Lundin GOLD Reconfirms Project Schedule and Lowers All-IN Sustaining Cost Estimate to US$583 PER Ounce FOR Its Fruta Del Norte GOLD Project
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NEWS RELEASE
LUNDIN GOLD RECONFIRMS PROJECT SCHEDULE AND LOWERS
ALL-IN SUSTAINING COST ESTIMATE TO US$583 PER OUNCE FOR
ITS FRUTA DEL NORTE GOLD PROJECT
September 19, 2018 (Vancouver, Canada ) Lundin Gold Inc. ("Lundin Gold" or the
"Company") (TSX: LUG, Nasdaq Stockholm: LUG) is pleased to announce the results of its
update of the project estimate (“UPE”) for its Fruta del Norte gold project (“Fruta del Norte” or
the “Project”). The UPE involved a thorough review of the mine plan, capital and operating
cost re-estimate and an update to the Project schedule. All amounts are in U.S. dollars unless
otherwise indicated. This update should be read in conjunction with the Technical Report
entitled "Fruta del Norte - NI 43-101 Technical Report on Feasibility Study" (the " Technical
Report") filed by the Company in June 2016 , with an effective date of April 30, 2016, and the
Company’s project update press release dated May 30, 2017.
UPE Highlights:
• Reconfirmed construction schedule with first mine production planned in Q2 2019 and
first gold production planned in Q4 2019.
• Reduced period of capital payback to 3.5 years from 4 years with improved IRR to
17.5% from 16.3%.
• A 10% increase in NPV 5% to $786 million from $717 million.
• Estimated all-in sustaining cost (“AISC”) reduced to $583 per ounce of gold from $609
per ounce of gold.
• Estimated operating cost per tonne decreased 7.3% from $111.84 to $103.65.
• Estimated total gold production increased by 73,000 ounces to 4.6 million ounces over
a 15 year mine life.
• Total estimated capital expenditures increased only 1.2% from $684 million to $692
million.
“At the end of August we had committed 63% of planned capital expenditure, and construction
is 27% complete. The UPE demonstrates that we are on track to build Fruta del Norte on
budget and on schedule which is a credit to our Project team,” said Ron Hochstein, Lundin
Gold’s President and CEO. “We were able to lower the estimated AISC through improvements
in the mine plan, refinement of processing costs and negotiation of smelting contracts for the
concentrate. This further demonstrates the robustness of our high-grade Fruta del Norte gold
deposit.”
Fruta del Norte Update:
• As at August 31, 2018, a total of 2.9 kilometres (“km”) had been achieved including
declines and auxiliary development, with 1.4 km and 1.5 km achieved in the Kuri and
K’isa declines, respectively.
• Daily August average advance rates were 6.1 metres (“m”) for both Kuri and K’isa,
versus a target of 4.7 m and 4.3 m per day, respectively.
• Both declines have now crossed the Machinaza Fault and have gone under the
Machinaza River, with no water inflows.
• Grinding build ing steel erection is underway , and process plant concrete is 30 %
complete.
• Mill process equipment is arriving on site, and the grinding mills are currently en route.
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• The t wo construction fronts on the North Access Road have met , and the road is
expected to be complete by the end of September.
• The Environmental Licence was received for the Mountain Pass Quarry , and
negotiation of the Quarry Exploitation Agreement with the Yantzaza municipality is well
underway.
• Construction of the powerline, both onsite and offsite, is proceeding.
• Construction of the Tailings Storage Facility is ongoing.
• 63% of planned capital expenditure is now committed or incurred, of which 36% of
planned capital expenditure has been incurred. Project engineering i s now 60%
complete.
• Activities have commenced to prepare for operations including the hiring of the general
manager and mill manager.
Update of the Project Estimate Details
Probable Mineral Reserve Estimates
The Company has increased its estimates for Probable Mineral Reserves slightly by 80,000
ounces when compared to the Project update annouced on May 30, 2017 (the “PPR”) and by
204,000 ounces when compared to the estimates contained in the Technical Report.
