H. Lundbeck
Annual Report 2019

Plain-text annual report

2019 Annual Filings December 31, 2019 Management’s Discussion and Analysis For the year ended December 31, 2019 This management’s discussion and analysis (“MD&A”) has been prepared as of February 20, 2020 and should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2019. 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 Annual Financial Information ....................................................................................... 5 Summary of Quarterly Results .................................................................................................... 5 Revenue Overview ...................................................................................................................... 6 Annual Financial Results ............................................................................................................. 9 Fourth Quarter Financial Results ................................................................................................ 11 Mining Operations ...................................................................................................................... 12 Production Overview ............................................................................................................. 12 Cash Cost Overview ............................................................................................................... 13 Capital Expenditures .............................................................................................................. 13 Candelaria .............................................................................................................................. 14 Chapada ................................................................................................................................. 16 Eagle....................................................................................................................................... 17 Neves-Corvo .......................................................................................................................... 18 Zinkgruvan ............................................................................................................................. 20 Metal Prices, LME Inventories and Smelter Treatment and Refining Charges........................... 21 Liquidity and Capital Resources .................................................................................................. 22 Financial Instruments ................................................................................................................. 23 Related Party Transactions ......................................................................................................... 24 Changes in Accounting Policies and Critical Accounting Estimates and Judgements ................ 24 Non-GAAP Performance Measures ............................................................................................ 25 Managing Risks ........................................................................................................................... 31 Management’s Report on Internal Controls ............................................................................... 31 Outstanding Share Data .............................................................................................................. 32 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; the results of any Preliminary Economic Assessment, 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 (such as the Chapada mine) 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: risks inherent in and/or associated with operating in foreign countries; uncertain political and economic environments; community activism, shareholder activism and risks related to negative publicity with respect to the Company or the mining industry in general; changes in laws, regulations or policies including but not limited to those related to permitting and approvals, environmental and tailings management, labour, trade relations, and transportation; delays or the inability to obtain necessary governmental approvals and/or permits; regulatory investigations, enforcement, sanctions and/or related or other litigation; risks associated with business arrangements and partners over which the Company does not have full control; risks associated with acquisitions and related integration efforts (including with respect to the Chapada mine), including the ability to achieve anticipated benefits, unanticipated difficulties or expenditures relating to integration and diversion of management time on integration; competition; development or mining results not being consistent with the Company’s expectations; estimates of future production and operations; operating, cash and all-in sustaining cost estimates; allocation of resources and capital; litigation; uninsurable risks; volatility and fluctuations in metal and commodity prices; the estimation of asset carrying values; funding requirements and availability of financing; indebtedness; foreign currency fluctuations; interest rate volatility; changes in the Company’s share price, and equity markets, in general; changing taxation regimes; counterparty and credit risks; health and safety risks; risks related to the environmental impact of the Company’s operations and products and management thereof; unavailable or inaccessible infrastructure and risks related to ageing infrastructure; 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; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; ore processing efficiency; risks relating to attracting and retaining of highly skilled employees; ability to retain key personnel; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; the price and availability of energy and key operating supplies or services; the inherent uncertainty of exploration and development, and the potential for unexpected costs and expenses including, without limitation, for mine closure and reclamation at current and historical operations; 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; actual ore mined and/or metal recoveries varying from Mineral Resource and Mineral Reserve estimates; mine plans, and life of mine estimates; the possibility that future exploration, development or mining results will not be consistent with expectations; natural phenomena such as earthquakes, flooding, and unusually severe weather; 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; security at the Company’s operations; breach or compromise of key information technology systems; materially increased or unanticipated reclamation obligations; risks related to mine closure activities; risks related to closed and historical sites; title risk and the potential of undetected encumbrances; risks associated with the structural stability of waste rock dumps or tailings storage facilities; and other risks and uncertainties, including but not limited to those described in the “Risk and Uncertainties” section of the Annual Information Form for the year ended December 31, 2018 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 successfully met or exceeded the Company’s most recent annual metal production guidance. Candelaria, Chapada, Neves-Corvo and Zinkgruvan all achieved annual cash costs in-line with or better than the most recent guidance. Further, both Neves-Corvo and Zinkgruvan set all-time annual records for ore mined. Annual capital expenditures of $665.3 million were marginally lower than the most recent guidance of $695.0 million. Significant achievements during the year ended December 31, 2019 include successful acquisition and integration of the Chapada mine, completion of pre-production development of the Candelaria Underground South Sector project and processing of first ore from Eagle East. In addition, progress on the Candelaria Mill Optimization Project and Neves-Corvo’s Zinc Expansion Project (“ZEP”) continues to advance in-line with the latest schedule and capital cost guidance. Candelaria (80% owned): The Candelaria operations produced, on a 100% basis, 146,330 tonnes of copper, approximately 88,000 ounces of gold and 1.3 million ounces of silver in concentrate during the year. Copper production was in-line with market guidance and higher than the prior year, a reflection of mining and processing higher-grade ore following successful mining of the open pit Phase 10 pushback and development of the Candelaria South Sector. Copper cash costs1 of $1.54/lb were better than annual guidance, and the prior year. As noted above, pre-production development of the Candelaria South Sector underground mine was successfully completed and the project was transferred to operations, ahead of schedule. Mine production from Candelaria’s North and South Sector underground mines ramped up to an average of 13,500 tonnes per day during the fourth quarter. Chapada (100% owned): Acquisition of the Chapada mine was completed on July 5, 2019. During the period of Lundin Mining’s ownership, Chapada produced 30,529 tonnes of copper and approximately 54,000 ounces of gold. Copper production exceeded guidance, and gold production was in-line with expectations. Copper cash costs of $0.58/lb were better than guidance with higher precious metal credits and favourable foreign exchange effects. Eagle (100% owned): Eagle production for the year met guidance, producing 13,494 tonnes of nickel and 14,297 tonnes of copper. Nickel cash costs of $2.84/lb for the year were higher than guidance and prior year due to lower sales volumes. Development of Eagle East reached an important milestone with first ore extracted and processed ahead of schedule, and with project costs expected to be below budget. Neves-Corvo (100% owned): Neves-Corvo produced 41,436 tonnes of copper and 73,202 tonnes of zinc for the year, meeting guidance. Copper cash costs of $1.59/lb for the year were in-line with the most recent guidance, though higher than the prior year due to lower by-product credits. ZEP continued to advance in accordance with the revised schedule and budget for the phased start-up and production during 2020. Zinkgruvan (100% owned): Zinc production of 78,313 tonnes met guidance and was higher than the prior year. Zinc, lead and copper production all exceeded the prior year as a result of higher head grades and metal recoveries. Zinc cash costs of $0.39/lb for the year were in-line with guidance. 1 This is a non-GAAP measure – see page 25 of this MD&A for discussion of non-GAAP measures. 1 Production and Cash Cost Summary: Total 2019 production and cash costs are compared to the most recent guidance as follows: Production Cash Cost Years ended December 31, (Contained tonnes) Copper (t) Zinc (t) Candelaria (100%) Chapadab Eagle Neves-Corvo Zinkgruvan Total Neves-Corvo Zinkgruvan Total 2019 Actual 146,330 30,529 14,297 41,436 2,906 235,498 73,202 78,313 151,515 2019 Guidancea 145,000 - 155,000 27,000 - 30,000 13,000 - 15,000 40,000 - 42,000 2,000 - 3,000 227,000 - 245,000 73,000 - 76,000 76,000 - 81,000 149,000 - 157,000 2019 Actual $1.54/lb $0.58/lb 2019 Guidancea $1.60/lb $0.80/lb $1.59/lb $1.60/lb $0.39/lb $0.40/lb Nickel (t) Eagle 13,494 12,000 - 14,000 $2.84/lb $2.60/lb a - Revised guidance as disclosed in the Company's MD&A for the three and nine months ended September 30, 2019. b - For the period of Lundin Mining's ownership Chapada gold production was 54,000 ounces compared to guidance of 50,000 to 55,000 ounces for the same period. Financial Performance • Gross profit for the year ended December 31, 2019 was $440.4 million, an increase of $3.8 million in comparison to the prior year. The increase reflects the addition of Chapada’s gross profit contribution of $104.4 million. Gross profit variances from the other operations include higher depreciation expense ($40.5 million), lower realized metal prices ($34.0 million) and higher treatment and refining charges ($24.5 million). • For the year ended December 31, 2019, net earnings of $189.2 million, was $26.2 million lower compared to the prior year. Lower net earnings in the current year were due to negative revaluation adjustments for marketable securities and derivatives ($37.6 million) and lower income from investment in associates ($23.7 million), partially offset by lower finance costs ($21.4 million). • Adjusted earnings1 for the year were lower than the prior year primarily due to lower realized foreign exchange gains offset by lower exploration and business development expenses and finance costs. • Net debt1 position at December 31, 2019 was $60.2 million compared to net cash of $804.4 million at December 31, 2018. The movement from a net cash to a net debt position ($864.6 million) was largely attributable to the acquisition of Chapada ($757.0 million), cash used for capital investments in excess of operating cash flow ($100.7 million) and dividends paid ($66.4 million), partially offset by distributions received from investment in associate ($114.2 million). 1 These are non-GAAP measures – see page 25 of this MD&A for discussion of non-GAAP measures. 2 Corporate Highlights • On July 5, 2019, the Company announced the closing of the acquisition of a 100% ownership stake in Mineração Maracá Indústria e Comércio SA, which owns the Chapada copper-gold mine located in Brazil from Yamana Gold Inc. The net purchase price of $757.0 million was funded by cash on hand and a drawdown of $285.0 million on the Company’s secured revolving credit facility (the "Credit Facility"). • The execution of a third amended and restated credit agreement was announced by the Company on August 28, 2019. The Credit Facility was increased to $800.0 million, with a $200.0 million accordion option to total $1.0 billion, with reduced costs of borrowing and an extended term to August 2023. • On September 5, 2019, the Company reported its Mineral Resource and Mineral Reserve estimates as at June 30, 2019. On a consolidated and attributable basis, estimated contained metal in the Proven and Probable Mineral Reserve categories totaled 5,507 thousand tonnes of copper, including 1,757 thousand tonnes from Chapada, 3,231 thousand tonnes of zinc, 108 thousand tonnes of nickel, 977 thousand tonnes of lead and 6.8 million ounces of gold. • On December 2, 2019, the Company announced that its joint venture with Freeport-McMoRan Inc., Freeport Cobalt, had completed the sale of its cobalt refinery in Kokkola, Finland and related cobalt cathode precursor business to Umicore for total cash consideration of approximately $200.0 million, including net working capital of approximately $50.0 million at the time of close (the “Freeport Cobalt Transaction”). During 2019, the Company received approximately $114.2 million in funds distributed by the joint venture, including attributable proceeds of the Freeport Cobalt Transaction. • During 2019 approximately 4.3 million shares were purchased by the Company under its normal course issuer bid (“NCIB”). All shares purchased under the NCIB were cancelled. On December 5, 2019, the Company renewed its NCIB which allows the Company to purchase up to 63,797,653 common shares over a period of twelve months commencing on December 9, 2019. Financial Position and Financing • In 2019, the Company acquired the Chapada mine for net cash consideration of $757.0 million. The purchase price of $800.0 million at the date of acquisition was paid using cash on hand of $515.0 million and a $285.0 million drawdown on the revolving credit facility. Offsetting this was cash held in the acquired operations and working capital adjustments totaling $43.0 million. • Cash and cash equivalents decreased by $564.8 million during 2019. Cash flow from operations of $564.6 million were more than offset by capital expenditures of $665.3 million. In addition, the Company utilized cash of $472.0 million during the year for the acquisition of Chapada, and received $114.2 million in distributions from its equity investment in Freeport Cobalt, including attributable proceeds of the Freeport Cobalt Transaction. • The Company ended 2019 with a net debt balance of $60.2 million compared to a net cash position of $804.4 million at December 31, 2018. • As of February 20, 2020, the Company had a cash and net debt balance of approximately $200.0 million and $90.0 million, respectively. 3 Outlook 2020 Production and Cash Cost Production, cash cost and capital expenditure guidance for 2020 remains unchanged from that provided on November 26, 2019 (see news release “Lundin Mining Provides Operational Outlook & Shareholder Returns Update”). (contained metal in concentrate) Production Copper (t) Candelaria (100%) Zinc (t) Gold (oz) Chapada Eagle Neves-Corvo Zinkgruvan Total Neves-Corvo Zinkgruvan Total Candelaria (100%) Chapada Total Eagle Cash Costsa $1.45/lbb $1.15/lbc $1.80/lb $0.55/lb 165,000 - 175,000 51,000 - 56,000 15,000 - 18,000 38,000 - 43,000 3,000 - 4,000 272,000 - 296,000 95,000 - 105,000 77,000 - 82,000 172,000 - 187,000 100,000 - 105,000 90,000 - 95,000 190,000 - 200,000 15,000 - 18,000 Nickel (t) a. Cash costs are based on various assumptions and estimates, including but not limited to: production volumes, as noted above, commodity prices (Cu: $2.70/lb, Zn: $1.10/lb, Ni: $6.00/lb, Pb: $0.90/lb, Au: $1,350/oz), foreign exchange rates (€/USD:1.20, USD/SEK:8.50, USD/CLP:675, USD/BRL:3.75) and operating costs. b. 68% of Candelaria's total gold and silver production are subject to a streaming agreement and as such cash costs are calculated based on receipt of $412/oz and $4.12/oz respectively, on gold and silver sales. Silver production at Zinkgruvan and Neves-Corvo are also subject to streaming agreements, and cash costs are calculated based on receipt of $4.30 and $4.39/oz, respectively, on silver sales. c. Chapada cash costs are calculated on a by-product basis and do not include the effects of its copper stream agreements. Effects of the copper stream agreements are reflected in copper revenue and will impact realized price per pound. $1.00/lb 2020 Capital Expenditure Guidance Capital expenditures, excluding capitalized interest, are expected to be $620 million, as outlined below. 2020 Guidance Candelaria (100% basis) Chapada Eagle Neves-Corvo Zinkgruvan Total Sustaining Capital Zinc Expansion Project (Neves-Corvo) Total Capital Expenditures $ millions 265 60 15 75 50 465 155 620 2020 Exploration Investment Guidance Planned exploration expenditures are expected to be $55 million in 2020, $10 million lower than previous guidance. The majority of the decrease is due to a reduction in the planned activities on regional exploration stage projects in South America. Planned expenditures for 2020 will be spent supporting significant in-mine and near- mine targets at our operations ($20 million at Candelaria, $15 million at Zinkgruvan, $10 million at Chapada, and $10 million at Neves-Corvo). 4 Selected Annual Financial Information1,2 ($ millions, except share and per share amounts) Revenue Costs of goods sold: Production costs Depreciation, depletion and amortization Gross Profit Net earnings attributable to: Lundin Mining shareholders, continuing Lundin Mining shareholders, discontinued Non-controlling interests Net earnings Adjusted earnings3 Adjusted EBITDA3 Cash flow from operations Capital expenditures4 Total assets Total debt & lease liabilities Net (debt) cash3 Per share amounts: Basic and diluted earnings per share attributable to shareholders - continuing operations (EPS - Continuing) - net earnings (EPS - Total) Adjusted earnings per share3 Adjusted operating cash flow per share3 Dividends declared (C$/share) 2019 1,892.7 (1,066.2) (386.1) 440.4 167.3 - 21.9 189.2 159.5 705.7 564.6 665.3 6,917.2 308.5 (60.2) 0.23 0.23 0.22 0.75 0.12 Year ended December 31, 2018 1,725.6 (969.6) (319.4) 436.6 195.8 - 19.6 215.4 183.6 643.2 476.4 751.8 5,934.8 11.0 804.4 0.27 0.27 0.25 0.66 0.12 2017 2,077.5 (875.9) (381.3) 820.3 371.4 55.1 75.5 502.0 360.2 1,054.6 903.5 478.8 6,286.4 449.9 1,110.5 0.51 0.59 0.50 1.14 0.12 Summary of Quarterly Results2,5 ($ millions, except per share data) Q4-19 Q3-19 Q2-19 Q1-19 Q4-18 Q3-18 Q2-18 Q1-18 Revenue Cost of goods sold Gross profit Net earnings (loss) - attributable to shareholders EPS - Basic and diluted Cash flow from operations Adjusted operating cash flow per share Capital expenditures (cash basis) 568.4 (422.9) 145.5 104.8 97.0 0.13 186.4 0.28 139.6 538.7 (410.1) 128.6 32.1 26.4 0.04 111.6 0.21 165.0 369.3 (344.1) 25.1 (8.6) (7.8) (0.01) 204.5 0.07 178.7 416.4 (275.2) 141.2 60.9 51.7 0.07 62.1 0.19 182.0 407.7 (335.7) 72.0 31.8 28.8 0.04 44.2 0.16 234.1 379.7 (320.1) 59.6 9.1 7.0 0.01 140.9 0.11 173.7 467.7 (312.6) 155.1 87.5 78.8 0.11 118.3 0.16 193.2 470.5 (320.6) 149.9 87.1 81.3 0.11 172.9 0.23 150.7 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 25 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. 5 Revenue Overview Sales Volumes by Payable Metal (Contained metal in concentrate) Copper (tonnes) Candelaria (100%) Chapada1 Eagle Neves-Corvo Zinkgruvan Total 2019 2018 Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 139,051 34,564 42,276 31,138 31,073 132,626 32,465 32,832 34,542 32,787 - 29,884 16,127 13,757 4,520 2,615 12,767 2,819 9,133 41,252 11,311 12,343 - 981 2,673 225,627 65,600 71,972 46,225 41,830 195,220 47,170 51,530 50,080 46,440 - - 16,480 3,295 44,729 10,700 13,525 11,371 872 - 3,047 7,710 - - 4,286 9,888 913 - 3,987 - 4,678 1,385 495 779 18 Zinc (tonnes) Neves-Corvo Zinkgruvan Gold (000 oz) Candelaria (100%) Chapada1 Nickel (tonnes) Eagle Lead (tonnes) Neves-Corvo Zinkgruvan Silver (000 oz) Candelaria (100%) Chapada1 Eagle Neves-Corvo Zinkgruvan 61,150 15,492 16,434 15,746 13,478 59,143 14,713 14,567 14,466 15,397 67,463 19,314 12,657 19,466 16,026 62,922 20,475 12,288 13,565 16,594 126,606 34,027 27,224 33,932 31,423 124,072 35,967 28,722 29,311 30,072 83 55 138 20 28 48 25 27 52 19 - 19 19 - 19 76 - 76 20 - 20 19 - 19 19 - 19 18 - 18 10,682 3,167 1,889 3,935 1,691 15,151 3,929 3,400 2,755 5,067 1,210 4,591 23,875 9,518 28,466 10,728 792 4,684 5,476 1,313 5,799 7,112 1,276 3,874 5,150 1,243 5,577 23,097 9,430 28,674 10,673 1,420 5,544 6,964 1,732 3,036 4,768 1,182 5,087 6,269 1,152 119 72 801 1,594 3,738 275 67 12 189 571 1,114 342 52 22 185 335 936 252 - 25 201 460 938 283 - 13 226 228 750 1,103 - 72 871 1,401 3,447 289 - 16 307 529 1,141 284 - 27 190 341 842 264 - 10 215 295 784 266 - 19 159 236 680 1. Sales results are for the period of Lundin Mining's ownership. 6 Revenue Analysis by Mine ($ thousands) Candelaria (100%) Chapada1 Eagle Neves-Corvo Zinkgruvan 1. Revenue results are for the period of Lundin Mining's ownership. Year ended December 31, 2019 $ 896,283 248,011 212,929 337,167 198,323 1,892,713 % 47 13 11 18 11 2018 $ 838,772 - 265,863 404,263 216,691 1,725,589 % 49 - 15 23 13 Change $ 57,511 248,011 (52,934) (67,096) (18,368) 167,124 Year ended December 31, by Metal ($ thousands) Copper Zinc Gold Nickel Lead Silver Other 2019 % $ 1,240,348 66 242,510 13 173,634 9 131,247 7 52,414 3 35,173 1 17,387 1 1,892,713 2018 $ % 1,095,931 64 292,282 17 4 77,533 146,977 59,547 31,110 22,209 1,725,589 9 1 2 3 Change $ 144,417 (49,772) 96,101 (15,730) (7,133) 4,063 (4,822) 167,124 Revenue for the year ended December 31, 2019 was $1,892.7 million, an increase of $167.1 million in comparison to the prior year. The increase was mainly due to the acquisition of Chapada mine in the third quarter, partially offset by lower net realized metal prices ($34.0 million) relating primarily to copper and zinc, and higher zinc treatment and refining charges ($19.7 million). Gold and silver revenue for the year ended December 31, 2019 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 approximately $408/oz for gold and between $4.08/oz and $4.39/oz for silver. After the acquisition of Chapada, revenue from copper includes the recognition of deferred revenue from the acquired copper streams, 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. The Company is subject to credit and customer concentration risk associated with trade receivables, with four customers representing a significant portion of sales. The Company manages this risk through evaluation and monitoring of industry and economic conditions and assessment of customers’ financial reports. The Company transacts with credit-worthy customers to minimize credit risk and employs pre-payment arrangements and the use of letters of credit, as appropriate. There is no assurance that customers will remain solvent over time and in the event a significant customer is unable to accept contracted volumes, the volumes may then be sold on a spot basis to smelters or traders, sold under renegotiated contractual volumes with existing customers, or sold under contracts with new customers. 7 Provisionally valued revenue for the year ended December 31, 2019 Metal Copper Zinc Gold Nickel Payable metal 59,968 t 32,530 t 30,893 oz 2,895 t Valued at $ per lb/oz $2.80 /lb $1.03 /lb $1,536 /oz $6.36 /lb Full-Year Reconciliation of Realized Prices Copper 1,337,110 9,812 1,346,922 ($ thousands) Current period sales1 Prior period price adjustments Other metal sales Copper stream cash effect Gold stream cash effect Less: Treatment & refining charges Total Revenue Year ended December 31, 2019 Gold 201,002 988 201,990 Zinc 312,527 759 313,286 Nickel 160,730 8,594 169,324 Payable Metal 225,627 t 126,606 t 138 koz 10,682 t Current period sales1, 2 Prior period adjustments Realized prices $2.69 0.02 $2.71 /lb $1.12 - $1.12 /lb $1,459 7 $1,466 /oz $6.83 0.36 $7.19 /lb Copper 1,215,566 (15,786) 1,199,780 Current period sales1 Prior period price adjustments Other metal sales Gold stream cash effect Less: Treatment & refining charges Total Revenue Twelve months ended December 31, 2018 Nickel Gold 184,900 3,440 188,340 Zinc 340,882 1,800 342,682 95,189 (882) 94,307 Payable Metal 195,220 t 124,072 t 76 koz 15,151 t Total 2,011,369 20,153 2,031,522 103,224 (4,930) (14,560) (222,543) 1,892,713 Total 1,836,537 (11,428) 1,825,109 143,366 (43,364) (199,522) 1,725,589 Current period sales1, 2 Prior period adjustments Realized prices 1. Includes provisional price adjustments on current period sales. 