provision for pension obligations

10,687

10,938

Deferred tax liabilities (Note 17)

708,908

636,700

2,087,897

2,014,477

Total liabilities

2,652,069

2,619,846

SHAREHOLDERS' EQUITY

4,184,257

Share capital (Note 11)

4,184,667

Contributed surplus

54,424

51,339

Accumulated other comprehensive loss

(240,097)

(284,649)

Deficit

(195,335)

(178,298)

Equity attributable to Lundin Mining Corporation shareholders

3,803,249

3,773,059

Non-controlling interests

517,027

524,341

4,320,276

4,297,400

$

6,972,345

$

6,917,246

Commitments and contingencies (Note 19)

Subsequent event (Note 23)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

- 1 -

LUNDIN MINING CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited - in thousands of US dollars, except for shares and per share amounts)

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Revenue (Note 12)

$

600,673

$

538,715

$

1,511,977

$

1,324,350

Cost of goods sold

(279,373)

(831,082)

Production costs (Note 13)

(293,899)

(754,807)

Depreciation, depletion and amortization

(121,957)

(116,203)

(362,136)

(274,600)

Gross profit

199,343

128,613

318,759

294,943

General and administrative expenses

(10,319)

(11,376)

(32,871)

(35,163)

General exploration and business development

(11,642)

(16,925)

(34,262)

(59,620)

Finance income (Note 15)

5,515

954

5,524

9,769

Finance costs (Note 15)

(12,300)

(19,829)

(43,745)

(37,050)

Income (loss) from equity investment in associate

1,034

(868)

2,980

(11,515)

Other (expense) income (Note 16)

(4,709)

(2,762)

14,471

(5,557)

Earnings before income taxes

166,922

77,807

230,856

155,807

Current tax recovery (expense) (Note 17)

11,464

(29,046)

(24,370)

(60,438)

Deferred tax expense (Note 17)

(44,791)

(16,711)

(138,201)

(10,996)

Net earnings

$

133,595

$

32,050

$

68,285

$

84,373

Net earnings attributable to:

$

122,355

$

49,599

Lundin Mining Corporation shareholders

$

26,367

$

70,240

Non-controlling interests

11,240

5,683

18,686

14,133

Net earnings

$

133,595

$

32,050

$

68,285

$

84,373

Basic and diluted earnings per share attributable to

Lundin Mining Corporation shareholders

$

0.17

$

0.04

$

0.07

$

0.10

Weighted average number of shares outstanding (Note 11)

733,825,007

733,981,090

Basic

735,149,783

735,447,121

Diluted

735,514,039

735,986,173

734,981,419

736,168,758

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

- 2 -

LUNDIN MINING CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited - in thousands of US dollars)

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Net earnings

$

133,595

$

32,050

$

68,285

$

84,373

Other comprehensive income (loss), net of taxes

Item that may be reclassified subsequently to net earnings:

48,293

44,552

Effects of foreign exchange

(49,260)

(60,015)

Other comprehensive income (loss)

48,293

(49,260)

44,552

(60,015)

Total comprehensive income (loss)

$

181,888

$

(17,210)

$

112,837

$

24,358

Comprehensive income (loss) attributable to:

170,648

$

94,151

Lundin Mining Corporation shareholders

$

(22,893)

$

10,225

Non-controlling interests

11,240

5,683

18,686

14,133

Total comprehensive income (loss)

$

181,888

$

(17,210)

$

112,837

$

24,358

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

- 3 -

LUNDIN MINING CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited - in thousands of US dollars, except for shares)

Accumulated

other

Non-

Number of

Share

Contributed

comprehensive

controlling

shares

capital

surplus

loss

Deficit

interests

Total

Balance, December 31, 2019

734,233,642

$

4,184,667

$

51,339

$

(284,649)

$

(178,298)

$

524,341

$

4,297,400

Distributions

-

-

-

-

-

(26,000)

(26,000)

Exercise of share-based awards

1,671,923

9,234

(4,595)

-

-

-

4,639

Share-based compensation

-

-

7,680

-

-

-

7,680

Dividends declared (Note 11(c))

-

-

-

-

(65,187)

-

(65,187)

Share purchase (Note 11(d))

(2,212,600)

(9,644)

-

-

(1,449)

-

(11,093)

Net earnings

-

-

-

-

49,599

18,686

68,285

Other comprehensive income

-

-

-

44,552

-

-

44,552

Total comprehensive income

-

-

-

44,552

49,599

18,686

112,837

Balance, September 30, 2020

733,692,965

$

4,184,257

$

54,424

$

(240,097)

$

(195,335)

$

517,027

$

4,320,276

Balance, January 1, 2019

733,534,879

$

4,177,660

$

49,424

$

(260,179)

$

(275,759)

$

502,420

$

4,193,566

Exercise of share-based awards

3,591,185

21,376

(12,607)

-

-

-

8,769

Share-based compensation

-

-

11,012

-

-

-

11,012

Dividends declared

-

-

-

-

(49,757)

-

(49,757)

Share purchase

(2,585,756)

(11,146)

-

-

(1,166)

-

(12,312)

Net earnings

-

-

-

-

70,240

14,133

84,373

Other comprehensive loss

-

-

-

(60,015)

-

-

(60,015)

Total comprehensive (loss) income

-

-

-

(60,015)

70,240

14,133

24,358

Balance, September 30, 2019

734,540,308

$

4,187,890

$

47,829

$

(320,194)

$

(256,442)

$

516,553

$

4,175,636

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

- 4 -

LUNDIN MINING CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited - in thousands of US dollars)

Three months ended

Nine months ended

Cash provided by (used in)

