Lundin GOLD Inc. Reports 2016 Results
NEWS RELEASE
LUNDIN GOLD INC. REPORTS 2016 RESULTS
February 24, 2017 (Vancouver, Canada)… Lundin Gold Inc. ("Lundin Gold" or the "Company") (TSX:
“LUG”, Nasdaq Stockholm: “LUG”) is pleased to announce its results for the year ended December 31,
2016. All amounts in this release are in U.S. dollars unless otherwise indicated.
Highlights
An independent feasibility study for the Fruta del Norte Project (“FDN” or the “Project”) was
completed in June 2016 (the “Feasibility Study”).
In July, the La Zarza concession (host to FDN) phase change application was approved by the
Government of Ecuador. With this approved, the status of the La Zarza concession was
converted from the Exploration Phase to the Exploitation Phase under Ecuador's mining law.
The Company completed an equity financing with a syndicate of underwriters (the
"Underwriters"), pursuant to which the U nderwriters purchased, on a bought deal basis,
17,250,000 common shares of the Company at a price of CAD$5.50 per common share (the
“Offering”). Gross proceeds under the Offering were CAD$94,875,000 ($72.6 million).
An exploration drilling campaign was completed in early August, having tested five key targets
located 15 to 20 km south of the FDN. The results of the drilling program indicated that further
follow up is required.
In October, the Company’s Environmental Impact Study (the "EIS") for FDN was approved and
the Environmental License was granted by the Government of Ecuador.
During 2016, the Company completed negotiati ons and signed the Exploitation Agreement (the
“EA”) for FDN with the Government of Ecuador in December. The EA, combined with existing
laws and regulations, establishes the fiscal, operational and commercial terms and conditions
for the development of FDN.
During 2016, the Company completed negotiations and signed the Investment Protection
Agreement (the “IPA”) with the Government of Ecuador in December. The IPA provides further
legal and tax stability to Lundin Gold in conjunction with the EA.
The Company continued to progress its planned Early Works program to advance the
engineering and initiate field work to maintain the project critical path. During the fourth quarter
of 2016, work commenced on site clearing and earth works associated with the development of
the area and facilities to support the commencement of construction of the mine portals and
mine access declines in the second quarter of 2017. The Company also closed bids for the
underground mine development contract which is expected to be awarded in first quarter of
2017.
On January 16, 2017, the Company secured a $35 million credit facility from an insider of the
Company.
On February 21, 2017, the Company awarded t he mine development contract for FDN which
encompasses construction of the mine portals and soft tunnelling work and the development of
the twin declines.
”Lundin Gold made significant advancements in the development of FDN during 2016 as the Company
completed the Feasibility Study, obtained the Environmental License, and signed the EA and IPA.” said
Lundin Gold President and CEO, Ron Hochstein, “We also have embarked on our Early Works Program.
We expect 2017 to be another milestone year in th e development of FDN, as we complete our project
financing and commence the construction starting with the mine portals and declines in mid-2017.”
Financial Results
(in thousands, except per share amounts)
Three months ended
December 31,
Year ended
December 31,
2016 2015 2016 2015
Results of Operations:
Net loss for the period $ (23,889) $ (12,761) $ (62,814) $ (45,324)
Basic and diluted loss per share (0.20) (0.13) (0.59) (0.45)
(in thousands)
A s a t
December
31, 2016
As at
December
31, 2015
Financial Position:
Cash 8,503 21,360
Working capital 1,022 16,314
Property, plant and equipment 7,822 8,557
Mineral properties 236,874 236,874
Total assets 278,906 267,400
Long-term liabilities 974 867
Note: the complete analysis of the 2016 financial results can be found in the MD&A and financial statements dated February 24,
2017 filed on SEDAR.
The current quarter’s net loss is higher compared to losses in prior quarters, including the fourth quarter
of 2015, primarily because of an increase in general and administrative expenditures. This increase
was mainly due to the one-time mandatory contribut ion to the Government of Ecuador for earthquake
relief efforts (see below), a settlement of proceeding legal dispute (see below), an increase in project
evaluation and exploration expenditures, and higher employee compensation due to incentive bonuses.