2. The realized price for copper inclusive of the impact of streaming agreements for 2019 is $2.70/lb (2018: n/a). The realized price for gold inclusive of the impact of streaming agreements for 2019 is $1,077/oz (2018: $682/oz). $1,241 (12) $1,229 /oz $5.54 0.10 $5.64 /lb $1.25 - $1.25 /lb $2.82 (0.03) $2.79 /lb 8 Annual Financial Results Production Costs Production costs for the year ended December 31, 2019 were $1,066.2 million, an increase of $96.6 million in comparison to the $969.6 million reported in 2018. The increase was largely due to the inclusion of Chapada mine production costs ($117.3 million), partially offset by the impact of favourable foreign exchange rates at all mines. Depreciation, Depletion and Amortization Depreciation, depletion and amortization expense for the current year increased in comparison to the prior year. The increase was primarily attributable to the inclusion of Chapada as well as increased amortization of deferred stripping at Candelaria associated with the increased production from Phase 10 of the open pit. Depreciation at Eagle has decreased as a result of lower sales volumes. Depreciation by operation ($ thousands) Candelaria Chapada Eagle Neves-Corvo Zinkgruvan Other Year ended December 31, 2019 2018 212,298 26,237 58,102 57,425 30,328 1,727 386,117 164,708 - 65,808 57,656 29,662 1,542 319,376 Change 47,590 26,237 (7,706) (231) 666 185 66,741 Income from Equity Investment in Associate During the fiscal year ended December 31, 2019, there was a decrease of $23.7 million recognized in income compared to the prior year, due mainly to inventory revaluations as a result of lower cobalt prices in 2019. During the year the Company received distributions of $114.2 million which included sale proceeds from the Freeport Cobalt Transaction. General Exploration and Business Development General exploration and business development expenses for the year ended December 31, 2019 were $77.8 million, a modest decrease compared to the prior year. The lower expenditures reflect reduced exploration activities at Eagle. During 2019, exploration costs were spent primarily on in-mine and near-mine targets at the Company’s operations, with the majority of expenditures occurring at Candelaria and Zinkgruvan. At Candelaria, drilling was within the underground mines, on surface at La Española and strategically throughout the district. Exploration expense at Zinkgruvan was focused on underground drilling, exploration drifting and surface drilling on the Dalby and Flaxen concessions. The Company also spent $4.4 million on exploration stage projects, primarily in South America. Finance Income and Costs Net finance costs of $38.8 million for the year ended December 31, 2019 reflect a decrease of $21.4 million from the prior year. In 2018 the Company expensed $16.9 million related to the early redemption of its secured notes. Other Income and Expense Net other expense for the year ended December 31, 2019 was $13.3 million, compared to $20.2 million net other income in the prior year. The increase in net other expense of $33.5 million was primarily due to higher revaluation losses on derivatives associated primarily with the contingent payment on the acquisition of Chapada ($21.3 million) and higher revaluation loss on marketable securities ($15.0 million). 9 Foreign exchange gains recorded in net other expenses relate to the foreign exchange revaluation of working capital denominated in foreign currencies that was held by the Company. Period end exchange rates affecting foreign exchange recorded at December 31, 2019 were $1.00:CLP749 (December 31, 2018 - $1.00:CLP695), $1.00:BRL4.03 (December 31, 2018 – n/a), $1.12:€1.00 (December 31, 2018 - $1.15:€1.00) and $1.00:SEK9.32 (December 31, 2018 - $1.00:SEK8.97). Income Taxes Income taxes by mine Income tax expense (recovery) ($ thousands) Candelaria Chapada Eagle Neves-Corvo Zinkgruvan Other Income taxes by classification Income tax expense (recovery) ($ thousands) Current income tax Deferred income tax Year ended December 31, 2019 2018 Change 22,812 40,480 (2,546) (11,744) 11,400 20,017 80,419 13,982 - 5,939 14,624 17,586 24,238 76,369 8,830 40,480 (8,485) (26,368) (6,186) (4,221) 4,050 Year ended December 31, 2019 2018 Change 62,861 17,558 80,419 76,761 (392) 76,369 (13,900) 17,950 4,050 Income tax expense for the year ended December 31, 2019 increased by $4.1 million compared to the prior year. The increase in the income tax expense in the current year was mainly due to the addition of the Chapada mine ($40.5 million), which includes the deferred tax impact of a weakening BRL on translation of non-monetary assets ($14.3 million), offset by lower taxable net earnings at Zinkgruvan, Neves-Corvo and Eagle, as well as a tax recovery of $7.1 million on reduced withholding tax rates in Chile (from 15% to 10%) and $15.1 million in investment tax credits recognized at Neves-Corvo. 10 Fourth Quarter Financial Results Gross Profit Gross profit for the quarter ended December 31, 2019 was $145.5 million, $73.5 million higher in comparison to the fourth quarter of the prior year ($72.0 million). The increase was primarily due to the inclusion of Chapada ($56.6 million) as well as higher realized metal prices. Fourth Quarter Reconciliation of Realized Prices Copper 400,153 10,463 410,616 Three months ended December 31, 2019 Nickel Gold Zinc 77,631 (784) 76,847 73,931 (899) 73,032 44,431 (116) 44,315 ($ thousands) Current period sales1 Prior period price adjustments Other metal sales Copper stream cash effect Gold stream cash effect Less: Treatment & refining charges Total Revenue Payable Metal 65,600 t 34,027 t 48 koz 3,167 t Current period sales1, 2 Prior period adjustments Realized prices ($/lb, $/oz) $2.77 0.07 $2.84 /lb $1.03 (0.01) $1.02 /lb $1,527 (19) $1,508 /oz $6.36 (0.01) $6.35 /lb Copper 282,395 (9,541) 272,854 Three months ended December 31, 2018 Nickel Gold Zinc 90,858 (155) 90,703 24,271 950 25,221 41,886 (6,943) 34,943 ($ thousands) Current period sales1 Prior period price adjustments Other metal sales Gold stream cash effect Less: Treatment & refining charges Total Revenue Payable Metal 47,170 t 35,967 t 20 koz 3,929 t Total 596,145 8,665 604,810 46,535 (3,883) (14,560) (64,539) 568,363 Total 439,410 (15,689) 423,721 47,812 (11,893) (51,899) 407,741 Current period sales1, 2 $2.72 (0.10) Prior period adjustments Realized prices ($/lb) $2.62 /lb 1. Includes provisional price adjustments on current period sales. $1.15 (0.01) $1.14 /lb $1,214 - $1,214 /oz $4.84 (0.81) $4.03 /lb 2. The realized price for copper inclusive of the impact of streaming agreements for 2019 is $2.81/lb (2018: n/a). The realized price for gold inclusive of the impact of streaming agreements for 2019 is $1,207/oz (2018: $695/oz). Net Earnings Net earnings for the quarter ended December 31, 2019 were $104.8 million compared to net earnings of $31.8 million in the fourth quarter of the prior year. Net earnings were positively impacted by higher gross profit ($73.5 million) and additional income from the equity investment in Freeport Cobalt ($10.0 million) partially offset by higher income tax expense ($14.6 million). Adjusted Earnings Adjusted earnings were higher than the prior year quarter mainly due to higher gross profit, offset by lower realized foreign exchange gains recognized in the current quarter. Cash Flow from Operations Cash flow from operations for the quarter ended December 31, 2019 was $186.4 million, compared to the $44.2 million reported in the prior year comparable quarter. The increase was largely due to comparative non-cash working capital ($50.3 million) and long-term inventory ($25.0 million) as well as higher gross profit. 11 Mining Operations Production Overview (Contained metal in concentrate) 2019 2018 YTD Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Copper (tonnes) Candelaria (100%) Chapada1 Eagle Neves-Corvo Zinkgruvan Zinc (tonnes) Neves-Corvo Zinkgruvan Gold (000 oz) Candelaria (100%) Chapada1 Nickel (tonnes) Eagle Lead (tonnes) Neves-Corvo Zinkgruvan Silver (000 oz) Candelaria (100%) Chapada1 Eagle Neves-Corvo Zinkgruvan 146,330 30,529 14,297 41,436 2,906 39,221 40,698 33,633 32,778 134,578 33,011 35,323 34,397 31,847 12,884 17,645 - - - 4,773 3,042 5,178 17,974 3,626 45,692 11,287 11,746 11,899 10,760 10,898 12,055 176 523 1,120 235,498 67,131 74,560 47,685 46,122 199,630 48,206 52,770 51,098 47,556 - 3,897 8,868 579 - 3,732 9,615 705 - 3,908 - 4,115 1,386 502 687 - 75,435 18,465 18,905 20,230 17,835 73,202 76,606 23,559 17,157 16,845 19,045 78,313 151,515 38,925 35,028 37,116 40,446 152,041 42,024 36,062 37,075 36,880 17,946 18,232 18,251 18,773 20,979 16,796 18,865 21,673 88 54 142 23 20 43 24 34 58 21 - 21 20 - 20 78 - 78 21 - 21 20 - 20 20 - 20 17 - 17 13,494 2,651 3,232 3,398 4,213 17,573 3,501 4,697 4,234 5,141 1,365 5,474 27,703 9,361 33,177 10,726 1,305 144 143 1,706 2,464 5,762 337 63 31 385 724 1,540 1,106 6,291 7,397 355 81 40 431 630 1,537 1,350 6,219 7,569 292 - 45 392 631 1,360 1,653 5,832 7,485 321 - 27 498 479 1,325 6,571 24,613 31,184 1,207 - 158 1,791 2,155 5,311 1,418 8,161 9,579 307 - 41 508 607 1,463 1,524 5,515 7,039 330 - 46 458 531 1,365 1,872 3,914 5,786 295 - 28 420 452 1,195 1,757 7,023 8,780 275 - 43 405 565 1,288 1. Production results are for the period of Lundin Mining's ownership. 12 Cash Cost Overview3 ($/lb) Candelaria (cost/lb Cu) Gross cost By-product1 Cash Cost AISC2 Chapada (cost/lb Cu)4 Gross cost By-product Cash Cost AISC Eagle (cost/lb Ni) Gross cost By-product Cash Cost AISC Neves-Corvo (cost/lb Cu) Gross cost By-product Cash Cost AISC Zinkgruvan (cost/lb Zn) Gross cost By-product Cash Cost AISC Three months ended December 31, Twelve months ended December 31, 2019 1.70 (0.32) 1.38 2.22 1.96 (1.19) 0.77 1.28 6.50 (2.97) 3.53 4.53 2.85 (1.07) 1.78 2.65 0.87 (0.56) 0.31 0.62 2018 1.90 (0.25) 1.65 3.99 - - - - 4.79 (3.03) 1.76 2.55 3.02 (1.53) 1.49 2.64 0.67 (0.44) 0.23 0.50 2019 1.82 (0.28) 1.54 2.88 1.84 (1.26) 0.58 0.97 6.30 (3.46) 2.84 3.74 2.93 (1.34) 1.59 2.38 0.83 (0.44) 0.39 0.65 2018 1.90 (0.22) 1.68 3.34 - - - - 4.57 (3.56) 1.01 1.84 2.87 (1.59) 1.28 1.95 0.78 (0.44) 0.34 0.62 1. By-product is after related treatment and refining charges. 2. All-in Sustaining Cost ("AISC") is a non-GAAP measure – see page 25 of this MD&A for discussion of non-GAAP measures. 3. On adoption of IFRS 16, Leases, the Company has elected not to restate comparative periods presented. 4. Cash costs and AISC for Chapada are for the period of Lundin Mining's ownership. Capital Expenditures 1,2 Year ended December 31, 2019 Sustaining Expansionary Capitalized Interest Total Sustaining Expansionary Capitalized Interest Total 2018 367,298 28,996 11,466 56,494 38,956 417 503,627 - - 30,288 130,044 - - 160,332 - - 126 1,203 - - 1,329 367,298 28,996 41,880 187,741 38,956 417 665,288 490,993 - 9,958 54,545 37,951 5,558 599,005 - - 33,424 104,261 - - 137,685 7,617 - 2,425 5,021 - - 15,063 498,610 - 45,807 163,827 37,951 5,558 751,753 ($ thousands) by Mine Candelaria Chapada Eagle Neves-Corvo Zinkgruvan Other 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 25 of this MD&A for discussion of non-GAAP measures. 13 Candelaria (Chile) Compañía Contractual Minera Candelaria (“CCMC”) and Compañía Contractual Minera Ojos del Salado (“CCMO”), collectively "Candelaria", are located near Copiapó in the Atacama region of Chile. The Company holds an indirect 80 percent ownership interest in Candelaria with the remaining 20 percent interest indirectly held by Sumitomo Metal Mining Co., Ltd and Sumitomo Corporation. CCMC consists of an open pit mine and an underground mine providing copper ore to an on-site processing plant. CCMO consists of two underground mines, Santos and Alcaparrosa, and the Pedro Aguirre Cerda (“PAC”) processing plant. The Santos mine provides copper ore to the PAC plant, while ore from both the Santos mine and Alcaparrosa mine is treated at the CCMC plant. The CCMC plant has a processing capacity of 27.0 million tonnes per annum (“mtpa”), and the PAC plant has a capacity of 1.3 mtpa, both producing copper in concentrate. The primary metal is copper, with gold and silver as by-product metals. Operating Statistics (100% Basis) Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 2019 2018 Ore mined (000s tonnes) Ore milled (000s tonnes) Grade Copper (%) Gold (g/t) Recovery Copper (%) Gold (%) Production (contained metal) Copper (tonnes) Gold (000 oz) Silver (000 oz) Revenue ($000s) Gross profit ($000s) Cash cost ($ per pound copper) AISC ($ per pound copper) 28,753 10,067 6,336 26,287 9,329 6,295 5,620 6,450 3,737 7,206 17,799 27,585 3,432 7,017 3,771 7,241 6,225 7,137 4,372 6,190 0.60 0.14 92.3 72.1 0.66 0.15 92.8 74.4 0.70 0.16 92.9 71.8 0.57 0.14 91.4 70.6 0.49 0.11 91.9 70.5 0.53 0.12 91.2 68.9 0.52 0.13 89.8 68.6 0.54 0.13 91.0 67.6 0.52 0.12 91.6 70.2 0.56 0.11 92.6 69.3 24 355 23 337 88 1,305 146,330 39,221 40,698 33,633 32,778 134,578 78 1,207 31,847 17 275 896,283 235,015 249,930 178,677 232,661 838,772 200,434 176,511 243,585 218,242 55,502 180,650 57,989 42,612 1.71 1.39 2.91 2.49 1,390 78,659 180,959 1.68 1.62 3.34 3.30 73,259 1.71 2.92 13,568 1.64 3.58 38,630 1.65 3.99 34,397 20 295 33,011 21 307 35,323 20 330 20 321 1.86 3.73 21 292 1.54 2.88 1.38 2.22 Gross Profit Gross profit for the year ended December 31, 2019 was comparable to 2018, largely as a result of higher depreciation expense and lower prices net of price adjustments, offset by favourable effects of foreign exchange. Production Copper production for the year ended December 31, 2019 was higher than 2018 and in-line with annual guidance. The increase in production was largely a result of higher grades as more ore tonnes were sourced from the open pit and underground mines, and less from the low-grade stockpile. Cash Costs Copper cash costs for the year ended December 31, 2019 were $0.14/lb lower than cash costs in 2018 and better than guidance. The improvement in cash costs was largely due to the positive impact of foreign exchange rate and higher by-product credits. AISC for 2019 were lower than those reported in the prior year, primarily due to lower cash costs and reduced sustaining capex, as significant reinvestment programs launched in 2018 were completed or ramping down in 2019. In 2019, approximately 55,000 oz of gold and 786,000 oz of silver were subject to terms of a streaming agreement from which approximately $408/oz of gold and $4.08/oz of silver were received. The Company has delivered approximately 330,000 oz of gold and 5.4 million oz of silver since the inception of the precious metal stream. 14 Projects The Candelaria Mill Optimization Project to increase throughput capacity, improve metal recoveries and reduce maintenance costs for the mill is progressing and now expected to be completed in the first quarter of 2020, corresponding with the expected timing of mill maintenance down-time to minimize disruption to production. Primary crusher re-powering is complete; three of the four ball mill motor replacements have been installed and installation of new cyclones is on-going. All remaining equipment to be installed is on site. Pre-production development of the Candelaria Underground South Sector was completed in the third quarter of 2019. Combined production from the Candelaria North and South Sector underground mines increased to 13,500 tonnes per day in the fourth quarter, approaching the 14,000 tonnes per day permitted. Studies completed to date show potential to add value in further expansion of the Candelaria underground mines and a feasibility study on expanding the underground mine has commenced. Baseline environmental data has been collected in support of an updated Environmental Impact Assessment which is to be submitted to the Chilean authorities in early 2020. Delivery of new open pit mine fleet equipment under the Mine Fleet Investment program is substantially complete, with 99% of the equipment received and placed into service. The final two pieces of equipment will be delivered in 2021 and 2022. 15 Chapada (Brazil) The Chapada mine consists of an open pit mine and on-site processing facilities located in the northern Goiás State of Brazil, approximately 270 km northwest of the national capital of Brasilia. The processing plant has a capacity of 24.0 mtpa, producing high-quality gold-rich copper concentrate. The primary metal is copper, with gold and silver as by-product metals. Operating Statistics1 (100% Basis) Total Q4 Q3 Q2 Q1 2019 0.27 0.20 0.31 0.24 7,592 5,731 10,648 6,180 18,240 11,911 Ore mined (000s tonnes) Ore milled (000s tonnes) Grade Copper (%) Gold (g/t) Recovery Copper (%) Gold (%) Production (contained metal) Copper (tonnes) Gold (000 oz) Silver (000 oz) Revenue ($000s) Gross profit ($000s) Cash cost ($ per pound copper) AISC ($ per pound copper) 1. Operating results are for the period of Lundin Mining's ownership. 17,645 34 81 248,011 133,144 114,867 47,864 56,581 104,445 0.35 0.77 0.58 0.62 1.28 0.97 0.34 0.28 83.7 61.0 30,529 54 144 12,884 20 63 82.7 59.4 81.6 57.0 - - - - - - - - - - - - - - - - - - - - - - Gross Profit Gross profit for the year was positively impacted by higher gold prices and volume sold than expected, as well as favourable foreign exchange rates. Several operational excellence projects undertaken earlier this year to reduce the costs of the blasting process, concentrate logistics/storage, in-mine infrastructure contracts and chemical laboratory products, as well as projects to increase truck productivity have contributed to reduced operating costs and better than expected results for the period. Production Copper production for the period of Lundin Mining’s ownership exceeded guidance while gold production was in- line with guidance. The better than expected copper production was mainly due to higher than planned ore grades mined primarily from the Corpo Sul open pit. Cash Costs Copper cash costs were better than guidance, benefitting primarily from favourable foreign exchange rates, as well as rising gold prices which improved the realized by-product credit. AISC was also better than expected due to lower cash costs. Projects The Company is continuing to evaluate options for long-term mine and plant expansion. Study work is being completed in parallel with a significant increase in exploration efforts, largely focused on near-mine targets, with the results to be incorporated in any future expansionary plans. During the fourth quarter, the Company completed a Mineral Range Inventory Analysis targeting process near the current mining operations to identify areas of high exploration potential. Since taking ownership, through the end of 2019, approximately 15,000 metres of diamond drilling has been completed. The 2020 exploration program is planned to include an expanded 50,000 metre drill program and geophysical surveys. 16 Eagle (USA) The Eagle mine consists of the Eagle underground mine, located approximately 53 km northwest of Marquette, Michigan, U.S.A. and the Humboldt mill, located 61 km west of Marquette. The mill has a processing capacity of 0.7 mtpa, producing nickel and copper in concentrates. The primary metal is nickel with copper, and minor amounts of cobalt, gold, and platinum- group metals as by-product metals. Operating Statistics Ore mined (000s tonnes) Ore milled (000s tonnes) Grade Nickel (%) Copper (%) Recovery Nickel (%) Copper (%) Production (contained metal) Nickel (tonnes) Copper (tonnes) Revenue ($000s) Gross profit ($000s) Cash cost ($ per pound nickel) AISC ($ per pound nickel) 2019 2018 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 748 747 2.2 2.0 194 191 1.7 2.0 82.1 96.0 80.5 95.3 197 197 2.0 1.6 80.4 95.5 192 194 2.1 2.0 81.3 95.7 165 165 3.0 2.4 85.0 97.6 753 754 2.8 2.5 82.8 97.0 192 195 2.2 2.1 81.5 96.4 192 192 2.9 2.8 82.6 97.2 183 185 2.7 2.3 83.6 96.8 186 182 3.4 2.7 83.6 97.7 13,494 14,297 212,929 35,987 2.84 3.74 3,232 2,651 3,042 3,626 53,717 53,592 (1,021) 19,350 3.25 4.37 3.53 4.53 3,398 3,732 59,412 4,213 17,573 3,897 17,974 46,208 265,863 (800) 18,458 74,218 1.01 0.37 3.14 1.84 1.65 3.65 3,501 3,908 50,914 4,697 5,178 59,084 (128) 13,341 0.87 1.76 1.76 2.55 4,234 4,115 63,651 24,220 1.09 2.14 5,141 4,773 92,214 36,785 0.49 1.17 Gross Profit Gross profit for the year ended December 31, 2019 was $38.2 million lower than 2018. The decrease was primarily due to lower sales volumes resulting from lower metal production due to planned lower grades ahead of Eagle East ore contributing to mill feed, partially offset by higher nickel metal prices. Production Both nickel and copper production for the year met annual guidance. Metal production compared to the prior year was lower, reflecting planned lower grades due to mine sequencing and ahead of Eagle East ore contributing meaningfully to mill feed. Cash Costs Nickel cash costs for the year ended December 31, 2019 were higher than the prior year due primarily to lower sales volumes. Cash costs were also higher than guidance for the year due to a combination of lower sales volumes and higher TC/RCs as a result of a change in customer mix. AISC for the year ended December 31, 2019, were higher than that reported in 2018 as a result of higher cash costs. Projects Eagle East development was substantially completed by the end of 2019. Development reached the important milestone of first ore mined in the third quarter and first ore fed to the mill early in the fourth quarter. The Eagle East project is expected to be completed below budget and ahead of the original schedule in the first quarter of 2020, following final development of a ventilation raise and the underground maintenance shop. 17 Neves-Corvo (Portugal) Neves-Corvo is located 220 km southeast of Lisbon, Portugal, in the western part of the Iberian Pyrite Belt and consists of an underground mine, which exploits five major ore bodies, and on-site processing facilities. The copper plant has a processing capacity of 2.6 mtpa, producing copper in concentrate, and the zinc plant has a capacity of 1.1 mtpa with the ability to process zinc or copper ore, producing zinc or copper in concentrate. The primary metal is copper, with zinc, lead and silver as by-product metals. Operating Statistics Ore mined, copper (000 tonnes) Ore mined, zinc (000 tonnes) Ore milled, copper (000 tonnes) Ore milled, zinc (000 tonnes) Grade Copper (%) Zinc (%) Recovery Copper (%) Zinc (%) Production (contained metal) Copper (tonnes) Zinc (tonnes) Lead (tonnes) Silver (000 oz) Revenue ($000s) Gross profit ($000s) Cash cost (€ per pound copper) Cash cost ($ per pound copper) AISC ($ per pound copper) 2019 2018 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 2,702 1,153 2,679 1,137 2.0 7.9 78.3 78.8 686 290 681 286 2.1 7.8 77.9 78.0 699 284 702 285 2.1 7.8 80.6 80.2 628 283 626 280 2.0 7.9 689 296 670 286 1.7 8.0 75.8 78.6 79.3 78.3 2,693 1,119 2,692 1,125 2.2 7.8 75.5 80.6 696 280 704 287 2.1 7.6 688 273 696 280 2.2 7.9 618 283 641 278 2.5 8.3 Q1 691 283 651 280 2.2 7.6 76.8 79.1 76.3 81.0 74.2 82.0 74.6 80.4 41,436 73,202 5,474 1,706 337,167 42,896 1.42 1.59 2.38 10,898 17,946 1,365 385 88,492 8,772 1.61 1.78 2.65 12,055 18,232 1,106 431 86,009 11,546 1.44 1.60 2.35 9,615 18,251 1,350 392 77,519 3,834 1.68 1.88 2.60 1,653 498 11,746 18,905 1,524 458 8,868 45,692 11,287 18,773 75,435 18,465 1,418 6,571 508 1,791 11,899 20,230 1,872 420 85,147 404,263 91,059 104,730 110,816 37,606 3,408 18,744 85,311 0.81 1.31 1.09 0.96 1.49 1.28 1.46 2.64 1.95 19,339 1.28 1.48 1.90 0.81 0.92 1.72 10,760 17,835 1,757 405 97,658 24,958 0.93 1.14 1.84 Gross Profit Gross profit for the year ended December 31, 2019 was $42.4 million lower than 2018. Gross profit was impacted by lower realized metal prices, net of price adjustments in the current year for both copper and zinc ($34.3 million) as well as lower sales volumes. Production A record volume of ore mined was achieved in the year. Copper production for the year ended December 31, 2019 met annual guidance but was lower than 2018. Copper recoveries were 3% higher than the prior year and the highest since 2015. However, lower copper grades resulted in lower contained metal production than the prior year. Operational improvements were the primary contributors to the favourable increase in copper recovery in the current year. Zinc production for the year ended December 31, 2019 met production guidance, though was lower than the comparable period in 2018 as zinc concentrate grade was prioritized over total metal recovery to maximize return in a more demanding concentrate market. Cash Costs Copper cash costs for the year ended December 31, 2019 were in-line with annual guidance, but higher than 2018. The $0.31/lb increase over the prior year was largely a result of lower by-product credits. AISC were higher compared to the prior year largely as a result of higher cash cost. 18 Projects ZEP advanced in accordance with the revised schedule and budget for the phased start-up strategy and production during 2020. During 2019 the Company revised the pre-production cost estimate to €360 million ($430 million) from €305 million. The updated cost estimate includes the following new items: • €7 million for underground paste backfill expansion (not included in the initial project scope) • €10 million of potential contractor claims for surface delays and time extensions • €10 million of owners and indirect costs on schedule delays, and • €28 million contingency (representing 15% of remaining spend). While commissioning of surface facilities is still expected to commence by the end of the first quarter of 2020, a phased approach is expected to take several quarters to ramp up with full throughput rates expected by the fourth quarter of 2020. Commissioning of the underground crushing and conveying systems is expected to occur during the second quarter of 2020. During 2019, underground materials handling civil works advanced and are substantially complete. Mechanical and electrical equipment installations for the 3.5 km of conveyor systems are well advanced and mechanical installation of the jaw crusher is nearing completion. The first phase of the upgrade of the Santa Barbara shaft was successfully completed and commissioned in early December 2019 with the installation of two new 18.3 tonne capacity skips and new multi-stand hoist ropes. Hoisting capacities with these upgrades are meeting design specifications. Development of the Lower Lombador zinc ore stopes is well underway with development of the first two access sub-levels continuing, as well as deepening of the ramp to reach the next sub-levels of zinc stopes in the orebody. Surface construction continued with a focus on mechanical piping, electrical and instrumentation installation of the materials handling system, SAG mill, flotation equipment, dewatering circuit, backfill cyclone station, tailings and water supply piping systems, and a new paste fill tailings thickener. Preparation for the early stages of the commissioning of surface process equipment was also initiated in the fourth quarter of 2019 and is well advanced. 19 Zinkgruvan (Sweden) The Zinkgruvan mine consists of an underground mine and on-site processing facilities, located approximately 200 km southwest of Stockholm, Sweden. The zinc plant has processing capacity of 1.4 mtpa, producing zinc and lead in concentrate, and the copper plant has capacity of 0.3 mtpa with the ability to process copper or zinc-lead ore, producing copper, or zinc and lead concentrates. The primary metal is zinc, with lead, silver and copper as by-products. Operating Statistics Ore mined, zinc (000 tonnes) Ore mined, copper (000 tonnes) Ore milled, zinc (000 tonnes) Ore milled, copper (000 tonnes) Grade Zinc (%) Lead (%) Copper (%) Recovery Zinc (%) Lead (%) Copper (%) Production (contained metal) Zinc (tonnes) Lead (tonnes) Copper (tonnes) Silver (000 oz) Revenue ($000s) Gross profit ($000s) Cash cost (SEK per pound) Cash cost ($ per pound) AISC ($ per pound) 2019 2018 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 1,138 182 1,120 178 7.6 3.1 1.8 91.5 80.9 89.1 336 28 322 26 7.1 3.5 2.2 91.7 83.0 89.6 230 65 254 63 7.2 3.1 1.9 92.2 80.8 90.8 303 37 292 48 7.2 2.7 1.7 89.7 80.0 86.0 269 52 252 41 9.3 2.9 1.6 92.5 78.6 89.1 1,203 97 1,202 111 7.0 2.6 1.4 90.6 79.1 88.4 330 - 325 - 7.9 3.1 - 91.7 80.2 - 276 23 280 35 6.7 2.5 1.7 91.2 78.8 90.6 288 34 288 62 6.6 1.8 1.3 89.4 73.5 87.0 309 40 309 14 6.8 2.8 1.4 89.9 81.3 88.2 78,313 27,703 2,906 2,464 198,323 81,341 3.69 0.39 0.65 20,979 9,361 502 724 58,120 23,928 2.95 0.31 0.62 16,796 6,291 1,120 630 34,192 8,557 4.02 0.42 0.70 18,865 6,219 705 631 53,643 21,873 3.88 0.41 0.63 21,673 5,832 579 479 76,606 24,613 1,386 2,155 52,368 216,691 26,983 100,517 2.97 0.34 0.62 4.08 0.44 0.69 23,559 8,161 - 607 65,334 30,800 2.12 0.23 0.50 17,157 5,515 523 531 39,384 14,514 3.13 0.35 0.62 16,845 3,914 687 452 49,605 21,007 3.51 0.41 0.71 19,045 7,023 176 565 62,368 34,196 3.47 0.43 0.71 Gross Profit Gross profit for the year was $19.2 million lower than in 2018 largely because of lower metal prices, net of price adjustments and higher zinc treatment charges. Production Zinc and copper production met annual guidance for 2019 and an all-time record for ore mined was achieved during the year. Compared to the prior year, zinc and lead production were higher due to better head grades and metal recoveries. Copper production was higher due to a combination of higher throughput, grades and recoveries. Cash Costs Zinc cash costs in the current year were slightly higher than those in 2018, due primarily to higher zinc treatment charges. Cash cost for the year met annual guidance. AISC in 2019 were higher than in 2018 largely as a result of the higher cash costs. 