Fruta del Norte achieves gold production of 355,190 oz and an
AISC¹ of $785/oz sold in the first
nine months of 2022
VANCOUVER, BC, Nov. 8, 2022
/CNW/ - Lundin Gold Inc. (TSX: LUG) (Nasdaq Stockholm: LUG)
(OTCQX: LUGDF) ("Lundin Gold" or the "Company") today
reports results for the third quarter of 2022, highlighted by Q3
production of 121,635 ounces ("oz") of gold and sales of 134,640 oz
at a cash operating cost1 of $656 per oz sold and all-in sustaining cost
("AISC")1 of $807 per oz
sold. For the first nine months of 2022, Lundin Gold produced 355,190 oz and sold 350,213
oz of gold at an AISC1 of $785 per oz sold, putting the Company firmly on
track to meet the upper end of its production guidance of 430,000
to 460,000 oz and lower end of or slightly below its
AISC1 guidance of $820 to
$870 per oz sold. All amounts are in
U.S. dollars unless otherwise indicated. PDF version.
In the third quarter, Lundin Gold
generated net revenues of $210
million, adjusted earnings1 of $20.4 million and free cash flow1 of
$65.2 million, resulting in a cash
balance of $304 million at quarter
end. With operations at Fruta del Norte ("FDN") generating sizeable
free cash flow and considering the Company's existing cash balance,
Lundin Gold paid an inaugural
semi-annual dividend of $0.20 per
share on September 13, 2022
(September 15 for shares trading on
Nasdaq Stockholm) based on a record date of August 24, 2022. Under its recently established
dividend policy, Lundin Gold
anticipates continuing to pay dividends of at least $0.40 per share annually, equivalent to
approximately $100 million, based on
current gold prices, expected production levels, and current issued
and outstanding shares.
Ron Hochstein, President and CEO
of Lundin Gold commented, "Once
again, I am pleased to report another fantastic quarter for
Lundin Gold. We continue to strive
for operational excellence at Fruta del Norte, and remain focused
on further optimization, improved efficiencies and lowering costs.
Now that the South Ventilation Raise is complete, we will have more
flexibility to mine on all levels, allowing us to continue
generating strong results. Payment of our first dividend was a
great milestone, and we see potential to create further shareholder
value through the significant free cash flow we are generating from
this tier one asset. With this cash flow we will continue to
evaluate restructuring and paying down our debt, funding
exploration, evaluating throughput expansion and M&A
opportunities."
____________________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on pages 13 to 16
of the Company's MD&A for the three and nine months ended
September 30, 2022 available on SEDAR.
|
Third Quarter of 2022 Financial
Overview
- The Company sold a total of 134,640 oz of gold, consisting of
88,083 oz of concentrate and 46,557 oz of doré at an average
realized gold price1 of $1,618 per oz for total gross revenues from gold
sales of $218 million. Net of
treatment and refining charges, revenues were $210 million. As a result of the recent decline
in the gold price, revenues from concentrate sales reflect a gold
price adjustment of $10.8 million for
sales whose provisional gold price is settled after quarter end.
This adjustment is estimated using the forward gold price at
quarter end for the expected month of settlement of each individual
sale.
- Cash operating costs1 and AISC1 were
$656 and $807 per oz of gold sold, respectively.
Sustaining capital is expected to remain high in the last quarter
of the year due to the ongoing construction of the third tailings
dam raise and other site infrastructure projects.
- Income from mining operations was $83.9
million. The Company generated cash flow of $105 million from operations and ended the
quarter with a cash balance of $304
million. Free cash flow1 for the quarter was
$65.2 million or $0.28 per share.
- Earnings before interest, taxes, depreciation, and
amortization1 ("EBITDA") and adjusted EBITDA1
were $159 million and $117 million, respectively. The difference is the
derivative gain of $41.8 million in
the quarter.