September 30,

September 30,

2020

2019

2020

2019

Operating activities

$

133,595

$

68,285

Net earnings

$

32,050

$

84,373

Items not involving cash and other adjustments

121,957

362,136

Depreciation, depletion and amortization

116,203

274,600

Share-based compensation

2,300

3,564

7,680

11,012

Foreign exchange gain

(2,972)

(12,378)

(40,845)

(13,241)

Finance costs, net

6,785

18,875

38,221

27,281

Recognition of deferred revenue (Note 9)

(17,276)

(9,873)

(51,790)

(35,208)

Deferred tax expense

44,791

16,711

138,201

10,996

(Income) loss from equity investment in associate

(1,034)

868

(2,980)

11,515

Revaluation of derivative asset and liability (Note 16)

5,553

15,741

23,217

15,379

Other

3,391

(3,059)

1,981

856

Reclamation payments (Note 10)

(375)

(1,808)

(1,597)

(8,175)

Other payments

(4,798)

(1,939)

(5,559)

(4,991)

Changes in long-term inventory

(29,903)

(19,944)

(68,084)

(30,326)

Changes in non-cash working capital items (Note 22)

10,187

(43,418)

(75,643)

34,131

272,201

111,593

393,223

378,202

Investing activities

(89,773)

(331,000)

Investment in mineral properties, plant and equipment

(164,950)

(525,664)

Chapada acquisition, net of cash acquired

-

(756,954)

-

(756,954)

Contingent consideration received (Note 4)

-

-

25,714

-

Payment of Chapada derivative liability (Note 7)

(25,000)

-

(25,000)

-

Interest received

4,912

1,287

5,524

9,208

Distributions from associate

-

-

6,017

15,730

Other

(39)

411

655

(1,862)

(109,900)

(920,206)

(318,090)

(1,259,542)

Financing activities

(4,174)

(10,592)

Interest paid

(5,032)

(7,453)

Principal payments of lease liabilities

(3,934)

(3,023)

(11,204)

(8,373)

Principal repayments of debt (Note 8)

(282,243)

(50,000)

(330,365)

(50,000)

Proceeds from debt (Note 8)

122,927

345,899

368,794

380,899

Dividends paid to shareholders

(22,275)

(16,620)

(64,899)

(49,681)

Share purchase (Note 11)

(3,666)

(5,818)

(11,093)

(12,312)

Proceeds from common shares issued

2,374

489

4,639

8,769

Distributions to non-controlling interests

(26,000)

-

(26,000)

-

(216,991)

265,895

(80,720)

261,849

Effect of foreign exchange on cash balances

(7,286)

(7,797)

(23,012)

(11,385)

Decrease in cash and cash equivalents during the period

(61,976)

(550,515)

(28,599)

(630,876)

Cash and cash equivalents, beginning of period

283,940

735,068

250,563

815,429

Cash and cash equivalents, end of period

$

221,964

$

184,553

$

221,964

$

184,553

Supplemental cash flow information (Note 22)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

- 5 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

  1. NATURE OF OPERATIONS
    Lundin Mining Corporation (the "Company") is a diversified Canadian base metals mining company primarily producing copper, zinc, gold and nickel. The Company owns 80% of the Candelaria and Ojos del Salado mining complex ("Candelaria") located in Chile. The Company's wholly-owned operating assets include the Chapada mine located in Brazil, the Eagle mine located in the United States of America ("USA"), the Neves-Corvo mine located in Portugal, and the Zinkgruvan mine located in Sweden.
    The Company's common shares are listed on the Toronto Stock Exchange ("TSX") in Canada and the Nasdaq Stockholm Exchange in Sweden. The Company is incorporated under the Canada Business Corporations Act. The Company is domiciled in Canada and its registered address is 150 King Street West, Toronto, Ontario, Canada.
  2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
    1. Basis of presentation and measurement
      The unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") which the Canadian Accounting Standards Board has approved for incorporation into Part 1 of the CPA Canada Handbook - Accounting including IAS 34 Interim financial reporting. The condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2019.
      The consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments which have been measured at fair value.
      The Company's presentation currency is United States ("US") dollars. Reference herein of $ or USD is to US dollars, C$ is to Canadian dollars, SEK is to Swedish krona, € refers to the Euro, CLP refers to the Chilean peso and BRL refers to the Brazilian real.
      Balance sheet items are classified as current if receipt or payment is due within twelve months. Otherwise, they are presented as non-current.
      These condensed interim consolidated financial statements were approved by the Board of Directors for issue on October 28, 2020.
    2. Critical accounting estimates and judgments in applying the entity's accounting policies
      Areas of judgment that have the most significant effect on the amounts recognized in the financial statements are disclosed in Note 2 of the Company's consolidated financial statements for the year ended December 31, 2019, except for those noted below.
      The Company continues to manage and respond to the COVID-19 pandemic and has implemented preventative measures to ensure the safety of its workforce, local communities and other key stakeholders. To date, production disruptions as a result of COVID-19 have been minimal and there has been no significant disruption in the delivery or receipt of goods at our operations.

- 6 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

As at September 30, 2020, an indicator of impairment of long-lived assets was identified due to the carrying amount of the Company's net assets exceeding its market capitalization. As a result, an impairment assessment was performed with no impairments identified. Future metal prices, exchange rates, discount rates and other key assumptions used in the Company's assessment are subject to greater uncertainty given the current economic environment. Changes in these assumptions could significantly impact the valuation of the Company's assets in the future.

The carrying value of the Neves-Corvo cash generating unit of $1,075.0 million, Chapada's long-term ore stockpile of $279.3 million, and deferred tax assets of $31.1 million relating to Eagle are most sensitive to changes in these key assumptions.

  1. Significant accounting policies
    The accounting policies followed in these condensed interim consolidated financial statements are consistent with those disclosed in Note 2 of the Company's consolidated financial statements for the year ended December 31, 2019.