The loss during the year ended December 31, 2016 is higher compared to the previous year as a result
of exploration expenditures of $5.3 million in 2016 compared to $0.9 million in 2015. Professional fees
increased by $1.3 million due to an increase in corpor ate activities relating to negotiations with the
Government of Ecuador on the EA and IPA. The Company was also required to pay $3.9 million due
to a one-time mandatory contribution to the Government of Ecuador for the earthquake relief efforts. A
law passed by the Government of Ecuador in response to an earthquake in the provinces of Manabí
and Esmeraldas in Ecuador on April 16, 2016 es tablished a mandatory one-time levy was based on
0.9% of the book value of the equity interest held in Ecuadorian companies by non-resident entities and
is not deductible for income tax purposes.
In addition, the Company incurred $2.8 million to settle a legal dispute against the Company relating to
a net smelter royalty on a Russian gold project previ ously held by the Company. Lastly, in 2016, the
Company generated a gain on account of foreign exchange of $5.2 million. This gain was generated by
the substantial holdings of U.S. dollars at the parent company level. As the functional currency of the
parent company is the Canadian dollar, a strengthe ning of the U.S. dollar against the Canadian dollar
during the year ended December 31, 2015 generated a gain in terms of Canadian dollars. The foreign
exchange gain was less in 2016.
Liquidity and Capital Resources
As at December 31, 2016, the Company had cash of $8.5 million and a working capital balance of $1.0
million compared to cash of $21.4 million and a worki ng capital balance of $16.3 million at December
31, 2015. The $12.9 million decrease in cash wa s due primarily to $57.4 million used in operating
activities relating to project evaluation expenses on FDN. The Company also paid its first advance
royalty payment of $25 million upon signing of the EA. The balance of the payments will be due in two
equal disbursements of $20 million on the first and se cond anniversary of signing. This decrease was
offset by cash provided by financing activities of $69.7 million mainly from an equity financing (see
paragraph below).
Equity Financing
The Company completed an equity financing pursuant to which the Underwriters purchased, on a bought
deal basis, 17,250,000 common shar es of the Company at a price of CAD$5.50 per common share.
The total gross proceeds raised under the Offering was CAD$94,875,000 ($72.6 million). Share issue
costs of $3.3 million were paid resulting in net proc eeds of $69.3 million received by the Company in
relation to the Offering.
Short-term credit facilities
On June 8, 2016, the Company secured an $18 million credit facility from an insider of the Company. A
total of $8 million was drawn down under the Facility and repaid in full on July 22, 2016 from the proceeds
of the Offering. A total of 39,267 common shares of the Company were issued in lieu of interest and
fees.
Subsequently, on January 16, 2017, the Company secured a second short-term $35 million credit facility
from the same party (the “2017 Facility”).
The 2017 Facility is evidenced by a debenture (the “2017 Debenture”) which is unsecured and is due
on the earlier of the closing of a financing by the Company or May 31, 2017 (the "Maturity Date"). No
interest is payable in cash during the term of the 2017 Debenture. Any amount of the 2017 Facility
remaining unpaid and outstanding on or after the Maturity Date shall bear interest at a rate of 5.00% per
annum until repaid in full.
The Company issued an aggregate of 60,000 common shares on January 16, 2017 as consideration for
the 2017 Facility in lieu of fees. The Company will also issue an additional 1,700 common shares per
month for each $1 million of the 2017 Facility draw n down and outstanding until the Maturity Date. All
securities issued in conjunction with the 2017 Facility will be subject to a four-month hold period under
applicable securities law.
Outlook
The Company remains on track with the Early Works program which is expected to be completed by
mid-2017. In addition, the mine development co ntract for FDN was aw arded on February 21, 2017
which encompasses construction of the mine portals and soft tunnelling work and the development of
the twin declines. These activities support the commencement of construction of the mine portals and
twin declines in the second quarter of 2017.
Upon completion of basic engineering, near the end of the first quarter of 2017, the Company anticipates
preparing a production plan based on the new mine plan, updated capital and operating cost estimates
and a revised execution plan taking into account a self perform approach versus conventional EPCM
approach.
During the next 12 months, the Company will continue to work with its financial advisors to put in place
the financing for the construction of FDN. Fundi ng for the construction and development of FDN is
expected to be done by various financing transactions or arrangements, including equity financing, debt
financing, stream financing, joint venturing or other means with the objective of securing a first stage of
funding by mid-2017.