- Net income was $62.7 million
including a derivative gain of $41.8
million, and net of corporate, exploration, finance costs,
and associated taxes on earnings. Adjusted earnings1,
which exclude derivative gains, were $20.4
million, or $0.09 per share.
Net income was positively impacted by the recording of gold sales
from the delay of shipments of gold concentrate from the second
quarter, offset by the lower gold price realized on sales in Q3
2022.
- While quarterly revenues were affected by the declining gold
price, they were positively impacted by the sale of additional
ounces produced late in the second quarter but not shipped and sold
until the third quarter. This was due to blockades on some of
Ecuador's major highways during a
national strike in the country, which ended on June 30th and resulted in a positive
impact on revenues, income from mining operations, earnings, and
cash flow in Q3 2022.
Third Quarter of 2022 Production Overview
- Mine production was 377,921 tonnes of ore at an average grade
of 12.4 grams per tonne. Consistent with the previous quarter,
efforts are underway to reduce the ore stockpile in order to
minimize future potential oxidization of ore as it affects mill
recoveries.
- The mill processed 379,258 tonnes of ore at an average
throughput rate of 4,122 tpd, slightly below design capacity due to
an earlier than planned SAG and ball mill re-lining completed in
late September.
- The average grade of ore milled was 11.0 grams per tonne with
average recovery at 90.3%. Recoveries in the third quarter were
positively impacted by the higher grade and improved blending
strategies put in place to reduce the impact of oxidized ore.
- Gold production was 121,635 oz, comprised of 81,607 oz of
concentrate and 40,028 oz of doré.
Third Quarter of 2022 Operating
and Financial Highlights
The following two tables provide an overview of key operating
and financial results during the third quarter and first nine
months of 2022.
________________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on pages 13 to 16
of the Company's MD&A for the three and nine months ended
September 30, 2022 available on SEDAR.
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
2022
|
2021
|
2022
|
2021
|
Tonnes ore
mined
|
377,921
|
382,667
|
1,126,980
|
1,145,778
|
Tonnes ore
milled
|
379,258
|
365,316
|
1,138,340
|
1,036,468
|
Average head grade
(g/t)
|
11.0
|
10.3
|
10.9
|
10.9
|
Average
recovery
|
90.3 %
|
88.8 %
|
89.4 %
|
88.2 %
|
Average mill throughput
(tpd)
|
4,122
|
3,971
|
4,170
|
3,797
|
Gold ounces
produced
|
121,635
|
107,663
|
355,190
|
320,599
|
Gold ounces
sold
|
134,640
|
111,605
|
350,213
|
318,822
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
2022
|
2021
|
2022
|
2021
|
Net revenues
($'000)
|
210,425
|
190,753
|
604,705
|
546,889
|
Income from mining
operations ($'000)
|
83,930
|
89,431
|
277,659
|
264,066
|
Earnings before
interest, taxes, depreciation, and amortization
($'000)1
|
158,876
|
112,832
|
402,386
|
352,475
|
Adjusted earnings
before interest, taxes, depreciation, and amortization
($'000)1
|
117,038
|
113,468
|
355,286
|
327,187
|
Net income
($'000)
|
62,673
|
56,673
|
141,817
|
192,637
|
Free cash flow
($'000)1
|
65,202
|
47,114
|
178,256
|
193,689
|
Average realized gold
price ($/oz sold)1
|
1,618
|
1,769
|
1,781
|
1,770
|
Cash operating cost
($/oz sold)1
|
656
|
650
|
656
|
635
|
All-in sustaining costs
($/oz sold)1
|
807
|
804
|
785
|
778
|
Free cash flow per
share ($)1
|
0.28
|
0.20
|
0.76
|
0.84
|
Adjusted net earnings
($'000)1
|
20,379
|
58,796
|
91,419
|
171,005
|
Adjusted net earnings
per share ($)1
|
0.09
|
0.25
|
0.39
|
0.74
|
Liquidity and Capital
Resources
At the end of the third quarter of 2022, the Company is in a
strong financial position.
