Josemaria Resources

JOSEMARIA RESOURCES The latest large scale resource project to be delivered by the Lundin Group

The Lundin Group was founded by Swedish oil and mining entrepeneur Adolf H. Lundin over 40 years ago and is today comprised of 13 publicly traded companies dotted around the global resources sector. In the beginning, the Group was driven forward by Adolf’s passion for natural resources and his desire to supply the world with key commodities. In order to do this, he quickly learned that you need to find large, high quality resources and bring them into production wherever they are to be found in the world and no matter how unfavourable the jurisdiction might appear to be.

“The Lundin Group modus operandi is to find tier 1 assets that benefit local communities. We’re not scared to go to any jurisdiction, as long as the local country wants to do it together. This belief has taken us across the world,” says Adolf’s grandson and current president and CEO of Josemaria Resources, Adam Lundin.

A truly global resources group

The poster child of the Group’s success in the mining sector is Lundin Gold, after it brought into production the multi-million ounce Fruta del Norte gold mine in Ecuador – a jurisdiction that precious few Western companies had explored in prior to Lundin’s discovery.

ADOLF H. LUNDIN, LUNDIN GROUP FOUNDER Elsewhere, the Lundin Group has been involved in developing one of the largest copper-cobalt mines in the Democratic Republic of Congo through Lundin Mining, which currently operates mines in Brazil, the US, Portugal, Chile and Sweden. On the oil side of the business, the Lundin Group has production out of Norway, Canada, Nigeria, France, Malaysia and Iraqi Kurdistan.

“In Argentina, we’ve had ups and downs but my father went there in the early 90s and found success and we never left. Overall, it’s a Group where a lot of people came together who were passionate about making the world a better place and doing that through the extraction of natural resources.”

The Lundin Group’s early success in Argentina goes back to the discovery of the Veladero gold deposit in San Juan Province. The project was soon acquired by Homestake Mining after fighting off a hostile bid by Barrick, who ultimately bought Homestake to get their hands on the prized deposit. Veladero has remained one of the largest gold mines in the world over the last two decades.

On the back of this divestment, the same Lundin Group exploration team decided to

stake some ground on the Chile-Argentina border, not far from the Veladero deposit, at the turn of the century. The subsequent exploration campaigns yielded three grassroots discoveries – one being the Josemaría coppergold deposit in 2004.

The three discoveries are in the same land package and are located within 15 km of each other, but have since been spun into three separate companies within the Lundin Group.

“Josemaría is currently the most defined project. We feel we’ve found the boundary of the resource, so the view now is to get something into production and maybe we can later tie in the other two deposits to form a district that will allow us to be mining here for 50+ years,” says Lundin.

Faith in Argentina

In years gone by, international mining companies have been wary of investing in

LUKAS AND ADAM LUNDIN WITH ARGENTINA PRESIDENT ALBERTO FERNÁNDEZ (MIDDLE), JAN 2020

LUKAS AND ADAM LUNDIN WITH ARGENTINA PRESIDENT ALBERTO FERNÁNDEZ (MIDDLE), JAN 2020

an emerging market like Argentina, especially while some of its provinces receive low rankings for attractiveness as a mining jurisdiction.

However, it has never been the remit of the Lundin Group to be put off by warnings of this nature. As we have already learned, if a project is large and of a high quality, the group will commit to its development.

In the case of San Juan Province, where Josemaría is located in the shade of the resplendent Andes mountains snaking through Northern Argentina, mining is entrenched in the political and economic fibres of the region.

“San Juan is where we made the Veladero discovery, so it has producing mines and they understand mining and how it can help benefit the local economy. Before Veladero came into production, San Juan was one of the top five poorest provinces in Argentina

and now it’s one of the top five wealthiest, because of those royalties and benefits attached to the Veladero mine.”

In addition, Josemaria’s experience working with the different layers of government in Argentina thus far has been overwhelmingly positive. On the provincial level, the company has been in close contact with the minister of mines for San Juan Province, who was recently appointed federal minister of mines, reporting directly to the president.

JOSEMARIA RESOURCES AT A GLANCE

STOCK TICKER

TSX:JOSE, OMX:JOSE

MARKET CAPITALISATION

US$87.2 million (as of April 2, 2020) j

At the federal level, Lundin and his father Lukas managed to arrange a meeting with President Alberto Fernández during a visit to Buenos Aires in mid-January. “To be able to meet the president at short notice and get in front of key government officials shows their willingness and their want to get mining going.

“This is their resource. We are happy to help put it into production but they will be biggest benefiters, followed by our shareholders,” Lundin asserts.

Entering a new era

Following the publishing of a robust pre-feasibility study (PFS) at the end of 2018, Josemaria made the decision to plough on with the bankable and full feasibility studies. And so, last year became a transformational year in the development of the company and the project.

