Mining Industry Update

The International Iron and Steel Institute (IISI), has upgraded its global forecasts for apparent steel consumption, for both 2007 and 2008, implying significant ongoing positive knock-on effects for mining companies producing the various inputs that go into the steel making process.

Apparent steel use is expected to increase from 1121 million tons last year to 1198 million tons in 2007, an increase of 6.8%, and one that significantly outpaces the rate of global economic growth. The IISI's latest projections for 2008 suggest a similar global growth rate to 2007, at 6.8%. The figures represent an upward percentage point revision of 0.9 for 2007 and 0.7 for 2008 over earlier forecasts, published in March.

While iron-ore diggers stand as the most visible beneficiaries of strong ongoing demand for steel, producers of other steel ingredients such as coking (metallurgical) coal, manganese and molybdenum stand to benefit; in the case of stainless steel, demand for chrome and nickel is set to remain strongly underpinned.

According to the IISI, the BRIC (Brazil , Russia , India and China ) countries, which accounted for about 41% of global steel demand in 2006, will again be leading the growth with an expected increase of 12.8% for 2007 and 11.1% for 2008. Overall, 77% of world growth in 2007 and 71% in 2008 will take place in BRIC.

China's apparent steel use is expected to grow by 11.4% in 2007 and 11.5% in 2008, accounting for 35% of the world total. For India, forecasts for apparent steel use point to an increase of 13.7% in 2007 and 11.8% in 2008.

The IISI spelled out its belief that recent financial market volatility would do little, if anything, to stem demand for steel. IISI executive committee chairman John Surma said in a statement that "although global economic risks have increased, the IISI forecast assumes that the recent credit market volatility will not move the US economy into recession".

The stock price for the world's leading iron ore digger, Brazil's CVRD (NYSE: RIO, US$33.56 a share), has more than tripled in the past 12 months; stock prices for the second and third dominant members of the club, Rio Tinto (RTP.L, £43.10), and BHP Billiton (BHP.L, £17.66), have also soared. Among junior iron ore stocks, Fortesque (FMG.AX, A$53.95) is currently trading at record levels.

Seen at the steel end of the story, the price of Arcelor Mittal (MT, US$78), the world's biggest steelmaker, has more than doubled in the past 12 months, and is currently trading up around record highs.

The analyst community anticipates that global iron ore production is set to increase from nearly 500m tons in 2000 to close on 1000m tons in 2010. By that stage, it is expected that CVRD will be producing some 32% of the world total, followed by Rio Tinto (25%) and BHP Billiton (15%). All other producers combined are expected to supply 28% by 2010, and include Kumba Iron Ore (JSE: KIO, R229), and by 2010, no doubt also emergent producers such as Fortesque.

Pamodzi Gold Increases Production Threefold

Gold junior Pamodzi Gold (JSE:PZG) has positioned the company on the East Rand of Johannesburg and in South Africa's Free State province to continue its acquisition strategy aimed at hitting 1 million production ounces by 2009.

Pamodzi Gold CEO Peter Steenkamp told Mineweb Tuesday the company has built a good track record of realising set targets as it has increased production threefold with its ongoing President Steyn Gold Mines and recently completed Orkney acquisitions.

The company's gold production has climbed from 150 000 ounces to 420 000 ounces per year. It has given itself two years to reach the production target of one million ounces as investors, especially those in the United States, were more likely to invest in companies of this size.

Pamodzi's strategy was to acquire affordable assets that had the potential for turnaround and growth and were of better quality than its current assets. The company believed that the South African mining sector needed junior companies to buy gold assets that major gold producers disposed of.

Steenkamp said the fact that the company had a presence in more than one area meant it was set for consolidation on the East and West Rand of Johannesburg, while it could build a good track record with the community in the Free State.

PZGold has focused on the Orkney and President Steyn acquisitions and has not considered synergies with other mining operations on the East Rand yet, but there were some surface sources here that could be the subjects of future deals. Steenkamp said the President Steyn acquisition was one of the "nicest resources" around as it contained 9.8m resource ounces at a grade of 8.3 grams per ton.

He pointed out that Aflease Gold (JSE:AFO) also had a presence on the East Rand, but said Pamodzi Gold has not spoken to the company yet.

Pamodzi recently lowered its offer for Thistle Mining's (AIM:TMG) President Steyn Gold Mines to R250m (US$35.7m) after production problems occurred here. The transaction is conditional on production in excess of 340kg at the mines in October and November this year.