(in thousands of
U.S. dollars)
|
As at September
30,
2022
|
As at December
31,
2021
|
Financial
Position:
|
|
|
Cash
|
303,639
|
262,608
|
Working
capital
|
253,673
|
217,221
|
Total assets
|
1,634,590
|
1,685,113
|
Long-term
debt
|
589,919
|
739,977
|
As at September 30, 2022, the
Company had cash of $304 million and
a working capital balance of $254
million compared to cash of $263
million and a working capital balance of $217 million at December
31, 2021. The change in cash during the nine months ended
September 30, 2022 was primarily due
to cash generated from operating activities of $293 million and proceeds from the exercise of
stock options, warrants, and anti-dilution rights of $9.4 million. This is offset by principal
repayments, interest, and finance charges, including associated
taxes, under the gold prepay and stream credit facilities totaling
$89.1 million, interest and principal
repayments under the senior debt of $72.5
million, dividends of $47.0
million and cash outflows of $44.6
million for capital expenditures, which include costs for
the South Ventilation Raise ("SVR") and sustaining capital.
______________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on pages 13 to 16
of the Company's MD&A for the three and nine months ended
September 30, 2022 available on SEDAR.
|
The Company's strong operating cash flow during the first nine
months of 2022 is expected to continue for the remainder of the
year based on its production and AISC guidance. This strong
operating cash flow will continue to support aggressive debt
repayments, regional and near mine exploration, conversion drilling
at FDN, planned capital expenditures, growth initiatives and
regular dividend payments under the dividend policy approved in the
second quarter of this year.
Capital Expenditures
- South Ventilation Raise: Following the end of the
quarter, Lundin Gold announced that
the SVR at Fruta del Norte is now complete and operational. As a
result of the completion of the SVR, ventilation in the mine will
increase from 180 m3/s to
350 m3/s resulting in
improved efficiencies and enabling mining activities on all
levels.
- Sustaining Capital: The third raise of the tailings dam
started during the second quarter, continued in the third, and
construction is anticipated to be completed in Q4. Conversion
drilling at Fruta del Norte is now complete for 2022, and final
results were received during the quarter. The results of the 18,341
metre conversion drilling campaign will provide a significant
improvement in the current deposit geological model by enabling
better delineation of the distribution of and controls on higher
grade mineralized zones within the known resource. A new resource
model is underway, and the Company anticipates updating its
estimates of Mineral Resources and Reserves at Fruta del Norte
before the end of Q1 2023. Expenditures for other sustaining
capital projects, such as construction of a new warehouse and
improvements in the sewage treatment plants, will ramp up during
the remainder of the year.
Health and Safety
With the Company's success in facilitating the provision of
COVID-19 vaccines to its workforce and sub-contractor personnel,
including booster shots, COVID-19 protocols have been essentially
eliminated. Through vaccination campaigns by Ecuador's Ministry of Public Health, 100% of
the Company's employees and on-site contractors were vaccinated
and, as at September 30, 2022, 97.8%
had received at least one booster shot.
During the quarter there was one Lost Time Incident and no
Medical Aid Incidents. The Total Recordable Incident Rate was 0.33
per 200,000 hours worked during the nine months ended September 30, 2022.
Community
Various community projects supported by the Company are under
way, including sponsoring the establishment of micro businesses
providing ancillary services to Fruta del Norte and the community,
such as a textile manufacturer, fire extinguisher maintenance, and
pest control. These are in addition to the ongoing projects such as
road maintenance, education projects, and broader-based
development, with a focus upon the agricultural sector and
infrastructure challenges.
The Company continues to implement a range of initiatives. They
include working with Shuar indigenous communities to promote
improved agricultural practices, as well as the further development
of a Shuar-owned company. Together with the NGO Junior Achievement
Ecuador, efforts to prepare local students for the national high
school exit exam (and thus access to post-secondary education)
continue to show very strong results. Efforts to address social
challenges in the local community have continued, for example
through the ongoing implementation of after-school activities.