20 Metal Prices, LME Inventories and Smelter Treatment and Refining Charges The average metal prices for copper and zinc were both lower in 2019 compared to 2018 however the average metal price for nickel and gold were higher in 2019 compared to the average price for 2018. Also, during the fourth quarter of 2019, the metal prices for copper, zinc and gold increased while the price for nickel decreased. The average prices during the fourth quarter for copper, zinc and gold were 1%, 2% and 1% higher, respectively, than the average prices of the third quarter of the year while the price of nickel was 1% lower during the fourth quarter compared to the third quarter of 2019. (Average LME Price) Copper Zinc Gold Nickel US$/pound US$/tonne US$/pound US$/tonne US$/ounce US$/pound US$/tonne Three months ended December 31, Change -5% 2019 2.67 5,881 1.08 2,388 1,481 7.01 15,450 2018 2.80 6,172 1.19 2,631 1,226 5.22 11,516 -9% 21% 34% Twelve months ended December 31, 2019 2.72 6,000 1.16 2,546 1,393 6.32 13,936 2018 2.96 6,523 1.33 2,922 1,268 5.95 13,122 Change -8% -13% 10% 6% The LME inventory for copper increased during 2019 and ended the year 10% higher than the closing levels of 2018 while zinc and nickel decreased during 2019, ending the year 60% and 27% lower, respectively, than the closing levels of 2018. During the first eight months of 2019 the treatment charges (“TC”) and refining charges (“RC”) in the spot market for copper concentrates between miners and commodity traders decreased from an average spot TC during January of $80 per dmt of concentrate and a spot RC of $0.08 per lb of payable copper to a spot TC of $35 per dmt of concentrate and a spot RC of $0.035 per lb of payable copper during August 2019. In September, Freeport- McMoRan’s Grasberg mine received a permit to increase concentrate exports by an additional 500,000 tonnes, for a total of 700,000 tonnes for export. The increase in concentrate supply contributed to the spot TC increase from the August low to a spot TC of $43 per dmt of concentrates and a spot RC of $0.043 per lb payable copper in December 2019. 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. This represents an improvement for the mines compared to the 2018 annual terms at a TC of $80.80 per dmt of concentrates and a RC of $0.0808 per payable lb of copper. The spot TC, delivered China, for zinc concentrates during the first three months of 2019 increased from $187 per dmt, flat, at the beginning of the year to $257 per dmt, flat, by the end of the first quarter. TC’s for zinc concentrates traded in a range of $270-$290 per dmt, flat, i.e. without escalators during the second and third quarters on limited transactions. The last quarter of the year saw spot TC’s increase and trade in the range of $295 per dmt, flat, to $305 per dmt, flat, at the end of the year. The anticipated increase in supply from new mines and reactivation of closed mines, reduced demand for zinc concentrates from China due to temporary smelter shut- downs and increased environmental demands resulted in a swift increase in TC’s from the historically low TC’s over the previous year. The TC for annual contracts for 2019 was settled at $245 per dmt of concentrates at a base price range of $2,700 to $3,000, with the reintroduction of small up and down scales. The agreed terms represented an improvement in favour of the smelters of approximately $100 per dmt compared to the prior year. Negotiations of annual terms for 2020 have started but the Company does not expect any settlement until the end of the second quarter at the earliest. The Company’s nickel concentrate production from Eagle is sold under several long-term contracts at terms in- line with market conditions. Gold production from Chapada and Candelaria is sold at terms in-line with market conditions for copper concentrates. 2221 Liquidity and Capital Resources As at December 31, 2019, the Company had cash and cash equivalents of $250.6 million. The Company had contractual commitments and obligations of $913.0 million which are expected to be funded primarily through operating cash flow generated, cash on hand and available debt facilities. Cash and cash equivalents decreased by $564.9 million compared to a decrease of $751.6 million in the prior year. Net cash outflows were lower in 2019 by $186.7 million due mainly to higher cash flow from operations ($88.2 million), lower capital expenditures of $86.5 million and higher distributions from its investment in associates of $119.8 million primarily due to sale proceeds from the Freeport Cobalt Transaction. In addition, the Company also utilized cash during the year for the acquisition of Chapada ($472.0 million) which approximates the cash used in the prior year for debt repayments and related fees of $461.9 million Subject to various risks and uncertainties, the Company believes it will generate sufficient cash flow and has adequate cash and credit facilities to finance on-going operations, contractual obligations and planned capital and exploration investment programs. Capital Resources As at December 31, 2019, the Company had $308.5 million of debt and lease liabilities outstanding including $225.0 million drawn on its available Credit Facility. During the year, the Company executed a third amended and restated credit agreement that increased its Credit Facility to $800.0 million, previously $550.0 million, with a $200.0 million accordion option, reduced the cost of borrowing and extended the term to August 2023 (previously October 2022). As at December 31, 2019, the Credit Facility had $225.0 million drawn. Additionally, letters of credit have been issued totalling $23.6 million. The Credit Facility is subject to customary covenants. During 2019, a majority-owned subsidiary company obtained fixed-term loans in the amount of $85.0 million and subsequently repaid $50.0 million. At December 31, 2019, the outstanding amount of the fixed loan was $35.0 million, with interest at a rate of 2.2% per annum payable upon maturity in August 2020. The Company also has a commercial paper program for $33.7 million (€30 million) which is undrawn and a line of credit for equipment financing of $28.1 million (€25 million). As at December 31, 2019, the outstanding balance on the line of credit was $8.7 million (€7.9 million). The Company purchased approximately 4.3 million shares under its NCIB at an average price of C$6.75 per share for total consideration of $21.7 million during 2019. All of the common shares purchased have been cancelled. On December 5, 2019, the Company renewed its NCIB which allows the Company to purchase up to 63,797,653 common shares over a twelve-month period commencing December 9, 2019. The Company does not have unlimited financial resources and there is no assurance that sufficient additional funding or financing will be available, when needed, by the Company or its direct and indirect subsidiaries on acceptable terms, or at all, for further exploration or development of its properties or to fulfill its obligations under any applicable agreements. Lundin Mining is a multinational company and relies on financial institutions worldwide to fund its corporate and project needs. Instability of large financial institutions may impact the ability of the Company to obtain equity or debt financing in the future and, if obtained, on terms favourable to the Company. Disruptions in the capital and credit markets as a result of uncertainty, geo-political events, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect the Company’s access to the liquidity needed for the business in the longer term. Failure to obtain such additional funding could result in the delay or indefinite postponement of the exploration and development of the Company’s properties. The Company may incur substantial debt from time to time to finance working capital, capital expenditures, investments or acquisitions or for other purposes. If the Company does so, the risks related to the Company’s indebtedness could intensify, including: (i) increased difficulty in satisfying existing debt obligations; (ii) limitations 22 on the ability to obtain additional financing, or imposed requirements to make non-strategic divestitures; (iii) imposed hedging requirements, (iv) imposed restrictions on the Company’s cash flows, for debt repayment or capital expenditures; (v) increased vulnerability to general adverse economic and industry conditions; (vi) interest rate risk exposure as borrowings may be at variable rates of interest; (vii) decreased flexibility in planning for and reacting to changes in the industry in which it competes; (viii) reduced competitiveness versus less leveraged competitors; and (ix) increased cost of borrowing. In addition, debt arrangements may contain restrictive covenants that limit the Company’s ability to engage in activities that may be in the Company’s long-term best interest. The Company’s failure to comply with those covenants could result in an event of default. The Company’s access to funds under its debt arrangements is dependent on the ability of the financial institutions that are counterparties to the facilities to meet their funding commitments. Those financial institutions may not be able to meet their funding requirements. Default by financial institutions the Company deals with could require the Company to take measures to conserve cash until the markets stabilize or until alternative credit or other funding arrangements for the Company’s business needs can be obtained. The Company maintains relationships with various banking partners for its operating activities in the jurisdictions in which the Company operates. One or more partners may experience a deteriorating financial condition ultimately resulting in their failure or default. The Company regularly monitors the financial position of its key bankers. Contractual Obligations, Commitments and Contingencies The Company has the following contractual obligations and capital commitments as at December 31, 2019: US$ thousands Long-term debt and lease liabilities Reclamation and closure provisions Capital commitments Defined pension obligations <1 year 82,143 3,735 107,016 974 193,868 Payments due by period1 Thereafter 1-5 years 229,649 16,264 10,249 3,450 259,612 5,936 449,556 - 3,722 459,214 Total 317,728 469,555 117,265 8,146 912,694 1. Reported on an undiscounted basis, before inflation. From time to time, the Company is involved in legal proceedings that arise in the ordinary course of its business. Additionally, the Company has other commitments and contingencies as discussed in the Company’s Consolidated Financial Statements Note 27 “Commitments and Contingencies”. 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 a detailed discussion of the Company’s financial instruments refer to Note 26 of the Company’s Consolidated Financial Statements. Market and Liquidity Risks and 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 $. Commodity prices, primarily copper, zinc, gold and nickel are key performance drivers and fluctuations in the prices of these commodities can have a dramatic effect on the results of operations. Prices can fluctuate widely and are affected by numerous factors beyond the Company’s control. The prices of metals are influenced by 2223 supply and demand, exchange rates, interest rates and interest rate expectations, inflation or deflation and expectations with respect to inflation or deflation, speculative activities, changes in global economies, and geo- political, social and other factors. The supply of metals consists of a combination of new mine production, recycling and existing stocks held by governments, producers and consumers. If market prices for metals fall below the Company’s full production costs and remain at such levels for any sustained period of time, the Company may experience losses and may decide to discontinue mining operations or development of a project at one or more of its properties. If the prices drop significantly, the economic prospects of the mines and projects in which the Company has an interest could be significantly reduced or rendered uneconomic, in which case the Company may need to restate its Mineral Resource and Mineral Reserve estimates. Low metal prices will affect the Company’s liquidity, and if they persist for an extended period of time, the Company may have to look for other sources of cash flow to maintain liquidity until metal prices recover. A sustained and material impact on the Company’s liquidity may also impact the Company’s ability to comply with financial covenants under its credit facilities. The following table illustrates the sensitivity of the Company's risk on final settlement of its provisionally priced revenues: Metal Copper Zinc Gold Nickel Payable Metal 59,968 t 32,530 t 30,893 oz 2,895 t Provisional price on December 31, 2019 $2.80 /lb $1.03 /lb $1,536 /oz $6.36 /lb Change +/- 10% +/- 10% +/- 10% +/- 10% Effect on Revenue ($millions) +/- $37.0 +/- $7.4 +/- $4.7 +/- $4.1 The following table presents the Company's sensitivity to certain currencies and the impact of exchange rates, against the US dollar, on cost of goods sold: Currency Change +/- 10% Chilean peso +/- 10% Euro +/- 10% Swedish krona Brazilian real1 +/- 10% 1. Sensitivities are for the period of Lundin Mining's ownership, commencing July 6, 2019. Related Party Transactions For the twelve months ended December 31, 2019 ($millions) +/- $40.4 +/- $28.8 +/- $11.9 +/- $10.0 The Company enters into related party transactions that are in the normal course of business and on an arm’s length basis. Related party disclosures can be found in Note 29 of the Company’s December 31, 2019 Consolidated Financial Statements. Changes in Accounting Policies and Critical Accounting Estimates and Judgments The Company describes its significant accounting policies as well as any changes in accounting policies in Note 2 “Basis of Presentation and Significant Accounting Policies” of the December 31, 2019 Consolidated Financial Statements. No significant changes in accounting policies have occurred other than the implementation of a new IFRS as issued by the IASB. 24 Non-GAAP Performance Measures1 The Company uses certain performance measures in its analysis. These performance measures have no meaning within generally accepted accounting principles under IFRS and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The following are non-GAAP measures that the Company uses as key performance indicators. Net (Debt) Cash Net (debt) cash is a performance measure used by the Company to assess its financial position. Net (debt) cash is defined as cash and cash equivalents, less debt and lease liabilities, excluding deferred financing fees and can be reconciled as follows: ($thousands) December 31, 2019 December 31, 2018 December 31, 2017 Current portion of long-term debt and lease liabilities Long-term debt and lease liabilities Deferred financing fees (netted in above) Cash and cash equivalents Net (debt) cash (80,782) (227,767) (308,549) (2,238) (310,787) 250,563 (60,224) (3,830) (7,162) (10,992) - (10,992) 815,429 804,437 (3,431) (446,515) (449,946) (6,627) (456,573) 1,567,038 1,110,465 Adjusted Operating Cash Flow per Share Adjusted operating cash flow per share 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 per share is defined as cash provided by operating activities, excluding changes in non-cash working capital items, divided by the basic weighted average number of shares outstanding. Adjusted operating cash flow per share can be reconciled to the Company's cash provided by operating activities as follows: ($thousands, except share and per share amounts) Cash provided by operating activities Changes in non-cash working capital items Adjusted operating cash flow before changes in non-cash working capital items Year ended December 31, 2019 564,559 (13,813) 550,746 2018 476,353 10,217 486,570 2017 903,484 (73,518) 829,966 Weighted average common shares outstanding 735,309,697 731,734,265 726,994,036 Adjusted operating cash flow per share 0.75 0.66 1.14 ($thousands, except share and per share amounts) Cash provided by operating activities Changes in non-cash working capital items Adjusted operating cash flow before changes in non-cash working capital items Weighted average common shares outstanding Adjusted operating cash flow per share Three months ended December 31, 2019 186,357 20,318 206,675 2018 44,222 70,639 114,861 734,901,977 0.28 733,509,076 0.16 1. Upon adoption of new IFRS standards as issued by the IASB, the Company has elected not to restate comparative periods presented. 25 Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share Adjusted 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: ($thousands) Net earnings from continuing operations Add back: Depreciation, depletion and amortization Finance income and costs Income taxes Unrealized foreign exchange Unrealized revaluation loss (gain) of derivative asset and liability Revaluation of marketable securities Income from investment in associates Other Total adjustments - EBITDA Adjusted EBITDA ($thousands) Net earnings Add back: Depreciation, depletion and amortization Finance income and costs Income taxes Unrealized foreign exchange loss Unrealized revaluation loss of derivative asset and liability Loss (gain) on disposal of marketable securities Income from investment in associates Other Total adjustments - EBITDA Adjusted EBITDA Year ended December 31, 2019 189,177 386,117 38,792 80,419 694,505 (6,861) 21,935 1,495 (6,239) 857 11,187 705,692 2018 215,440 319,376 57,982 76,369 669,167 10,486 5,318 (13,520) (29,933) 1,640 (26,009) 643,158 2017 446,915 381,317 74,899 191,404 1,094,535 (14,308) (12,107) 2,534 (13,438) (2,611) (39,930) 1,054,605 Three months ended December 31, 2019 104,804 111,517 11,511 8,985 236,817 6,380 6,556 1,299 (17,754) 1,269 (2,250) 234,567 2018 31,784 89,581 29,775 (5,660) 145,480 17,781 601 (384) (7,721) 1,618 11,895 157,375 26 Adjusted earnings and adjusted earnings per share can be reconciled to the Company's Consolidated Statement of Earnings as follows: ($thousands, except share and per share amounts) Net earnings attributable to Lundin Mining shareholders Add back: Total adjustments - EBITDA Tax effect on adjustments Deferred tax arising from foreign exchange translation Tax asset revaluations Notes redemption payment Interest income received on tax refund Total Adjusted earnings Weighted average number of shares outstanding: Year ended December 31, 2019 167,256 11,187 (2,584) (14,300) - - (2,100) (7,797) 159,459 2018 195,850 2017 371,422 (26,009) (3,136) - - 16,900 - (12,245) 183,605 (39,930) 200 - 14,997 (20,625) 34,133 (11,225) 360,197 Basic Diluted 735,309,697 736,056,877 731,734,265 733,552,476 726,994,036 729,742,955 Basic and diluted earnings per share attributable to Lundin Mining shareholders: Net earnings Total adjustments Adjusted earnings per share 0.23 (0.01) 0.22 0.27 (0.02) 0.25 0.51 (0.01) 0.50 ($thousands, except share and per share amounts) Net earnings attributable to Lundin Mining shareholders Add back: Total adjustments - EBITDA Tax effect on adjustments Deferred tax arising from foreign exchange translation Total adjustments Adjusted earnings Weighted average number of shares outstanding: Basic Diluted Basic and diluted earnings per share attributable to Lundin Mining shareholders: Net earnings Total adjustments Adjusted earnings per share Three months ended December 31, 2019 97,016 (2,250) (2,894) 1,300 (3,844) 93,172 2018 28,766 11,895 (5,852) - 6,043 34,809 734,901,977 735,996,877 733,509,076 734,689,912 0.13 - 0.13 0.04 0.01 0.05 27 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. 28 Cash and All-in Sustaining Costs can be reconciled to the Company's production costs as follows: Three months ended December 31, 2019 Operations ($000s, unless otherwise noted) Candelaria Chapada (Cu) (Cu) Eagle Neves-Corvo Zinkgruvan (Zn) (Cu) (Ni) Sales volumes (Contained metal in concentrate): Tonnes Pounds (000s) 34,564 76,200 16,127 35,554 3,167 6,982 11,311 24,936 19,314 42,580 Production costs Less: items included in the above Royalties and other Deduct: By-product credits Add: Treatment and refining charges Cash cost Cash cost per pound ($/lb) Add: Sustaining capital expenditure(1) Royalties Interest expense Leases & other(2) All-in sustaining cost AISC per pound ($/lb) 104,810 1.38 27,505 24,678 3.53 0.77 62,741 - 1,158 815 169,524 2.22 13,226 3,000 1,283 467 2,974 3,133 406 458 45,481 31,649 4.53 1.28 44,437 1.78 17,693 2,125 24 1,788 66,067 2.65 13,036 0.31 12,804 - 49 320 26,209 0.62 Three months ended December 31, 2018 Operations ($000s, unless otherwise noted) Candelaria Chapada (Cu) (Cu) Eagle Neves-Corvo Zinkgruvan (Zn) (Cu) (Ni) Sales volumes (Contained metal in concentrate): Tonnes Pounds (000s) 32,465 71,573 - - 3,929 8,662 10,700 23,589 20,475 45,140 Production costs Less: items included in the above Royalties and other Deduct: By-product credits Add: Treatment and refining charges Cash cost Cash cost per pound ($/lb) 117,751 1.65 - 15,212 1.76 - 35,045 1.49 10,581 0.23 Add: Sustaining capital expenditure(1) 26,535 423 Royalties 295 Interest expense - Leases & other 62,298 All-in sustaining cost AISC per pound ($/lb) 2.64 1. Sustaining capital expenditure, as reported in AISC, is presented on an accrual basis and excludes capitalized interest. 2. On adoption of IFRS 16, Leases, the Company has elected not to restate comparative periods presented. - 3,207 - 3,423 - 263 - - - 22,105 2.55 - 166,611 - 872 - 285,234 3.99 11,974 - (190) 189 22,554 0.50 Total 311,396 (10,018) 301,378 (138,057) 51,145 214,466 Total 246,116 (9,649) 236,467 (99,698) 41,820 178,589 29  Operations ($000s, unless otherwise noted) Sales volumes (Contained metal in concentrate): Tonnes Pounds (000s) 139,051 306,555 Twelve months ended December 31, 2019 Candelaria Chapada1 (Cu) (Cu) Eagle (Ni) Neves- (Cu) Zinkgruvan (Zn) Total 29,884 65,883 10,682 23,550 41,252 90,945 67,463 148,730 Production costs Less: items included in the above Royalties and other Deduct: By-product credits Add: Treatment and refining charges Cash cost Cash cost per pound ($/lb) 473,361 1.54 38,126 0.58 66,780 2.84 144,541 1.59 1,066,203 (19,697) 1,046,506 (440,947) 175,229 780,788 57,980 0.39 Add: Sustaining capital expenditure(2) Royalties Interest expense Leases & other(3) All-in sustaining cost AISC per pound ($/lb) 401,370 - 5,225 3,494 883,450 2.88 16,756 6,017 2,556 760 64,215 0.97 9,501 8,455 1,624 1,740 88,100 3.74 60,982 5,572 121 5,368 216,584 2.38 37,609 - 199 1,291 97,079 0.65 Operations ($000s, unless otherwise noted) Sales volumes (Contained metal in concentrate): Tonnes Pounds (000s) 132,626 292,390 Twelve months ended December 31, 2018 Chapada (Cu) Candelaria (Cu) Eagle (Ni) Neves- (Cu) Zinkgruvan (Zn) Total - - 15,151 33,402 44,729 98,610 62,922 138,719 Production cost Less: items included in the above Royalties and other Deduct: By-product credits Add: Treatment and refining charges Cash cost Cash cost per pound ($/lb) Add: Sustaining capital expenditure(2) Royalties Interest expense Leases & other All-in sustaining cost AISC per pound ($/lb) 491,053 1.68 482,007 - 3,862 - 976,922 3.34 - - - - - - - - 33,823 1.01 126,292 1.28 11,977 14,492 1,052 - 61,344 1.84 57,892 7,073 682 - 1 191,939 1.95 47,773 0.34 37,404 - 182 895 86,254 0.62 1. Cash costs and AISCs are for the period of Lundin Mining's ownership. 2. Sustaining capital expenditure, as reported in AISC, is presented on an accrual basis and excludes capitalized interest. 3. On adoption of IFRS 16, Leases, the Company has elected not to restate comparative periods presented. 969,610 (30,062) 939,548 (400,573) 159,966 698,941 30 Managing Risks Risks and Uncertainties The operations of Lundin Mining are exposed to a number of inherent risks and uncertainties, including those related to health and safety, environment, fluctuations in commodity prices, foreign exchange rates and other risks as discussed in this document. The ability to manage these risks is a key component of the Company’s business strategy. In this regard, Lundin Mining has developed a Risk Management Statement which defines the Company’s approach to enterprise risk management (“ERM”) and establishes a framework for embedding effective risk management practices and tools into the culture, systems and processes of the business. Lundin Mining’s approach to ERM is to ensure that key risks which are emerging or evolving are appropriately identified, managed, and incorporated into the assessment, monitoring, and reporting processes. Operational and enterprise risk information is compiled and reviewed on a quarterly basis for consolidation and reporting to executive management and the Board of Directors. Other than those risks already disclosed, additional key risk factors to consider include: • Inability to secure required licenses, permits and/or approvals in a timely manner due to an increasingly complex political and regulatory landscape. • Global cybersecurity threats. • Unforeseen schedule delays and cost overruns related to the Zinc Expansion Project. • Depressed metal prices and currency volatility. • Catastrophic loss of stability affecting water or tailings storage facilities, open pit mine walls, waste rock dumps, and/or underground mine infrastructures. • Country risks such as civil unrest, political instability, nationalization, and unforeseen changes to mining regulations (i.e. evolving country risks resulting in political instability, social unrest that impacts workforce well-being and operational continuity, increased potential for regulatory or tax regime change, or regulatory delays that affect timely issuance of permits). • Epidemic or pandemic outbreaks affecting workforce health and wellbeing, reducing operational capacity or • productivity, disrupting transportation networks and supply chains, or reducing customer demand. Loss of reputation due to unanticipated operational failures such as environmental spills or releases, or significant occupational injuries or incidents. For a complete discussion of risks and uncertainties, refer to the “Risks and Uncertainties” section of the Company’s most recently filed Annual Information Form. 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. Management has evaluated the effectiveness of the Company’s DCP and has concluded that they were effective as at December 31, 2019. 