Qualified Person
The technical information relating to the FDN contained in this press release has been reviewed and
approved by Ron Hochstein P. Eng, Lundin Gold’s President & CEO, and Nicholas Teasdale, MAusIMM
CP(Geo), Lundin Gold’s Vice-President Exploration, both of whom are Qualified Persons under NI 43-
101.
Full details of the Feasibility Study can be found in a technical report entitled "Fruta del Norte - NI 43-
101 Technical Report on Feasibility Study" (the “Technical Report”) which has an effective date of April
30, 2016. The Technical Report is available for review under the Company's profile on SEDAR
(www.sedar.com) and on the Company's website (www.lundingold.com).
Additional Information
The Company’s consolidated financial statements for the year ended December 31, 2016 and related
management’s discussion and analysis are available on the Company’s website at www.lundingold.com
or under its profile on SEDAR at www.sedar.com.
The information in this release is subject to the disclosure requirements of Lundin Gold under the EU
Market Abuse Regulation and the Swedish Financial Instruments Trading Act. This information was
publicly communicated on February 24, 2017 at 4:00 p.m. Pacific Time.
About the Company:
Lundin Gold Inc. owns the Fruta del Norte ("FDN") go ld project located in southeast Ecuador. FDN is
one of the largest and highest grade undeveloped gold projects in the world. The Company is advancing
FDN in order to realize the significant potential of this asset.
The Company believes that the value created will no t only greatly benefit shareholders, but also the
Government and people of Ecuador who are the Company's most important stakeholders in this project.
Lundin Gold views its commitment to corporate soci al responsibility as a strategic advantage that
enables it both to access and effectively manage business opportunities in increasingly complex
environments. Lundin Gold is committed to addressing the challenge of sustainability - delivering value
to its shareholders, while simultaneously prov iding economic and social benefits to impacted
communities and minimizing its environmental footprint.
For more information, please contact
Lundin Gold Inc.
Ron F. Hochstein
President and CEO
593 2-299-6400
604-806-3589
Lundin Gold Inc.
Sophia Shane
Corporate Development
604-689-7842
604-689-4250 (FAX)
www.lundingold.com
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 “for ward-looking statements”). Any st atements that express or involve
discussions with respect to predictions, expectat ions, 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 thes e 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 informat ion in a number of places, such as in statements
pertaining to: the benefits to be derived under the exploitation agreement and the investment protection
agreement; the timing, progress and success of the Early Works program; the success of the Company’s
exploration plans and activities; planned explorat ion and development expenditures and reclamation
costs; the timing and success of permitting and regulatory approvals; the completion of a new production
plan within the expected timeframe; future sources of liquidity, capital expenditures and requirements;
the expectations of market prices and costs; the development, construction and operation of FDN;
anticipated future tax payments and rates, cash flows and their uses.
Lundin Gold’s actual results could differ materially from those anticipated. Management has identified
the following risk factors which could have a material impact on the Company or the trading price of its
shares: the ability to arrange financing and the risk to shareholders of dilution from future equity
financings; risks related to carrying on business in an emerging market such as possible government
instability and civil turmoil and economic instability; vola tility in the price of gold; the timely receipt of
regulatory approvals, permits and licenses; risks associated with the performance of the Company’s
contractors; risks inherent in t he development of an underground mine; deficient or vulnerable title to
mining concessions and surface rights; shortages of resources, such as labour, and the dependence on
key personnel; risks associated with the Company’s community relationships; unreliable infrastructure
and local opposition to mining; volatility in the market price of the Company’s shares; uncertainty with
the tax regime in Ecuador; measures required to pr otect endangered species; difficulty complying with
changing government regulations and policies, including without limitation, compliance with
environment, health and safety regulations, and the co st of compliance or failure to comply with
applicable laws; exploration and development risks; the accuracy of the Mineral Reserve and Resource
estimates for FDN and the Company’s reliance on one project; liabilities; the Company’s lack of
operating history in Ecuador; illegal mining; uncertainty as to reclamation and decommissioning; adverse
global economic conditions; risks associated with the Company’s information systems; the inadequacy
of insurance; risks of bribery or corruption; the poten tial for litigation; limits of disclosure and internal
controls; and the potential influence of the Company’s largest shareholders.
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 Management
Discussion and Analysis for the financial year ended December 2016, which is available on SEDAR at
www.sedar.com.