Exploration
Near Mine Exploration Program
The Company's
2022 near mine exploration started in Q3 2022 with two rigs testing
potential targets both at depth and to the south of Fruta del
Norte. During the third quarter of 2022, a total of 3,936 metres
were drilled across eight holes.
- 1,953 metres were completed across five underground drill holes
testing FDN's continuity at depth in the southern portion of the
mine. All the holes intercepted similar hydrothermal alteration
zones consistent with the Fruta del Norte deposit (silicification,
chalcedony and marcasite, veins, and veinlets or breccias), with
different intensities and thickness.
- 1,983 metres were completed across three surface drill holes to
test the southern continuity of the main controlling structures of
the Fruta del Norte deposit. Drilling intercepted a wide zone of
intense hydrothermal alteration represented by silicification,
chalcedony veins, pyrite and marcasite.
Results are pending. Drilling is continuing with a third rig now
added to test the east structure of Fruta del Norte.
Regional Exploration Program
The Company's 2022
regional exploration continued on the Barbasco target and at new
targets Capullo and Barbasco Norte with three drill rigs turning.
During the third quarter of 2022, a total of 6,187 metres were
drilled across nine holes, mainly at Barbasco and Capullo.
- Two drill holes were completed at Barbasco Norte for a total of
1,327 metres to test a continuous geochemical gold soil anomaly at
the edge of the Suarez Basin. Drilling intercepted a narrow
hydrothermal alteration zone with quartz veins and
illite-smectite-carbonate alteration, similar to that found in
epithermal systems like Fruta del Norte.
- At Barbasco, drilling continued to explore beneath the thick
sequence of finely laminated silica on top of the volcanic rocks in
the Santiago Formation, a proximal indicator of epithermal systems.
Three drill holes were completed for a total of 2,700 metres with
limited hydrothermal alteration intercepted.
- At Capullo, a total of 2,159 metres were drilled across four
holes. Drilling tested a major geological fault, associated with
anomalous geochemical values for gold and epithermal pathfinder
elements in rock samples. The first hole intersected a hydrothermal
alteration zone containing a one meter breccia zone with silica,
carbonate veinlets, enveloped by a wider 15 metre silica alteration
with disseminated sulfides. Other follow up drill holes intersected
narrower zones.
Results are pending. Drilling is continuing with two drill rigs,
one at Barbasco Norte and one to test other targets such as Capullo
and Quebrada La Negra before the end of the year.
Newcrest Earn-In Agreement
Newcrest
International Pty Ltd. ("Newcrest"), a wholly owned subsidiary of
Newcrest Mining Limited, met the first expenditure requirement of
$4.0 million under the Earn-In
Agreement covering eight of Lundin
Gold's early-stage concessions to the north and south of
Fruta del Norte and exercised its option to proceed to the second
stage of the earn-in in Q2 2022. Through completion of the second
stage, which requires the expenditure of a further $6.0 million, Newcrest would earn an initial 25%
interest in the eight concessions indirectly through a subsidiary
of Lundin Gold. Newcrest is
advancing the planning of a new program focused on drill testing
priority copper-gold porphyry targets which to date detected
low-level porphyry style copper mineralization. Drilling is
anticipated to restart in late Q4 2022.
Outlook
Lundin Gold's strong performance
in the first nine months of 2022 points to a strong overall result
for the year. Management is confident that the Company's production
will be at or near the high end of its guidance of 430,000 to
460,000 oz and at the low end of or slightly below its
AISC1 guidance of $820 to $870 per oz
gold sold.
The SVR, the last remaining scope of work under the original FDN
construction project, was completed shortly after the end of the
third quarter. As a result, ventilation in the mine will increase
from 180 m3/s to
350 m3/s resulting in
improved efficiencies and enabling mining activities on all
levels.
Sustaining capital will continue to be high for the last quarter
of 2022 with completion of construction of the third raise of the
TSF and several other capital projects underway or planned for
2022.