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents are comprised of the following:

September 30,

December 31,

2020

2019

Cash

$

201,861

$

233,466

Short-term deposits

20,103

17,097

$

221,964

$

250,563

4. TRADE AND OTHER RECEIVABLES

Trade and other receivables are comprised of the following:

September 30,

December 31,

2020

2019

Trade receivables

$

309,454

$

229,730

Value added tax

26,090

44,948

Prepaid expenses

15,462

21,726

Other receivables

15,118

39,378

$

366,124

$

335,782

In 2019, other receivables included $25.7 million for contingent consideration due under the terms of the TF Holdings Limited disposal that occurred in 2017. The Company received this payment in January 2020.

- 7 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

5. INVENTORIES

Inventories are comprised of the following:

September 30,

December 31,

2020

2019

Ore stockpiles

$

59,971

$

49,696

Concentrate stockpiles

29,332

44,015

Materials and supplies

131,621

122,792

$

220,924

$

216,503

Long-term inventory is comprised of ore stockpiles. As at September 30, 2020, the Company had $382.2 million (December 31, 2019 - $297.3 million) and $279.3 million (December 31, 2019 - $253.3 million) of long-term ore stockpiles at Candelaria and Chapada, respectively.

6. MINERAL PROPERTIES, PLANT AND EQUIPMENT

Mineral properties, plant and equipment are comprised of the following:

Mineral

Plant and

Assets under

Cost

properties

equipment

construction

Total

As at January 1, 2019

$

3,656,432

$

2,458,440

$

350,269

$

6,465,141

Chapada acquisition

655,377

248,199

16,752

920,328

Additions

195,118

9,152

386,010

590,280

Disposals and transfers

21,056

234,287

(257,984)

(2,641)

Effects of foreign exchange

(96,935)

(37,574)

(10,746)

(145,255)

As at September 30, 2019

4,431,048

2,912,504

484,301

7,827,853

Chapada acquisition

17,265

(10,828)

1,948

8,385

Additions

34,485

20,910

100,961

156,356

Disposals and transfers

104,168

35,614

(167,179)

(27,397)

Effects of foreign exchange

60,640

23,665

7,606

91,911

As at December 31, 2019

4,647,606

2,981,865

427,637

8,057,108

Additions

142,760

18,955

175,433

337,148

Disposals and transfers

31,163

180,632

(220,543)

(8,748)

Effects of foreign exchange

64,412

28,018

13,392

105,822

As at September 30, 2020

$

4,885,941

$

3,209,470

$

395,919

$

8,491,330

- 8 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

Accumulated depreciation,

Mineral

Plant and

Assets under

depletion and amortization

properties

equipment

construction

Total

As at January 1, 2019

$

1,719,761

$

883,198

$

-

$

2,602,959

Depreciation

165,354

134,622

-

299,976

Disposals and transfers

-

(706)

-

(706)

Effects of foreign exchange

(57,378)

(18,916)

-

(76,294)

As at September 30, 2019

1,827,737

998,198

-

2,825,935

Depreciation

92,884

48,452

-

141,336

Disposals and transfers

(282)

(22,011)

-

(22,293)

Effects of foreign exchange

34,817

11,757

-

46,574

As at December 31, 2019

1,955,156

1,036,396

-

2,991,552

Depreciation

263,216

153,570

-

416,786

Disposals and transfers

-

(5,492)

-

(5,492)

Effects of foreign exchange

40,026

14,504

-

54,530

As at September 30, 2020

$

2,258,398

$

1,198,978

$

-

$

3,457,376

Mineral

Plant and

Assets under

Net book value

properties

equipment

construction

Total

As at December 31, 2019

$

2,692,450

$

1,945,469

$

427,637

$

5,065,556

As at September 30, 2020

$

2,627,543

$

2,010,492

$

395,919

$

5,033,954

On July 5, 2019, the Company acquired 100% of Mineração Maracá Indústria e Comércio S/A, which owns the Chapada copper‐gold mine located in Brazil from Yamana Gold Inc.

During the three and nine months ended September 30, 2020, the Company capitalized $3.8 million (Q3 2019 - $3.2 million) and $6.9 million (YTD Q3 2019 - $8.3 million) of finance costs to assets under construction, at a weighted average interest rate of 4.4% (2019 - 5.0%).

During the three and nine months ended September 30, 2020, the Company capitalized $19.6 million (Q3 2019 - $24.6 million) and $83.2 million (YTD Q3 2019 - $108.5 million), respectively, of deferred stripping costs to mineral properties. The depreciation expense related to deferred stripping for the three and nine months ended September 30, 2020, was $46.9 million (Q3 2019 - $52.3 million) and $134.7 million (YTD Q3 2019 - $73.6 million), respectively. Included in the mineral properties balance at September 30, 2020, is $281.1 million (December 31, 2019 - $205.4 million) related to deferred stripping at Candelaria and $88.0 million (December 31, 2019 - $84.3 million) related to underground development of the Zinc Expansion Project at the Neves-Corvo mine, which are currently non-depreciable.

- 9 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

The Company leases various assets including buildings, rail cars, vehicles, machinery and equipment. The following table summarizes the changes in right-of-use assets within plant and equipment:

Plant and equipment

Net book value

As at January 1, 2019

$

43,262

Additions

4,411

Depreciation

(8,612)

Effects of foreign exchange

(627)

As at September 30, 2019

38,434

Additions

11,254

Depreciation

(4,030)

Disposals

(1,800)

Effects of foreign exchange

506

As at December 31, 2019

44,364

Additions

8,560

Depreciation

(11,112)

Disposals

(450)

Effects of foreign exchange

441

As at September 30, 2020

$

41,803

The Company acts as lessee in certain leases that contain variable lease payment terms that are primarily based on usage of the right-of-use assets.