The company announced on 3 September it had formally acquired the Orkney Shafts 1 to 7 from Harmony Gold.

Mechel Wins More Output, Becoming a World-class Coal Producer

Mechel's coal output is now approaching 30 Mt/y following its recent takeover of Yakutugol and purchase of Russia's largest known, undeveloped high quality coking coal deposit.

As the result of an auction held on October 5, 2007, Mechel acquired 75% less one share of Yakutugol OJSHC's charter capital and 68.86% of Elgaugol OAO's charter capital, for a total of RUR58.2 billion (approximately US$2.3 billion). Thus, Mechel's stake in Yakutugol increases to 100%, given that the company already held 25% plus one share in its ownership.

Yakutugol mines mainly coking coal with some steam coal output. Its total coal output is about 10 Mt/y (more than half Mechel's current output). The coal reserves of Yakutugol's existing assets are estimated at approximately 200 Mt, according to Russian reserve valuation standards. Yakutugol is the largest Russian exporter of coking coal and sells most of its output to countries in the Pacific region, including Japan, South Korea, and Taiwan.

Elgaugol holds the license for development of the Elga coal deposit with the total reserves of fat coking coals amounting to approximately 2,200 Mt. According to the experts' estimates, coal reserves in this region are 30,000 to 40,000 Mt. In addition, a real-estate complex owned by JSC Russian Railways was put up at the auction and acquired by Mechel. The complex includes the railway spur track from Zeisk station of the Far Eastern Railway to the Elga coal deposit and an access road from Zeisk station of the Far Eastern Railway to the Elga deposit.

Igor Zyuzin, Mechel's Chief Executive Officer, commented: "We are pleased with our victory at the auction. By acquiring Yakutugol, we have gained control over the last operating unprivatized coal asset, concluding a three-year privatization process. Although there had been some uncertainty among some investors that Mechel would obtain control over Yakutugol, we are glad that we proved our ability to bring all our undertakings to conclusion. Yakutugol will significantly strengthen Mechel's position on the Russian and international coking coal markets. Secondly, we obtained access to the largest deposit of high quality coking coals, which lays a reliable foundation for long term development of Mechel's coal mining. With ownership of Southern Kuzbass, Yakutugol, and Elgaugol, we hope to establish a world-class modern coal mining company. We plan to ship most of the mined coal to Russian consumers including Mechel's subsidiaries."

In 2006, Mechel produced approximately 17 Mt of coal comprising 9.7 Mt of coking coal and 7.3 Mt of steam coal.

Government of India Approves Pebble Creek's Askot Mining Lease

Pebble Creek Mining Ltd. (the "Company") announced that the Indian Ministry of Mines has approved the Company's Mining Lease application on 386 Hectares at Askot and has returned it to the State of Uttarakhand for granting. Central government approval opens the way for the relevant authorities to process other permits and clearances such as environmental, forest and the Company's mining plan. The Company has drafted all of these applications and has already submitted some of them.

Drilling is proceeding at the Company's Askot and Gadarwara prospects under supervision of Andrew E. Nevin, P.Eng., a Qualified Person under NI 43-101.

At the Company's Annual General Meeting on September 27, 2007, Douglas A. Nevin was elected as a director to fill the vacancy left by the resignation of David C.M. Bell prior to the AGM. Mr. Nevin is a businessman resident in North Vancouver.

The Company is well funded and committed to exploration and mine development in India. In addition to holding Askot and Gadarwara, it holds title to one other prospect and has 16 applications pending on a total of more than 14,000 square kilometres.

Ashapura Forms JV with Oman Co for Mining

AshapuraMinechem Ltd, through its 100 per cent subsidiary in UAE, Ashapura Minechem UAE, has established a joint venture company in Oman with Alawi Enterprises LLC, for mining, processing and value addition of minerals.

The joint venture will undertake mining and processing of industrial minerals like ground calcium carbonate, gypsum and others, a release issued here today said.

Ashapura will have a 60 per cent stake in the JV company.

The first phase of the project will be mining and processing of ground calcium carbonate and gypsum which are multi-application minerals popularly used in industries like paper, plastics, paint, cement and others, the release said.

The first phase is scheduled for completion by mid-2008 and the second phase by 2010.

In the second phase, the focus will be on value added products like clinker, white cement and gypsum board.

