Lundin GOLD Inc. Reports Q2 2017 Results
NEWS RELEASE
LUNDIN GOLD INC. REPORTS Q2 2017 RESULTS
August 9, 2017 (Vancouver, Canada)… Lundin Gold Inc. ("Lundin Gold" or the "Company") (TSX:
“LUG”, Nasdaq Stockholm: “LUG”) is pleased to announce its results for the three and six months ended
June 30, 2017. All amounts in this release are in U.S. dollars unless otherwise indicated.
“We are proud of the progress that the Company has made on the development of the Fruta del Norte
Project during the second quarter of 2017. Construction is progressing with the advancements of the
two mine portals and site infrastructure and facilities,” commented Ron Hochstein, Lundin Gold’s
President and Chief Executive Officer. “Two other significant milestones, being the project update and
first stage of the project financing, were completed on time and in line with expectations. Both of these
accomplishments significantly de-risk the Project and bring us closer to achieving first production at the
end of 2019.”
Highlights
Fruta del Norte Project
• The mine development contractor mobilized to th e Fruta del Norte Project and construction of
mine portals commenced in May 2017.
• Construction of the mine development support facilities commenced during the second quarter
of 2017 in preparation for the development of the twin mine declines in the fourth quarter.
• On May 30, 2017, the Company announced the completion of a project update for the Fruta del
Norte Project. The update was based on advancing the design and estimates from the
Technical Report entitled " Fruta del Norte - NI 43-101 Tec hnical Report on Feasibility Study "
filed by the Company in June 2016. The updated results include a revised mine plan, updated
capital and operating costs and a new execution plan based on a self-perform approach.
Financing
• On January 16, 2017, the Company obtained a $35 million short-term unsecured credit facility
from an insider of the Company (the "Facility"). The outstanding balance of $28.6 million at
June 30, 2017 was repaid in full on July 14, 2017.
• On May 30, 2017, the Company secured a proj ect finance package of $400 to $450 million (the
“Financing”) with the Orion Mine Finance Grou p and Blackstone Tactical Opportunities (the
“Lenders”).
Exploration
• Exploration activities have focused on advancing targets to the drill testing stage. The Puma,
Barbasco and Fruta del Norte SW epithermal gold- silver targets within the Suarez pull-apart
basin have been better defined; while outside of the basin, the Gata Salvaje, Las Nubes and El
Quimi targets have been advanced.
Financial Results
(in thousands, except per share amounts)
Three months ended
June 30,
Three months ended
March 31,
2017 2016 2017 2016
Results of Operations:
Net income (loss) for the period $ 784 $ (12,431) $ (5,603) $ (27,140)
Income (loss) per share
Basic 0.01 (0.12) (0.05) (0.27)
Diluted 0.01 (0.12) (0.05) (0.27)
(in thousands)
As at June
30, 2017
As at
December
31, 2016
Financial Position:
Cash 134,336 8,503
Working capital 107,024 1,022
Property, plant and equipment 49,043 7,822
Mineral properties 239,795 236,874
Total assets 460,838 278,906
Long-term liabilities 154,992 974
Note: the complete analysis of the Q2 2017 financial results can be found in the MD&A and financial statements dated August 9,
2017 filed on SEDAR.
The Company generated net income in the current quarter due to the recognition of a $4.4 million gain
on the fair value revaluation of its long-term debt at June 30, 2017. In addition, starting in the first quarter
of 2017, the Company commenced the capitalization of expenses relating to the development of the
Fruta del Norte Project in accordance to the Company’s accounting policy. This resulted in the reduction
of project evaluation expenditures. On the other hand, the Company incurred higher professional fees
during the second quarter of 2017 due to ongoing costs relating to project finance initiatives.
The loss in the six months ended June 30, 2017 is lower compared to that of the six months ended June
30, 2016 due to the revaluation of the Company’s long-term debt and commencement of capitalization
of expenses as noted above.
Liquidity and Capital Resources
As at June 30, 2017, the Company had cash of $1 34.3 million and a working capital of $107.0 million
compared to cash of $8.5 million and a working capita l balance of $1.0 million at December 31, 2016.
The change in cash was primarily due to proceeds fr om the Financing offset by costs incurred for the
development of the Fruta del Norte Project of $29.6 million and exploration expenditures of $3.8 million.
Short-term credit facility
On January 16, 2017, the Company obtained the Facility from an insider of the Company. On July 14,
2017, the Company repaid the $28.6 million outstanding balance of the Facility in full.
The Company issued an aggregate of 60,000 common shares on January 16, 2017 as consideration for
the Facility in lieu of fees. No interest was payable in cash during the term of the Facility. The Company
also issued 1,700 common shares per each $1 million of the Facility drawn down and outstanding each
month. As at June 30, 2017, 117,290 common shares valued at $521,659 have been issued for amounts
drawn down and outstanding under the Facility. All securities issued in conjunction with the Facility are
subject to a four-month hold period under applicable securities law.
The Financing
On May 30, 2017, the Company's operating subsidiary, Aurelian Ecuador S.A. ("Aurelian"), which holds
the Fruta del Norte Project, closed the Financing co mprised of a gold prepay credit facility for $150
million (the “Prepay Loan”), a stream loan credit facility of $150 million (the “Stream Loan”) and an
offtake agreement (the “Offtake”). The Lenders also committed to participate in future equity financings
of the Company required to fund the Fruta del Nort e Project, in an aggregate amount of not less than
$100 million and not more than $150 million, as and wh en initiated by the Company and subject to
minimum financing thresholds.