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. 31 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”). Management conducted an evaluation of the effectiveness of ICFR and concluded that it was effective as at December 31, 2019. Changes in ICFR There have been no changes in the Company’s ICFR during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. Outstanding Share Data As at February 20, 2020, the Company has 734,519,237 common shares issued and outstanding, and 9,454,430 stock options and 2,099,710 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). 32 Independent auditor’s report To the Shareholders of Lundin Mining Corporation Our opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Lundin Mining Corporation and its subsidiaries (together, the Company) as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). What we have audited The Company’s consolidated financial statements comprise: • • • • • • the consolidated balance sheets as at December 31, 2019 and 2018; the consolidated statements of earnings for the years then ended; the consolidated statements of comprehensive income for the years then ended; the consolidated statements of changes in equity for the years then ended; the consolidated statements of cash flows for the years then ended; and the notes to the consolidated financial statements, which include a summary of significant accounting policies. Basis for opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements. PricewaterhouseCoopers LLP PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2 T: +1 416 863 1133, F: +1 416 365 8215 “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership. Other information Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • • • • • • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. The engagement partner on the audit resulting in this independent auditor’s report is James Lusby. (Signed) “PricewaterhouseCoopers LLP” Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario February 20, 2020 Consolidated Financial Statements of   Lundin Mining Corporation  December 31, 2019                                              Management’s Report  The accompanying consolidated financial statements of Lundin Mining Corporation (the “Company”) and  other  information  contained  in  the  management’s  discussion  and  analysis  are  the  responsibility  of  management and have been approved by the Board of Directors. The consolidated financial statements  have  been  prepared  by  management  in  accordance  with  International  Financial  Reporting  Standards  (“IFRS”)  as  issued by the  International Accounting Standards  Board  (“IASB”)  as outlined  in  Part  1 of  the  Handbook of the Chartered Professional Accountants of Canada, and include some amounts that are based  on management’s estimates and judgment.  The  Board  of Directors carries  out  its  responsibility  for  the  consolidated  financial  statements  principally  through its Audit Committee, which is comprised solely of independent directors. The Audit Committee  reviews the Company’s annual consolidated financial statements and recommends its approval to the Board  of  Directors.  The  Company’s  auditors  have  full  access  to  the  Audit  Committee,  with  and  without  management  being  present.  These  consolidated  financial  statements  have  been  audited  by  PricewaterhouseCoopers LLP, Chartered Professional Accountants, Licensed Public Accountants.   (Signed) Marie Inkster  (Signed) Jinhee Magie  President and Chief Executive Officer  Senior Vice President and Chief Financial Officer  Toronto, Ontario, Canada  February 20, 2020                                  LUNDIN MINING CORPORATION  CONSOLIDATED BALANCE SHEETS  (in thousands of US dollars)  ASSETS  Cash and cash equivalents (Note 4)  Trade and other receivables (Note 5)  Income taxes receivable  Inventories (Note 6)  Other current assets  Total current assets  Restricted cash  Long‐term inventory (Note 6)  Other non‐current assets (Note 7)    Mineral properties, plant and equipment (Note 8)  Investment in associate (Note 9)  Deferred tax assets (Note 25)  Goodwill (Note 11)  Total assets  LIABILITIES  Trade and other payables (Note 12)  Income taxes payable   Current portion of debt and lease liabilities (Note 13)  Current portion of deferred revenue (Note 14)  Current portion of reclamation and other closure provisions (Note 15)  Total current liabilities  Debt and lease liabilities (Note 13)  Deferred revenue (Note 14)  Reclamation and other closure provisions (Note 15)  Other long‐term liabilities (Note 16)  Provision for pension obligations  Deferred tax liabilities (Note 25)  Total liabilities  SHAREHOLDERS' EQUITY  Share capital (Note 17)  Contributed surplus  Accumulated other comprehensive loss  Deficit  Equity attributable to Lundin Mining Corporation shareholders  Non‐controlling interests  Commitments and contingencies (Note 27)  December 31, 2019 December 31, 2018¹ $  $  $  $  250,563   $  335,782   52,523   216,503   14,330   869,701   47,666   550,561   7,970   5,065,556   28,957   104,627   242,208   6,047,545   6,917,246   $  370,067   $  66,825   80,782   83,960   3,735   605,369   227,767   674,186   380,049   84,837   10,938   636,700   2,014,477   2,619,846   4,184,667   51,339   (284,649)  (178,298)  3,773,059   524,341   4,297,400   6,917,246   $  815,429  384,332  75,602  160,993  7,242  1,443,598  44,424  241,545  34,644  3,829,345  136,943  94,472  109,794  4,491,167  5,934,765  380,016  42,971  3,830  61,478  6,604  494,899  7,162  527,376  292,086  3,406  11,068  405,202  1,246,300  1,741,199  4,177,660  49,424  (260,179) (275,759) 3,691,146  502,420  4,193,566  5,934,765  ¹In accordance with the transitional provisions in IFRS 16, Leases (Note 2 (ii)(l)), the comparatives for the 2018 reporting  period have not been restated.  The accompanying notes are an integral part of these consolidated financial statements.  APPROVED BY THE BOARD OF DIRECTORS  (Signed) Lukas H. Lundin ‐ Director                                                                                              (Signed) Dale C. Peniuk ‐ Director  ‐ 2 ‐                                                                                                                                                                                                                                    LUNDIN MINING CORPORATION  CONSOLIDATED STATEMENTS OF EARNINGS  For the years ended December 31, 2019 and 2018  (in thousands of US dollars, except for shares and per share amounts)  Revenue (Note 19)  Cost of goods sold  Production costs (Note 20)  Depreciation, depletion and amortization  Gross profit  General and administrative expenses  General exploration and business development (Note 22)  Finance income (Note 23)  Finance costs (Note 23)  Income from equity investment in associate (Note 9)  Other (expense) income (Note 24)  Earnings before income taxes  Current tax expense (Note 25)  Deferred tax (expense) recovery (Note 25)  Net earnings  Net earnings attributable to:    Lundin Mining Corporation shareholders    Non‐controlling interests  Net earnings  Basic and diluted earnings per share attributable to Lundin Mining Corporation     shareholders  Weighted average number of shares outstanding (Note 17)    Basic    Diluted  2019   $  1,892,713  $  2018¹  1,725,589  (1,066,203)   (386,117)   440,393    (47,104)   (77,848)   14,122    (52,914)   6,239    (13,292)   269,596    (62,861)   (17,558)   189,177  $  (969,610)  (319,376)  436,603  (49,438)  (85,296)  25,490  (85,682)  29,933  20,199  291,809  (76,761)  392  215,440  167,256  $  21,921  189,177  $  195,850  19,590  215,440  0.23  $  0.27  $  $  $  $  735,309,697    736,056,877    731,734,265  733,552,476  ¹In accordance with the transitional provisions in IFRS 16, Leases (Note 2 (ii)(l)), the comparatives for the 2018 reporting  period have not been restated.  The accompanying notes are an integral part of these consolidated financial statements.  ‐ 3 ‐                                                                                                                                                                                                                                            LUNDIN MINING CORPORATION  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  For the years ended December 31, 2019 and 2018  (in thousands of US dollars)  Net earnings   Other comprehensive (loss) income, net of taxes  Item that will not be reclassified to net earnings:    Remeasurements for post‐employment benefit plans  Item that may be reclassified subsequently to net earnings:  Effects of foreign exchange  Item that was reclassified to net earnings:    Cumulative translation adjustment  Other comprehensive loss  Total comprehensive income  Comprehensive income attributable to:    Lundin Mining Corporation shareholders    Non‐controlling interests  Total comprehensive income  2019  189,177  $  2018¹  215,440  $  (585)  (34)  (26,399)  (53,609)  2,514  (24,470)  ‐  (53,643)  164,707  $  161,797  142,786  $  21,921  164,707  $  142,207  19,590  161,797  $  $  $  ¹In accordance with the transitional provisions in IFRS 16, Leases (Note 2 (ii)(l)), the comparatives for the 2018 reporting  period have not been restated.  The accompanying notes are an integral part of these consolidated financial statements.  ‐ 4 ‐                                                          LUNDIN MINING CORPORATION  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY  For the years ended December 31, 2019 and 2018  (in thousands of US dollars, except for shares)  Balance, December 31, 2018¹  Exercise of share‐based awards  Share‐based compensation  Dividends declared (Note 17(e))  Share purchase (Note 17(f))     Net earnings     Other comprehensive loss  Total comprehensive (loss) income  Balance, December 31, 2019  Balance, December 31, 2017  IFRS 9 & IFRS 15 adjustments  Balance, January 1, 2018  Exercise of share‐based awards  Share‐based compensation  Dividends declared  Deferred tax adjustment     Net earnings     Other comprehensive loss  Total comprehensive (loss) income  Balance, December 31, 2018¹  Number of shares 733,534,879  $ 4,991,525  ‐  ‐  (4,292,762) ‐  ‐  ‐  Share capital 4,177,660  $ 25,563  ‐  ‐  (18,556) ‐  ‐  ‐  Contributed surplus 49,424  $ (11,439) 13,354  ‐  ‐  ‐  ‐  ‐  734,233,642  $ 4,184,667  $ 51,339  $ 728,418,632  $ 4,152,469  $ 48,926  $ ‐  728,418,632  5,116,247  ‐  ‐  ‐  ‐  ‐  ‐  ‐  4,152,469  26,413  ‐  ‐  (1,222) ‐  ‐  ‐  ‐  48,926  (11,642) 12,140  ‐  ‐  ‐  ‐  ‐  733,534,879  $ 4,177,660  $ 49,424  $ Accumulated     other comprehensive loss (260,179) $ ‐  ‐  ‐  ‐  ‐  (24,470) (24,470) (284,649) $ (196,657) $ (9,879) (206,536) ‐  ‐  ‐  ‐  ‐  (53,643) (53,643) (260,179) $ Non‐ controlling interests 502,420  $ ‐  ‐  ‐  ‐  21,921  ‐  21,921  524,341  $ 482,830  $ ‐   482,830   ‐  ‐  ‐  ‐  19,590  ‐  19,590  502,420  $  Deficit (275,759) $ ‐  ‐  (66,607) (3,188) 167,256  ‐  167,256  (178,298) $ (336,353) $ (66,982)  (403,335)  ‐  ‐  (68,274) ‐  195,850  ‐  195,850  (275,759) $ Total 4,193,566  14,124  13,354  (66,607) (21,744) 189,177  (24,470) 164,707  4,297,400  4,151,215  (76,861) 4,074,354  14,771  12,140  (68,274) (1,222) 215,440  (53,643) 161,797  4,193,566  ¹In accordance with the transitional provisions in IFRS 16, Leases (Note 2 (ii)(l)), the comparatives for the 2018 reporting period have not been restated.  The accompanying notes are an integral part of these consolidated financial statements.  ‐ 5 ‐                                                                                                    LUNDIN MINING CORPORATION  CONSOLIDATED STATEMENTS OF CASH FLOWS  For the years ended December 31, 2019 and 2018  (in thousands of US dollars)  Cash provided by (used in)  Operating activities  Net earnings  Items not involving cash and other adjustments    Depreciation, depletion and amortization    Share‐based compensation    Foreign exchange (gain) loss    Finance costs, net    Recognition of deferred revenue    Deferred tax expense (recovery)    Earnings from equity investment in associate    Revaluation of derivative asset and liability (Note 24)    Revaluation of marketable securities (Note 24)    Other  Reclamation payments (Note 15)  Other payments  Changes in long‐term inventory  Changes in non‐cash working capital items (Note 32)  Investing activities  Chapada Acquisition, net of cash acquired (Note 3)  Investment in mineral properties, plant and equipment  Interest received  (Purchase of) proceeds from marketable securities  Distributions from (contributions to) associate, net (Note 9)  Other  Financing activities  Interest paid  Dividends paid to shareholders  Share purchase (Note 17)  Principal payments of lease liabilities  Principal repayment of debt (Note 13)  Proceeds from debt (Note 13)  Proceeds from common shares issued  Secured notes redemption fee  Other  Effect of foreign exchange on cash balances  Decrease in cash and cash equivalents during the year  Cash and cash equivalents, beginning of year  Cash and cash equivalents, end of year  Supplemental cash flow information (Note 32)  2019   2018  $ 189,177  $ 215,440  386,117   13,354   (6,861)  38,792   (44,458)  17,558   (6,239)  21,940   1,495   (8,585)  (10,495)  (13,379)  (27,670)  13,813   564,559   (756,954)  (665,288)  13,095   (2,976)  114,225   66   (1,297,832)  (12,631)  (66,437)  (21,744)  (11,842)  (187,754)  455,838   14,124   ‐   (2,420)  167,134   1,273   (564,866)  815,429   250,563  $ $ 319,376  12,140  10,486  60,192  (37,819) (392) (29,933) (617) (13,520) 9,542  (11,834) (7,874) (38,617) (10,217) 476,353  ‐  (751,753) 25,866  52,614  (5,586) 3,479  (675,380) (25,123) (66,912) ‐  ‐  (445,000) ‐  16,016  (16,901) (1,782) (539,702) (12,880) (751,609) 1,567,038  815,429  The accompanying notes are an integral part of these consolidated financial statements.  ‐ 6 ‐                                                                                                                                        LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (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’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 also owns 80% of the Candelaria and Ojos del Salado mining complex  ("Candelaria") located in Chile.  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 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (i) Basis of presentation and measurement  The 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.  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 consolidated financial statements were approved by the Board of Directors of the Company for issue on  February 20, 2020.  (ii) Significant accounting policies  The Company has consistently applied the accounting policies to all the years presented other than with regard to  the policies that have been adopted for the first time in the year ended December 31, 2019 (Note 2(ii)(l)). The  significant accounting policies applied in these consolidated financial statements are set out below.  (a) Basis of consolidation  The  financial  statements  consist  of  the  consolidation  of  the  financial  statements  of  the  Company  and  its  subsidiaries.  Subsidiaries are entities over which the Company has control, including the power to govern the financial and  operating policies in order to obtain benefits from their activities. The existence and effect of potential voting  rights  that  are  currently  exercisable  or  convertible  are  considered  when  assessing  whether  the  Company  controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained by the  Company and are de‐consolidated from the date that control ceases.  ‐ 7 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Where  necessary,  adjustments  are  made  to  the  results  of  the  subsidiaries  and  associates  to  bring  their  accounting policies in line with those used by the Company. Intra‐group transactions, balances, income and  expenses are eliminated on consolidation.  For non wholly‐owned controlled subsidiaries, the net assets attributable to outside equity shareholders are  presented as non‐controlling interests in the equity section of the consolidated balance sheet. Net earnings  for the period that are attributable to non‐controlling interests are calculated based on the ownership of the  minority shareholders in the subsidiary.   (b) Investments in associates   An associate is an entity over which the Company has significant influence, but not control, and is neither a  subsidiary, nor an interest in a joint venture.   Investments in which the Company has the ability to exercise significant influence are accounted for by the  equity method. Under this method, the investment is initially recorded at cost and adjusted thereafter to  record the Company’s share of post‐acquisition earnings or loss of the investee as if the investee had been  consolidated. The carrying value of the investment is also increased or decreased to reflect the Company’s  share of capital transactions, including amounts recognized in other comprehensive income (“OCI”), and for  accounting changes that relate to periods subsequent to the date of acquisition.   (c) Translation of foreign currencies  The  functional  currency  of  each  entity  within  the  Company  is  the  currency  of  the  primary  economic  environment in which it operates. The Company’s presentation currency is US dollars.  Transactions denominated in currencies other than the functional currency are recorded using the exchange  rates prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated  in foreign currencies are translated at the rates prevailing on the balance sheet date. Non‐monetary items  that are measured at historical cost in a foreign currency are translated using the exchange rate at the date  of the transaction. Non‐monetary items measured at fair value in a foreign currency are translated at the  rates prevailing on the date when the fair value was determined.  Exchange differences arising on the settlement of monetary items, and on the translation of monetary items,  are  recognized  in  the  consolidated  statement  of  earnings  in  the  period  in  which  they  arise.  Exchange  differences  arising  on  the  translation  of  non‐monetary  items  carried  at  fair  value  are  included  in  the  consolidated statement of earnings. However, exchange differences arising on the translation of certain non‐ monetary items are recognized as a separate component of equity.  On disposal of a foreign operation, the historical, cumulative amount of exchange differences recognized as  a separate component of equity is reclassified and recognized in the consolidated statement of earnings.   For  the  purpose  of  presenting  the  consolidated  financial  statements,  the  assets  and  liabilities  of  the  Company’s foreign operations are translated into US dollars, which is the presentation currency of the group,  at the rate of exchange prevailing at the end of the reporting period. Income and expenses are translated at  the average exchange rates for the period where these approximate the rates on the dates of transactions.   (d) Cash and cash equivalents  Cash and cash equivalents comprise cash on deposit with banks, and highly liquid short‐term interest‐bearing  investments  with  a  term  to  maturity  at  the  date  of  purchase  of  90  days  or  less  which  are  subject  to  an  insignificant risk of change in value.  ‐ 8 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  (e) Restricted cash  Restricted  cash  includes  cash  that  has  been  pledged  for  reclamation  and  closure  activities  which  are  not  available for immediate disbursement.  (f) Inventories  Ore and concentrate stockpiles are valued at the lower of production cost and net realizable value (“NRV”).  Production  costs  include  direct  costs  of  materials  and  labour  related  directly  to  mining  and  processing  activities,  including  production  phase  stripping  costs,  depreciation  and  amortization  of  mineral  property,  plant  and  equipment  directly  involved  in  the  related  mining  and  production  process,  amortization  of  any  stripping costs previously capitalized and directly attributable overhead costs.  Materials and supplies inventories are valued at the lower of average cost less allowances for obsolescence  and NRV.   If carrying value exceeds NRV, a write‐down is recognized. The write‐down may be reversed in a subsequent  period if the circumstances which caused the write‐down no longer exist.  (g) Mineral properties  Mineral properties are carried at cost, less accumulated depletion and any accumulated impairment charges.  Expenditures of mineral properties include:  i. Acquisition costs which consist of payments for property rights and leases, including the estimated  fair value of exploration properties acquired as part of a business combination or the acquisition of  a group of assets.  ii. Exploration,  evaluation  and  project  investigation  costs  incurred  on  an  area  of  interest  once  a  determination has been made that a property has economically recoverable Mineral Resources and  Mineral  Reserves  (“R&R”)  and  there  is  a  reasonable  expectation that costs  can  be  recovered  by  future  exploitation  or  sale  of  the  property.  Exploration,  evaluation  and  project  investigation  expenditures made prior to a determination that a property has economically recoverable R&R are  expensed as incurred.  iii. Deferred stripping costs which represent the cost incurred to remove overburden and other waste  materials to access ore in an open pit mine. Stripping costs incurred prior to the production phase  of the mine are capitalized and included as part of the carrying value of the mineral property. During  the production phase, stripping costs which provide probable future economic benefits, identifiable  improved access to the ore body and which can be measured reliably are capitalized to mineral  properties.  Capitalized  stripping  costs  are  amortized  using  a  unit‐of‐production  basis  over  the  Proven and Probable Mineral Reserve to which they relate.  iv. Development costs incurred on an area of interest once management has determined that, based  on  a  feasibility  study,  a  property  is  capable  of  economical  commercial  production  as  a  result  of  having established a Proven and Probable Mineral Reserve are capitalized. Development costs are  directly attributable to the construction of a mine. When additional development expenditures are  made on a property after commencement of production, the expenditure is capitalized as mineral  property  when  it  is  probable  that  additional  economic  benefit  will  be  derived  from  future  operations. Development costs are amortized using a unit‐of‐production basis over the Proven and  Probable Mineral Reserve to which they relate.  ‐ 9 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  v. Interest and financing costs on debt or other liabilities that are directly attributed to the acquisition,  construction and development of a qualifying asset are capitalized to the asset. All other borrowing  costs are expensed as incurred.  Incidental pre‐production expenditures, if any, are recognized in the consolidated statement of earnings. Net  proceeds from sales generated during the development phase are deducted from the cost of the asset.    (h) Plant and equipment  Plant  and  equipment  are carried  at  cost  less  accumulated  depreciation  and  any  accumulated  impairment  charges.  For  production  plant  and  equipment,  depreciation  is  recorded  on  a  units  of  production  basis.  Depreciation on all other plant and equipment is recorded on a straight‐line basis over the estimated useful  life of the asset or over the estimated remaining life of the mine, if shorter. Residual values and useful lives  are reviewed annually. Gains and losses on disposals are calculated as proceeds received less the carrying  amount and are recognized in the consolidated statement of earnings.  Useful lives are as follows:  Buildings  Plant and machinery  Equipment  (i) Impairment and impairment reversals  Number of years  8 ‐ 20  3 ‐ 20   3 ‐ 8   At  each  reporting period,  the  Company  assesses  whether  there  is  an  indication  that  an  asset  or group of  assets may be impaired. When impairment indicators exist, the Company estimates the recoverable amount  of the asset and compares it against the asset’s carrying amount. The recoverable amount is the higher of the  fair  value  less  cost  of  disposal  and  the  asset’s  value  in  use.  If  the  carrying  value  exceeds  the  recoverable  amount, an impairment loss is recorded in the consolidated statement of earnings during the period.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐ tax discount rate that reflects current market assessments of the time value of money and the risks specific  to the asset for which the estimates of future cash flows have not been adjusted. The cash flows are based  on best estimates of expected future cash flows from the continued use of the asset and its eventual disposal.  Fair value less costs to dispose (“FVLCD”) is best evidenced if obtained from an active market or binding sale  agreement. Where neither exists, the fair value is based on the best estimates available to reflect the amount  that could be received from an arm’s length transaction.  Reversals  of  impairment  are  assessed  at  each  reporting  period  where  there  is  an  indication  that  an  impairment  loss  recognized  previously  may  no  longer  exist  or  has  decreased.  If  an  impairment  reversal  indicator  exists,  the  recoverable  amount  is  calculated.  If  the  recoverable  amount  exceeds  the  carrying  amount,  the  carrying  value  of  the  asset  is  increased  to  the  recoverable  amount  net  of  depreciation.  The  increased carrying amount cannot exceed the carrying amount that would have been determined had no  impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized  as a gain in the consolidated statement of earnings in the period it is determined.   ‐ 10 ‐      LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  (j) Business combinations and goodwill  Acquisitions  of  businesses  are  accounted  for  using  the  purchase  method  of  accounting  whereby  all  identifiable assets and liabilities are recorded at their fair values as at the date of acquisition. Any excess  purchase price over the aggregate fair value of net assets is recorded as goodwill. Goodwill is identified and  allocated to cash‐generating units (“CGU”), or groups of CGUs, that are expected to benefit from the synergies  of the acquisition. Goodwill is not amortized. Any excess of the aggregate fair value of net assets over the  purchase price is recognized in the consolidated statement of earnings.  A CGU to which goodwill has been allocated is tested for impairment at least annually or when events or  circumstances indicate that an assessment for impairment is required. For goodwill arising on an acquisition  in a financial year, the CGU to which the goodwill has been allocated is tested for impairment before the end  of that financial year.  