The new JV strengthens Ashapura's presence in the Middle East and is in continuation with its three-pronged strategy of mineral portfolio expansion, emphasis on value added products and global synergies.

Mantle Mining to buy Trafford Coal

Perth-based exploration company Mantle Mining is to buy the share capital of small coal mining company Trafford Coal Pty for A$660,000, according to Australian news sources.

As part of the deal, Mantle will acquire 87.5% of the 500 million tonne Mt Mulligan coal deposit in Queensland, says the Sydney Morning Herald.

Mantle has a market capitalisation of about $8.6m and is seeking gold, uranium and base metals in Queensland and Victoria.

The acquisition includes coal seam methane rights for $100,000 cash and the issue of two million fully paid ordinary shares

Newmont Mining to Acquire Miramar for C$1.5 Billion

Newmont Mining Corp., the world's second-largest gold producer, agreed to buy Miramar Mining Corp. for about C$1.5 billion ($1.52 billion) in cash to replace dwindling reserves of the precious metal.

The offer of C$6.25 per share, 20 percent higher than the Oct. 5 closing price, has the support of Miramar's board, Denver- based Newmont said today in a statement. JPMorgan Chase & Co. and Citigroup Inc. have committed to underwrite a $1.3 billion loan to help finance the acquisition, Newmont said.

Newmont Chief Executive Officer Richard T. O'Brien, like his counterparts at Barrick Gold Corp. and Gold Fields Ltd., is buying rivals to bolster reserves and increase production to capitalize on the highest gold prices since 1981. Bullion has gained for six straight years as global output fell and investors bought more of the metal as an alternative to a declining dollar.

``It's a great deal for Newmont,'' said Joe Foster, a fund manager at New York-based Van Eck Associates Corp., which owned about 3.3 percent of Miramar as of June 30. ``I'm not happy with the price. I did my valuation, and they have a great asset. It's world class.''

Miramar, based in North Vancouver, surged C$1.02, or 20 percent, to C$6.21 at 11:45 a.m. in Toronto Stock Exchange trading. Of the 10 analysts who rate the company's shares, five advise clients to buy the stock, two recommend holding it and three say to sell. Newmont gained 63 cents, or 1.4 percent, to $45.46 in New York.

Newmont already owns 8.4 percent of Miramar and could increase the holdings to 15 percent by exercising warrants, Newmont spokesman Omar Jabara said in an interview from Denver. Miramar may be liable for a breakup fee of C$41.4 million if the acquisition doesn't succeed, he said.

The size of the offer and the breakup fee make the offer difficult to challenge, said Thomas Winmill, president of Midas Management Corp., which owned about 1.4 million Miramar shares as of June 30.

``For another bid to come is possible, but they'd have to be pretty hungry, and there would have to be a lot of cash on the table in addition to shares,'' Winmill said.

The acquisition will give Newmont control of Miramar's 10.7 million-ounce Hope Bay gold resource in Canada's Nunavut region, about 160 kilometers (99.4 miles) north of the Arctic Circle. Miramar planned to start construction this year and have annual output of as much as 600,000 ounces of gold by 2012, according to a presentation on its Web site.

Newmont will review plans for the deposit's development, Jabara said.

``We're looking to develop a plan that will responsibly maximize Hope Bay's full potential,'' Jabara said. ``It's one of the largest undeveloped gold deposits in the world.''

Newmont said on Sept. 26 that costs this year will exceed an earlier target of $400 an ounce and warned it may have difficulty increasing reserves each year. The company had gold reserves of 93.9 million ounces and output of 5.9 million ounces in 2006.

O'Brien, who replaced Wayne Murdy as CEO in July, said that Newmont will no longer ignore smaller acquisitions and will buy deposits that can produce as few as 150,000 ounces a year to lower its average production costs and expand its reserves.

Newmont is being advised by Genuity Capital Markets, JPMorgan and Citigroup, with legal counsel provided by Wachtell, Lipton, Rosen & Katz and Goodmans LLP.

BMO Capital Markets, Gowling Lafleur Henderson LLP and Dorsey & Whitney LLP are advising Miramar.

M45 Mining Resources Finalizes Acquisition of 160 Mining Titles

M45 Mining Resources Inc. recently announced that it has finalized the acquisition of 160 mining titles covering a total area of 8,935 Hectares in the East area of the Matagami Mining Camp. The mining titles were acquired from "Miniere Grenville," a Canadian Corporation, for a total consideration of One Million Two Hundred and fifty thousand dollars payable in common shares. This acquisition is a key milestone of the "East Wind" phase of the Company's business development program.

