Lundin revised capital cost projections on Tenke project

Lundin Mining Corporation reports that Freeport McMoRan Copper and Gold Company (Freeport ) has advised of further capital cost increases on the Tenke Project, which is under construction in the Democratic Republic of Congo (DRC).

The Company holds an effective 24.75% equity interest in the Tenke Project. Freeport holds an effective 57.75% interest and is the project operator.

The initial Tenke project is based on mining and processing ore reserves approximating 100 million tons with ore grades of 2.3% copper and 0.3% cobalt.

Annual production in the initial years of the project is expected to approximate 115,000 tonnes of copper and 8,000 tonnes of cobalt.

Freeport expects the results of drilling activities will enable significant future expansion of the initial production.

Approximately $US475 million in project costs have been incurred to date. Construction activities are being advanced with in excess of 2,200 construction personnel onsite.

Current activities are focused on concrete placement, steel tank erection, structural steel, and infrastructure development including shops, warehouses, and extensive social and regional infrastructure programs.

All long lead time equipment has been ordered and Freeport advise that initial production is targeted during the second half of 2009.

Freeport is engaged in a review of the capital cost estimates for the project, which were estimated in October 2007 to be $900 million ($1 billion including advances to a third party for the refurbishment of provincial power facilities).

A recent capital cost review prepared in April 2008 indicates estimated capital costs of approximately $1.75 billion, (approximately $1.9 billion including loans to a third party for power development).

These estimates include substantial amounts for infrastructure to support a larger scale operation than the initial phase of the project. This includes the provision of expanded power generating capacity providing improved reliability for the region.

This regional power infrastructure investment is now estimated to be in the range of US$175 million, the majority of which is expected to be funded through a loan to the DRC State power authority.

The latest capital cost estimates include: provision for expanded housing and support facilities for the project work force; enhancements to national roads and bridges; extended social and training initiatives.

The latest estimates also reflect substantial industry-wide escalation in construction costs and the incremental costs to develop the project in Central Africa, where infrastructure and logistics are challenging in developing a greenfield project.