When the recoverable amount of the CGU is less than the carrying amount of that CGU, the impairment loss  is allocated to reduce the carrying amount of any goodwill allocated to that CGU first, and then to the other  assets of that CGU on the pro rata basis of the carrying amount of each asset in the CGU. Any impairment  loss  for  goodwill  is  recognized  directly  in  the  consolidated  statement  of  earnings.  An  impairment  loss  for  goodwill is not reversed in subsequent periods.  On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain  or loss on disposal.  (k) Non‐current assets held for sale and discontinued operations  Non‐current assets are classified as assets held for sale when it is highly probable their value will be recovered  principally through a sale rather than through continuing use. For the sale to be highly probable, management  must be committed to and have initiated a plan to, sell the assets; the assets must be available for immediate  sale in their present condition and the sale must be expected to qualify for recognition as a completed sale  within one year from the date of classification.   Assets classified as held for sale are carried at the lower of carrying amount and fair value less costs to sell.  A discontinued operation is a component of the Company that has been disposed of or is classified as held  for sale. A component comprises operations and cash flows that can be clearly distinguished from the rest of  the Company. To be classified as a discontinued operation, the component must either (i) represent a major  line of business or geographical area of operation; (ii) be part of a plan to dispose of a major line of business;  or (iii) be a subsidiary acquired with a view to resell.  (l) Leasing  Right‐of‐use assets and lease liabilities for the year ended December 31, 2019  The Company adopted IFRS 16 effective January 1, 2019, using the modified retrospective approach. The  comparatives for the 2018 reporting period have not been restated and are accounted for under IAS 17,  Leases, and IFRIC 4, Determining Whether an Arrangement Contains a Lease, as permitted under the  specific transitional provisions in the standard. The transitional adjustments arising from the adoption are  recognized in the opening balance sheet on January 1, 2019 (Note 33).  At inception of a contract, the Company assesses whether the contract is, or contains a lease. A contract is,  or contains a lease, if the contract conveys the right to control the use of an identified asset for a period of  time in exchange for consideration.    ‐ 11 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  The Company has elected not to recognize right‐of‐use assets and lease liabilities for short‐term leases that  have  a  lease  term  of  12  months  or  less,  and  leases  of  low‐value  assets.  For  these  leases,  the  Company  recognizes the lease payments as an expense in net earnings on a straight‐line basis over the term of the  lease.  The Company recognizes a lease liability and a right‐of‐use asset at the lease commencement date.   The lease liability is initially measured as the present value of future lease payments discounted using the  interest rate implicit in the lease or, if that rate cannot be readily determined, each operation’s applicable  incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have to  pay  to  borrow,  over  a  similar  term  and  with  a  similar  security,  the  funds  necessary  to  obtain an  asset  of  similar value to the right‐of‐use asset in a similar economic environment.   Lease payments included in the measurement of the lease liability comprise the following:  ‐ ‐ ‐ ‐ ‐ fixed payments, including in‐substance fixed payments, less any lease incentives receivable;  variable lease payments that depend on an index or a rate, initially measured using the index or rate  as at the commencement date;   amounts expected to be payable by the Company under residual value guarantees;  the exercise price of a purchase option if the Company is reasonably certain to exercise that option;  and  payments of penalties for terminating the lease, if the Company expects to exercise an option to  terminate the lease.  The lease liability is subsequently measured by:  ‐ ‐ ‐ increasing the carrying amount to reflect interest on the lease liability;  reducing the carrying amount to reflect lease payments made; and  remeasuring the carrying amount to reflect any reassessment or lease modifications.  The lease liability is remeasured when there is a change in future lease payments arising from a change in an  index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a  residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase,  extension or termination option.   The right‐of‐use asset is initially measured at cost, which comprises the following:  ‐ ‐ ‐ ‐ the amount of the initial measurement of the lease liability;  any lease payments made at or before the commencement date, less any lease incentives received;  any initial direct costs incurred by the Company; and  an estimate of costs to be incurred by the Company in dismantling and removing the underlying  asset,  restoring  the  site  on  which  it  is  located  or  restoring  the  underlying  asset  to  the  condition  required  by  the  terms  and  conditions  of  the  lease,  unless  those  costs  are  incurred  to  produce  inventories.  The  right‐of‐use  asset  is  subsequently  measured  at  cost,  less  any  accumulated  depreciation  and  any  accumulated impairment losses, and adjusted for any remeasurement of the lease liability. It is depreciated  in accordance with the Company’s accounting policy for plant and equipment, from the commencement date  to the earlier of the end of its useful life or the end of the lease term.   Each lease payment is allocated between the lease liability and finance cost. The finance cost is charged to  net earnings over the lease period so as to produce a constant periodic rate of interest on the remaining  balance of the liability for each period.  ‐ 12 ‐        LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  On the consolidated balance sheet, right‐of‐use assets and lease liabilities are reported in mineral properties,  plant and equipment and debt and lease liabilities, respectively.  Leases for the year ended December 31, 2018  Assets held under finance leases are initially recognized as assets at their fair value at the inception of the  lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the  lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between  finance cost and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining  balance of the liability.  (m) Provision for pension obligations  The  Company’s  Zinkgruvan  mine  has  an  unfunded  defined  benefit  pension  plan  based  on  employee  pensionable remuneration and length of service. The cost of the defined benefit pension plan is determined  annually by independent actuaries. The actuarial valuation is based on the projected benefit method pro‐ rated for service which incorporates management’s best estimate of future salary levels, retirement ages of  employees  and  other  actuarial  factors.  Actuarial  gains  and  losses  are  recorded  in  other  comprehensive  income.  Payments to defined contribution plans are expensed when employees render service entitling them to the  contribution.  (n) Reclamation and other closure provisions  The  Company  has  obligations  for  reclamation  and  other  closure  costs  such  as  site  restoration,  decommissioning activities and end of mine life severance related to its mining properties. These costs are a  normal consequence of mining, and the majority of these expenditures are incurred at the end of the life of  the mine.  The future obligations for mine closure activities are estimated by the Company using mine closure plans or  other similar studies which outline the requirements that will be carried out to meet the obligations. Since  the obligations are dependent on the laws and regulations of the countries in which the mines operate, the  requirements could change as a result of amendments in the laws and regulations relating to environmental  protection and other legislation affecting resource companies.  As the estimate of the obligations is based on future expectations, a number of assumptions are made by  management  in  the  determination  of  closure  provisions.  The  closure  provisions  are  more  uncertain  the  further into the future the mine closure activities are to be carried out.  The Company records the fair value of its reclamation and other closure provisions as a liability as incurred  and records a corresponding increase in the carrying value of the related asset. The provision is discounted  using a current market pre‐tax discount rate. Reclamation and other closure provisions are recorded as part  of  the  mineral  property  and  depreciated  accordingly.  In  subsequent  periods,  the  carrying  amount  of  the  liability is accreted by a charge to the consolidated statement of earnings to reflect the passage of time and  the liability is adjusted to reflect any payments made and changes in the timing of the underlying future cash  flows.  ‐ 13 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Changes to the obligations resulting from any revisions to the timing or amount of the original estimate of  costs  are  recognized  as  an  increase  or  decrease  in  the  reclamation  and  other  closure  provisions,  and  a  corresponding  change  in  the  carrying  amount  of  the  related  long‐lived  asset.  Where  rehabilitation  is  conducted systematically over the life of the operation, rather than at the time of closure, a provision is made  for  the  estimated  outstanding  continuous  rehabilitation  work  at  each  balance  sheet  date  and  the  cost  is  charged to the consolidated statement of earnings.  (o) Revenue recognition  Revenue from contracts with customers is recognized when a customer obtains control of the promised asset  and the Company satisfies its performance obligation. Revenue is allocated to each performance obligation.  The Company considers the terms of the contract in determining the transaction price. The transaction price  is based upon the amount the entity expects to be entitled to in exchange for the transferring of promised  goods. The Company earns revenue from contracts with customers related to its concentrate sales and its  copper, gold and silver streaming arrangements.   The Company satisfies its performance obligations for its concentrate sales per specified contract terms which  are  generally  upon  shipment  or  upon  delivery.    Revenue  from  concentrate  sales  is  recorded  based  upon  forward market prices of the expected final sales price date. The Company typically receives payment shortly  after vessel arrival at its destination port.  Deferred  revenue  arises  from  up‐front  payments  received  by  the  Company  or  obligations  acquired  in  consideration for future commitments as specified in its various streaming arrangements. The accounting for  streaming arrangements is dependent on the facts and terms of each of the arrangements. Revenue from  streaming arrangements are recognized when the customer obtains control of the copper, gold and/or silver  metal and the Company has satisfied its performance obligations.   The  Company  identified  significant  financing  components  related  to  its  streaming  arrangements  resulting  from a difference in the timing of the up‐front consideration received and delivery of the promised goods.  Interest expense on deferred revenue is recognized in finance costs. The interest rate is determined based  on the rate implicit in each streaming agreement at the date of inception or acquisition.  The initial consideration received from the streaming arrangements is considered variable, subject to changes  in the total copper, gold and silver ounces to be delivered. Changes to variable consideration are reflected in  revenue in the consolidated statement of earnings.   (p) Share‐based compensation  The Company grants share‐based awards in the form of share options and share units to certain employees  in exchange for the provision of services. The share options and share units are equity‐settled awards. The  Company  determines  the  fair  value  of  the  awards  on  the  date  of  grant.  This  fair  value  is  charged  to  the  consolidated statement of earnings using a graded vesting attribution method over the vesting period of the  awards,  with  a  corresponding  credit  to  contributed  surplus.  When  the  share  options  or  share  units  are  exercised, the applicable amounts of contributed surplus are transferred to share capital. At the end of the  reporting period, the Company updates its estimate of the number of awards that are expected to vest and  adjusts the total expense to be recognized over the vesting period.  ‐ 14 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  (q) Current and deferred income taxes  Income tax expense represents the sum of current and deferred tax. Current taxes payable is based on taxable  earnings  for  the  year.  Taxable  earnings  may  differ  from  earnings  before  income  tax  as  reported  in  the  consolidated statement of earnings because it may exclude items of income or expense that are taxable or  deductible in other years and it may further exclude items of income or expense that are never taxable or  deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or  substantively enacted at the balance sheet date.  Deferred  tax  is  recognized  on  differences  between  the  carrying  amounts  of  assets  and  liabilities  in  the  financial statements and the corresponding tax bases used in the computation of taxable earnings. Deferred  tax  liabilities  are  generally  recognized  for  all  taxable  temporary  differences  and  deferred  tax  assets  are  recognized to the extent that it is probable that taxable earnings will be available against which deductible  temporary  differences  can  be  utilized.  Such  assets  and  liabilities  are  not  recognized  if  the  temporary  difference arises from goodwill or from the initial recognition (other than in a business combination) of other  assets and liabilities in a transaction that affects neither the taxable earnings nor the accounting earnings.  Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries  and investments in associates, except where the Company is able to control the reversal of the temporary  differences and it is probable that the temporary differences will not reverse in the foreseeable future. The  carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that  it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be  recovered.   Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled  or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the  balance sheet date. Deferred tax is charged or credited to earnings, except when it relates to items charged  or credited directly to equity, in which case the deferred tax is reflected in equity.  Income tax assets and liabilities are offset when there is a legally enforceable right to offset the assets and  liabilities and when they relate to income taxes levied by the same tax authority on either the same taxable  entity or different taxable entities where there is an intention to settle the balance on a net basis.  (r) Earnings (loss) per share  Basic  earnings  (loss)  per  share  is  calculated  using  the  weighted  average  number  of  common  shares  outstanding  during  each  reporting  period.  Diluted  earnings  (loss)  per  share  is  calculated  assuming  the  proceeds from the exercise of exercisable in‐the‐money stock options are used to purchase common shares  at the average market price during the period and cancelled. If the calculated result is dilutive, it is included  in the diluted earnings (loss) per share calculation.  (s) Financial instruments  Financial instruments are recognized on the consolidated balance sheet on the trade date, the date on which  the  Company  becomes  a  party  to  the  contractual  provisions  of  the  financial  instrument.  The  Company  classifies its financial instruments in the following categories:  ‐ 15 ‐        LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Financial Assets at Amortized Cost  Assets that are held for collection of contractual cash flows where those cash flows represent solely payments  of principal and interest are measured at amortized cost. The Company’s intent is to hold these receivables  until cash flows are collected. Receivables are recognized initially at fair value, net of any transaction costs  incurred and subsequently measured at amortized cost using the effective interest method. The Company  recognizes a loss allowance for expected credit losses on a financial asset that is measured at amortized cost.  Financial Assets at Fair Value through Profit or Loss (“FVTPL”)  Financial assets measured at FVTPL are assets which do not qualify as financial assets at amortized cost or at  fair value through other comprehensive income.   Provisionally priced trade receivables are considered embedded derivatives as some or all of the cash flows  are dependent on commodity prices. Trade receivables with embedded derivatives are initially measured at  their  transaction  price.  Subsequent  changes  to  provisionally  priced  trade  receivables  are  recorded  in  the  consolidated statement of earnings as revenue from other sources.    Marketable  securities  and  derivative  assets  are  classified  as  FVTPL.  These  financial  assets  are  initially  recognized at their fair value with changes to fair values recognized in the consolidated statement of earnings.   Financial Liabilities at Amortized Cost  Financial  liabilities  are  measured  at  amortized  cost  using  the  effective  interest  method,  unless  they  are  required to be measured at FVTPL, or the Company has opted to measure them at FVTPL. Long‐term debt is  recognized initially at fair value, net of any transaction costs incurred, and subsequently at amortized cost  using the effective interest method.   Financial Liabilities at FVTPL  Financial liabilities at FVTPL are liabilities which include embedded derivatives and cannot be classified as  amortized cost. Cash flows from the Company’s derivative liability incorporate metal prices and volatility.  Financial liabilities at FVTPL are initially recognized at fair value with changes to fair values recognized in the  consolidated statement of earnings.  The Company may enter into derivative instruments to mitigate exposures to commodity price and currency  exchange  rate  fluctuations,  among  other  exposures.  Unless  the  derivative  instruments  qualify  for  hedge  accounting, and management undertakes appropriate steps to designate them as such, they are designated  as financial assets at FVTPL and recorded at their fair value with realized and unrealized gains or losses arising  from changes in the fair value recorded in the consolidated statement of earnings in the period they occur.  Fair  values  for  derivative  instruments  are  determined  using  valuation  techniques.  The  valuations  use  assumptions based on prevailing market conditions on the reporting date.   The Company derecognizes financial assets only when the contractual rights to cash flows from the financial  assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards  of ownership. Gains and losses on derecognition are generally recognized in the consolidated statement of  earnings.  The  Company  derecognizes  financial  liabilities  only  when  its  obligations  under  the  financial  liabilities  are  discharged,  cancelled  or  expelled.  The  difference  between  the  carrying  amount  of  the  financial  liability  derecognized and the consideration paid and payable, including any non‐cash assets transferred or liabilities  assumed, is recognized in the consolidated statement of earnings.  ‐ 16 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  (iii) Critical accounting estimates in applying the entity’s accounting policies  The  preparation  of  consolidated  financial  statements  in  accordance  with  IFRS  requires  the  use  of  certain  critical accounting estimates. These estimates are based on management’s best knowledge of the relevant  facts and circumstances taking into account previous experience, but actual results may differ materially from  the amounts included in the financial statements.  Areas where critical accounting estimates have the most significant effect on the amounts recognized in the  consolidated financial statements include:  Depreciation, depletion and amortization of mineral properties, plant and equipment ‐ Mineral properties,  plant and equipment comprise a large component of the Company’s assets and as such, the depreciation,  depletion and amortization of these assets have a significant effect on the Company’s financial statements.  Upon commencement of commercial production, the Company depletes mineral property over the life of the  mine  based  on  the  depletion  of  the  mine’s  Proven  and  Probable  Mineral  Reserves.  In  the  case  of  mining  equipment  or  other  assets,  if  the  useful  life  of  the  asset  is  shorter  than  the  life  of  the  mine,  the  asset  is  amortized over its expected useful life.  Proven and Probable Mineral Reserves are determined based on a professional evaluation using accepted  international  standards  for  the  estimation  of  Mineral  Reserves.  The  assessment  involves  geological  and  geophysical  studies,  economic  data  and  the  reliance  on  a  number  of  assumptions.  The  estimates  of  the  Mineral Reserves may change based on additional knowledge gained subsequent to the initial assessment.  This  may  include  additional  data  available  from  continuing  exploration,  results  from  the  reconciliation  of  actual  mining  production  data  against  the  original  Mineral  Reserve  estimates,  or  the  impact  of  economic  factors such as changes in the price of commodities or the cost of components of production.  A change in the original estimate of Mineral Reserves would result in a change in the rate of depreciation,  depletion and amortization of the related mineral assets. The effect of a change in the estimates of Mineral  Reserves would have a relatively greater effect on the amortization of the current mining operations at Eagle  because  of  the  relatively  short  mine  life  of  this  operation.  A  short  mine  life  results  in  a  high  rate  of  amortization and depreciation, and mineral assets may exist at these sites that have a useful life in excess of  the revised life of the related mine.  Revenue from Contracts with Customers – To determine the transaction price for streaming agreements,  the Company made estimates with respect to interest rates implicit in the agreements, future production of  the life of mine and R&R quantities to adjust the consideration for the effects of the time value of money.  These  estimates  are  subject to  variability  and  may  have an  impact  on the timing  and  amount  of  revenue  recognized.  The Company exercised judgment in the identification of performance obligations under its contracts and the  allocation of the transaction price thereto. Specifically, the Company considered the following in determining  the contract’s relevant performance obligations and the respective allocation of the transaction price to each  of the performance obligations (i) the customer’s rights to the interest in R&R, (ii) the customer’s ability to  benefit from this interest through the extraction services provided by the Company and (iii) the Company’s  role as an agent to provide refined metal through a third party refinery.     Valuation of long‐term inventory ‐ The Company carries its long‐term inventory at the lower of production  cost and NRV. If carrying value exceeds net realizable amount, a write‐down is required. The write‐down may  be reversed in a subsequent period if the circumstances which caused it no longer exist.  ‐ 17 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  The Company reviews NRV at least annually. In particular, for the NRV of long‐term inventory the Company  makes significant estimates related to future production and sales volumes, metal prices, foreign exchange  rates, R&R quantities, future operating and capital costs. These estimates are subject to various risks and  uncertainties and may have an effect on the NRV estimate and the carrying value of the long‐term inventory.  Valuation  of  mineral  properties  ‐  The  Company  carries  its  mineral  properties  at  cost  less  accumulated  depletion and any accumulated provision for impairment. The Company expenses exploration costs which  are related to specific projects until commercial feasibility of the project is determinable. The costs of each  property  and  related  capitalized  development  expenditures  are  depleted  over  the  economic  life  of  the  property on a units‐of‐production basis. Costs are charged to the consolidated statement of earnings when a  property is abandoned or when there is a recognized impairment in value.  The  Company  undertakes  a  review  of  the  carrying  values  of  mineral  properties  and  related  expenditures  whenever events or changes in circumstances indicate that their carrying values may exceed their estimated  net recoverable amounts determined by reference to estimated future operating results and discounted net  cash flows. Where previous impairment has been recorded, the Company analyzes any impairment reversal  indicators.  An  impairment  loss  is  recognized  when  the  carrying  value  of  those  assets  is  not  recoverable.  Impairment reversals are recognized in subsequent periods when there has been a change in the estimates  used  to  determine  the  asset’s  recoverable  amount  since  the  last  impairment  loss  was  recognized.  In  undertaking this review, management of the Company is required to make significant estimates of, amongst  other things, future production and sale volumes, metal prices, foreign exchange rates, R&R quantities, future  operating and capital costs and reclamation costs to the end of the mine’s life. These estimates are subject  to various risks and uncertainties which may ultimately have an effect on the expected recoverability of the  carrying values of the mineral properties and related expenditures.  The  Company,  from  time  to  time,  acquires  exploration  and  development  properties.  When  a  number  of  properties are acquired in a portfolio, the Company must make a determination of the fair value attributable  to  each  of  the  properties  within  the  total  portfolio.  When  the  Company  conducts  further  exploration  on  acquired properties, it may determine that certain of the properties do not support the fair values applied at  the  time  of  acquisition.  If  such  a  determination  is  made,  the  property  is  written  down,  and  could  have  a  material effect on the consolidated balance sheet and consolidated statement of earnings.   Goodwill  ‐  The  amount  by  which  the  purchase  price  of  a  business  acquisition  exceeds  the  fair  value  of  identifiable assets and liabilities acquired is recorded as goodwill. Goodwill is allocated to the CGUs acquired  based on the assessment of which CGU would be expected to benefit from the synergies of the acquisition.  