The mining titles are situated on the east side of Matagami Mining Camp adjacent to properties owned by Xstrata plc, the world's fifth largest diversified mining company by market capitalization. These strategic territories strengthen M45's presence in the Matagami Camp by adding a new series of high-grade potential mining titles to the Company's existing "West Wind" territories. The Matagami Mining Camp is a world-class mining district, composed of 18 known volcanogenic massive sulphide (VMS) deposits. The area is host to historical production of 8.6 billion pounds of Zinc and 853 million pounds of Copper and has established infrastructure including a railway, paved road and a 2,350 t/day mill owned by Falconbridge/Xstrata plc.

M45 CEO Mr. Andrea Cortellazzi stated the following: "We have been very active during the past 6 months in increasing our strategic resource base in the Matagami Mining Camp, following the discovery of major anomalies on our West Wind properties. We have conducted geologic surveys (NI-43-101) on the newly acquired territories, which will be published. Considering the drilling program on the West Wind properties scheduled for January 2008, we have decided to evaluate the merits of conducting further drilling sessions on the East Wind sector."

Wega Mining Strikes $1.9 Billion Gold Find at Canadian Field

Wega Mining ASA found gold and base metals valued at $1.9 billion at the J&L deposit in British Columbia, Canada.

The deposit contains 838,000 ounces of gold, 11.1 million ounces of silver, 214,000 tons of zinc and 133,000 tons of lead, the company's Merit Mining Corp. unit said today in a statement to the Oslo Stock Exchange. The field will start production in 2010, according to the statement.

Wega Mining's ownership of the J&L project will cost C$10.8 million ($10.9 million) over seven years, plus as many as 1.03 million shares in Merit.

Arcapita agrees to acquire Varel for $369 million

Arcapita Agrees to Acquire Varel for $369 million

Arcapita Inc. announced that its affiliates have signed a definitive purchase agreement to acquire Varel Holdings, Inc. from KRG Capital Partners for approximately $369 million. Varel is the world's fastest growing manufacturer of drill bits for the oil and gas, and mining and industrial industries.

Headquartered in Carrollton, Texas, Varel produces polycrystalline diamond compact and roller cone bits for the oil and gas drill bit market, as well as roller cone bits for other mining and industrial applications. With operations and sales offices in 41 countries, Varel serves a broad range of national and multi-national oil and gas companies and generates 50 percent of its revenue outside North America.

Stockton Croft, Director at Arcapita, said, "Varel's growth is being driven by excellent industry dynamics, superior customer service and a talented and highly experienced management team. In addition, Arcapita is excited about the opportunity to assist Varel in expanding its presence in the important markets of the Middle East, where Arcapita's local knowledge and extensive contacts will be a major competitive advantage for Varel."

Jim Nixon, Chief Executive Officer of Varel International, stated, "We are excited about continuing our growth journey with our new partner Arcapita. We look forward to leveraging Arcapita's strong relationships in the Middle East and to expanding our global position in Energy and Mining applications."

The transaction is expected to close in the fourth quarter of 2007 and is subject to regulatory approvals and other customary closing conditions. Lehman Brothers Inc. is serving as exclusive financial advisor to KRG Capital Partners and Varel, and is providing senior debt and mezzanine acquisition financing for the transaction. King & Spalding LLP is serving as legal advisor to Arcapita in the acquisition, while Hogan & Hartson is representing KRG Capital Partners.

leveland-Cliffs Announces Acquisition of PinnOa

Cleveland-Cliffs Announces Acquisition of PinnOak Resources

Cleveland-Cliffs Inc ("Cliffs") (NYSE: CLF) announced that it has agreed to acquire PinnOak Resources, LLC, and its subsidiary operating companies, for $450 million in cash plus approximately $150 million in debt. PinnOak is a privately owned domestic producer of high-quality, low-volatile metallurgical coal. Payment of 25 percent of the cash portion will be deferred until December 31, 2009. The transaction is expected to close within 60 days and is subject to regulatory clearances.

"This acquisition represents an attractive expansion opportunity for our Company. When combined with our Australian coking and thermal coal operation, the Sonoma Project, the Company will control a 10 million ton position, with the majority being for export," commented Joseph A. Carrabba, Cleveland-Cliffs chairman, president and chief executive officer. "It marks yet another step in the execution of our strategy to deepen Cliffs' exposure to faster growing international markets and further diversify its mineral sales."

