Lundin completes Semblana resource

Lundin Mining (LUN-T, LUMI-O) discovered the Semblana copper deposit adjacent to its Neves-Corvo mine in southern Portugal in September last year and describes it on its website as “the first new massive sulphide deposit discovery at Neves-Corvo in more than twenty years.”

An initial resource estimate completed just in time for Christmas outlines 6.58 million tonnes grading 3.0% copper and 24 grams silver per tonne in the inferred category, and the company believes there is potential for width, strike and depth extensions.

Lundin has identified a new zone of high-grade copper sulphides about 300 metres to the south of the defined resource that was not incorporated into the initial resource estimate. Step-out hole PSR42 intercepted 14 metres of massive sulphides including a 5.0 metre interval grading 4.6% copper at a starting depth of 930 metres. A second step-out hole, PSQ44, about 880 metres to the northeast of PSR42, returned 8.4 metres grading 5.2% copper at a starting depth of 920 metres.

In addition the company has made a further copper discovery about 1.4 km south of Semblana and about 1.3 km southeast of the Zambujal copper-zinc orebody. Hole SCA26 returned a 32.5 metre-thick section of stockwork-type copper sulphides grading 2.2% copper. The hole also included    a higher grade interval of 11.0 metres of 3.9% copper.

Lundin has now drilled 72,450 metres in 75 diamond drill holes at Semblana in total and more drilling is planned for 2012. One of the highlights of the drill program so far was hole PSM46B-1, which intercepted 20.5 metres of massive sulphides grading 6.1% copper, 4.0% zinc, 1.2% lead, 75 grams silver per tonne and 0.23 gram gold per tonne, including an interval of 5.0 metres grading 16.0% copper, 10.1% zinc, 1.7% lead, 110 grams silver and 0.37 gram gold.

Neil O’Brien, Lundin’s senior vice president of exploration and new business development said in a statement that he believes the discovery massive copper sulphides at Semblana will lead “to a significantly greater resource and in turn result in the fast-tracking of the underground development at Neves-Corvo to Semblana.”

“The ongoing exploration program shows much promise,” Tom Meyer, an analyst at Scotia Capital, wrote in a note, adding that the initial resource estimate was prepared to “facilitate the Underground Material Handling Study currently underway and expected to be completed in early Q1/12.”

Meyer points out that the Semblana copper deposit adds about 9% to the existing Neves-Corvo resource “and biases the copper grade higher.” Meyer has a one-year target on the stock of $7.00 per share.

Matt Murphy, an analyst at UBS Investment Research wrote in a note that “exploration upside at the deposit remains” and has a one-year target on the stock of $5.50 per share.

Kerry Smith, an analyst at Haywood Securities, has a $6.25 per share target price on the stock. “The current resource at Semblana is equivalent to about 2.5 years of mill-feed but the main target in our opinion is the higher-grade zone which currently averages 6.2% copper, while the rest of the resource averages 2.6% copper (lower grade than the current reserve at Neves),” he writes in a note to clients. “However we fully expect that once Lundin gets some development underground into this area that tighter-spaced drilling from underground will deliver more pods of higher grade copper ore.”

At presstime Lundin was trading at $3.70 per share within a 52-week range of $3.17-$9.31. The company has about 582.5 million shares outstanding.

Neves-Corvo is an underground mine, 100 km north of Faro in the western part of the Iberian Pyrite Belt. The mine has been a significant producer of copper since 1989 and in 2006 started treating zinc ore.