Vicuna Expansion And Decarbonization Progress Will Support Long Term Copper And Gold Upside

Catalysts

About Lundin Mining

Lundin Mining is a diversified base metals producer with a core focus on copper, along with meaningful gold and nickel exposure from mines in the Americas.

What are the underlying business or industry changes driving this perspective?

• Clear ambition to become a top 10 global copper producer with targeted output of over 500,000 tons of copper and more than 550,000 ounces of gold per year. If executed, this directly supports higher long term revenue and cash flow.
• Vicuna, combining the Josemaria and Filo del Sol deposits, ranks among the largest copper, gold and silver resources globally. Continued drilling plus an integrated technical report targeted for early 2026 provide a pathway to scale that can materially influence future earnings.
• Low capital intensity brownfield projects such as Sauva at Chapada and underground throughput expansion at Candelaria target an additional 30,000 to 40,000 tons of copper and 60,000 to 70,000 ounces of gold in annual production. This is geared toward supporting higher revenue with relatively limited incremental operating cost.
• Group copper C1 costs of US$1.92 per pound in Q2, below revised guidance, together with lower Chapada cost guidance and disciplined capital allocation, are aimed at supporting net margins and EBITDA resilience against commodity price swings.
• Progress on decarbonization, including achieving the 2030 Scope 1 and 2 emissions target based on a 2019 baseline and Candelaria sourcing 100% renewable power, aligns the company with long term resource and energy transition themes. This can support license to operate, project approvals and potentially lower cost of capital, all of which feed into earnings quality over time.

Assumptions

This narrative explores a more optimistic perspective on Lundin Mining compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Lundin Mining's revenue will grow by 4.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 5.6% today to 16.8% in 3 years time.
• The bullish analysts expect earnings to reach $721.0 million (and earnings per share of $0.86) by about January 2029, up from $212.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $634.0 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 33.6x on those 2029 earnings, down from 92.6x today. This future PE is greater than the current PE for the GB Metals and Mining industry at 23.2x.
• The bullish analysts expect the number of shares outstanding to decline by 1.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.57%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The Vicuna project and other growth initiatives rely on large and rising copper, gold and silver output over many years, so any slowdown in long term demand for these metals or extended periods of weaker prices could leave a high capital base generating less revenue than expected, putting pressure on earnings.
• The company is concentrating its production and revenue in a few South American jurisdictions, with 94% of revenue coming from those operations in Q2 2025. Long term changes in taxes, royalties, permitting frameworks or fiscal stability rules such as RIGI could increase the effective tax burden or operating restrictions, which would weigh on net margins and cash flow.
• The plan to become a top 10 copper producer, ramp up Vicuna and expand brownfield projects like Sauva and Candelaria requires sustained high capital expenditure, with 2025 capex guidance at US$795 million and work on some projects already running slower than planned. Persistent cost inflation, project delays or scope creep could raise capital intensity and reduce future returns on that spending, affecting earnings.
• Consolidated C1 copper costs of US$1.92 per pound in Q2 2025 depend partly on by product credits from high gold prices and favorable FX at Chapada. If these long term tailwinds fade while energy, labor or consumable costs stay elevated, unit costs could drift higher and compress operating margins.
• The long life plan assumes reliable ore supply and processing performance across Candelaria, Caserones, Chapada and Eagle. Structural issues with ore characteristics, ongoing crusher or mill disruptions, or difficulty sourcing and retaining skilled labor for initiatives like in sourcing underground mining at Candelaria could constrain throughput and grades over time, limiting revenue and EBITDA growth relative to current expectations.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Lundin Mining is CA$32.48, which represents up to two standard deviations above the consensus price target of CA$28.03. This valuation is based on what can be assumed as the expectations of Lundin Mining's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$32.48, and the most bearish reporting a price target of just CA$19.6.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $4.3 billion, earnings will come to $721.0 million, and it would be trading on a PE ratio of 33.6x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of CA$31.6, the analyst price target of CA$32.48 is 2.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.