7. TRADE AND OTHER PAYABLES

Trade and other payables are comprised of the following:

September 30,

December 31,

2020

2019

Trade payables

$

119,134

$

188,430

Unbilled goods and services

71,149

72,702

Employee benefits payable

62,364

59,792

Chapada derivative liability - current portion

23,970

22,472

Royalties payable

8,088

8,769

Prepayment from customer

193

6,562

Other

11,316

11,340

$

296,214

$

370,067

In August 2020, the Company paid the first $25.0 million tranche of the derivative liability related to the Chapada acquisition (Note 19). The second tranche has been reclassified from other long-term liabilities to trade and other payables.

- 10 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

8. DEBT AND LEASE LIABILITIES

Debt and lease liabilities are comprised of the following:

September 30,

December 31,

2020

2019

Revolving credit facility (a)

$

198,219

$

222,762

Term loans (b)

100,000

35,000

Lease liabilities (c)

37,325

42,616

Line of credit (d)

8,641

8,171

Debt and lease liabilities

344,185

308,549

Less: current portion

116,460

80,782

Long-term portion

$

227,725

$

227,767

The changes in debt and lease liabilities are comprised of the following:

Leases

Debt

Total

As at January 1, 2019

$

42,644

$

-

$

42,644

Additions

5,115

379,620

384,735

Payments

(9,347)

(50,000)

(59,347)

Interest

974

-

974

Financing fee amortization

-

42

42

Effects of foreign exchange

(701)

(812)

(1,513)

As at September 30, 2019

38,685

328,850

367,535

Additions

8,787

73,798

82,585

Payments

(4,136)

(137,754)

(141,890)

Disposals

(1,870)

-

(1,870)

Interest

667

-

667

Financing fee amortization

-

154

154

Effects of foreign exchange

483

885

1,368

As at December 31, 2019

42,616

265,933

308,549

Additions

8,106

368,794

376,900

Payments

(12,296)

(330,365)

(342,661)

Disposals

(464)

-

(464)

Interest

1,092

-

1,092

Financing fee amortization

-

457

457

Effects of foreign exchange

(1,729)

2,041

312

As at September 30, 2020

37,325

306,860

344,185

Less: current portion

13,789

102,671

116,460

Long-term portion

$

23,536

$

204,189

$

227,725

  1. The Company has a secured revolving credit facility of $800.0 million with a $200.0 million accordion option, maturing August 2023. The credit facility bears interest on drawn funds at rates of LIBOR +1.75% to LIBOR +2.75%, depending on the Company's net leverage ratio. The revolving credit facility is subject to customary covenants. During the first quarter of 2020, the Company repaid $30.0 million and subsequently drew down $150.0 million on the credit facility. During the third quarter of 2020, the Company repaid an additional $145.0 million. As at September 30, 2020, the balance outstanding was $200.0 million (December 31, 2019 - $225.0 million), along with letters of credit totalling $20.6 million (SEK 162.0 million and €2.2 million) (December 31, 2019 - $23.6 million). Deferred financing fees of $1.8 million, at September 30, 2020, have been netted against borrowings (December 31, 2019 - $2.2 million).
    • 11 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

  1. During 2019, Candelaria obtained an unsecured fixed term loan in the amount of $50.0 million, of which $15.0 million was subsequently repaid. During the first quarter of 2020, Candelaria obtained two additional unsecured fixed term loans in the amount of $20.0 million and $35.0 million, respectively. All three term loans were repaid in full during the third quarter and two additional unsecured fixed term loans in the amount of $80.0 million and $20.0 million were obtained. These loans mature on July 27, 2021 and August 12, 2021, respectively, and accrue interest at a rate of 1.1% per annum, with interest payable upon maturity. As at September 30, 2020, the total balance outstanding was $100.0 million (December 31, 2019 - $35.0 million).
  2. Lease liabilities relate to leases on buildings, rail cars, vehicles, machinery and equipment which have remaining lease terms of one to fifteen years and interest rates of 0.8% - 7.1% over the terms of the leases.
  3. Sociedade Mineira de Neves-Corvo, S.A. ("Somincor"), a subsidiary of the Company which owns the Neves-Corvo mine, has a $29.3 million (€25.0 million) line of credit for equipment financing. During the first quarter of 2020, Somincor drew $2.0 million (€1.8 million) on the line of credit for purchases of equipment. As at September 30, 2020, the balance outstanding was $8.6 million (€7.3 million). Interest rates vary from a fixed rate of 0.88% to EURIBOR +0.84%, dependent on the piece of equipment, with the debt maturing throughout 2023 and 2024.
  4. Somincor has a commercial paper program which matures in October 2021. The $35.1 million (€30.0 million) program bears interest at EURIBOR +0.84%. During the second quarter of 2020, Somincor drew down $16.4 million (€15.0 million) and $22.5 million (€20.0 million) under this program. Both amounts were repaid on the required repayment dates of June 29, 2020 and July 29, 2020, respectively. During the third quarter of 2020, Somincor drew down an additional $22.9 million (€20.0 million) and repaid the amount in full on August 28, 2020. There was no balance outstanding as at September 30, 2020.

