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Executives

Paul Conibear – President and CEO

Marie Inkster – SVP and CFO

Analysts

Matt Murphy – UBS

David Charles – Dundee Securities

Larseric Fransson – Erik Penser

Steve Bristo – RBC Capital Markets

Kerry Smith – Haywood Securities

Oscar Cabrera – Bank of America Merrill Lynch

Lundin Mining Corporation (OTC:LUNCF) Q4 2012 Earnings Call February 22, 2013 10:00 AM ET

Operator

Good morning, ladies and gentlemen. Welcome to the Lundin Mining Fourth Quarter Conference Call.

I’d like to turn the meeting over to Mr. Paul Conibear, President and Chief Executive Officer. Please go ahead, Mr. Conibear.

Paul Conibear

Thank you Dona and thank you to everybody for joining Lundin Mining as we go through our 2012 results for the year and also for the fourth quarter 2012.

I’m joined today by Marie Inkster, our Senior Vice President and Chief Financial Officer, and by Steve Gatley, our Vice President of Technical Services. At the end of my presentation today, I would welcome any questions and Marie and Steve will join me in answering them to the best of our ability.

Operational highlights for 2012, our operations continued to consistently perform. Annual copper production achieved the high-end of the 2012 guidance range including the contribution of Tenke production. We achieved exposure to 102,000 tonnes of copper against our guidance range up to 102,000 tons for the year.

Similarly, our annual zinc production slightly exceeded the high end of our 2012 guidance range. We came in at 122,000 tonnes of zinc in concentrate. That was contributed to by record production at Zinkgruvan where we had new record set for zinc, lead, and copper production from this mine.

On cash operating costs, overall they were in line with expectations better than expected at Zinkgruvan and at Tenke, slightly higher in the fourth quarter than expected at Neves-Corvo. For Tenke, the operations achieved record mining, milling and copper production rates during the year principally because of the success of the Phase II expansion that was ramped up in stages as 2012 progressed.

Financial highlights; Lundin Mining had overall revenues of $721 million for the year. We had adjusted net income after taking a write-down on the Aguablanca operations, adjusted it was $185 million. We had operating cash flow from our own operations of $194 million. And that did not include the attributable operating cash flow from Tenke, which was $146 million for the year. That $146 million was retained by the operations to fund expansion initiatives and sustaining CapEx at Tenke. We ended the year in a very solid positive cash position of $265 million as compared to $236 million from the year previous.

Taking a look at the physical changes year-on-year of production of the metals that we’re involved with. On copper, we were down a little bit, predominantly as a result of less throughput through the Neves-Corvo operations. On zinc, we achieved higher than previous year zinc production, contributed to by the ramping up of the zinc circuit at Neves-Corvo and also by higher grades, and excellent recoveries at Zinkgruvan. Lead was down a little bit. That’s primarily because the Galmoy Mine ended its production in the third quarter of last year and we started producing nickel again at Aguablanca, which contributed to exposure to the nickel market once again for the company.

Cash operating costs, we had begun the year on copper cash operating costs at Neves-Corvo with guidance of $1.80. We had improved that guidance as the year progressed because of good progress we were making quarter-by-quarter. In the fourth quarter of the year, we did get into a lot of out of reserve material, which was lower grade, profitable. We brought it through the mill. And ultimately that did affect our cash operating costs. We came in at $1.79 at Neves-Corvo. Zinkgruvan had one of its best years on record as far as the cost of operations. We came in at a remarkable $0.13 per pound of zinc produced there, which was contributed by a combination of good grades, good recoveries, and very good by-product credits.

Aguablanca has ramped up to full design levels towards year end, came in at $6.76. We’re guiding $5 for this year. Tenke had a very good operating year both in tonnes, grades, recoveries in all regards. We came in at $1.23 per pound of copper produced that includes the cobalt credit and we’re guiding $1.03 for this year for the operations.