Table 1. Probable Mineral Reserves(1)
Technical Report PPR(2)(3)(4)(5)(6)(7)(8) UPE(2)(3)(4)(5)(6)(7)(8)
Mt 15.5 16.8 17.8
Au (g/t) 9.67 9.16 8.74
Au (Moz) 4.82 4.94 5.02
Ag (g/t) 12.7 12.6 12.1
Ag (Moz) 6.34 6.79 6.95
See “Additional Technical Information” below for further information regarding the Probable
Mineral Reserve Data.
Mine Plan Review
As a result of the UPE, Fruta del Norte’s mine plan has been improved, and a strategic decision
was made to utilize primary-secondary sequenc ing versus end -slicing. Implementing this
methodology provides greater operational flexibility with access to more areas of the ore body
simultaneously and reduced backfill costs due to longer cure times and less binder
requirements.
Other changes to the mine plan included:
• Lower cut -off grade from 4.1 gram per tonne gold (“g/t gold”) to 3.8 g/t gold for
transverse stoping and from 5.1 g/t gold to 5.0 g/t gold for the drift and fill stopes.
• Better balancing of mining methods with a slight increase in transverse stoping from
72% to 75% of ore removed. The remainder will be mined using drift and fill techniques.
• Total capital development, including owner and contractor, reduced from 19.0 km to
14.7 km.
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Capital Cost Estimate
Revised pre -production capital cost is now estimated to be $6 92 million, inclusive of
contingency and pre-production expenses and revenues and net of taxes. This represents a
slight increase of $8 million, or 1.2% over the PPR estimate, which totalled $684 million. This
increase is mainly due to infrastructure costs and community and environmental monitoring
being higher in the UPE than the PPR.
Operating Cost Estimate
Operating costs estimate is down 7.3% or $8.19 in the UPE to $103.65 on a per tonne basis
compared to the PPR, and 3.7% or $15.89 to $408.20 on a per ounce basis. This is a result
of the optimized mining methods , which reduced the mining costs , and reduced reagent
consumption estimates based on the most recent metallurgical test work.
Table 2. Life of Mine Operating Cost by Area
Area PPR Cash
Cost ($/t)
PPR Cash Cost
($/oz Au
payable)
UPE Cash
Cost ($/t)
UPE Cash Cost
($/oz Au
payable)
Mining 54.98 208.48 47.85 188.4
Process 32.44 123.00 27.60 108.71
Surface 4.21 15.96 6.17 24.32
General & Administration 20.21 76.65 22.02 86.74
Total Operating Cost 111.84 424.09 103.65 408.20
Note: Numbers may not add due to rounding
All-In Sustaining Cost Estimate
AISC is now expected to be $583 per ounce of gold instead of $609 per ounce of gold,
representing a $26 , or 4% reduction. In addition to the lower mining costs, average
concentrate treatment charges in the UPE are significantly lower than the charge of $275 per
dry metric tonne estimated in the PPR , which was offset by slig htly higher transportation,
refining and penalty charges.
Table 3. Life of Mine AISC ($/oz Au payable)
Area PPR Cash Cost UPE Cash Cost
On site operating cost 424 408
Treatment and refining charges 84 78
Royalties and production taxes 76 74
By-product silver credit (22) (23)
Cash Cost 561 537
Sustaining capital and closure
costs 49 46
AISC $ per oz Au 609 583
Note: Numbers may not add due to rounding
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Project Economics
Project economics continued to improve using the same gold ($1 ,250 per ounce) and silver
price assumptions ($20 per ounce) used for the PPR and the Technical Report. The capital
payback period is now estimated at 3.5 years with a 17.5% IRR and an NPV 5% of $786
million.
Table 4: Project Economics
PPR After Tax UPE After Tax
Net Present Value at a 5%
discount rate (NPV5) $717 million $786 million
Internal Rate of Return
(IRR) 16.3% 17.5%
Capital Payback (years) 4.0 3.5
Notes:
1. All figures are reported on a 100% equity project basis valuation. Capital payback is calculated based on start of
commercial production.
2. Economic valuation is presented using a start date of July 1, 2017.
Additional Technical Information
Qualified Person
The technical information relating to the Fruta del Norte Project contained in this Press Release
has been reviewed and approved by Ron Hochstein P. Eng, Lundin Gold's President and CEO,
who is a Qualified Person under NI 43-101.