The schedule of undiscounted lease payment and debt obligations is as follows:

Leases

Debt

Total

Less than one year

$

15,057

$

102,671

$

117,728

One to five years

22,043

205,970

228,013

More than five years

3,425

-

3,425

Total undiscounted obligations as at September 30, 2020

$

40,525

$

308,641

$

349,166

- 12 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

9. DEFERRED REVENUE

The following table summarizes the changes in deferred revenue:

As at December 31, 2018

$

588,854

Chapada acquisition

175,360

Recognition of revenue

(42,269)

Variable consideration adjustment

9,862

Finance costs

25,319

Effects of foreign exchange

(3,684)

As at September 30, 2019

753,442

Recognition of revenue

(16,826)

Variable consideration adjustment

8,365

Finance costs

10,452

Effects of foreign exchange

2,713

As at December 31, 2019

758,146

Recognition of revenue

(51,790)

Finance costs

31,036

Effects of foreign exchange

1,837

As at September 30, 2020

739,229

Less: current portion

85,512

Long-term portion

$

653,717

Consideration from the Company's stream agreements are considered variable. Gold, silver and copper revenue can be subject to cumulative adjustments when the volume to be delivered under the contracts changes. In 2019, the Company recognized an adjustment to gold and silver revenue and finance costs due to an increase in the Company's Mineral Resources and Mineral Reserves estimates.

- 13 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

10. RECLAMATION AND OTHER CLOSURE PROVISIONS

Reclamation and other closure provisions relating to the Company's mining operations are as follows:

Reclamation

Other closure

provisions

provisions

Total

Balance, December 31, 2018

$

253,484

$

45,206

$

298,690

Chapada acquisition

71,154

-

71,154

Accretion

6,805

-

6,805

Changes in estimate

(3,200)

(1,592)

(4,792)

Changes in discount rate

34,465

-

34,465

Payments

(8,175)

-

(8,175)

Effects of foreign exchange

(10,559)

(1,158)

(11,717)

Balance, September 30, 2019

343,974

42,456

386,430

Accretion

2,920

-

2,920

Changes in estimate

1,643

(1,925)

(282)

Changes in discount rate

(11,649)

-

(11,649)

Payments

(2,320)

-

(2,320)

Effects of foreign exchange

8,544

141

8,685

Balance, December 31, 2019

343,112

40,672

383,784

Accretion

7,740

-

7,740

Changes in estimate

4,773

24

4,797

Changes in discount rate

16,883

-

16,883

Payments

(1,597)

-

(1,597)

Effects of foreign exchange

2,968

(3,516)

(548)

Balance, September 30, 2020

373,879

37,180

411,059

Less: current portion

2,406

-

2,406

Long-term portion

$

371,473

$

37,180

$

408,653

The Company expects these liabilities to be settled between 2020 and 2056. The provisions are discounted using current market pre-tax discount rates which range from 0.1% to 7.2% (December 31, 2019 - 0.3% to 7.0%).

- 14 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

11. SHARE CAPITAL

  1. Basic and diluted weighted average number of shares outstanding

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Basic weighted average number of shares outstanding

733,825,007

735,149,783

733,981,090

735,447,121

Effect of dilutive securities

1,689,032

836,390

1,000,329

721,637

Diluted weighted average number of shares outstanding

735,514,039

735,986,173

734,981,419

736,168,758

Antidilutive securities

6,000

3,501,500

3,991,500

4,469,000

The effect of dilutive securities relates to in-the-money outstanding stock options and share units ("SUs").

b) Stock options and SUs granted

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Stock options

30,000

276,000

4,004,000

4,210,000

SUs

6,000

48,500

1,033,500

1,078,000

  1. Dividends
    During the three and nine months ended September 30, 2020, the Company declared dividends in the amount of $22.0 million (Q3 2019 - $16.8 million) or C$0.04 per share (Q3 2019 - C$0.03), and $65.2 million (YTD Q3 2019 - $49.8 million) or C$0.12 per share (YTD Q3 2019 - C$0.09), respectively.
  2. Normal course issuer bid
    In 2019, the Company obtained approval from the TSX for the renewal of its normal course issuer bid ("NCIB") to purchase up to 63,797,653 common shares between December 9, 2019 and December 8, 2020. Daily purchases (other than pursuant to a block purchase exemption) on the TSX under the NCIB are limited to a maximum of 517,131 common shares. The price that the Company will pay for common shares in open market transactions will be the market price at the time of purchase.
    For the three and nine months ended September 30, 2020, 621,000 and 2,212,600 shares were purchased under the NCIB at an average price of C$7.84 and C$6.69 per share for total consideration of $3.7 million and $11.1 million, respectively. All the common shares purchased were cancelled.
    For the three and nine months ended September 30, 2019, 1,302,082 and 2,585,756 shares were purchased under the NCIB at an average price of C$5.93 and C$6.37 per share for total consideration of $5.8 million and $12.3 million, respectively. All the common shares purchased were cancelled.

- 15 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

12. REVENUE

The Company's analysis of revenue from contracts with customers, segmented by product, is as follows:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Copper

$

372,798

$

381,304

$

1,001,236

$

884,639

Gold

66,914

67,879

190,267

114,289

Zinc

52,863

48,950

128,911

196,586

Nickel

52,253

27,021

117,940

75,932

Lead

10,436

8,828

28,746

32,325

Silver

9,134

9,754

27,969

24,305

Other

6,083

3,228

15,921

10,967

570,481

546,964

1,510,990

1,339,043

Provisional pricing adjustments on concentrate sales

30,192

(8,249)

987

(14,693)

Revenue

$

600,673

$

538,715

$

1,511,977

$

1,324,350

The Company's geographical analysis of revenue from contracts with customers, segmented based on the destination of product, is as follows:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Europe

$

247,103

$

313,808

$

707,512

$

702,849

Asia

197,337

176,013

513,350

510,150

North America

79,037

12,271

178,809

64,127

South America

47,004

44,872

111,319

61,917

570,481

546,964

1,510,990

1,339,043

Provisional pricing adjustments on concentrate sales

30,192

(8,249)

987

(14,693)

Revenue

$

600,673

$

538,715

$

1,511,977

$

1,324,350

13. PRODUCTION COSTS

The Company's production costs are comprised of the following:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