Pursuant to the Financing, the Company, together with Aurelian and other subsidiaries related to the
Project (collectively, the “Project Subsidiaries”), are subject to a number of non-financial covenants while
amounts remain outstanding. The Prepay and Stream Loans are secured by way of a first ranking
charge over the Project Subsidiaries’ assets, pledges of the shares of the Project Subsidiaries and
guarantees of the Company and the Project Subsidiaries.
To date, $150 million has been advanced under the Financing. The remaining $150 million is available
to be drawn at the option of Aurelian, up to the end of June 2018, subject to the perfection of all security
and certain other conditions.
(a) Gold prepay credit facility
The Prepay Loan is a senior secured loan facility of $150 million with a stated interest rate of
7.5% per annum with interest accruing based upon the outstanding balance. As at June 30,
2017, $75 million has been drawn under this facility.
The Prepay Loan is amortized and repayable over 19 quarters starting December 31, 2020.
The quarterly payments are equivalent to the value of 11,500 oz. of gold based on the spot price
of gold at the time of the payment date. T he excess of the quarterly repayments over the
principal and interest components, if any, is a variable additional charge (the “Finance Charge”).
If the average gold price in the fiscal quarter pr ior to repayment date is greater than $1,436 or
less than $1,062, then the repayments are reduce d or increased by 15%, respectively. In
addition, the Company has an option to defer the quarterly instalments for up to four (4) quarters
by increasing the gold equivalent deliveries by 1,000 oz. for each deferred quarter.
(b) Stream loan credit facility
The Stream Loan is a senior secured loan facility of $150 million with a stated interest rate of
7.5% per annum with interest accruing based upon the outstanding balance. As at June 30,
2017, $75 million has been drawn under this facility.
The Stream Loan is repayable in variable monthly instalments equivalent to the value of 7.75%
of gold production less $400 per oz. (the “Gold Base Price”) and 100% of the silver production
less $4 per oz. (the “Silver Base Price”) upon the start of commercial production at the Fruta del
Norte Project, up to a maximum of 350,000 oz. of gold and six million oz. of silver. The Gold
Base Price and Silver Base Price are subject to increase by 1% per annum starting on the third
anniversary of the commercial production date. The excess of the monthly repayments over
the principal and interest components, if any, is a Finance Charge.
The monthly gold and silver quantities and associated maximum deliverable ounces are subject
to increase by set percentages if commercial production is not achieved by December 31, 2020
until October 1, 2021. In addition, the Company has the option to repay (i) 50% of the remaining
Stream Loan on June 30, 2024 for $150 million and / or (ii) the other 50% of the remaining
Stream Loan on June 30, 2026 for $225 million.
(c) Offtake Commitment
The Lenders have been granted the right to purchas e 50% of Fruta del Norte gold production,
up to a maximum of 2.5 million oz., at a price determined based on monthly delivery dates and
a defined quotational period. This obligation will be satisfied first through the sale of doré and
then, if required, financial settlement.
Outlook
The Fruta del Norte Project is in transition from the Early Works phase into the Project Execution phase
which began on July 1, 2017. Detailed engineering work is expected to be substantially complete by
the third quarter of 2018. The majority of plant and mine equipment purchase orders are expected to
be placed by the end of 2017. Mine development is expected to be well underway with completion of
the mine decline portals and soft tunneling and commencement of the underground development by the
end of 2017. The approval of the power line EIA and the new Mountain Pass quarry are anticipated
within the next twelve months to allow construction to begin. Site capture is expected to be substantially
complete in 2018.
During the next 12 months, the Company will also cont inue to work with its financial advisors to put in
place the remaining funding for the construction of the Fruta del Norte Project.
An airborne resistivity (ZTEM) survey is planned to better define targets in and in proximity to the Suarez
pull-apart basin, and an airborne MAG/RAD survey will be carried out on out lying concessions to
facilitate reconnaissance in those areas. The expl oration activities will focus on advancing existing
targets to the drill-ready stage and based on current plans drilling of some of the targets is anticipated
for late 2017.
Qualified Person
The technical information relating to the Fruta del Norte Project contained in this press release has been
reviewed and approved by Ron Hochst ein P. Eng, Lundin Gold’s President & CEO who is a Qualified
Person under NI 43-101. The disclosure of exploration information contained in this press release was
prepared by Steve Leary, MAusIMM CP(Geo), a consultant to the Company, who is a Qualified Person
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" which has an effective date of April 30, 2016. The Technical
Report is available for review under the Comp any'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 three months and six ended June 30, 2017
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 Securiti es Markets Act. This information was publicly
communicated on August 9, 2017 at 2:30pm Pacific Time.
About the Company:
Lundin Gold Inc., headquartered in Vancouver, Canada, owns the Fruta del Norte (FDN) gold project in
southeast Ecuador, which is one of the largest and highest grade undeveloped gold projects in the world.
The Company has an experienced board and management team with extensive expertise in
construction and operations dedicated to the advancement of this exceptional project.
The Company operates with transparency and in accordance with international best practices in the
areas of sustainability, health and safety, environment and community relations. The Company is
committed to addressing the challenge of sustainab ility - delivering value to its shareholders, while
simultaneously providing economic and social b enefits to impacted communities and minimizing its
environmental footprint. The Company believes that the value created through the development of FDN
will not only greatly benefit its shareholders, but also the Government and people of Ecuador.
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 Financing; the timing, progress and success of the Early Works program; the success
of the Company’s exploration plans and activities; planned exploration and development expenditures
and reclamation costs; the timing and success of permitting and regulatory approvals; the results of the
project update; future sources of liquidity, capita l expenditures and requirements; the expectations of
market prices and costs; the development, construc tion 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.