Just taking a quick look at normalized earnings, we had adjusted net income of $183 million for the year as compared to $230 million for the previous year.

Moving to our operations and the outlook for the company and its metal production, really 2013 should be a very familiar year to 2012 both on overall tonnes produced of each of the metals that we’re exposed to and cash operating costs. So, I expect it will be largely in line with how we performed in 2012 as long as our metal prices behave.

Taking a look at the overall copper that we produced, we had 102,000 tonnes and you can see we’re guiding between 102,000 and 108,000 for 2013. Taking a look at our zinc production profile from 2012, where we accomplished a 122,000 tonnes of zinc in concentrate. We’re guiding 118,000 to 128,000 for this year. Lead will be a little bit down predominantly because Galmoy is offline and we have slightly lower grades at Zinkgruvan for this year and we’ll be producing quite a bit more nickel from Aguablanca as it’s now operating at full capacity.

Taking a look three years ahead, we’ve got at least steady copper production going forward and that’s not counting for any de-bottlenecking or improvements that are possible at both Tenke and our own operations. And we’ve got an aggressive program to increase our zinc production over the next three years to take us up by 2015, to about 165,000 tonnes of zinc production. That’s the midpoint of the guidance that we’re providing here generally on this slide.

Going to each of the operations, going down a little bit to the performance that we had at each of those mines in 2012 and a bit of an outlook forwards for this year. We had a total production of about 59,000 tonnes of copper and 30,000 tonnes of zinc at Neves-Corvo. As I mentioned we came in at C1 operating cost of $1.79. We’re guiding $1.80 for this year. We had average copper grades of 2.6% at excellent recoveries of 88% in the mill.

More than 40% of the material that we did process through our mill at Neves-Corvo last year was out of reserve. That was material that we encountered in stopes we’d already opened up, that was not in our models. It was lower grade, but it contributed significantly to our bottom line and to life of mine extension at that operation.

Our average zinc grades at Neves-Corvo last year was 7.3% at a recovery rate of 71% through the mill. And our zinc production was at the high end of our guidance and will be increased significantly this year.

Ramp up for the zinc plant continues. Our overall zinc recovery should be quite a bit better this year as we’ve refined the operation of the plant. As I mentioned, we have the out of reserve material, which is a contributing factor to life of mine and positive overall economics to Neves-Corvo. We need to understand that better. We’ve doubled our drilling program for this year to have better mine planning ahead of encountering some of this lower grade, but extensive mineralization that occurs in the quarter.

We continued to progress studies for both Semblana and the lower Lombador with copper and zinc mineralization to look at minimum capital opportunities to get down into that material, increase the tonnage coming out of Lombador in particular and looking at the development plans for Semblana that will be a few years ahead of us contributing to copper production at Neves-Corvo. We continue to have a very major exploration expenditure in and around the Neves-Corvo facilities, in particular on the Monte Branco target which is near the tailings dam.

Zinkgruvan had a wonderful year last year. It should have a very, very solid year again this year. We produced more than 80,000 tonnes of zinc at the operation and had extremely good credits from 37,000 tonnes of lead and 3,000 tonnes of copper produced which took us down into the absolute lowest quartile of zinc producers in the industry. We had very good grades of zinc at 9.1% and recovery is over 90 and good grades and recoveries of lead and copper as well on operation.

We still have opportunities to continue to allow Zinkgruvan to be at the very lowest quartile of zinc producers. We’re looking at modernizing the front-end of the plant. We’ve got bids in now for an autogenous grinding mill. We’re into the permitting process which we hope to have some news on by Q3 this year. We’re looking at an approximate $55 million expenditure over the next 24 months to modernize the front-end of the plant to keep us at the lowest quartile of zinc production, to increase our ability to produce more zinc as we see the zinc market strengthening, to improve our environmental emissions and generally to make a more efficient plant. We’ve also increased our exploration expenditure this year quite a bit at Zinkgruvan driven primarily to extend the resource and life of mine of this very excellent asset.