$

2020

2019

Direct mine and mill costs

$

250,347

$

260,265

743,740

$

681,547

Transportation

20,130

27,603

64,447

61,474

Royalties

8,896

6,031

22,895

11,786

Total production costs

$

279,373

$

293,899

$

831,082

$

754,807

- 16 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

14. EMPLOYEE BENEFITS

The Company's employee benefits are comprised of the following:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Production costs

$

62,559

$

185,803

Wages and benefits

$

64,426

$

180,510

Retirement benefits

290

311

1,119

755

Share-based compensation

495

878

1,890

2,742

General and administrative expenses

63,344

65,615

188,812

184,007

4,519

14,071

Wages and benefits

4,132

14,974

Retirement benefits

186

180

659

582

Share-based compensation

1,780

2,637

5,687

8,111

General exploration and business development

6,485

6,949

20,417

23,667

885

2,958

Wages and benefits

1,376

5,063

Retirement benefits

10

12

32

41

Share-based compensation

25

48

103

158

920

1,436

3,093

5,262

Total employee benefits

$

70,749

$

74,000

$

212,322

$

212,936

15. FINANCE INCOME AND COSTS

The Company's finance income and costs are comprised of the following:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Interest income

$

4,838

$

554

$

5,524

$

8,324

Deferred revenue finance costs

(7,493)

(10,622)

(25,469)

(20,473)

Interest expense and bank fees

(1,973)

(6,068)

(8,580)

(8,798)

Accretion expense on reclamation provisions

(2,441)

(2,797)

(7,740)

(6,805)

Lease liability interest

(393)

(342)

(1,092)

(974)

Other

677

400

(864)

1,445

Total finance costs, net

$

(6,785)

$

(18,875)

$

(38,221)

$

(27,281)

Finance income

$

5,515

$

954

$

5,524

$

9,769

Finance costs

(12,300)

(19,829)

(43,745)

(37,050)

Total finance costs, net

$

(6,785)

$

(18,875)

$

(38,221)

$

(27,281)

- 17 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

16. OTHER INCOME AND EXPENSE

The Company's other income and expense are comprised of the following:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Foreign exchange gain

$

3,745

11,456

$

50,419

11,439

Revaluation of marketable securities

624

(777)

71

(196)

Revaluation of derivative asset and liability

(5,553)

(15,741)

(23,217)

(15,379)

Other expense

(3,525)

2,300

(12,802)

(1,421)

Total other (expense) income, net

$

(4,709)

$

(2,762)

$

14,471

$

(5,557)

During the second quarter of 2020, the Company incurred $6.3 million of idle project costs.

17. INCOME TAXES

Income tax expense is recognized based on management's estimate of the weighted average annual income tax rate expected for the full financial year.

As at September 30, 2020, the Company had $644.3 million (December 31, 2019 - $532.1 million) in net deferred tax liabilities. During the year, there was an increase in net deferred tax liabilities arising from the revaluation of non- monetary assets in Brazil of $80.1 million and an increase in temporary differences of $56.2 million.

For the three and nine months ended September 30, 2020, deferred tax expense includes $4.4 million (Q3 2019 - $14.6 million) and $80.1 million (YTD Q3 2019 - $14.6 million), respectively, arising from the above-mentioned revaluation of non-monetary assets.

- 18 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

18. FAIR VALUES OF FINANCIAL INSTRUMENTS

The Company's financial assets and financial liabilities have been classified into categories that determine their basis of measurement. The following table shows the carrying values, fair values and fair value hierarchy of the Company's financial instruments as at September 30, 2020 and December 31, 2019:

September 30, 2020

December 31, 2019

Carrying

Carrying

Level

value

Fair value

value

Fair value

Financial assets

Fair value through profit or loss

Restricted cash

1

$

47,806

$

47,806

$

47,666

$

47,666

Trade receivables (provisional)

2

255,521

255,521

203,565

203,565

Marketable securities

1

4,171

4,171

4,331

4,331

Derivative asset

2

-

-

25,714

25,714

$

307,498

$

307,498

$

281,276

$

281,276

Financial liabilities

Amortized cost

$

306,860

$

306,860

Debt

2

$

265,933

$

265,933

Fair value through profit or loss

$

90,064

$

90,064

Chapada derivative liability

2

$

91,817

91,817

Fair values of financial instruments are determined by valuation methods depending on hierarchy levels as defined below:

Level 1 - Quoted market price in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted market prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. observed prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities are not based on observable market data.

The Company calculates fair values based on the following methods of valuation and assumptions:

Marketable securities/restricted cash - The fair value of investments in shares is determined based on the quoted market price.

Trade receivables - The fair value of the embedded derivatives on provisional sales are valued using quoted forward market prices. The Company recognized positive pricing adjustments of $30.2 million in revenue during the three months ended September 30, 2020 (Q3 2019 - $8.2 million negative pricing adjustments) and positive pricing adjustments of $1.0 million in revenue during the nine months ended September 30, 2020 (YTD Q3 2019 - $14.7 million negative pricing adjustments).

Derivative asset & derivative liability - The fair value of these derivatives is determined using a valuation model that incorporates such factors as metal prices, metal price volatility, expiry date, and risk-free interest rate.

Debt - The fair values approximate carrying values as the interest rates are comparable to current market rates.

- 19 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

The carrying values of certain financial instruments maturing in the short-term approximate their fair values. These financial instruments include cash and cash equivalents, trade and other receivables other than those provisionally priced, and trade and other payables which are classified as amortized cost.