The conversion drilling program at Fruta del Norte is now
complete for 2022. All results were returned, data review and the
design of a new geological model is underway and is planned to be
completed in the last quarter of 2022. The Company is working on an
update to its estimates of Mineral Resources and Reserves and
anticipates filing an updated technical report prepared in
accordance with National Instrument 43-101 ("NI 43-101") for the
Fruta del Norte deposit before the end of Q1 2023.
The regional and near mine exploration drill programs are
continuing with a total of five rigs operating. Targets of interest
on the regional program currently are Barbasco Norte, Capullo, Puma
and Quebrada La Negra. Results are pending on drilling carried out
during Q3 2022. Under the near mine drill program, one rig is
operating underground to test extension of the deposit at depth and
to the east and west of the current edges of the deposit. On
surface, drilling is continuing to test potential mineralization
along the structural trend to the south of FDN and a second surface
rig will be moved from the regional program to test the east
structure of Fruta del Norte.
Qualified Persons
The technical information relating to Fruta del Norte contained
in this News Release has been reviewed and approved by Ron Hochstein P. Eng, Lundin Gold's President and CEO who is a
Qualified Person under National Instrument 43-101. The disclosure
of exploration information contained in this press release was
prepared by Andre Oliveira, P.Geo,
Lundin Gold's V.P. Exploration, who
is a Qualified Person in accordance with the requirements of NI
43-101.
Webcast and Conference
Call
The Company will host a conference call and webcast to discuss
its results on Wednesday, November 9,
2022 at 7:00 a.m. PT,
10:00 a.m. ET, 4:00 p.m. CET.
Conference Call Dial-In Numbers:
Participant Dial-In
North America:
|
+1
416-764-8659
|
Toll-Free Participant
Dial-In North America:
|
+1
888-664-6392
|
Participant Dial-In
Sweden:
|
0200899189
|
Conference
ID:
|
Lundin Gold /
93837422
|
A link to the webcast is available on the Company's website,
www.lundingold.com. A replay of the conference call will be
available two hours after the completion of the call until
November 23, 2022.
Toll Free North America
Replay Number:
|
+1
888-390-0541
|
International Replay
Number:
|
+1
-416-764-8677
|
Replay
passcode:
|
837422 #
|
_______________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on pages 13 to 16
of the Company's MD&A for the three and nine months ended
September 30, 2022 available on SEDAR.
|
About Lundin Gold
Lundin Gold, headquartered in
Vancouver, Canada, owns the Fruta
del Norte gold mine in southeast Ecuador. Fruta del Norte is among the
highest-grade operating gold mines in the world.
The Company's board and management team have extensive expertise
in mine operations and are dedicated to operating Fruta del Norte
responsibly. The Company operates with transparency and in
accordance with international best practices. Lundin Gold is committed to delivering value to
its shareholders, while simultaneously providing economic and
social benefits to impacted communities, fostering a healthy and
safe workplace and minimizing the environmental impact. The Company
believes that the value created through the development of Fruta
del Norte will benefit its shareholders, the Government and the
citizens of Ecuador.
Non-IFRS Measures
This news release refers to certain financial measures, such as
average realized gold price per oz sold, EBITDA, adjusted EBITDA,
cash operating cost per oz sold, all-in sustaining cost, free cash
flow, free cash flow per share, and adjusted earnings, which are
not measures recognized under IFRS and do not have a standardized
meaning prescribed by IFRS. These measures may differ from those
made by other companies and accordingly may not be comparable to
such measures as reported by other companies. These measures have
been derived from the Company's financial statements because the
Company believes that they are of assistance in the understanding
of the results of operations and its financial position. Please
refer to the Company's MD&A for the third quarter of 2022 for
an explanation of non-IFRS measures used.