Estimates of recoverable value may be impacted by changes in metal prices, foreign exchange rates, discount  rates, level of capital expenditures, operating costs and other factors that may be different from those used  in determining fair value. Changes in estimates could have a material impact on the carrying value of the  goodwill.  For  CGUs  that  have  recorded  goodwill,  the  estimated  recoverable  amount  of  the  unit  is  compared  to  its  carrying  value  at  least  once  each  year,  or  when  circumstances  indicate  that  the  value  may  have  become  impaired.   ‐ 18 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Reclamation and other closure provisions ‐ The Company has obligations for reclamation and other closure  activities related to its mineral properties. The future obligations for mine closure activities are estimated by  the Company using mine closure plans or other similar studies which outline the requirements that will be  carried out to meet the obligations. Because the obligations are dependent on the laws and regulations of  the countries in which the mines operate, the requirements could change as a result of amendments in the  laws and regulations relating to environmental protection and other legislation affecting resource companies.  As the estimate of obligations is based on future expectations, a number of estimates and assumptions are  made  by  management  in  the  determination  of  closure  provisions.  The  reclamation  and  other  closure  provisions are more uncertain the further into the future the mine closure activities are to be carried out.   The Company’s policy for recording reclamation and other closure provisions is to establish provisions for  future  mine  closure  costs  based  on  the  present  value  of  the  future  cash  flows  required  to  satisfy  the  obligations. This provision is  updated as the estimate for future closure costs change. The amount of the  present value of the provision is added to the cost of the related mineral assets and depreciated over the life  of the mine. The provision is accreted to its future value over the life of mine through a charge to finance  costs.  (iv) Critical accounting judgments in applying the entity’s accounting policies  Management exercises judgment in applying the Company’s accounting policies. These judgments are based  on management’s best estimates. Areas where critical accounting judgments have the most significant effect  on the consolidated financial statements include:  Business Combination ‐ The Company’s acquisition of Mineração Maracá Indústria e Comércio S/A (Note 3),  which  owns  the  Chapada  copper‐gold  mine  (“Chapada”),  requires  each  identified  asset  and  liability  to  be  measured at its acquisition date fair value. The excess, if any, of the fair value of consideration over the fair  value  of  the  identifiable  net  assets  acquired  and  liabilities  assumed  is  recognized  in  goodwill.  The  determination of fair values requires management to make assumptions and estimates about future events  and  judgements  such  as  production  profile,  future  metal  prices  and  discount  rates.  Changes  in  these  assumptions or estimates could affect the fair values assigned to assets acquired, liabilities assumed, and  goodwill in the purchase price allocation.   Income taxes ‐ Deferred tax assets and liabilities are determined based on differences between the financial  statement  carrying  values  of  assets  and  liabilities  and  their  respective  income  tax  bases  (“temporary  differences”) and losses carried forward.   The  determination  of  the  ability  of  the  Company  to  utilize  tax  loss  carry‐forwards  to  offset  deferred  tax  liabilities  requires  management  to  exercise  judgment  and  make  certain  assumptions  about  the  future  performance of the Company. Management is required to assess whether it is “probable” that the Company  will benefit from these prior losses and other deferred tax assets. Changes in economic conditions, metal  prices and other factors could result in revisions to the estimates of the benefits to be realized or the timing  of utilization of the losses.  Assessment of impairment and reverse impairment indicators ‐ Management applies significant judgement  in assessing whether indicators of impairment or reverse impairment exist for an asset or group of assets  which would necessitate impairment testing. Internal and external factors such as significant changes in the  use of the asset, commodity prices, foreign exchange rate and interest rates are used by Management in  determining whether there are any indicators.   ‐ 19 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Contingent liabilities ‐ Contingent liabilities are possible obligations that arise from past events which will be  confirmed by the occurrence or non‐occurrence of future events. These contingencies are not recognized in  the  consolidated  financial  statements  when  the  obligation  is  not  probable  or  if  the  obligation  cannot  be  measured  reliably.  The  Company  exercises  significant  judgment  when  determining  the  probability  of  the  future outcome and with regard to any required disclosure of contingencies, and measuring the liability is a  significant estimate.    3.   BUSINESS COMBINATION  On July 5, 2019, the Company acquired 100% of Mineração Maracá Indústria e Comércio S/A (“Chapada Acquisition”),  which  owns  the  Chapada  copper‐gold  mine  located  in Brazil from  Yamana  Gold  Inc.  (“Yamana”).  The  total  cash  consideration paid was $783.1 million, consisting of an $800 million base purchase price less $16.9 million of working  capital adjustments.  In addition, the Company must pay a 2.0% net smelter return royalty on future gold production  from the Suruca gold deposit (“NSR”), if the Company chooses to develop the project, and contingent consideration  of $100 million on potential construction of a pyrite roaster (“pyrite roaster”). Further, the Company is responsible for  contingent payments of up to $25 million per year over the next five years if certain gold price thresholds are met (Note  27).  The purchase price is as follows:  Cash consideration  Contingent consideration  Cash acquired  $  $  783,057  69,261  (26,103)  826,215  The fair value of the contingent consideration was calculated using a valuation method that incorporates such factors  as metal prices, metal price volatility and expiry date. This liability has been recorded in other payables and long‐term  liabilities. The consideration associated with the NSR and pyrite roaster were valued at nil.  Final fair values of assets acquired and liabilities assumed  Trade and other receivables  Inventories  Long‐term inventory  Mineral properties, plant and equipment  Goodwill  Other assets  Total assets  Trade and other payables  Deferred revenue  Reclamation and other closure provisions  Deferred tax liabilities  Other liabilities  Total liabilities  Total assets acquired and liabilities assumed, net  $  $  15,335  37,905  228,406  928,713  134,284  4,499  1,349,142  53,920  175,360  71,154  209,787  12,706  522,927  826,215  Management  primarily  used  a  discounted  cash  flow  model  (net  present  value  of  expected  future  cash  flows)  to  determine the fair value of the mineral interests, long‐term inventory and deferred revenue. The model incorporated  expected  future  cash  flows  based  on  estimates  of  projected  revenues,  production  costs,  capital  expenditures  and  production profile of the life of mine plan as at the acquisition date.    ‐ 20 ‐                                                                                                                                                                                                                                                          LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Short‐term inventory was valued based on assumed market price less cost to complete and a reasonable profit margin.  Management used the depreciated replacement cost approach in determining the fair value of plant and equipment.  The  excess  of  the  purchase  price  over  net  identifiable  assets  acquired  represents  goodwill.  The  goodwill  primarily  reflects  deferred  tax  liabilities  due  to  the  difference  between  the  assigned  fair  values  and  the  tax  bases  of  assets  acquired and liabilities assumed. Goodwill is not deductible for income tax purposes.  Acquisition  related  fees  of  $2.7  million  are  recorded  in  the  consolidated  statement  of  earnings  as  a  business  development cost.  Revenue  and  net  earnings  contributed  by  Chapada  since  acquisition  and  included  in  the  consolidated  statement  of  earnings were $248.0 million and $35.6 million, respectively.  If Chapada had been consolidated from January 1, 2019, the Company’s consolidated statement of earnings for the year  ended December 31, 2019 would show revenue of $2,119.6 million and net earnings of $230.3 million.  4.  CASH AND CASH EQUIVALENTS  Cash and cash equivalents are comprised of the following:  Cash  Short‐term deposits  5.  TRADE AND OTHER RECEIVABLES  Trade and other receivables are comprised of the following:  Trade receivables  Value added tax  Prepaid expenses  Other receivables  December 31,   2019  233,466    17,097    250,563    $  $  December 31,  2018  679,619  135,810  815,429  $  $  $  December 31,  2019  229,730    44,948    21,726    39,378    335,782    $  December 31,  2018  251,010  34,467  79,299  19,556  384,332  $  $  Prepaid expenses in 2018 included $58.7 million related to advance payment of mine equipment purchases.  Other receivables contain the contingent consideration agreed upon under the terms of the TF Holdings Limited disposal  in  2017,  previously  recorded  in  other  non‐current  assets  (Note  7).  On  January  9,  2020,  the  Company  received  cash  consideration of $25.7 million for the derivative asset.  The Company does not have any significant balances that are past due nor any significant expected credit losses. The  Company's credit risk is discussed in Note 30.  The fair value of trade and other receivables, including the embedded derivative arising from provisionally priced trade  receivables, is disclosed in Note 26.  ‐ 21 ‐                                                                                                                                                              LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  The carrying amounts of trade and other receivables are mainly denominated as follows: $241.5 million, CLP 16.6 billion,  €15.3 million, C$1.6 million, SEK 37.5 million and BRL 87.6 million as at December 31, 2019 (2018 ‐ $266.7 million, CLP  52.8 billion, €27.9 million, C$2.8 million and SEK 50.0 million).  6.  INVENTORIES  Inventories are comprised of the following:  Ore stockpiles  Concentrate stockpiles  Materials and supplies  $  December 31,    2019  49,696    44,015    122,792    216,503    $  December 31,  2018  33,207  23,776  104,010  160,993  $  $  Long‐term inventory is comprised of ore stockpiles. As at December 31, 2019, the Company had $297.3 million (2018 ‐  $241.5 million) and $253.3 million (2018 ‐ nil) of long‐term ore stockpiles at Candelaria and Chapada, respectively.   December 31,  2018  2,756  25,098  6,790  34,644  $  $  7.  OTHER NON‐CURRENT ASSETS  Other non‐current assets comprise the following:  Marketable securities  Derivative asset  Other   $  December 31,   2019   4,331    ‐    3,639    7,970    $  During 2019, the Company reclassified its derivative asset to trade and other receivables (Note 5).  ‐ 22 ‐                                                                                                                                                      LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  8.  MINERAL PROPERTIES, PLANT AND EQUIPMENT  Mineral properties, plant and equipment comprise the following:  Cost  As at December 31, 2017  Additions  Disposals and transfers  Effects of foreign exchange  As at December 31, 2018  IFRS 16 transition (Note 33)  As at January 1, 2019  Chapada Acquisition (Note 3)  Additions  Disposals and transfers  Effects of foreign exchange  As at December 31, 2019  Accumulated depreciation,  depletion and amortization  As at December 31, 2017  Depreciation  Disposals and transfers  Effects of foreign exchange  As at December 31, 2018  Depreciation  Disposals and transfers  Effects of foreign exchange  As at December 31, 2019  $  $  $  $  Mineral  properties  3,359,061    $  341,387    43,992    (88,008)   3,656,432    ‐    3,656,432    672,642    229,603    125,224    (36,295)   4,647,606    $  Mineral  properties  1,637,113    $  139,514    (1,992)   (54,874)   1,719,761    258,238    (282)   (22,561)   1,955,156    $  Plant and  equipment  2,133,591    $  3,146    326,276    (37,410)   2,425,603    32,837    2,458,440    237,371    30,062    269,901    (13,909)   2,981,865    $  Assets under  construction  402,817    $  463,547    (509,471)   (6,624)   350,269    ‐    350,269    18,700    486,971    (425,163)   (3,140)   427,637    $  Plant and  equipment  Assets under  construction  869,890    $  160,938    (127,148)   (20,482)   883,198    183,074    (22,717)   (7,159)   1,036,396    $  ‐    $  ‐    ‐    ‐    ‐    ‐    ‐    ‐    ‐    $  Net book value  As at December 31, 2018  As at January 1, 2019  As at December 31, 2019  Mineral  properties   $  1,936,671  1,936,671  $  2,692,450  Plant and  equipment  $  1,542,405  1,575,242  $  1,945,469  Assets under  construction  350,269  350,269  427,637  $  $  Total  5,895,469  808,080  (139,203)  (132,042)  6,432,304  32,837  6,465,141  928,713  746,636  (30,038)  (53,344)  8,057,108  Total  2,507,003  300,452  (129,140)  (75,356)  2,602,959  441,312  (22,999)  (29,720)  2,991,552  Total  $  3,829,345  3,862,182  $  5,065,556  During the third quarter of 2019, the Company completed the Chapada Acquisition acquiring $928.7 million (Note 3) of  mineral properties, plant and equipment.  During 2019, the Company capitalized $11.4 million (2018 ‐ $15.1 million) of finance costs to assets under construction,  at a weighted average interest rate of 5.0% (2018 ‐ 6.5%).  ‐ 23 ‐                                                                                                                                LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  During  2019,  the  Company  capitalized  $129.0  million  (2018  ‐  $212.8  million)  of  deferred  stripping  costs  to  mineral  properties. The depreciation expense related to deferred stripping for the year was $120.0 million (2018 ‐ $23.9 million).  Included in the mineral properties balance at December 31, 2019 is $205.4 million (2018 ‐ $555.3 million) related to  deferred stripping at Candelaria and $84.3 million (2018 ‐ $56.5 million) related to underground development of the  Zinc Expansion Project at the Neves‐Corvo mine, which are currently non‐depreciable.  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  Leased assets as at December 31, 2018 reclassified as right‐of‐use assets as at January 1, 2019  IFRS 16 transition (Note 33)  As at January 1, 2019  Additions  Depreciation  Disposals  Effects of foreign exchange  As at December 31, 2019  Net book value 10,425  $ 32,837  43,262  15,665  (12,642) (1,800) (121) $ 44,364  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.   9.  INVESTMENT IN ASSOCIATE  The following table summarizes the changes in the investment in associate:  As at December 31, 2017  Contributions, net  Share of equity income  As at December 31, 2018  Distributions, net  Share of equity income  As at December 31, 2019  $  $  101,424  5,586  29,933  136,943  (114,225)  6,239  28,957  The Company has a 24% ownership interest in Freeport Cobalt, with the balance held by Freeport‐McMoRan Inc. (56%)  and La Générale des Carrières et des Mines (20%), a Democratic Republic of the Congo government‐owned corporation.   On  May  23,  2019,  Freeport  Cobalt  entered  into  a  definitive  agreement  to  sell  its  cobalt  refinery  and  related  cobalt  cathode precursor business to Umicore. In November 2019, the sale completed for cash consideration of approximately  $200 million, including net working capital of approximately $50 million at the time of close. The Company received  cash distributions of $79.1 million from the transaction and continues to retain a 24% interest in Freeport Cobalt’s fine  powders, chemicals, catalyst, ceramics and pigments businesses.  ‐ 24 ‐                                                                                                                                                                                                                            LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  10.    ASSET IMPAIRMENT  At each reporting period, the Company assesses whether there is an indication that an asset or group of assets may be  impaired. When impairment indicators exist, the Company estimates the recoverable amount of the asset and compares  it against the asset’s carrying amount.  Investment in Freeport Cobalt  During 2019, the Company identified an impairment indicator; specifically, Freeport Cobalt’s sale of its cobalt refinery  and related cobalt cathode precursor business (Note 9).  The recoverable amount of the investment in Freeport Cobalt  was determined based on its value in use.  The Company has calculated its value in use as the present value of the expected cash distributions from its investment,  which  includes  the  cash  flows  from  Freeport  Cobalt’s  fine  powders,  chemicals,  catalyst,  ceramics  and  pigments  businesses. The valuation is considered to be level 3 in the fair value hierarchy (Note 26).  The Company determined that the recoverable amount of its investment in Freeport Cobalt was higher than its carrying  value, and therefore no impairment was recognized.  11.    GOODWILL  The Company recognized goodwill on the acquisition of Chapada, Neves‐Corvo, and Ojos del Salado (“Ojos”).   Goodwill is allocated to the following CGUs:   Chapada  Neves‐Corvo   $  Balance at December 31, 2017  Effects of foreign exchange  Balance at December 31, 2018  Chapada Acquisition (Note 3)  Effects of foreign exchange  Balance at December 31, 2019  ¹ Ojos is included in the Candelaria reporting segment.  ‐   $  ‐     ‐     134,284     ‐     134,284   $    $  103,778   $  (4,697)    99,081     ‐     (1,870)    97,211   $  Ojos¹ 10,713   $  ‐     10,713     ‐     ‐     10,713   $  Total 114,491  (4,697) 109,794  134,284  (1,870) 242,208  The Company performs an impairment assessment annually, or more frequently if there are impairment indicators, for  the carrying amount of its CGUs where goodwill is allocated.  The recoverable value of a CGU is determined using cash flow projections based on life‐of‐mine financial plans. The key  assumptions used in cash flow projections consist of forecasted commodity prices, treatment and refining charges, R&R  quantities,  production  costs,  capital  expenditures,  reclamation  and  other  closure  costs,  discount  rates  and  foreign  exchange rates.  Commodity prices used in the cash flow projections are within a range of market consensus observed during the fourth  quarter of 2019. The valuation of recoverable amount is most sensitive to changes in metal prices, exchange rates and  discount rates.  Production costs and capital expenditures included in the cash flow projections are based on operating plans which  consider past and estimated future performance.   ‐ 25 ‐                                                  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Chapada  Chapada's purchase price allocation was performed as at July 5, 2019 at which time fair values were assigned for assets  acquired  and  liabilities  assumed  (Note  3),  with  the  resulting  goodwill  allocated  entirely  to  the  Chapada  CGU.  As  at  December 31, 2019, the recoverable amount of the Chapada CGU was assessed using FVLCD.  In assessing the FVLCD,  Management considered the most recent mine plan and whether there were changes in observable market conditions  since  the  acquisition  date.  For  the  year  ended  December  31,  2019,  the  Company  determined  that  the  recoverable  amount of the Chapada CGU was consistent with its carrying value, and therefore no impairment was recognized.      Key assumptions for Chapada  Copper price $/lb   Gold price $/oz  After‐tax discount rate  BRL/$ exchange rate   Life of mine  2019  2.80 ‐ 3.10  1,400 ‐ 1,550   6.5%  4.00  31 years  In performing the CGU impairment test for Neves‐Corvo and Ojos, the Company used a FVLCD valuation model. Inputs  utilized in this model were based on level 3 fair value measurements (see Note 26), which were not based on observable  market data. The R&R were based on the Company’s last published estimate dated June 30, 2019. Incorporated in the  FVLCD were fair value estimates developed by the Company for R&R not captured in the cash flow projections. These  estimates are benchmarked using third‐party market information.   Neves‐Corvo  For the Neves‐Corvo CGU impairment review, the Company used a FVLCD model (level 3 measurement). For the years  ended December 31, 2019 and 2018, the Company determined that the recoverable amount of the Neves‐Corvo CGU  was higher than its carrying value, and therefore no impairment was recognized.   Sensitivity analysis was performed on the cash flow model for Neves‐Corvo. Reviewing changes in key inputs such as  changes to metal prices (+/‐5%), foreign exchange rate (+/‐5%) and discount rate (+/‐1%) did not have a material impact  on the result of the Company’s goodwill impairment assessment.  Key assumptions for Neves‐Corvo  Copper price $/lb   Zinc price $/lb  After‐tax discount rate  $/€ exchange rate   Life of mine  Ojos  2019  2.80 ‐ 3.10  1.10   9.0%  1.15 ‐ 1.20  13 years  2018  3.00 ‐ 3.30  1.10 ‐ 1.20  9.0%  1.20 ‐ 1.25  12 years  For the Ojos CGU impairment review, the Company used a FVLCD model (level 3 measurement). For the years ended  December 31, 2019 and 2018, the Company determined that the recoverable amount of the Ojos CGU was higher than  its carrying value, and therefore no impairment was recognized.  ‐ 26 ‐              LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Sensitivity analysis was performed on the cash flow model for Ojos. Reviewing changes in key inputs such as changes to  metal prices (+/‐5%), foreign exchange rate (+/‐5%) and discount rate (+/‐1%) did not have a material impact on the  result of the Company’s goodwill impairment assessment.  Key assumptions for Ojos  Copper price $/lb   After‐tax discount rate   CLP/$ exchange rate   Life of mine   2019  2.80 ‐ 3.10  8.5%  700  10 years  2018  3.00 ‐ 3.30  8.5%  585 ‐ 670  10 years  12.  TRADE AND OTHER PAYABLES  Trade and other payables are comprised of the following:  Trade payables  Unbilled goods and services  Employee benefits payable  Chapada derivative liability (Note 27(b))  Royalty payable  Prepayment from customer  Other  $  December 31,   2019  188,430  72,702    59,792    22,472    8,769    6,562    11,340    370,067    $  $  December 31,  2018  228,608  81,813  59,238  ‐  10,195  162  ‐  380,016  $  As at December 31, 2019, the total Chapada derivative liability is $91.8 million (2018 ‐ nil).  The current portion is $22.5  million and the long‐term portion is $69.3 million (Note 16).  13.  DEBT AND LEASE LIABILITIES  Debt and lease liabilities are comprised of the following:  $  December 31,   2019  222,762  35,000  42,616  8,171  ‐    308,549    80,782    227,767    $  Revolving credit facility (a)  Term loan (b)  Lease liabilities (c)  Line of credit (d)  Finance leases (Note 33)  Debt and lease liabilities  Less: current portion  Long‐term portion   ‐ 27 ‐  $  December 31,  2018  ‐  ‐  ‐  ‐  10,992  10,992  3,830  7,162  $                                                                                                                                                            LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  The changes in debt and lease liabilities are comprised of the following:  As at December 31, 2017  Additions  Financing fee amortization/write‐off  Effects of foreign exchange  Cashflow       Payments  As at December 31, 2018  IFRS 16 transition adjustment (Note 33)  As at January 1, 2019  Additions  Disposals  Interest  Financing fee amortization  Effects of foreign exchange  Cashflow       Payments  As at December 31, 2019  Less: current portion  Long‐term portion  $  Leases  11,573  $  Debt  438,373  $  3,641    ‐    (606)   (3,616)   10,992    31,652    42,644    13,902    (1,870)   1,641    ‐    (218)   ‐    6,627    ‐    (445,000)   ‐    ‐    ‐    453,418    ‐    ‐    196    73    (13,483)   42,616  13,713  28,903  $  (187,754)   265,933  67,069  198,864  $  $  Total  449,946  3,641  6,627  (606)  (448,616)  10,992  31,652  42,644  467,320  (1,870)  1,641  196  (145)  (201,237)  308,549  80,782  227,767  a) During 2019, the Company executed a third amended and restated credit agreement that increased its secured  revolving  credit  facility  to  $800.0  million  (previously  $550.0  million)  with  a  $200.0  million  accordion  option,  reduced the cost of borrowing, and extended the term to August 2023 (previously October 2022). 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. Certain assets and shares of the Company’s  material subsidiaries are pledged as security for the credit facility. During the year, the Company had drawn $315.0  million  on  the  credit  facility  and  subsequently  repaid  $90.0  million.  As  at  December  31,  2019,  the  balance  outstanding  was  $225.0  million,  along  with  letters  of  credit  totaling  $23.6  million  (SEK  162.0  million  and  €5.3  million) (2018 ‐ $24.8 million). Deferred financing fees, at December 31, 2019, of $2.2 million have been netted  against borrowings. Subsequent to December 31, 2019, the Company repaid a further $30.0 million against the  revolving credit facility.  b) During the first quarter of 2019, Candelaria acquired an unsecured fixed term loan in the amount of $35.0 million,  which it repaid in the third quarter of 2019. In addition, in the third quarter of 2019, Candelaria obtained another  unsecured  fixed  term  loan  in  the  amount  of  $50.0  million  with  a  new  institution,  of  which  $15.0  million  was  subsequently repaid.  The remaining $35.0 million loan accrues interest at a rate of 2.2% per annum, with interest  payable upon maturity on August 29, 2020.  In the fourth quarter of 2019, Candelaria obtained an additional $25.0  million unsecured loan and repaid the loan within the quarter.  c) d) 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.  Sociedade Mineira de Neves‐Corvo, S.A. (“Somincor”), a subsidiary of the Company which owns the Neves‐Corvo  mine, has a $28.1 million (€25 million) line of credit for equipment financing. During the year, Somincor had  drawn $8.7 million (€7.9 million) on the line of credit for purchases of equipment. At December 31, 2019, the  balance outstanding was $8.2 million (€7.3 million). Interest rates vary from a fixed rate of 0.88% to EURIBOR  +0.84%, depending on the piece of equipment, with the debt maturing throughout 2023.  ‐ 28 ‐                                                                                                                LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  e) f) g) Somincor  has  a  commercial  paper  program  which  matures  in  October  2021.  The  $33.7  million  (€30  million)  program bears interest at EURIBOR + 0.84%. During the third quarter of 2019, $10.9 million (€10 million) was drawn  under this program and an additional $11.2 million (€10 million) was drawn in the fourth quarter. Before the end  of  the  year,  Somincor  repaid  the  full  outstanding  amount  of  $22.1  million  (€20  million)  and  had  no  balance  outstanding at December 31, 2019 (2018 ‐ nil).  Certain  leases  relating  to  mine  development,  exploration,  production  and  transportation  equipment  contain  variable  lease  expenses  based  on  tonnage  or  drilling  metres.  Variable  lease  expense  for  the  period  ended  December 31, 2019 was $100.8 million. The Company has short‐term leases related to office space and equipment.  Short‐term lease expense for the period ended December 31, 2019 was $24.6 million.  In 2018, the Company redeemed $450 million of 7.875% Senior Secured Notes due in 2022 at a redemption price  of 103.94% of the principal amount of the Notes plus accrued and unpaid interest.   The premium over the face value of the Notes was recorded in finance costs (Note 23).  The schedule of undiscounted lease payment and debt obligations is as follows:  Less than one year  One to five years  More than five years  Total undiscounted obligations as at December 31, 2019  Leases   15,007    28,370    5,936    49,313    Debt   67,136  201,279    ‐    268,415    $  $  Total  82,143  229,649  5,936  317,728  $  $  $  $  14.  DEFERRED REVENUE  The following table summarizes the changes in deferred revenue:  As at December 31, 2017  IFRS 15 transition adjustment  As at January 1, 2018  Recognition of revenue  Variable consideration adjustment  Finance costs  Effects of foreign exchange  As at December 31, 2018  Chapada Acquisition (Note 3)  Recognition of revenue  Variable consideration adjustment  Finance costs  Effects of foreign exchange  As at December 31, 2019  Less: current portion  Long‐term portion  $  $  513,759  85,978  599,737  (53,126)  15,307  31,914  (4,978)  588,854  175,360  (59,095)  18,227  35,771  (971)  758,146  83,960  674,186  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.  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 for both 2018 and 2019.   ‐ 29 ‐                                                                                                                                                                                LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  For the year ended December 31, 2019, the Company recognized finance costs at a weighted average rate of 5.3% (2018  – 5.2%) on the deferred revenue balances.  a) Candelaria  The Company entered into a stream agreement with Franco‐Nevada Corporation (“FN”), whereby the Company  has agreed to sell 68% of all the gold and silver contained in production from Candelaria until 720,000 oz of gold  and 12 million oz of silver have been delivered. Thereafter, FN will be entitled to purchase 40% of gold and silver  production from Candelaria. The Company received an up‐front payment of $648 million which is being recognized  as gold and silver are delivered to FN under the contract.   For each ounce of gold and silver delivered, FN makes payments equal to the lesser of the prevailing market prices  and approximately $408/oz of gold and $4.08/oz of silver (2018 – $404/oz of gold and $4.04/oz of silver), subject  to a 1% annual inflationary adjustment. In 2019, approximately 55,000 oz of gold and 786,000 oz of silver (2018 –  approximately 50,000 oz of gold and 755,000 oz of silver) were subject to the terms of the streaming agreement.  b) Chapada mine   As  part  of  the  Chapada  Acquisition  (Note  3),  the  Company  assumed  the  following  streaming  agreements  from  Yamana:  Up to 39 million pounds (“Mlbs”), Sandstorm Gold Ltd. is entitled to purchase 4.2% of the payable copper produced  annually from Chapada at 30% of the market price. The percentage of payable copper is subject to two reduction  thresholds. Once an aggregate of 39 Mlbs has been delivered, the percentage of payable copper reduces to 3.0%.  Upon delivery of 50 Mlbs of copper, the percentage of payable copper reduces to 1.5% for the remaining life of  mine. Approximately 14 Mlbs have been delivered under this agreement as of December 31, 2019.  Altius Minerals Corporation is entitled to purchase 3.7% of the payable copper produced from Chapada at 30% of  the  market  price.  The  percentage  of  payable  copper  is  subject  to  two  reduction  thresholds.  In  the  event  of  a  specified expansion at Chapada, the percentage of payable copper reduces to 2.65%. Also, upon delivery of 75  Mlbs of copper in aggregate, the percentage of payable copper reduces to 1.5% for the remaining life of mine.  Approximately 14 Mlbs have been delivered under this agreement as of December 31, 2019.  c) Neves‐Corvo mine   The Company has an agreement to deliver all of the silver contained in concentrate produced from its Neves‐ Corvo mine to Wheaton Precious Metals Corporation, formerly Silver Wheaton Corp. (“Wheaton”). The Company  received an up‐front payment which was deferred and is being recognized in sales as silver is delivered under the  contract. The Company receives the lesser of a fixed payment (subject to annual inflationary adjustments) and the  market price per ounce of silver. During 2019, the Company received approximately $4.30 per ounce of silver  (2018 – $4.24). The agreement extends to the earlier of September 2057 and the end of mine life.   d) Zinkgruvan mine  The  Company  has  an  agreement  with  Wheaton  to  deliver  all  of  the  silver  contained  in  concentrate  from  the  Zinkgruvan mine. The Company received an up‐front payment which was deferred and is being recognized in sales  as silver is delivered under the contract and receives the lesser of a fixed payment (subject to annual inflationary  adjustments) and the market price per ounce of silver. During 2019, the Company received approximately $4.39  per ounce of silver (2018 – $4.34) (Note 27(c)).  ‐ 30 ‐     LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  15.  RECLAMATION AND OTHER CLOSURE PROVISIONS  Reclamation and other closure provisions relating to the Company's mining operations are as follows:  Balance, December 31, 2017    Accretion    Accruals for services    Changes in estimate    Changes in discount rate    Payments    Effects of foreign exchange  Balance, December 31, 2018    Chapada Acquisition (Note 3)    Accretion    Accruals for services    Changes in estimate    Changes in discount rate    Payments    Effects of foreign exchange  Balance, December 31, 2019  Less: current portion  Long‐term portion  Reclamation  provisions  Other closure  provisions  $  $  218,188    $  5,778    ‐    39,006    6,866    (11,834)   (4,520)   253,484    71,154    9,725    ‐   (1,557)   22,816    (10,495)   (2,015)   343,112    3,735    339,377    $  45,411    $  ‐    4,859    ‐    ‐    ‐    (5,064)   45,206    ‐    ‐    (3,517)   ‐    ‐    ‐    (1,017)   40,672    ‐    40,672    $  Total  263,599  5,778  4,859  39,006  6,866  (11,834)  (9,584)  298,690  71,154  9,725  (3,517)  (1,557)  22,816  (10,495)  (3,032)  383,784  3,735  380,049  The Company expects these liabilities to be settled between 2020 and 2055. The provisions are discounted using current  market pre‐tax discount rates which range from 0.3% to 7.0%.  16.  OTHER LONG‐TERM LIABILITIES  Other long‐term liabilities are comprised of the following:  Chapada derivative liability (Note 27(b))  Other  December 31,   2019  69,345  15,492    84,837    $  $  $  December 31,  2018  ‐  3,406  3,406  $  As at December 31, 2019, the total Chapada derivative liability is $91.8 million (2018 ‐ nil).  The current portion is  $22.5 million (Note 12) and the long‐term portion is $69.3 million.  ‐ 31 ‐                                                                                                                                                                                                                                          LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  17.  SHARE CAPITAL  (a) Authorized and issued shares  Authorized share capital consists of an unlimited number of voting common shares with no par value and one  special non‐voting share with no par value. As at December 31, 2019, there were 734,233,642 fully paid voting  common shares issued (2018 ‐ 733,534,879).   (b) Restricted share units  The Company has a Share Unit Plan (“SU Plan”) which provides for share unit awards (“SUs”) to be granted by the  Board of Directors to certain employees of the Company. The maximum number of SUs that are issuable under  the  SU  Plan  is  14,000,000.  An  SU  is  a  unit  representing  the  right  to  receive  one  common  share  (subject  to  adjustments) issued from treasury.  The number of SUs awarded will be approved by the Board of Directors. The market price shall be calculated at  the closing market price on the TSX of the Company’s common shares on the date of the grant. The performance  requirements are established by the Board of Directors.  The Company uses the fair value method of accounting for the recording of SU grants to employees and officers.  Under this method, the Company recorded share‐based compensation expense of $5.9 million for 2019 (2018 ‐  $4.7 million) with a corresponding credit to contributed surplus.  During 2019, the Company granted approximately 1.1 million SUs to employees and officers that expire in 2022.  The SUs vest three years from the grant date. The fair value of the SUs are based on the market value of the shares  on the date of the grant and an estimated forfeiture rate of 10% (2018 ‐ 10%). The weighted average fair value  per SU granted during 2019 was C$6.65 (2018 ‐ C$7.87). As at December 31, 2019, there was $4.7 million (2018 ‐  $5.4 million) of unamortized stock‐based compensation expense related to SUs.  During 2019, 1,405,010 common shares (2018 ‐ 1,203,687) were issued as a result of SUs being vested.  (c) Stock options  The Company’s stock option plan (“2014 Option Plan”) provides for stock option awards to be granted by the  Board of Directors to certain employees of the Company. The term of any stock options granted under the 2014  Option Plan may not exceed five years from the date of grant. The maximum number of stock options that are  issuable  under  the  2014  Option  Plan  is  30,000,000.  The  vesting  requirements  are  established  by  the  Board  of  Directors.  The Company uses the fair value method of accounting for the recording of stock options. Under this method, the  Company  recorded  a  share‐based  compensation  expense  of  $7.5  million  for  2019  (2018  ‐  $7.4  million)  with  a  corresponding credit to contributed surplus.  During 2019, the Company granted approximately 4.2 million stock options to employees and officers that expire  in 2024. The stock options vest over three years from the grant date. The Black‐Scholes option pricing model used  to determine the fair value of the stock options at the date of the grant assumed a dividend yield, risk‐free interest  rate of 1.41% to 1.82% (2018 ‐ 1.90% to 2.29%), expected life of 3.2 years (2018 ‐ 3.2 years) and expected price  volatility of 43% to 47% (2018 ‐ 45% to 50%). Volatility is determined using daily volatility over the expected life  of the options. A forfeiture rate of approximately 10% was applied (2018 ‐ 10%). The weighted average fair value  per stock option granted during 2019 was C$2.07 (2018 ‐ C$2.67). As at December 31, 2019, there was $3.3 million  of unamortized stock compensation expense (2018 ‐ $4.7 million) related to stock options.  ‐ 32 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  During 2019, 3,586,515 common shares (2018 ‐ 3,912,560) were issued as a result of stock options being exercised.  The continuity of share‐based payments outstanding is as follows:  Outstanding, December 31, 2017  Granted  Forfeited  Exercised  Outstanding, December 31, 2018  Granted  Forfeited  Exercised  Outstanding, December 31, 2019  Number of SUs  2,997,190  999,800  (257,283)  (1,203,687)  2,536,020  1,078,000  (86,600)  (1,405,010)  2,122,410  Number of  options  12,961,350    3,209,800    (820,320)   (3,912,560)   11,438,270    4,210,000    (1,053,390)   (3,586,515)   11,008,365    Weighted average  exercise price (C$)         5.96         8.21         7.93         5.29         6.68         6.64         7.79         5.14         7.07  The following table summarizes options outstanding as at December 31, 2019:  Range of exercise prices  (C$)  3 to 3.99  4 to 4.99  5 to 5.99  6 to 6.99  7 to 7.99  8 to 8.99  Outstanding Options  Exercisable Options  Weighted Average Remaining Contractual Life (Years) 0.7  1.2  0.7  4.1  2.7  2.7  2.9  Weighted Average Exercise Price (C$)  3.84   4.32   5.33   6.63   7.28   8.26   7.07   Number of Options Outstanding 32,400  1,198,200  451,595  4,010,200  466,400  4,849,570  11,008,365  Weighted  Average  Remaining  Contractual  Life (Years) 0.7  1.2  0.4  1.9  2.6  2.5  2.0  Weighted Average Exercise Price (C$) 3.84  4.32  5.34  6.35  7.30  8.24  6.96  Number of Options Exercisable 32,400  1,198,200  405,595  126,200  269,267  3,060,226  5,091,888         (d)   Basic and diluted weighted average number of shares  Basic weighted average number of shares outstanding   Effect of dilutive securities  Diluted weighted average number of shares outstanding  Antidilutive securities  December 31, 2019  735,309,697  747,180  736,056,877  3,350,500  December 31, 2018  731,734,265  1,818,211  733,552,476  920,400  The effect of dilutive securities relates to in‐the‐money outstanding stock options and SUs.  (e) Dividends  The Company declared dividends in the amount of $66.6 million (2018 ‐ $68.3 million), or C$0.12 per share, for the  year ended December 31, 2019 (2018 ‐ C$0.12).  ‐ 33 ‐                                                                                                                                                        LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  (f) Normal course issuer bid  In December 2018, the Company obtained approval from the TSX to commence a normal course issuer bid (“NCIB”)  to purchase up to 63,718,842 common shares between December 7, 2018 and December 6, 2019. Daily purchases  (other than pursuant to a block purchase exemption) on the TSX under the NCIB were limited to 573,371 common  shares.   In  December 2019,  the  Company  obtained  approval  from  the  TSX  for  the  renewal of  its  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 year ended December 31, 2019, 4,292,762 shares were purchased under the NCIB at an average price of  C$6.75 per share for total consideration of $21.7 million. The total amount paid to purchase the shares is allocated  to share capital and deficit in the consolidated statement of changes in equity. The amount allocated to share capital  is based on the average cost per common share and amounts paid above the average cost are allocated to deficit.  All  of  the common  shares purchased have  been  cancelled.  For the year  ended  December  31, 2018,  no  common  shares were purchased under the NCIB.  18.  NON‐CONTROLLING INTERESTS  The Company owns 80% of Compañia Contractual Minera Candelaria S.A. and Compañia Contractual Minera Ojos del  Salado S.A.’s copper mining operations and supporting infrastructure in Chile. The remaining 20% ownership stake is  held by Sumitomo Metal Mining Co., Ltd and Sumitomo Corporation. The continuity of non‐controlling interests balance  is disclosed in the consolidated statements of changes in equity.  Summarized financial information for Candelaria mine and Ojos mine on a 100% basis is as follows:  Summarized Balance Sheets  For the years ended December 31   Total current assets  Total non‐current assets  Total current liabilities  Total non‐current liabilities  Candelaria mine  Ojos mine  2019  330,078    $  2018  $  461,584    $  $  2,664,606    $  2,452,636    $  314,733    $  $  407,732    $  $  301,289    $  461,294    $  2019  168,228    $  178,009    $  35,941    $  46,833    $  2018  127,619  167,633  25,270  47,750  Summarized Statements of Earnings and Comprehensive Income  For the years ended December 31   Total sales  Net earnings/Comprehensive income  Candelaria mine  2019  896,011    $  63,010    $  2018  811,034    $  86,721    $  Ojos mine  2019  198,510    $  45,585    $  2018  188,453  27,133  $  $  The above information is presented before inter‐company eliminations.  ‐ 34 ‐                                                                                                                                                                                                    LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  19.  REVENUE  The Company's analysis of revenue from contracts with customers segmented by product is as follows:  Revenue from contracts with customers:  Copper  Zinc  Gold  Nickel  Lead  Silver  Other  Provisional pricing adjustments on concentrate sales  Revenue   2019  2018  $  $  1,246,927    253,594    174,448    111,872    51,868    34,732    19,635  1,893,076    (363)   1,892,713    $  $  1,156,426  304,479  79,728  157,127  60,882  25,875  23,055  1,807,572  (81,983)  1,725,589  The Company's geographical analysis of revenue from contracts with customers segmented based on the destination  of product is as follows:  Revenue from contracts with customers:  Europe  Asia  South America  North America  Provisional pricing adjustments on concentrate sales  Revenue   2019  2018  $  $  903,588    820,072    87,556    81,860    1,893,076    (363)   1,892,713    $  $  956,399  585,852  76,727  188,594  1,807,572  (81,983)  1,725,589  Revenue from contracts with customers for the year‐ended December 31, 2019 includes a reversal of $14.6 million  (2018 ‐ $15.3 million) due to variable consideration adjustment.  ‐ 35 ‐                                                                                                                                                                          LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  20.  PRODUCTION COSTS  The Company's production costs are comprised of the following:  Direct mine and mill costs  Transportation  Royalties  Total production costs  21.   EMPLOYEE BENEFITS  The Company's employee benefits are comprised of the following:  Production costs       Wages and benefits       Pension benefits       Share‐based compensation  General and administrative expenses       Wages and benefits       Pension benefits       Share‐based compensation  General exploration and business development       Wages and benefits       Pension benefits       Share‐based compensation    $    $  2019  957,515    $  88,644      20,044      1,066,203    $  2018  882,571  65,474  21,565  969,610  2019  2018  $  $  244,143    1,576    3,516    249,235    19,850    769    9,630    30,249    6,294    52    207    6,553    268,573  966  3,185  272,724  23,543  868  8,701  33,112  7,762  53  254  8,069  Total employee benefits  $  286,037    $  313,905  22.   GENERAL EXPLORATION AND BUSINESS DEVELOPMENT  The Company's general exploration and business development costs are comprised of the following:  General exploration  Project development  Corporate development  $  $  2019  61,021    13,130    3,697    77,848    $  $  2018  75,214  6,475  3,607  85,296  Project development expenses include study costs related to potential expansion projects.   ‐ 36 ‐                                                                                                                                                                                                                                                                                            LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  23.   FINANCE INCOME AND COSTS  The Company's finance income and costs are comprised of the following:  Interest income  Deferred revenue finance costs   Interest expense and bank fees  Accretion expense on reclamation provisions  Lease liability interest  Secured notes redemption fee  Other  Total finance costs, net  Finance income  Finance costs  Total finance costs, net  24.   OTHER INCOME AND EXPENSE  The Company's other income and expense are comprised of the following:  Foreign exchange gain  Revaluation of derivative asset and liability  Revaluation of marketable securities  Loss on sale of assets  Other expense  Total other (expense) income, net  25.  CURRENT AND DEFERRED INCOME TAXES  Current tax expense:  Current tax on net taxable earnings (a)  Adjustments in respect of prior years  Deferred tax expense (recovery):  Origination and reversal of temporary differences  Change in tax rates  Utilization and recognition of previously unrecognized tax losses and        temporary differences  Temporary differences for which no deferred asset was recognized  Total tax expense   ‐ 37 ‐  2019  12,165  (29,260)   (12,289)   (9,725)   (1,640)   ‐    1,957    (38,792)   14,122    (52,914)   (38,792)   2019  12,893    (21,940)   (1,495)   (909)   (1,841)   (13,292)   $  $  $  $  $  $  2018  25,490  (31,914)  (27,078)  (5,778)  ‐  (16,901)  (4,011)  (60,192)  25,490  (85,682)  (60,192)  2018  13,328  617  13,520  (5,283)  (1,983)  20,199  2019   2018  66,391    (3,530)   62,861    14,030    168    ‐    3,360    17,558    80,419    $  $  79,058  (2,297)  76,761  377  (2,866)  (1,589)  3,686  (392)  76,369  $  $  $  $  $  $  $  $                                                                                                                                                                                                                                                                    LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  a) Current tax expense of $62.9 million reflects tax on net taxable earnings of $266.3 million, offset by the current  portion  of  the  investment  tax  credit  receivable  of  $8.0  million  at  Neves‐Corvo  and  a  $7.1  million  reduction  in  withholding taxes payable in Chile.  The tax on the Company's earnings before income tax differs from the amount that would arise using the weighted  average rate applicable to earnings of the consolidated entities as follows:  Earnings excluding income taxes  Combined basic federal and provincial rates  Income taxes based on Canadian statutory income tax rates  Effect of different tax rates in foreign jurisdictions  Tax calculated at domestic tax rates applicable to earnings in the respective  countries  Tax effects of:  Non‐deductible and non‐taxable items (a)  Change in tax rates (b)  Adjustments in respect of prior years (c)  Tax losses and temporary differences for which no deferred income tax      asset was recognized  Foreign exchange impact on temporary differences (d)  Utilization and recognition of previously unrecognized tax losses and     temporary differences   Tax recovery associated with government grants and other tax credits  Net withholding tax on accrued interest receivable  Other  Total tax expense   $  $  $  2019  269,596  26.5%  71,443  26,006  $  $  2018  291,809  26.5%  77,329  (135)  97,449  77,194  (5,765)  (6,803)  (7,847)  3,360  14,279  ‐  (26,892)  11,745  893  80,419  $  7,929  (2,866)  3,607  3,686  ‐  (1,589)  (29,931)  16,363  1,976  76,369  The Company operates in tax jurisdictions that have tax rates ranging from 21% to 34%.  Sweden lowered its corporate tax rate to 21.4% from 22% effective January 1, 2019, and will further reduce to 20.6%  by 2021.  a) b) Included in the non‐taxable item of $5.8 million in 2019 is the impact of the tax depletion allowance at Eagle ($5.1  million). In 2018, the non‐deductible tax expense of $7.9 million included the impact of the foreign exchange on  intercompany transactions ($8.4 million).  In 2019, the withholding tax rate on interest payments in Chile decreased from 15% to 10%, resulting in current tax  recovery of $7.1 million.  In 2018, the increase in dividend refund rate in Chile resulted in deferred tax recovery of $6.5 million while the  increase in the marginal tax rate in Portugal increased deferred tax by $4.1 million from revaluing the deferred tax  liabilities at the new rate.   c) The Company recognized a deferred tax recovery of $9.3 million in 2019 resulting from the use of foreign tax credits  for the 2014 through 2018 tax years. In 2018, the Company recognized an additional current tax recovery in Neves‐ Corvo ($2.7 million) and deferred tax recovery in Eagle ($1.5 million) relating to prior period adjustments.  d) Deferred tax impact of weakening BRL on translation of non‐monetary assets.   ‐ 38 ‐                                                                                                              LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  e) In 2019, Neves‐Corvo recorded a total investment tax credit receivable of $15.1 million ($8.0 million current) related  to its capital expenditures, including the Zinc Expansion Project. In Canada, $11.7 million of accrued withholding  taxes payable in Chile was recorded as future foreign tax credits available to offset taxes payable.   In  2018,  Neves‐Corvo  recorded  an  investment  tax  credit  receivable  of  $13.6  million  mainly  related  to  the  Zinc  Expansion Project capital spending. In Canada, $16.4 million of accrued withholding taxes payable in Chile were  available as future foreign tax credits to offset taxes payable.  Deferred tax liabilities, net  Deferred tax assets  Deferred tax liabilities  Deferred tax liabilities, net    December 31,  2019     104,627    $  (636,700)     (532,073)   $  $  $  December 31,  2018  94,472  (405,202)  (310,730)  Net deferred tax liabilities of $522.9 million (2018 ‐ $329.5 million) are expected to be settled after 12 months and  net deferred tax liabilities of $9.2 million (2018 ‐ net deferred tax assets of $18.8 million) are expected to be settled  within 12 months.   