19. COMMITMENTS AND CONTINGENCIES

  1. The Company has capital commitments of $78.9 million on various initiatives, of which $39.6 million is expected to be paid during 2020.
  2. The Company may be involved in legal proceedings arising in the ordinary course of business. The potential amount of the liability with respect to such legal proceedings is not expected to materially affect the Company's financial position.
  3. Significant changes to commitments and contingencies, since those reported at December 31, 2019, are described below:
    1. In July 2020, a tax assessment was received for the 2017 taxation year relating to the withholding taxes paid on intercompany interest payments, the same issue as the 2016 tax assessment the Company received in 2019. The Chilean Internal Revenue Service issued a tax assessment of $144.3 million ($66.0 million in withholding taxes plus interest and penalties of $78.3 million) on interest payments made in 2017. The Company has filed an administrative appeal in response to the assessment. While not yet assessed, a similar position taken on interest payments made for taxation years 2018 to 2020 year-to-date could result in approximately $54.4 million in additional withholding taxes, excluding possible penalties and interest.
    2. In August 2020, another tax assessment was received for the 2016 taxation year relating to the same matter as above, but from an interest deductibility perspective, in the amount of $30.4 million ($13.8 million in taxes and $16.6 million in interest and penalties) on the interest expense deducted in 2016. While not yet assessed, a similar position taken from this perspective for the taxation years 2018 to 2020 year-to-date could result in an additional $54.9 million of taxes, excluding penalties and interest. The Company has filed an administrative appeal in response to the assessment.

No tax expense was accrued for the above assessments as the Company believes its original filing positions were in compliance with tax regulations and intends to vigorously defend this position.

  1. In August 2020, the Company paid $25.0 million under the Chapada gold price contingent consideration structure. The maximum contingent consideration has since been reduced to $100.0 million.
  2. On September 2, 2020, the plaintiffs in the Ontario class action (Markowich v. Lundin Mining Corporation et al) filed their leave application and motion for certification with the Ontario Superior Court of Justice. The application and motion have been scheduled for a court hearing in December 2021.

20. SEGMENTED INFORMATION

The Company is engaged in mining, exploration and development of mineral properties, primarily in Chile, Brazil, USA, Portugal and Sweden. Operating segments are reported in a manner consistent with the internal reporting provided to executive management who act as the chief operating decision-maker. Executive management are responsible for allocating resources and assessing performance of the operating segments.

- 20 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

For the three months ended September 30, 2020

Candelaria

Chapada

Eagle

Neves-Corvo

Zinkgruvan

Other

Total

Chile

Brazil

USA

Portugal

Sweden

Revenue

$

280,417

$

113,586

$

91,314

$

69,287

$

46,069

$

-

$

600,673

Cost of goods sold

Production costs

(120,597)

(41,723)

(36,973)

(53,034)

(26,540)

(506)

(279,373)

Depreciation, depletion and amortization

(71,309)

(9,305)

(17,707)

(13,299)

(9,864)

(473)

(121,957)

Gross profit (loss)

88,511

62,558

36,634

2,954

9,665

(979)

199,343

General and administrative expenses

-

-

-

-

-

(10,319)

(10,319)

General exploration and business development

(8,655)

(952)

176

(159)

(838)

(1,214)

(11,642)

Finance (costs) income

(7,576)

(4,142)

(430)

8,370

(818)

(2,189)

(6,785)

Income from equity investment in associate

-

-

-

-

-

1,034

1,034

Other (expense) income

(4,561)

3,120

(1,409)

1,014

(2)

(2,871)

(4,709)

Income tax (expense) recovery

(19,011)

(24,094)

(1,777)

13,235

89

(1,769)

(33,327)

Net earnings (loss)

$

48,708

$

36,490

$

33,194

$

25,414

$

8,096

$

(18,307)

$

133,595

Capital expenditures

$

49,534

$

7,959

$

1,283

$

24,265

$

6,677

$

55

$

89,773

For the nine months ended September 30, 2020

Candelaria

Chapada

Eagle

Neves-Corvo

Zinkgruvan

Other

Total

Chile

Brazil

USA

Portugal

Sweden

Revenue

$

708,521

$

311,832

$

191,340

$

196,252

$

104,032

$

-

$

1,511,977

Cost of goods sold

Production costs

(354,808)

(136,386)

(106,119)

(166,033)

(65,818)

(1,918)

(831,082)

Depreciation, depletion and amortization

(210,443)

(31,735)

(53,613)

(40,892)

(24,107)

(1,346)

(362,136)

Gross profit (loss)

143,270

143,711

31,608

(10,673)

14,107

(3,264)

318,759

General and administrative expenses

-

-

-

-

-

(32,871)

(32,871)

General exploration and business development

(20,242)

(2,542)

(32)

(1,482)

(5,369)

(4,595)

(34,262)

Finance (costs) income

(23,192)

(12,295)

(1,280)

8,424

(2,586)

(7,292)

(38,221)

Income from equity investment in associate

-

-

-

-

-

2,980

2,980

Other (expense) income

(4,184)

41,931

(3,671)

571

1,010

(21,186)

14,471

Income tax (expense) recovery

(39,219)

(129,813)

(1,694)

19,455

312

(11,612)

(162,571)

Net earnings (loss)

$

56,433

$

40,992

$

24,931

$

16,295

$

7,474

$

(77,840)

$

68,285

Capital expenditures

$

179,729

$

19,987

$

8,928

$

97,904

$

24,182

$

270

$

331,000

- 21 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

For the three months ended September 30, 2019

Candelaria

Chapada

Eagle

Neves-Corvo

Zinkgruvan

Other

Total

Chile

Brazil

USA

Portugal

Sweden

Revenue

$

249,930

$

114,867

$

53,717

$

86,009

$

34,192

$

-

$

538,715

Cost of goods sold

(138,057)

(49,704)

(24,106)

(61,555)

(19,602)

(875)

(293,899)

Production costs

Depreciation, depletion and amortization

(69,261)

(17,299)

(10,261)