Additional Information
The information in this release is subject to the disclosure
requirements of Lundin Gold under
the EU Market Abuse Regulation. This information was publicly
communicated on November 8, 2022 at
2:30 p.m. Pacific Time through the
contact persons set out below.
Caution Regarding Forward-Looking
Information and Statements
Certain of the information and statements in this press
release are considered "forward-looking information" or
"forward-looking statements" as those terms are defined under
Canadian securities laws (collectively referred to as
"forward-looking statements"). Any statements that express or
involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, identified by words
or phrases such as "believes", "anticipates", "expects", "is
expected", "scheduled", "estimates", "pending", "intends", "plans",
"forecasts", "targets", or "hopes", or variations of such words and
phrases or statements that certain actions, events or results
"may", "could", "would", "will", "should" "might", "will be taken",
or "occur" and similar expressions) are not statements of
historical fact and may be forward-looking statements. By their
nature, forward-looking statements and information involve
assumptions, inherent risks and uncertainties, many of which are
difficult to predict, and are usually beyond the control of
management, that could cause actual results to be materially
different from those expressed by these forward-looking statements
and information. Lundin Gold
believes that the expectations reflected in this forward-looking
information are reasonable, but no assurance can be given that
these expectations will prove to be correct. Forward-looking
information should not be unduly relied upon. This information
speaks only as of the date of this press release, and the Company
will not necessarily update this information, unless required to do
so by securities laws.
This press release contains forward-looking information in a
number of places, such as in statements relating to Company's 2022
production outlook, including estimates of gold production, grades
recoveries and AISC; expected sales receipts, cash flow forecasts
and financing obligations; its estimated capital costs, the
benefits of increased ventilation in the mine, the recovery of VAT;
the Company's declaration and payment of dividends pursuant to its
dividend policy; the timing and the success of its drill program at
Fruta del Norte and its other exploration activities; plans to
update estimates of mineral resources and reserves at Fruta del
Norte and file a related technical report; and the Company's
efforts to protect its workforce from COVID-19. There can be
no assurance that such statements will prove to be accurate, as
Lundin Gold's actual results and
future events could differ materially from those anticipated in
this forward-looking information as a result of the factors
discussed in the "Risk Factors" section in Lundin Gold's Annual Information Form dated
March 21, 2022, which is available at
www.lundingold.com or on SEDAR.
Lundin Gold's actual results
could differ materially from those anticipated. Factors that could
cause actual results to differ materially from any forward-looking
statement or that could have a material impact on the Company or
the trading price of its shares include: risks relating to
the impacts of a pandemic virus outbreak, political and economic
instability in Ecuador, production
estimates, mining operations, the Company's community
relationships, ability to maintain obligations or comply with debt,
financing requirements, volatility in the price of gold, shortages
of critical supplies, compliance with environmental laws and
liability for environmental contamination, lack of availability of
infrastructure, the Company's reliance on one mine, deficient or
vulnerable title to concessions, easements and surface rights,
uncertainty with the tax regime in Ecuador, the Company's workforce and its
labour relations, inherent safety hazards and risks to the health
and safety of the Company's employees and contractors, the
Company's ability to obtain, maintain or renew regulatory
approvals, permits and licenses, the imprecision of mineral reserve
and resource estimates, key talent recruitment and retention of key
personnel, volatility in the market price of the shares, the
potential influence of the Company's largest shareholders, measures
to protect endangered species and critical habitats, the reliance
of the Company on its information systems and the risk of
cyber-attacks on those systems, the cost of non-compliance and
compliance costs, exploration and development risks, risks related
to illegal mining, the adequacy of the Company's insurance,
uncertainty as to reclamation and decommissioning, the ability of
Lundin Gold to ensure compliance
with anti-bribery and anti- corruption laws, the uncertainty
regarding risks posed by climate change, the potential for
litigation, limits of disclosure and internal controls, security
risks to the Company, its assets and its personnel, conflicts of
interest, risks that the Company will not declare dividends and
social media and reputation.
SOURCE Lundin Gold Inc.