The production of the first copper cathode Tuesday at Tenke Fungurume in the Democratic Republic of the Congo (see Tenke - Slumbering giant renders first copper) means good news for financially struggling Lundin Mining.

In an analysis published Tuesday, Canada's Haywood Securities said they don't expect Lundin to default on their US$266.7 million debt, and is in a position to restructure or retire the debt by the June 5th deadline.

Tenke produced its first copper cathode Tuesday with commercial production likely to begin in four to six months. Haywood anticipates 25,000 tonnes of commercial production from the operation this year.

Initial cash flow from Tenke will be used to repay the approximate US$200 million loan from Freeport, Haywood metals analysts Kerry Smith said. We are forecasting receipt of Lundin's dividends from Tenke in 2011, once this debt is repaid.

Lundin recently lost a friendly take-over bid by HudBay Minerals.

As of December 31, 2008, Lundin was in default of its tangible net work convent on their US$575 million revolving credit facility, of which $266.7 million has been drawn. The convent has been waived by a syndicate of lenders with repayment renegotiated to June 5, 2009.

Lundin is now working on a restructuring plan that is expected to be submitted well ahead of the deadline.  Haywood's analysis suggests that Lundin likely needs a minimum of US$50 million of cash for working capital needs going forward and we would expect they currently require US$150 - $200 million of new funding-which will likely be a combination of cash flow from operations, asset sales, new equity and a new, but smaller, credit facility.

Lundin also needs to fund its share of any Phase II expansion at Tenke, which would be 30% of what Haywood estimates to be a US$800 million capex cost.

Meanwhile, Haywood noted that Lundin has reported a significant increase in zinc of 64% or 1.4 million tonnes of contained zinc at the Neves-Corvo mine in Portugal.  However, the contained copper reserves update showed a 9% decrease or 70,500 tonnes due to lower grades.

For the first time Lundin's Zinkgruvan zinc-lead mine in Sweden reported copper reserves containing 75,000 tonnes of contained copper and 2.6 million ounces of silver. However, zinc reserves at the mine declined 3% as a result of lower zinc grades.

Haywood forecast that Lundin will generate cash flow from Neves-Corvo and Zinkgruvan and from Tenke Fungurume in which it has a 24.75% equity interest in one of the premier copper projects in the world.

Haywood raised its target price for Lundin by $1.25 to $2.75 with a SECTOR OUTPERFORM rating.