The  movement  in  deferred  income  tax  assets  and  liabilities  during  the  year,  without  taking  into  consideration  the  offsetting of balances within the same jurisdiction, is as follows:  Deferred tax assets:   Loss carryforwards  Reclamation and other     closure provisions  Deferred revenue  Bond redemption fee  Future tax credits  Other  Deferred tax liabilities:  Mineral properties, plant     and equipment  Provisions  Mining royalty taxes  Long‐term inventory  Fair value gains  As at  December  31, 2018  (Expensed) / recovered  Equity  adjustment    Chapada  Acquisition  Effects of  foreign  exchange  As at  December  31, 2019  $ 134,741  $ 33,211  $ ‐  $ ‐  $  13  $  167,965  34,575  8,844  3,667  ‐    10,885  5,203  1,201  (3,667)  7,123    6,962  ‐  ‐  ‐  ‐    ‐  20,319  ‐  ‐  ‐    ‐  (300)  (197)  ‐  ‐    (28)  59,797  9,848  ‐  7,123  17,819  (450,616)  (22,238)  (10,023)  (20,565)  ‐  (28,493)  (6,157)  (4,460)  (18,792)  (9,689)  ‐  (1,141)  ‐  ‐  ‐  (201,588)  9,180  ‐  (37,698)  ‐  $ (310,730)  $ (17,558)  $ (1,141)  $ (209,787)  $  6,947  708  ‐  ‐  ‐  (673,750)  (19,648)  (14,483)  (77,055)  (9,689)  7,143  $  (532,073)  ‐ 39 ‐                                                                                                                                                            LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Deferred tax assets:   Loss carryforwards  Reclamation and other     closure provisions  Deferred Revenue  Bond redemption fee  Other  Deferred tax liabilities:  Mineral properties, plant     and equipment  Provisions  Mining royalty taxes  Long‐term inventory  As at  December  31, 2017  (Expensed) / recovered  Equity  adjustment  Chapada  Acquisition  Effects of  foreign  exchange  As at  December  31, 2018  $ 107,285  $ 27,439  $ ‐  $ ‐  $  17  $  134,741  34,217  ‐  4,195  13,061  1,165  ‐  (528)  (1,772)  ‐  9,131  ‐  (1,222)  (436,542)  (17,364)  (11,641)  (16,025)  $ (322,814)  $ (18,340)  (4,650)  1,618  (4,540)  392  $ ‐  (1,799)  ‐  ‐  6,110  $ ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  (807)  (287)  ‐  818  34,575  8,844  3,667  10,885  4,266  1,575  ‐  ‐  5,582  (450,616)  (22,238)  (10,023)  (20,565)  (310,730)  Deferred tax assets are recognized for tax loss carry‐forwards and other temporary differences to the extent that the  realization  of  the  related  tax  benefit  through  future  taxable  profits  is  probable.  The  Company  determined  that  it  is  probable  that  sufficient  future  taxable  profits  will  be  available  to  allow  the  benefit  of  the  deferred  tax  asset  to  be  utilized.    The Company did not recognize deferred tax assets of $13.9 million (2018 ‐ $12.7 million) arising from the provision for  asset retirement obligation at Eagle and $13.3 million (2018 ‐ $13.1 million) in respect of losses amounting to $51.7  million (2018 ‐ $50.8 million) that can be carried forward against future taxable income as noted below.  Year of expiry  2023 and thereafter  Canada  25,661     $ Ireland      26,009   $ Total      51,670   $ The non‐capital losses in Ireland can be carried forward indefinitely.  ‐ 40 ‐                                                                                                            LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  26.  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 December 31, 2019 and December 31, 2018:  Financial assets  Fair value through profit or loss    Restricted cash    Trade receivables (provisional)     Marketable securities    Derivative asset  Financial liabilities  Amortized cost    Debt    Finance leases  Fair value through profit or loss    Chapada derivative liability    Candelaria derivative liability  December 31, 2019  December 31, 2018  Carrying  value  Fair value  Carrying  value  Fair value  Level  1  2  1  2  2  2  2  2  $  $  $  $  $  $  47,666  $  203,565    4,331    25,714    281,276  $  47,666    $  203,565    4,331    25,714    281,276    $  44,424  $ 244,577    2,756    25,098    316,855  $ 44,424  244,577  2,756  25,098  316,855  265,933  $  265,933    $  ‐    ‐    265,933  $  265,933    $  ‐  $ 10,992    10,992  $ ‐  10,992  10,992  91,817    ‐    91,817    $  ‐    91,817  $  91,817    $  ‐    30    30  $ ‐  30  30  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 derivative on provisional sales are valued using quoted market  prices based on the forward London Metals Exchange price. The Company recognized negative pricing adjustments  of  $0.4  million  in  revenue  during  the  year  ended  December  31,  2019  (2018  ‐  $82.0  million  negative  pricing  adjustments).  ‐ 41 ‐                                                                                                                                                                                                                                                                                                                                                                                    LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  Derivative asset & derivative liabilities – The fair value of these derivatives is determined using a valuation model  that incorporates such factors as metal prices, metal price volatility and expiry date.   Debt  and  finance  leases  –  The  fair  values  approximate  carrying  values  as  the  interest  rates  are  comparable  to  current market rates. The Company’s lease liabilities under IFRS 16 are not considered financial instruments.  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.  27.  COMMITMENTS AND CONTINGENCIES  a) The Company has capital commitments of $117.3 million on various initiatives, of which $107.0 million is expected  to be paid during 2020.   b) Related to the Chapada Acquisition (Note 3), contingent consideration of up to $125 million may be payable over  five years from the acquisition date if certain gold price thresholds are met, as outlined below:     a $10 million payment per year if the gold price averages at least $1,350/oz in any sequential annual period  over five years,  a $10 million payment per year if the gold price averages at least $1,400/oz in any sequential annual period  over five years,  a $5 million payment per year if the gold price averages at least $1,450/oz in any sequential annual period  over five years.   In addition, contingent consideration of $100 million may be payable on the construction and commencement of  commercial production of a pyrite processing facility at Chapada and the Company must pay a 2.0% net smelter  return  royalty on  future gold  production  from  the Suruca  gold deposit  if  the  Company chooses  to  develop  the  project. The Company continues to evaluate these expansion scenarios.  As part of the Chapada Acquisition, the Company has been provided with tax indemnity for any tax liabilities that  may arise for periods prior to the date of the acquisition. For identified tax claims existing at the date of acquisition,  the  Company has  agreed  to be  liable  for up  to  the  first $25  million  (BRL  102  million).  While  it  is  uncertain, no  liabilities have been accrued as the Company believes payment is not likely due to the nature of the tax claims.  c) Under an agreement with Wheaton, the Company has agreed to deliver all future production of silver contained  in  concentrate  produced  from  the  Zinkgruvan  mine.  The  agreement  with  the  Zinkgruvan  mine  includes  a  guaranteed minimum delivery of 40 million ounces of silver over an initial 25 year term. If at the end of the initial  term the Company has not met its minimum obligation, it must pay $1.00 for each ounce of silver not delivered.  An aggregate total of approximately 26.4 million ounces has been delivered since the inception of the contract in  2004.  d) During 2018, the Chilean Internal Revenue Service (“IRS”) issued a tax assessment of $8.2 million ($4.2 million in  taxes plus interest and penalties of $4.0 million) denying a tax deduction related to interest expenses arising from  an intercompany debt for the taxation years 2014 and 2015. While not yet assessed by the IRS, a similar position  would deny tax refunds of approximately $59.0 million, excluding possible penalties and interest, related to tax  years 2016 to 2018 in addition to a current tax receivable of $8.4 million and deferred tax asset of $71.1 million  recorded at December 31, 2019. The Company believes the assessment is inconsistent with Chilean tax law and,  therefore, without merit. Accordingly, the Company has filed a claim against the tax assessments with the Chilean  tax court on April 30, 2019. While it is uncertain, no tax expense was accrued for this assessment as the Company  believes  its  original  filing  position  is  in  compliance  with  tax  regulations  and  intends  to  vigorously  defend  this  position.  ‐ 42 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  In 2019, the Company received an assessment from the IRS on the same intercompany debt as noted above for  the  2016  tax  year  with  respect  to  the  withholding  tax  rate  applied.  It  is  seeking  additional  withholding  taxes,  including interest and penalties, of approximately $30.0 million on interest payments made in 2016. While not yet  assessed, a similar position taken on interest payments made for taxation years 2017 to 2019 would equate to  approximately  $64.9  million  in  additional  withholding  taxes,  excluding  possible  penalties  and  interest.  The  Company  will  be  filing  a  claim  against  the  tax  assessments  with  Chilean  tax  court  as  the  Company  believes  its  original filing position is in compliance with tax regulations.  The above summarizes total tax exposure under two contradictory assessments received from the tax authorities.  Given that the assessments relate to the same issue, the Company’s potential exposure is expected to be limited  to one of the above scenarios.  e) The Company may be involved in legal proceedings arising in the ordinary course of business, including the actions  described below. The potential amount of the liability with respect to such legal proceedings is not expected to  materially affect the Company’s financial position. The Company believes the claims to be without merit and the  loss, if any, cannot be determined at this time for all contingencies. The Company has accordingly not accrued any  amounts related to the litigations below (unless otherwise noted).  The Company intends to vigorously defend  these claims.  i) ii) Two proposed class actions were filed against the Company and certain officers and directors. The first,  in the province of Ontario, on December 7, 2017 (Markowich v. Lundin Mining Corporation et al) and a  second  overlapping  action  in  the  Province  of  Québec  on  January  18,  2018  (Prévreau  v.  Lundin  Mining  Corporation et al). Both proposed class actions seek damages of $130 million (C$175 million) and punitive  damages of $7.0 million (C$10 million) and assert various statutory and other claims related to, among  other things, alleged misrepresentations and/or failure to make timely disclosure of material information  about the Company’s business and operations and, in particular, the operations of the Candelaria Mine  and a rock slide at the Candelaria Mine on October 31, 2017. The proposed Ontario class action asserts  claims on behalf of a putative class comprising persons who acquired securities of the Company between  October 25, 2017, and November 29, 2017, whereas the proposed Québec class action asserts claims on  behalf  of  only  such  persons  who  are  resident  or  domiciled  in  Québec.   In  June  2018,  counsel  to  the  plaintiffs in the Québec action agreed to a stay (i.e., indefinite cessation) of that proceeding in light of the  Ontario action.  On August 30, 2018, the Québec Superior Court, on consent of the parties, stayed the  Québec action indefinitely. It is not possible at this time for the Company to predict an outcome of the  class action proceedings.  In  early  2018,  the  Company  was  notified  of  claims  in  the  Copiapó  Court  of  Appeals  (CCA)  alleging  contamination to marine habitat as a result of vessel loading activities at the Punta Padrones port owned  by Candelaria. The claims seek damages totaling approximately $39.3 million. The Company’s response  sought  dismissal  of  the  claims  based  primarily  on  the  lack  of  evidence  supporting  the  environmental  damage  caused  by  the  port  facility,  the  imprecise  nature  of  the  monetary  claims  being  made  and  the  absence of actual damages. On February 25, 2019, the presiding judge in the CCA issued a ruling dismissing  all claims. On March 9, 2019, the Company became aware that the plaintiff Caldera fishermen had filed  an appeal with the Valparaíso Court of Appeals and is awaiting a hearing date. The Company believes the  claim  to  be  without  merit  and  accordingly  has  not  accrued  any  amounts  related  to  the  litigation.  The  Company intends to vigorously defend this claim.  ‐ 43 ‐    LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  28.   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.  ‐ 44 ‐  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  For the year ended December 31, 2019  Revenue  Cost of goods sold     Production costs     Depreciation, depletion and amortization  Gross profit  General and administrative expenses  General exploration and business development  Finance (costs) income  Income from equity investment in associate  Other income (expense)  Income tax (expense) recovery  Net earnings (loss)    Capital expenditures  Total non‐current assets1  Candelaria  Chile  896,283  $  $  Chapada  Brazil  248,011  $  Eagle  USA  212,929  $  Neves‐Corvo  Portugal  Zinkgruvan  Sweden  Other  Total  337,167  $  198,323  $  ‐  $  1,892,713  (503,335)   (212,298)   180,650    ‐    (27,275)   (33,032)   ‐    1,934    (22,812)   99,465  $  (117,329)   (26,237)   104,445    ‐    (2,358)   (9,146)   ‐    (16,818)   (118,840)   (58,102)   35,987    ‐    (11,179)   (130)   ‐    (922)   (236,846)   (57,425)   42,896    ‐    (6,624)   11,641    ‐    1,861    (86,654)   (30,328)   81,341    ‐    (19,526)   (5,670)   ‐    2,718    (3,199)   (1,727)   (4,926)   (47,104)   (10,886)   (2,455)   6,239    (2,065)   (1,066,203)  (386,117)  440,393  (47,104)  (77,848)  (38,792)  6,239  (13,292)  (40,480)   35,643  $  2,546    26,302  $  11,744    61,518  $  (11,400)   47,463  $  (20,017)   (81,214)  $  (80,419)  189,177  367,298  $  28,996  $  41,880  $  187,741  $  38,956  $  417  $  665,288  $  $  $  2,841,343  $  1,303,588  $  385,058  $  1,074,845  $  240,269  $  42,179  $  5,887,282  1. Non‐current assets include long‐term inventory, mineral properties, plant and equipment, investment in associates and goodwill.  ‐ 45 ‐                                                                                        LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  For the year ended December 31, 2018  Revenue  Cost of goods sold     Production costs     Depreciation, depletion and amortization  Gross profit  General and administrative expenses  General exploration and business development  Finance costs  Income from equity investment in associate  Other income (expense)  Income tax (expense) recovery  Net earnings (loss)  Capital expenditures  Total non‐current assets1  (493,105)  (164,708)  180,959    ‐    (40,430)  (27,053)  ‐    10,187  (13,982) 109,681  $ 498,610  $ $ $ $ Candelaria  Chile  838,772  $ $ Chapada  Brazil  Eagle  USA  265,863  $ Neves‐Corvo  Portugal  Zinkgruvan  Sweden  Other  Total  404,263  $ 216,691  $ ‐  $ 1,725,589  ‐  $ ‐    ‐    ‐    ‐    ‐    ‐    ‐    ‐  ‐  ‐  $ ‐  $ (125,837)  (65,808)  74,218    ‐    (22,166)  (117)  ‐    (1,622) (5,939) 44,374  $ (261,296)  (57,656)  85,311    ‐    (5,232)  (4,370)  ‐    6,384  (14,624) 67,469  $ (86,512)  (29,662)  100,517    ‐    (8,857)  (3,687)  ‐    6,261  (17,586) 76,648  $ (2,860)  (1,542)  (4,402)  (49,438)  (8,611)  (24,965)  29,933    (1,011) (24,238) (82,732) $ (969,610) (319,376) 436,603  (49,438) (85,296) (60,192) 29,933  20,199  (76,369) 215,440  45,807  $ 163,827  $ 37,951  $ 5,558  $ 751,753  2,617,749  $ ‐  $ 384,682  $ 930,811  $ 236,566  $ 147,819  $ 4,317,627  1. Non‐current assets include long‐term inventory, mineral properties, plant and equipment, investment in associates and goodwill.  ‐ 46 ‐                                                                            LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  29.   RELATED PARTY TRANSACTIONS  a) Transactions with associates ‐ The Company enters 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 (Note 9).  b) 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:  Wages and salaries  Share‐based compensation   Pension benefits  Post‐employment benefits  30.  MANAGEMENT OF FINANCIAL RISK  $  $  2019      6,343    $  3,447    162    ‐      9,952    $  2018  5,902  5,056  148  6,313  17,419  The Company’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk, foreign  exchange risk, commodity price risk and interest rate risk.  a) Credit risk  The exposure to credit risk arises through the failure of a customer or another third party to meet its contractual  obligations to the Company. The Company believes that its maximum exposure to credit risk as at December 31,  2019 is the carrying value of its trade receivables.  Concentrate produced at the Company’s Candelaria, Chapada, Eagle, Neves‐Corvo and Zinkgruvan mines are sold  to  a number  of  strategic  customers  with  whom  the  Company  has  established  long‐term  relationships.  Limited  amounts of concentrate are occasionally sold to commodity traders, under prevailing market conditions. Payment  terms vary and provisional payments are normally received shortly after vessel arrival, in accordance with industry  practice, with final settlement up to six months following the date of shipment. Sales to commodity traders are  made  against  secure  payment  terms  such  as  a  letter  of  credit,  pre‐payment  or  payment  against  scanned  shipping documents.  Credit worthiness of customers is reviewed by the Company on an annual basis or more  frequently,  if  warranted,  and  those  not  meeting  certain  credit  criteria  are  required  to  make  100%  provisional  payment up‐front or provide an acceptable payment instrument such as a letter of credit. The failure of any of the  Company’s strategic customers could have a material adverse effect on the Company’s financial position. For the  year ended December 31, 2019, the Company has four customers that individually account for more than 10% of  the Company’s total sales. These customers represent approximately 19%, 15%, 12% and 12% of total sales.  With respect to credit risk arising from the other financial assets of the Company, which comprise cash and cash  equivalents,  the  Company’s  exposure  to  credit  risk  arises  from  default  of  the  counterparty,  with  a  maximum  exposure equal to the carrying amount of these instruments. The Company limits material counterparty credit risk  on these assets by dealing with financial institutions with long‐term credit ratings with Standard & Poor’s of at  least A, or the equivalent thereof with Moody’s, or those which have been otherwise approved.   ‐ 47 ‐                                LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  b) Liquidity risk  The Company has in place a planning and forecasting process to help determine the funds required to support the  Company’s  normal  operating  requirements  on  an  ongoing  basis.  The  Company  ensures  that  there  is  sufficient  available capital to meet its short‐term business requirements, taking into account its anticipated cash flows from  operations and its holdings of cash and cash equivalents. The Company has a revolving credit facility in place to  assist with meeting its cash flow needs as required (Note 13).  The maturities of the Company’s non‐current liabilities are disclosed in Note 13. All current liabilities are settled  within one year.  c)  Foreign exchange risk  The Company operates internationally and is exposed to foreign exchange risk arising from various currencies,  primarily with respect to €, SEK, CLP and BRL.  The Company’s risk management objective is to manage cash flow risk related to foreign denominated cash flows.  The Company is exposed to currency risk related to changes in rates of exchange between foreign denominated  balances and the functional currencies of the Company’s principal operating subsidiaries. The Company’s revenues  are denominated in US dollars, while most of the Company’s operating and capital expenditures are denominated  in  the  local  currencies.  A  significant  change  in  the currency  exchange rates  between  the  US  dollar and  foreign  currencies could have a material effect on the Company’s net earnings and on other comprehensive income.  The following table illustrates the impact a 10% US dollar change against the €, SEK, CLP and BRL would have on  pre‐tax earnings as a result of translating the Company's foreign denominated financial instruments:  Currency    CLP    €    SEK    BRL  Change  +/‐10%  +/‐10%  +/‐10%  +/‐10%  +/‐ Effect on Pre‐ Tax Earnings  +/‐ $11,063  +/‐ $5,486  +/‐ $3,729  +/‐ $1,292  The impact of a US dollar change against the € and SEK by 10% at December 31, 2019 would have a $108.1  million (2018 ‐ $104.1 million) impact on OCI.  d) Commodity price risk  The Company is subject to price risk associated with fluctuations in the market prices for metals.  The  Company  may,  at  its  election,  use  forward  or  derivative  contracts  to  manage  its  exposure  to  changes  in  commodity prices, the use of which is subject to appropriate approval procedures. The Company is also subject to  price risk on the final settlement of its provisionally priced trade receivables.  ‐ 48 ‐                                                                                                                                                                  LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  The following table illustrates the sensitivity of the Company's risk on final settlement of its provisionally priced  trade receivables:  Metal    Copper    Zinc    Gold    Nickel  Payable metal  Provisional price on  December 31, 2019  59,968 t  32,530 t  30,893 oz  2,895 t  $2.80 /lb  $1.03 /lb  $1,536 /oz  $6.36 /lb  Change  +/‐10%  +/‐10%  +/‐10%  +/‐10%  Effect on Revenue  ($millions)  +/‐$37.0  +/‐$7.4  +/‐$4.7  +/‐$4.1  e) Interest rate risk  The Company’s exposure to interest rate risk arises from the interest rate impact on its cash and cash equivalents  as well as on its debt facilities. Currently, the interest rates on the Company’s revolving credit facility of $225.0  million includes a variable rate component referenced to LIBOR.  As at December 31, 2019, holding all other variables constant, a 1% change in the interest rate would result in an  approximate $2.3 million change in interest expense on an annualized basis.  31.    MANAGEMENT OF CAPITAL RISK  The Company’s objectives when managing its capital include ensuring a sufficient combination of positive operating  cash flows and debt and equity financing in order to meet its ongoing capital development and exploration programs in  a  way  that  maximizes  the  shareholder  return  given  the  assumed  risks  of  its  operations  while,  at  the  same  time,  safeguarding  the  Company’s  ability  to  continue  as  a  going  concern.  The  Company  considers  the  following  items  as  capital: excess cash balances, share capital reserve and long‐term debt.  Through the ongoing management of its capital, the Company will modify the structure of its capital based on changing  economic conditions in the jurisdictions in which it operates. In doing so, the Company may issue new shares or debt,  buy back issued shares, or pay off any outstanding debt. The Company continuously monitors its capital structure to  determine the appropriateness of paying dividends.  Planning, including life‐of‐mine plans, annual budgeting and controls over major investment decisions are the primary  tools  used  to  manage  the  Company’s  capital.  Updates  are  made  as  necessary  to  both  capital  expenditure  and  operational  budgets  in  order  to  adapt  to  changes  in  risk  factors  of  proposed  expenditure  programs  and  market  conditions within the mining industry.  32.   SUPPLEMENTARY CASH FLOW INFORMATION  Changes in non‐cash working capital items consist of:    Trade and income taxes receivable, inventories, and other current assets    Trade and income taxes payable, and other current liabilities  Operating activities included the following cash payments:    Income taxes paid  2019  2018  39,322    $  (25,509)      13,813    $  68,366  (78,583)  (10,217)  33,079    $  202,352  $  $  $  ‐ 49 ‐                                                                                                                                                                                                                              LUNDIN MINING CORPORATION  Notes to consolidated financial statements  For the years ended December 31, 2019 and 2018  (Tabular amounts in thousands of US dollars, except for shares and per share amounts)  During the year ended December 31, 2019, total interest paid, including capitalized interest, was $13.9 million (2018 ‐  $40.2 million). Total interest received for the year ended December 31, 2019 was $13.1 million (2018 ‐ $25.9 million).  33.   IFRS 16 TRANSITION ADJUSTMENTS  The Company has applied IFRS 16 using the modified retrospective approach which requires the cumulative effect of  initial  application  to  be  recognized  in  retained  earnings  at  January  1,  2019.  On  adoption  of  IFRS  16,  the  Company  recognized  lease  liabilities  for  leases  previously  classified  as  an  operating  lease  under  IAS  17.  These  liabilities  were  measured  at  the  present  value  of  the  remaining  lease  payments,  discounted  using  each  operation’s  applicable  incremental borrowing rate as of January 1, 2019. The weighted average incremental borrowing rate applied to the  lease liabilities on January 1, 2019 was 3.03%. For leases previously classified as finance leases under IAS 17, the carrying  amount of the lease asset and lease liability immediately before transition was recognized as the carrying amount of  the right‐of‐use asset and the lease liability at the date of initial application.   The Company has applied the following practical expedients, as permitted by IFRS 16:  ‐ ‐ ‐ ‐ reliance on previous assessments on whether leases are onerous;  accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as  short‐term leases;  exclusion of initial direct costs from the measurement of the right‐of‐use asset at the date of initial application;  and  use of hindsight in determining the lease term where the contract contains options to extend or terminate the  lease.  The  following  table  summarizes  the  difference  between  operating  lease  commitments  disclosed  immediately  preceding  the  date  of  initial  application,  and  lease  liabilities  recognized  in  the  balance  sheet  at  the  date  of  initial  application:  Operating lease commitments as at December 31, 2018  Discounted using the incremental borrowing rate at January 1, 2019  Less: contracts reassessed as service agreements  Add: finance lease liabilities recognized as at December 31, 2018  Add: other adjustments  Lease liabilities recognized as at January 1, 2019  Less: current portion  Long‐term portion  $  $  51,922  47,589  (19,362)  10,992  3,425  42,644  9,719  32,925  Other  adjustments  include  leases  reassessed  as  short‐term  leases,  low  value  leases  and  adjustments  as  a  result  of  different treatment of extension and termination options.  The associated right‐of‐use assets were measured at the amount equal to the lease liabilities, adjusted by the amount  of any prepaid or accrued lease payments relating to the leases recognized on the balance sheet as at December 31,  2018 (Note 8). There were no onerous lease contracts that would have required an adjustment to the right‐of‐use assets  at the date of initial application.  ‐ 50 ‐                                                                                  

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