Aguablanca had a successful restart. Last August, we produced quite a bit more nickel and quite a bit more copper than we had originally guided to. We continue to have some pretty complex problems with stability on the south wall, as a result conservatively we have take a write down on the operation. We look at having a solid year and half to two years of production left. We are looking at some opportunities to possibly extend that. We can’t guarantee that at this point in time but we’ll come out with news as soon as those studies are completed.

We’ve invested heavily in bringing this operation back into production and it’s expected to be a $5 nickel producer this year and even lower cash operating cost in its final months and year or so of operation.

Tenke Fungurume again had great achievement last year. New copper production record was set in 2012 by the TFM operating team. We produced almost 160,000 tonnes of high quality cathode, just under 12,000 tonnes of cobalt. There’s no question, that we’re the largest single cobalt producer in the world now.

The copper and cobalt production profile for this year that we’ve guided to will again have us doing record production and the Phase II expansion was substantially completed ahead of schedule and on budget by year end. The attributable cash flow that came from Tenke, as I mentioned previously, was $146 million to us. That was rolled back into very high value expansion effort for Phase II and going to the next slide as you look ahead to what’s happening for the partners here in 2013 at Tenke Fungurume is we have a hiatus between big capital spends. And we would expect a significant cash contribution coming back to Lundin Mining this year from surplus cash from operations. At current metal prices and current operating cost expectations we should expect something in the $120 million to $150 million coming back to us this year and to Freeport pro rata 70:30 for the investment (inaudible) to date on Tenke Fungurume.

Some of the cash flow from operations this year will be continuing to contribute to a very aggressive exploration program. A lot of study work going on, on Phase III and Phase IV concepts, fairly large scale heap leach testing program continues on low grade and low grade is 1% to 1.5% copper oxide material but continues to be tested by the TFM team.

I think you’re going to see Freeport operate the new expanded facilities very hard here over the next six or eight months to see what they can do and see where the next opportunities are for debottlenecking the facilities and get our production up even higher.

And as I mentioned, across the concession we’re putting a great deal of investment and time into looking at those next expansions that will take Tenke up into one of the larger scale copper operations in the world.

The next slide here gives a little bit of history. This is the fifth year of operation of Tenke Fungurume. Every year it has been successfully producing more-and-more copper and more-and-more cobalt. As I mentioned, we’re now the largest single cobalt producer and our strategy to maximize the value of that cobalt, the important cobalt credit and to preserve that value for the shareholders.

We worked very hard over the last six months in an acquisition that was announced in January where the Tenke partnership is acquiring OMG’s Kokkola cobalt refinery. It’s a very sophisticated refinery with very significant share of downstream products of cobalt so that really enhances our market position as the world’s largest producer of cobalt. The Kokkola production facilities and the staff there are already know as a global market leader and we’re very excited about this value add to the Tenke partnership. We expect closing of that acquisition to be announced in Q2 this year.

Moving on to exploration, which is always a very important part of any Lundin group company. We continued to spend $40 million to $50 million annually on exploration effort. Historically that’s been on our own properties and we started to make a shift last year to invest in juniors. I think this is a very attractive market for us to get good value add in investing in copper, copper-focused and poly-metallic high-grade deposits that are being developed by juniors. It’s a tough market for the those juniors, and we’re looking opportunistically to add to the future of Lundin Mining with those types of investments. One that we’re very excited about is the Southern Hemisphere investment that we’ve made in Chile with the Llahuin Project, which will be quite active this year.

So, that really sums up my presentation for today on the results of Lundin Mining for 2012 and where we look like we’re going in 2013 and beyond. We’re very comfortable with our existing portfolio of high quality, long-life mines that are performing very well. Each of those mines have optimization opportunities and exploration potential so, they’re good long-term assets, and we have no high risk, major capital projects looming ahead, which is obviously a concern in this very volatile market.

