Lundin finds more copper and zinc at Neves-Corvo

TORONTO, Dec 1 (Reuters) - Lundin Mining (LUN.TO), which has agreed to a takeover offer from HudBay Minerals (HBM.TO), said on Monday it had identified new high-grade copper and zinc mineralization zones at its Neves-Corvo mine operation in southern Portugal.

Lundin, which is based in Canada but operates mainly in Europe, said recent drilling at the south area of its Lombador extension at the deposit had produced results showing copper grading as high as 3.7 percent and zinc as high as 3.9 percent.

The company said it sees potential for discoveries at the site.

"In this belief, we have committed significant funds this year and next at Neves-Corvo to discover new copper and zinc resources," Lundin chief executive Phil Wright said in a statement.

The company has been aggressively exploring at Neves-Corvo, and in July announced it had discovered a new copper-zinc deposit at Lombador East boasting zinc grades as high as 8.43 percent.

On Monday, it released two additional results from that drilling campaign showing zinc mineralization as high as 12.8 percent over a 13.5 metre interval.

But since then, the company has said it will suspend zinc production at the mine and focus on copper until zinc prices rebound from their recent decline.

Zinc MZN0= has fallen 58 percent from its year-high in March.

Lundin's shares were down 7 Canadian cents, or 5.8 percent, at C$1.14 on Monday, among the strongest-performing Toronto-listed mining stocks.

The stock is well below the all-stock HudBay offer, which values Lundin at C$1.38 a share, based on HudBay's price of C$3.52.

Some doubt the deal will go through, not because Lundin shareholders will reject it, but because the deal could be derailed by a third-party bid for HudBay or a revolt by HudBay shareholders.

HudBay's stock has dropped 33 percent since the offer was announced a little more than a week ago, as shareholders of the cash-rich copper and zinc miner have worried about taking on Lundin's larger, but riskier and more debt-laden, metals portfolio.

($1=$1.24 Canadian) (Reporting by Cameron French; Editing by Jeffrey Jones)