The transaction is expected to increase Cliffs' 2008 revenues by approximately $400 million and add approximately $100 million in EBITDA. Due to customer transition issues, full-year 2007 revenues are expected to be approximately $300 million. The transaction will have minimal earnings impact to Cliffs in 2007 as it covers acquisition and integration costs.

PinnOak's operations include two complexes comprising three underground mines—the Pinnacle and Green Ridge mines in southern West Virginia, and the Oak Grove mine near Birmingham, Alabama. Combined, the mines have the capacity to produce in excess of seven million tons of premium-quality metallurgical coal annually.

The Pinnacle complex, located in Pineville, West Virginia, comprises the Pinnacle and Green Ridge properties. In operation since 1969, Pinnacle produces a high-quality, low-volatile metallurgical coal and boasts the only longwall plow system in the United States. The Green Ridge mine, opened in 2004, also produces a premium-quality product. Coal from both mines is processed by the Pinnacle Preparation Plant and then shipped to the customer via the Norfolk Southern rail line and exports from the port of Norfolk, Virginia.

Located in Adger, Alabama, the Oak Grove mine has been in operation since 1975 producing high-quality, low-volatile, very low-sulfur product, which is in high demand due to its excellent coking characteristics. Processing from this mine is done at the Concord Preparation Plant and product is transported domestically by rail, barge or truck. International shipments initiate from the port of Mobile, Alabama.

Approximately 80 percent of PinnOak's total 2007 production is slated for the international steel market, with the balance committed to integrated steelmakers in the United States. The company produced approximately 3.9 million tons of coal in 2006 and has current estimated reserves of 140 million tons.

"We are excited to welcome the PinnOak team to the Cliffs organization as they provide a depth of experience and an additional growth platform consistent with the Company's strategic objectives," Carrabba added.

Cleveland-Cliffs Inc, headquartered in Cleveland, Ohio, is the largest producer of iron ore pellets in North America and sells the majority of its pellets to integrated steel companies in the United States and Canada. Cleveland-Cliffs Inc operates a total of six iron ore mines located in Michigan, Minnesota and Eastern Canada. The Company owns 80 percent of Portman Limited, a large iron ore mining company in Australia, serving the Asian iron ore markets with direct-shipping fines and lump ore. It also has a 30 percent interest in the Amapá Project, a Brazilian iron ore project, and a 45 percent economic interest in the Sonoma Project, an Australian coking and thermal coal project.

Cleveland-Cliffs Agrees to Sell Wabush Interest

Cleveland-Cliffs Inc (NYSE: CLF) today announced that the Company has accepted an offer to sell its 26.8% interest in the Wabush Mines joint venture.

Under the definitive purchase agreement contemplated in the offer accepted today, Consolidated Thompson Iron Mines Ltd. (TSX Venture: CLM) would acquire the 71.4% of the Wabush Mines joint venture owned directly or indirectly by Cleveland-Cliffs (26.8%) and Stelco Inc. (44.6%) for $64.3 million in cash plus 3.0 million warrants of CLM common shares and assumption by CLM of ongoing employee and asset retirement obligations. Cleveland-Cliffs' pro rata share would be $24.1 million in cash and warrants, entitling Cleveland-Cliffs to purchase approximately 1.1 million CLM common shares at CAD$5.10 per share for a two-year period.

As part of the transaction, Cleveland-Cliffs would enter into an off-take agreement whereby CLM will sell to Cleveland-Cliffs a portion of its pro rata share of the 4.8 million tons of committed annual pellet production from the date of closing until December 31, 2009.

Dofasco Inc., a subsidiary of Mittal Steel Company N.V., holds the remaining 28.6% of the Wabush Mines joint venture. The acceptance of CLM's offer by Cleveland-Cliffs and Stelco triggers a 90-day purchase option that may be exercised by Dofasco.

Completion of the transaction is subject to a number of conditions, including receipt of requisite regulatory approval and the execution of definitive agreements. Closing would occur shortly after a Dofasco waiver is executed or expiration of its 90-day purchase option.

Cleveland-Cliffs President–North American Iron Ore Donald J. Gallagher stated: "This is a good transaction for all of the parties involved. As previously discussed, Wabush has long-term issues with its pit, and adding CLM's new resource to the existing mine and plant bodes well for both the long-term life of the Scully Mine and the Point Noire operations and the jobs associated with those facilities.