We are looking to be growth oriented, but we have a lot of discipline in that, which I think we’ve proven with our decisions we made over last 18 months and any growth that we do have that we pursue in the year ahead is supported by very strong cash flows, especially coming from Tenke now and a good balance sheet.

Thank you very much. And operator, we’d like to turn the session over to questions and answers.

Question-and-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. (Operator Instructions) And the first question is from Matt Murphy from UBS. Please go ahead.

Matt Murphy – UBS

Good morning, Paul. Can you help me out a little bit on the cobalt plant and just describe what the main goal is for that investment to achieve? Is it better price realization on cobalt production or is it helping manage market impact of supply growth?

Paul Conibear

Thanks for the question, Matt. And candidly there is only so much that I think is appropriate to say about our cobalt strategy. It’s an extremely competitive market and we’ve been looking at various alternatives as a way firstly to protect the important cobalt credits that comes from the Tenke Fungurume operations and also because we’ve just been producing a hydroxide, which is basically about a 40% concentrate.

We’ve been getting a pretty significant discount in the market on that. We sell historically both to consumers, significantly to traders, and really only getting 65% of the value of that cobalt. That’s been a steady important credit, but we’re looking at ways to make sure that we preserve and enhance the value of the cobalt. So, we’ve invested in an existing operation that has an excellent track record, very good market penetration. As a minimum, as an analyst, you should expect that we’re protecting that cobalt credit and certainly the intent is to enhance the value of the cobalt with the profits that ultimately will be available from having more than half a dozen downstream cobalt derivatives to penetrate the super alloys market, the battery market, the food and specialty chemicals.

Matt Murphy – UBS

Okay, thanks. And then, also just noted in the MD&A that Semblana was removed from the CapEx guidance. Is it hidden somewhere else in the numbers?

Paul Conibear

Yeah. That probably should have been explained a little bit more clearly. There was just a discussion of whether that should be considered as a capital or an expensed item and it’s just been moved to expense. So, we’re still working, busily, driving that ramp down from Zambujal towards Semblana.

Matt Murphy – UBS

And then last one, just wondering on Aguablanca, you had some insurance claim, the last time you had issues. Is there any chance of that this time around?

Marie Inkster

Yes. In the results the €6 million that’s been received. And we are settling on the insurance. We do expect to receive some additional funds for that in the first quarter, during this quarter.

Matt Murphy – UBS

Okay. Thank you.

Operator

Thank you. The next question is from David Charles from Dundee Securities. Please go ahead.

David Charles – Dundee Securities

Hi. Good morning. Paul here is a question that maybe you’ll be able to answer. Clearly, you’re looking to grow your business, you’re looking to grow your business as organically as possible. However, you do highlight that there could be as much as $130 million of cash flow coming back to Lundin this year.

I’m just wondering, would you guys ever consider paying a nominal dividend, let’s say $0.04 a share or something like that? Clearly, there’s a trend in the market towards returning capital to shareholders and I’m wondering if Lundin could have a part to play in that?

Paul Conibear

Yeah, David. We’ve considered that very seriously throughout the course of 2012. We (inaudible) the topic a couple of times with the board last year. We are projecting to continue to build our cash position. We’ve been polling a lot of our shareholders over the last year on their opinions on that and opinions quite frankly are very mixed.

Some people buy Lundin Mining because they feel it will be growth oriented, others hold Lundin Mining because they see – we’ve got a very simple story, very predictable story and increasing cash flows. Right now if we take a look at the benchmark of companies of our size and with our cash position, maybe half are paying dividends and half are not in our peer group. So we continue to consider it. There’s no commitment to do it at this point. It will be a balance between keeping cash solidly for growth and returning to shareholders when we can. So you would expect us to take a look I guess where we are by Q3 of this year and assess it seriously again then.