(12,908)

(6,033)

(441)

(116,203)

Gross profit (loss)

42,612

47,864

19,350

11,546

8,557

(1,316)

128,613

General and administrative expenses

-

-

-

-

-

(11,376)

(11,376)

General exploration and business development

(5,063)

(891)

(2,334)

(1,873)

(3,961)

(2,803)

(16,925)

Finance costs

(8,408)

(4,761)

(455)

(9)

(3,121)

(2,121)

(18,875)

Loss from equity investment in associate

-

-

-

-

-

(868)

(868)

Other income (expense)

4,044

(10,486)

37

5,644

2,335

(4,336)

(2,762)

Income tax expense

(7,727)

(26,981)

(772)

(193)

(3,548)

(6,536)

(45,757)

Net earnings (loss)

$

25,458

$

4,745

$

15,826

$

15,115

$

262

$

(29,356)

$

32,050

Capital expenditures

$

80,773

$

12,342

$

10,549

$

54,518

$

6,696

$

72

$

164,950

For the nine months ended September 30, 2019

Candelaria

Chapada

Eagle

Neves-Corvo

Zinkgruvan

Other

Total

Chile

Brazil

USA

Portugal

Sweden

Revenue

$

661,268

$

114,867

$

159,337

$

248,675

$

140,203

$

-

$

1,324,350

Cost of goods sold

(383,585)

(49,704)

(81,752)

(176,245)

(60,727)

(2,794)

(754,807)

Production costs

Depreciation, depletion and amortization

(155,022)

(17,299)

(40,577)

(38,306)

(22,063)

(1,333)

(274,600)

Gross profit (loss)

122,661

47,864

37,008

34,124

57,413

(4,127)

294,943

General and administrative expenses

-

-

-

-

-

(35,163)

(35,163)

General exploration and business development

(20,231)

(891)

(10,454)

(5,909)

(13,623)

(8,512)

(59,620)

Finance (costs) income

(24,462)

(4,761)

(841)

(693)

(4,755)

8,231

(27,281)

Loss from equity investment in associate

-

-

-

-

-

(11,515)

(11,515)

Other income (expenses)

3,971

(10,486)

81

1,694

4,363

(5,180)

(5,557)

Income tax (expense) recovery

(11,106)

(26,981)

1,137

322

(12,802)

(22,004)

(71,434)

Net earnings (loss)

$

70,833

$

4,745

$

26,931

$

29,538

$

30,596

$

(78,270)

$

84,373

Capital expenditures

$

313,665

$

12,342

$

30,695

$

142,759

$

26,053

$

150

$

525,664

- 22 -

LUNDIN MINING CORPORATION

Notes to condensed interim consolidated financial statements

For the three and nine months ended September 30, 2020

(Unaudited - Tabular amounts in thousands of US dollars, except for shares and per share amounts)

21. RELATED PARTY TRANSACTIONS

  1. Transactions with associates - The Company may enter into transactions related to its investment in associate. These transactions are entered into in the normal course of business and on an arm's length basis.
  2. Key management personnel - The Company has identified its directors and senior officers as its key management personnel. Employee benefits for key management personnel are as follows:

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Wages and benefits

$

1,582

$

1,523

$

4,945

$

4,800

Pension benefits

43

41

125

120

Share-based compensation

1,001

867

3,115

2,585

$

2,626

$

2,431

$

8,185

$

7,505

22. SUPPLEMENTARY CASH FLOW INFORMATION

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

Changes in non-cash working capital items consist of:

Trade and income tax receivables, inventories, and

other current assets

$

14,155

$

(27,868)

$

(58,182)

$

46,585

Trade and income taxes payable, and other current

liabilities

(3,968)

(15,550)

(17,461)

(12,454)

$

10,187

$

(43,418)

$

(75,643)

$

34,131

Operating activities included the following cash payments:

Income taxes (refunded) paid

$ (26,866)

$

27,524

$

8,329

$

20,310

23. SUBSEQUENT EVENT

During October 2020, the Candelaria AOS Union and Candelaria Mine Workers Union, which collectively represent approximately 900 workers at the Company's Candelaria operations in Chile, went on strike. Due to the strike, the Candelaria operations have been temporarily suspended. Critical works will continue to be performed to protect required onsite personnel, the operation and the environment. Given the uncertainty of when operations will resume, the Company is unable to estimate the financial impact of the temporary suspension.

- 23 -

Corporate Office

150 King Street West, Suite 2200, P.O. Box 38, Toronto, ON M5H 1J9

Phone: +1 416 342 5560 Fax: +1 416 348 0303

lundinmining.com

Disclaimer

Lundin Mining Corporation published this content on 28 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 October 2020 10:04:07 UTC


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Financials (USD)
Sales 2020 1 959 M - -
Net income 2020 92,1 M - -
Net Debt 2020 63,3 M - -
P/E ratio 2020 69,3x
Yield 2020 1,55%
Capitalization 5 463 M 5 468 M -
EV / Sales 2020 2,82x
EV / Sales 2021 1,97x
Nbr of Employees 4 170
Free-Float 86,8%
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Technical analysis trends LUNDIN MINING CORPORATION
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 21
Average target price 7,67 $
Last Close Price 7,45 $
Spread / Highest target 28,5%
Spread / Average Target 2,99%
Spread / Lowest Target -22,7%
EPS Revisions
Managers
NameTitle
Marie Inkster President, Chief Executive Officer & Director
Lukas Henrik Lundin Chairman
Peter Richardson Chief Operating Officer & Vice President
Jinhee Magie Chief Financial Officer & Senior Vice President
Stephen T. Gatley Vice President-Technical Services
Sector and Competitors
1st jan.Capitalization (M$)
LUNDIN MINING CORPORATION24.87%5 468
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