"In addition to the cash proceeds, Cliffs will be relieved of significant liabilities and will be able to allocate its available resources to longer lived assets in North America and its global growth strategies," he concluded.

Wabush, located in Canada, has been operating since 1965. It produced 4.1 million tons of pellets in 2006, and includes the Scully Iron Ore Mine near Wabush, Newfoundland, Labrador; the pellet plant and port facilities at Point Noire, Quebec; and integrated rail facilities and other related assets.

Chile’s Mining Minister Announces US$17 billion in New Investments

Chile’s Mining Minister Karen Poniachik stated that Chile is anticipating US$17 billion on new gold and copper mining investment in the next five years. Poniachik said the new cash infusion is needed to replace existing mines whose reserves are running out and to bolster output.

The new investments will be spread out over a period of five years, Ponichek said. During that time, she expects Chile's copper output to rise to 6.4 million metric tons, up from the current figure of 5.6 million tons.

Copper is a key sector in the Chilean economy, with exports last year reaching US$33.3 billion. According to a 2007 report from the Council on Hemispheric Affairs, the daily average copper price for the first half of 2007 was about US$3.06 per pound on the London Metal Exchange. That figure was 11.5 percent higher than in 2006. Copper mining accounts for roughly 7 percent of Chile’s total GDP, and in 2006 copper represented 57 percent of the country’s total exports and 32 percent of its total fiscal revenues.

Poniachik’s announcements come as copper prices are heading for their sixth consecutive annual gain.

Poniachik also confirmed that Chile’s government is not interested in selling the state-owned copper agency. Chilean President Michelle Bachelet revealed in January that a group had investors had approached the government with an offer to buy the company. “CODELCO is not for sale,” said Poniachik.

While Poniachik’s announcement will have important ramifications for Chile’s business and mining communities, it has also raised strong concerns among energy and environmental experts, who link the mining industry’s expansion to several potentially destructive energy projects currently in the works in Southern Chile.

“In Chile, 65 percent of the country’s electricity is currently being consumed by the mining industry,” ecologist Juan Pablo Orrego, director of the environmental NGO Ecosistemas, told the Santiago Times Monday. “The Hydroaysén project directors have stated that, with the creation of new mining projects, the country’s demand for energy will rise 6.8 percent annually (…) in other words, the directors themselves have linked hydroelectric projects in Southern Chile with mining initiatives to the North of Chile (…) but, I must be clear that the Central Interconnected Grid only extends to Region III. Still, it does include mines such as CODELCO’s Andina and El Teniente and Los Pelambres. Additionally, there are new projects which are specifically sprouting up within the Central Interconnected Grid’s range.”

Aaron Sanger, a U.S. environmentalist formerly with NGO ForestEthics and now helping lead an international effort to stop dam construction in Chile’s Patagonia region, also linked the mining industry’s needs to the destruction of Chile’s southern Patagonia region.

“Chile’s government, together with some very influential business groups within Chile, is together pushing a very large energy project in Patagonia,” Sanger told The Santiago Times. “If completed, all of that energy will be put in what is known as the Central Interconnected Grid. The biggest user, by far, of the energy in Chile’s Central Interconnected Grid is the mining industry (…) if the industry wants to expand, it will need to have more access to cheap sources of energy. The promoters of the hydroelectric projects in Patagonia are definitely promoting themselves as the new source — and the nearest new source — of the cheapest electricity Chile will ever have had.”

The Aysén Project is an initiative to construct five massive hydroelectric dams in Patagonia that would – if approved by government environmental authorities – generate an estimated 2,750 MW of electricity. The Project also calls for construction of a 2,000-km transmission line to transport the electricity from Chile’s Region XI, an area also known as Aysén, to Chile’s energy-hungry central and northern regions.

Local residents in Patagonia have joined with Chilean environmentalists and activists from around the world to fight the dam project. This past year several influential U.S.-based environmental groups – the Sierra Club, Natural Resources Defense Council and International Rivers Network (IRN) – have thrown their weight behind the movement.

Lundin Mining Plans to Quadruple Its Zinc Production

Lundin Mining Corporation ("Lundin Mining" or the "Company") (TSX: LUN)(NYSE: LMC)(OMX: LUMI) is pleased to announce that the Company's Board of Directors has approved major expansion programmes at the Neves-Corvo copper-zinc mine in southern Portugal and at the Zinkgruvan mine, in central Sweden.