David Charles – Dundee Securities

Okay. Thank you. That’s a good answer. And maybe one final question. Clearly there may be opportunities to be involved in M&A transactions this year. I’m just wondering how given the growth that you already have and the fact that you pointed out in the presentation that you don’t have any big CapEx expenditures on Greenfield going forward. Do you really feel that you have to be heavily involved in M&A this year or do you think that based on the market out there you may prefer to wait?

Paul Conibear

There’s definitely no drivers for us. I mean, we have no significant core assets that are closing eminently. Neves and Zinkgruvan have great life of mine and upside potential and obviously Tenke, has got decades ahead. So, we’ll be opportunistic David. I would like ultimately to add more copper into our portfolio for the future. We really like copper. We’ve got a great portfolio already of zinc and poly-metallic to be expanded in the future. I’d like some more copper so, we’ll be opportunistic if we see a good deal. Especially in this volatile market and as majors are potentially divesting things and as some of these mergers happen with some of the big companies and new CEO’s, if stuff comes along over the next year or so, we’ll take a look at it.

David Charles – Dundee Securities

Thank you very much.

Operator

Thank you. The next question is from Gustav Sandström from Erik Penser. Please go ahead.

Larseric Fransson – Erik Penser

Hi. This is Larseric Fransson, Stockholm. Very good morning to you. I have a question regarding Neves. Could you give us a ballpark figure of how much of the guided zinc production for the year that you’re contextually obligated to deliver to other parties?

Paul Conibear

I would not to be prepared to give that guidance. We – not specifically, but you can see how much we’ve guided to produce for the year and we always keep a pretty good contingency to sell in the spot market and just for flexibility.

Larseric Fransson – Erik Penser

All right.

Paul Conibear

Certainly, more than half – more than half of that production is definitely destined for regular customers.

Larseric Fransson – Erik Penser

All right. Thank you. And moving on to DRC, there has been some news flow lately regarding turbulence in Katanga caused by the Mai Mai rebels. Could you put some color on this situation there currently?

Paul Conibear

I’ve been going to DRC now for more than a dozen years myself and the Lundin family has been going since 1994. And there is quarterly, annually there are complex issues there that continue to plaque the stability of parts of the country. There has been some I think fairly highly publicized events in the east of the country with the M23 group that seems to be stabilizing. And frankly there has regularly been some small splinter groups in Northern Katanga that have been anarchist. They just haven’t got much publicity in the past. So, that level is really not much different than I’ve seen periodically over time. We monitor those types of things obviously very closely, but I don’t see that affecting Tenke operations and our investment or expansion plans at all.

Larseric Fransson – Erik Penser

Has that affected your security level or your interest in bringing visitors to the site or anything like that?

Paul Conibear

Pardon me.

Larseric Fransson – Erik Penser

Has the recent turbulence caused an increased security on site or something like that or is it business as usual?

Paul Conibear

Business as usual for sure. We just had a group of 20 some odd investors and shareholders to the site just a couple of weeks ago.

Larseric Fransson – Erik Penser

Great. All right. And a strategic question, there has been some news regarding Gécamines effort to increase copper output and also looking for financing and JV partners. Would you evaluate such an opportunity just to say with the type – asset type like Tenke in the Lubumbashi area?

Paul Conibear

Well, we haven’t really considered that. We’re very happy with the potential of Tenke. And I think it would be hard to find any investment opportunity in the copper belt better than Tenke so, we’re comfortable with that for now.

Larseric Fransson – Erik Penser

Great, all right. And, finally from me, you’ve been drilling for quite some time in Ireland. Do you foresee that your efforts there could materialize into resources – resources possibly already this year or you believe there is still significant work to be done there before anything materialize?

Paul Conibear

Yeah, no, we’re not very far away from having a maiden resource in County Clare Project.

Larseric Fransson – Erik Penser

Great, all right. Thank you, Paul.

Paul Conibear

Okay, thank you.

Operator

Thank you. The next question is from Steve Bristo from RBC Capital Markets. Please go ahead.