The company’s name was changed from NGEx Resources

(the original entity that made the three discoveries) to Josemaria Resources and Adam was brought in to head up the refreshed organisation, along with several other additions to the board and management team.

“We strengthened the board by bringing in Paul Conibear, the previous Lundin Mining CEO. We have Ashley Heppenstall, who is former Lundin Petroleum CEO. We also brought in Ron Hochstein who’s currently running Lundin Gold.”

Adam’s father Lukas is also on the board of directors alongside Jack – Adam’s brother and Lukas’ son. Alongside the familial connections, the board retained the services of renowned geoscientist Wojtek Wodzicki - who made the initial Josemaría discovery. “I think it’s important to keep that continuity,” Lundin adds. Christina Batruch rounds off Josemaria’s experienced board

Spotlight on Adam Lundin

Adam Lundin was appointed president and CEO of Josemaria Resources in September 2019, succeeding Dr. Wojtek Wodzicki, who had been at the helm of the company for over 10 years. Adam is the grandson of Adolf Lundin, the man who founded the Lundin Group over forty years ago. Following in the footsteps of his grandfather and father, Adam chose a career in natural resources and has accumulated several years of experience in capital markets and public company management across the sector. Working across the Lundin Group, Adam is also CEO and a director of Filo Mining Corp and a director of NGEx Minerals and Africa Energy Corp.

“We have big camaraderie in the Lundin Group. All the companies are independent from one another, but we learn from each other and we’re always there to support each other”- Adam Lundin, Josemaria Resources president and CEO

team and is responsible for helping guide the company’s sustainability strategy.

On the management side, Ian Gibbs was brought in as chief financial officer owing to his previous project finance experience from the oil side of the Lundin Group and with Lundin Gold. With an extensive history across global engineering companies, Arndt Brettschneider, VP Projects, was also recruited to lead the feasibility study. Going back to the 2018 PFS, Lundin was pleased with the anticipated economic metrics for the Josemaría project, particularly the capital expenditure (capex) estimate of US$2.75 billion. This may seem like a large figure in comparison to Josemaria’s market cap, but this is a large scale project that requires large scale investment.

Furthermore, Josemaría’s production profile is also attractive. The operation will

produce 125,000 tonnes per annum of its main commodity copper over a 20-year mine life, along with 230,000 ounces of gold and 790,000 ounces of silver per annum over the same period.

“The gold production is significant and accounts for around 25% of our revenue of the mine life. That gives us flexibility when it comes to project finance. Maybe we will look to the streaming deal that

Lundin Mining agreed when it bought the Candelaria mine in Chile, as a way of financing the capex for Josemaría.”

Ploughing ahead in 2020

The first quarter of 2020 has been about polishing elements of the PFS ahead of the publish of a full feasibility study and building towards applying for environmental and social permits. The company conducted a large field programme that included condemnation, geotechnical and water drilling.

Josemaria is blessed with a supply of groundwater just 1.5 km away from the project – a considerable benefit given that just across the border, Chilean authorities insist on miners building desalination plants for their water supply.

After proving its main source of water supply, the company

was about to test another basin as a future supply source until Argentina was placed in full lockdown to quell the spread of COVID-19 (coronavirus), so the work was cut short.

“The original plan before COVID-19 was to finish the feasibility and publish it in Q3. I think it’s better to start guiding the market towards the second half of the year, just to give us some flexibility as we adapt to these changing times. We’ve collected a lot of our baseline studies, so we’ll be in a good position to apply for permits in Q4.”

On the social side, Josemaria has engaged with the Lundin Foundation and started to run social programmes within the community. One aim is to eventually assist water treatment facilities in the local city of San Juan. Josemaria has also been monitoring the local environment in tandem with BGC Engineering over the last five years, specifically focusing on minimising any potential impact on a glacier around seven km away in the Andes.

A standout company and project

The Lundin Group is bullish about copper and a believer in the forthcoming electrical

revolution as the world looks to shift away from fossil fuels, and Josemaría is a large scale mine that is going to stand out in an environment where not many copper projects of an appropriate scale for the projected demand increase are coming to market.

Josemaria the company also stands out in the junior space, as its part of a much larger family of natural resource companies with decades of experience in different geographical contexts and economic cycles.

“Lundin Gold was one of the first projects we built by ourselves and we are hoping Josemaria is the next one. We have big camaraderie in the Lundin Group. All the companies are independent from one another, but we learn from each other and we’re always there to support each other,” Lundin exclaims. Despite the global resources sector facing an unprecedented squeeze from the coronavirus pandemic, Lundin is quietly confident that Josemaria can emerge stronger. “Downturns is when we benefit the most as a Group. We can push projects forward and retain key talent where other companies are sitting idle.”