- Production of zinc in concentrate from the recently discovered Lombador massive sulphide zone at the Neves-Corvo mine is scheduled to start in 2011 following a feasibility study to be completed in the second half of 2008. This is expected to increase zinc ore production at Neves-Corvo from 400,000 tpa to 2,400,000 tpa, significantly increasing the Company's overall annual zinc and lead production.

- At Zinkgruvan, ore production is planned to increase by 33% to 1.2 million tonnes per annum by 2010 with the commencement of copper concentrate production. These projects are consistent with the Company's growth strategy and its aim of maximizing long term shareholder value and reducing operating cash costs.

Lombador Zinc Expansion

The project plans for a production start-up of zinc-rich massive sulphides in early 2001, from the significant resources identified in the Lombador zone at Neves-Corvo in early 2011. At full capacity the annual production from the Lombador zone is anticipated to be 130,000 tonnes of contained zinc, 20,000 tonnes of contained lead and 300,000 ounces of contained silver. Production will be maintained over a period of at least ten years.

Management at Somincor will begin a feasibility study of the Lombador project during the fourth quarter of 2007. The feasibility study, which is expected to be completed during the fourth quarter 2008, will determine the optimal position for the new vertical shaft and the engineering design for the processing plant and associated infrastructures. In the meantime, the drilling programme will be ongoing to upgrade resources to reserves.

Total capital expenditure for the project is estimated to be US$250 million, of which approximately $180 million is required to achieve the first zinc production from Lombador. The investment will be financed through internally generated cash-flow.

In 2007, the Neves-Corvo mine is forecast to produce approximately 87,000 tonnes of copper in concentrate, 25,000 tonnes of zinc in concentrate and 850,000 ounces of silver in concentrate. The Lombador project will add significantly to the present production rate of zinc in concentrate from the mine, making it not only Europe's largest copper mine but also its largest zinc mine.

Zinkgruvan Expansion

The Zinkgruvan Expansion Programme includes a significant increase in ore production from the current level of 900,000 tonnes to 1.2 million tonnes per annum, with the first production of copper in concentrate planned for 2010. At full capacity, the annual copper production will be approximately 7,200 tonnes in concentrate and run for at least 12 years.

The current Zinkgruvan copper indicated resources (December 31, 2006) of 2.8 million tonnes will be upgraded to reserves by definition drilling. The construction phase of the project includes a ramp from surface to the 350 m level, a dedicated underground ore bin and crusher infrastructure system for copper ore and a copper processing line in the mill. Project preparation activities are not expected to affect current production rates. The capital expenditure for the project is US$37 million of which approximately $22 million is required to achieve first copper production. The project will be financed through internally generated cash-flow.

In 2007, the Zinkgruvan mine will produce approximately 70,000 tonnes of zinc in concentrate, 35,000 tonnes of lead in concentrate and 1.8 million ounces of silver in concentrate.

The investment at the Zinkgruvan mine will also increase the flexibility of the current operations as the ramp will also access future lead-zinc orebodies in the western zone of the mine.

Karl-Axel Waplan, CEO and President of Lundin Mining, commented, "The expansion programmes in two of our prime assets, the Neves-Corvo and Zinkgruvan mines, clearly demonstrate the Company's great potential for organic growth. Once these projects have been completed, together with the Aljustrel production from the end of this year and the start-up of the Ozernoe mine development project in 2011, our production of zinc in concentrate will more than double from the current level of 155,000 tonnes per annum. Furthermore, the commencement of copper production in Zinkgruvan demonstrates that the mine, despite its already long period of production, will continue to contribute to cash flow for a long period of time. The Company's copper production will also dramatically increase with the start-up of the Tenke Fungurume project in the fourth quarter 2008/early 2009."

Lundin Mining is a rapidly growing mining and exploration company engaged internationally in the extraction, development, acquisition and discovery of base metal deposits. The company currently owns five operating mines, extracting copper, zinc, lead, nickel and silver: Neves-Corvo in Portugal, the Zinkgruvan and Storliden mines in Sweden, the Galmoy mine in Ireland and the recently acquired Aguablanca mine in Spain. A further mine, the Aljustrel mine in Portugal, is under development and will be brought into production in the fourth quarter 2007. In addition, Lundin Mining holds an extensive exploration portfolio, including interests in international ventures and development projects such as the world class Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo, which is currently under construction and the Ozernoe zinc project under detailed feasibility study in Russia.

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