Steve Bristo – RBC Capital Markets

Hi, good morning, Paul. Just $25 million increase at Tenke, just wondering what’s driving that. Was it Phase III and IV test work and studies or is it something related to Phase II?

Paul Conibear

It’s a whole combination of things. We’ve come out with capital guidance to our shareholders before Freeport has finalized all of their budget, as far as just their own internal processes. So we do our best to take a shot at, like the year ahead. But that’s ahead of the partnerships finalizing budget so, what we’ve done is we’ve just adjusted the capital projection for working capital exploration effort. Although the studies we’re doing in Phase III and IV and everything, we took our best shot at it in December and early January. Now that the budgets have been confirmed we’ve just come out to upgrade the number to the best information between the partnership.

Steve Bristo – RBC Capital Markets

All right. And then you mentioned looking at copper assets, how big of an acquisition you’re looking to do?

Paul Conibear

I wouldn’t want to put any particular size on it. I mean, as I mentioned we’re looking at lots of junior opportunities, three or four of those would be great to add to our stable this year. They’re relatively small in kind of investment level, $2 million, $5 million, $7 million, $10 million earning type things over multiple years, type of thing.

And if we found an opportunity that was ready to build or already in production, I think the range of scale of what we keep our eyes open are operations that maybe in the low end that are doing 30,000 tonnes, high-end maybe 70,000 or 80,000 tonnes of production with more than a 10-year mine life. That kind of prospective I think would be valuable to add to the company if the price were right, but only if the price were right.

Steve Bristo – RBC Capital Markets

Great. That’s it from me. Thanks.

Operator

Thank you. The next question is from Kerry Smith from Haywood Securities. Please go ahead.

Kerry Smith – Haywood Securities

Thanks operator. Paul or Marie, for the refinery acquisition, I presume that was funded 70:30 by Freeport and yourself. So, that falls into the debt repayment schedule as well, is that correct?

Paul Conibear

No, it’s a completely separate investment Kerry, and yes, the funding obligation of the acquisition is 70:30. So, the initial amount is $325 million which we’ll fund our 30% on closing which we expect to be in Q2.

Kerry Smith – Haywood Securities

And so then – okay, so that investment or that I guess the loans by yourself and Freeport to that separate entity, those loans would be repaid from cash flow from the refinery itself then?

Paul Conibear

That’s correct. Yeah, equity investments and we get that investment repaid preferentially before there is dividends to all the partners.

Kerry Smith – Haywood Securities

Okay. And so, how will you account for that then, just as an equity investment, one liner like on the income statement or...?

Marie Inkster

Yeah, that’s right Kerry. The same way that we account for Tenke now.

Kerry Smith – Haywood Securities

Okay.

Marie Inkster

On a separate line.

Kerry Smith – Haywood Securities

Okay. And what – can you give us some rough sense as to what do you think the payback is on that investment?

Paul Conibear

No. We’d have to speculate on a lot of factors there.

Kerry Smith – Haywood Securities

Well, let’s say at current cobalt prices.

Paul Conibear

Yeah. I wouldn’t want to speculate, Kerry.

Kerry Smith – Haywood Securities

Okay. And you say in the slide show, Paul, that the contingent payments are based on achieving certain revenue targets. So I’m just wondering how we might think about that because the revenue is something completely out of your control, I’m wondering why you would have tied the consideration for the asset acquisition to something you couldn’t control?

Paul Conibear

Well it’s been quite a successful business in the past, but obviously the future of our metal cycles is a bit unpredictable. So it was just I think a balancing component to the deal that if the industry does well, if the facility does well, the seller does well and we pay for that added value. And if the industry comes under pressure there is a bit of relief on the purchase price.

Kerry Smith – Haywood Securities

Yeah, okay. And so if we were to assume that we had cobalt prices over the next three years, what would the rough contingent payments be, would it be the $100 million you talk about or would it be something less than that?

Paul Conibear

I wouldn’t be prepared to comment on that.

Kerry Smith – Haywood Securities

Okay. That’s good. Thank you.

Paul Conibear

Okay. Thank you.

Operator

Thank you. (Operator Instructions) And the next question is from Oscar Cabrera from Bank of America Merrill Lynch. Please go ahead.

Oscar Cabrera – Bank of America Merrill Lynch

Thanks, operator. Good morning, everyone. Paul, on the cash cost for Neves-Corvo in the fourth quarter, I believe it was something along the lines of up to $2.17 a pound. Guidance for 2013 is $1.80. Just wondering if you can walk us through what you need to do to lower those costs to those levels?

Paul Conibear

Well, the costs in Q4 were really contributed to by the grades that we processed. I think maybe 2.2% because of all of the out of reserve material. And as you know, Oscar, when you have lower grades, you get lower recovery, so instead of 88% we got, something less than that for the quarter. And also we actually suffered from a pretty strong euro, which we weren’t expecting. So when you convert – we operate in Euros there and when you convert that across to U.S. dollars, those were I guess three contributing factors in that order of influence for the quarter.

But, what we have planned for 2013 is overall average base of 2.7% copper, 88% recovery, and certain assumptions on Euro. So, I think we would expect to come in – on average quarter to – quarter-to-quarter will vary, some will be stronger, some will be not as strong. $1.80 is what we find for the year. If we’ve got a much stronger zinc price, then $0.95 on average, I mean that cost will come down.

Oscar Cabrera – Bank of America Merrill Lynch

Great, yeah. So that leads to the next question, thank you. So, in your production outlook 2013 to 2015, you’ve given us a ramp up on zinc more or less from the 123,000 tonnes in 2013 to say 165,000 tonnes in 2015. If zinc prices were to strengthen towards the end of 2014, how flexible are you to bring some of that production forward?

Paul Conibear

I think we’re pretty – what you see there is pushing the ore deposits and pushing the mills pretty hard. So, honestly if zinc prices were to spike a huge amount over the next 6 or 12 months, which I don’t think it will do, but if it does we would obviously mine as much as we could, but I think the production profile you see there is the best prediction we could get. We are – as some of the enhancement studies that we’re doing at Neves-Corvo, we’re looking to see if there’s ways that we can get into some of the higher grade Lombador zinc.

The Neves-Corvo area sort of have 4.5% to 6.5% zinc is the rough grades whereas Lombador has 7% to 9%. So, we could maybe push getting into Lombador a little bit earlier, just so, we couldn’t change tonnes, but we could maybe change grades, but I think you’re best off taking our guidance here and assuming that’s already pretty aggressive plan.

Oscar Cabrera – Bank of America Merrill Lynch

And then lastly, let me try this on your – finally this way. On the prices that you’re realizing for the cobalt hydroxide, based on what you see coming out of the Kokkola refinery, can we assume that the mix of products there would give you something closer to the – to cobalt prices that we see out of Bloomberg or other services?

Paul Conibear

Yeah, obviously, we’ve invested in this particular business because it’s been very successful and it’s got excellent market penetration into many different downstream products of cobalt. As I mentioned, our number one priority is to preserve the cobalt credit stream. Obviously, we’re only getting 65% of the metals 0.993 pricing. So, we want to get to the metals and the powders and everything that get significantly better multiples than just that 0.933 pricing. But I don’t want to go into much more detail, Oscar. Unfortunately, it’s a very competitive environment.

Oscar Cabrera – Bank of America Merrill Lynch

Yeah, that’s helpful, Paul. Thank you.

Operator

Thank you. There are no further questions registered at this time. I’d like to turn the meeting back over to Mr. Conibear.

Paul Conibear

Okay. Thank you very much Dona and thank you everybody for attending this yearend call for 2012 and I look forward to the next quarter when I speak to you again. I’ll terminate the call with that. Thank you.

Operator

Thank you, Mr. Conibear. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.

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