Notes to Table 1. Probable Mineral Reserves
(1) Except as set out below, the assumptions, parameters and risks associated with the results
of the Technical Report for the Project, the Mineral Resource and Mineral Reserve
estimates included therein, the PPR and the UPE, are as set out in the Technical Report.
(2) All Mineral Reserves in this table are Probable Mineral Reserves. No Proven Mineral
Reserves were estimated.
(3) PPR estimates are as at December 31, 2017 and UPE estimates are as at September 19,
2018.
(4) Mineral Reserves were estimated using key inputs listed in the table below:
Key Inputs for Mineral Reserve
Estimate PPR UPE Unit
Gold Price 1,250 1,250 $/oz
TS 57 48 $/t
Overhand D&F 79 81 $/t
Underhand D&F 85 71 $/t
Process, Surface Ops, G&A 58 58 $/t
Dilution Factor 10 10 percent
Concentrate Transport & Treatment 9 9 $/t
Royalty 71 71 $/oz
Gold Metallurgical Recovery 91.7 91.7 percent
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(5) Gold cut-off grades for the different mining methods are listed in the table below:
Gold Cut-off Grade PPR UPE Unit
Transverse Stope 4.1 3.8 g/t
Overhand D&F 4.8 5.0 g/t
Underhand D&F 5.1 5.0 g/t
Note: An increased cut-off grade was used in the PPR Overhand
D&F for the initial years of 6.5 g/t.
(6) The average silver metallurgical recovery is 81.6%. The silver price assumption was
$20/oz. Silver was not considered in the calculation of the cut-off grade.
(7) Tonnages are rounded to the nearest 1,000 t, gold grades are rounded to two decimal
places, and silver grades are rounded to one decimal place. Tonnage and grade
measurements are in metric units; contained gold and silver are reported as thousands of
troy ounces.
(8) Rounding as required by reporting guidelines may result in summation differences.
For information with respect to the key assumptions, parameters and risks associated with the
results of the Technical Report for the Project, the Mineral Resource and Mineral Reserve
estimates included therein and other technical information, please refer to the Technical Report
filed on SEDAR at www.sedar.com.
About Lundin Gold
Lundin Gold, headquartered in Vancouver, Canada, is developing its wholly-owned Fruta
del Norte gold project in southeast Ecuador. Fruta del Norte is one of the world's largest,
highest-grade gold projects currently under construction. The Company's board and
management team have extensive expertise in mine construction and operations, and are
dedicated to advancing this project through to first gold production in the fourth quarter of
next year.
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 people of Ecuador.
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 submitted for publication
September 19, 2018 at 05:00 a.m. PT through the contact persons set out below.
For more information, please contact
Lundin Gold Inc.
Ron F. Hochstein
President and CEO
+593 2-299-6400
+604-806-3589
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Lundin Gold Inc.
Sabina Srubiski
Manager, Investor Relations
+1-604-806-3089
www.lundingold.com
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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 predicti ons, 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 reas onable, 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
pertaining to: timing of first gold production and commercial production, scheduling, gold and silver price
and exchange rate assumptions, cash flow forecasts, projected capital and operating costs, metal or
mineral recoveries, mine life and production rates , the Company's potential plans and operating
performance, changes to the mine plan, the estimation of mineral reserves or the tonnage, potential
production from and viability of the Company's Project, access to funding, the terms of the Company’s
smelting contracts, performance of the Company's contractors , cons truction and infrastructure
development.
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; the ability to maintain its obligations under its debt facilities ; risks related to carrying on
business in Ecuador; volatility 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 the
development of an underground mine; deficient or vulnerable title to mining concessions and surface
rights; shortages of critical resources, labour and key executive personnel, such as input commodities,
equipment and skilled labour, and the dependence on key personnel; risks associated with the
Company's community relationships; unreliable infrastructure; volatility in the market price of the
Company's shares; the potential influence of the Company's largest shareholders; uncertainty with the
tax regime in Ecuador; measures required to protect endangered species; the cost of compliance or
failure to comply with applicable laws; exploration and development risks; the accuracy of the Mineral
Reserve and Resource estimates for the Fruta del Norte Project; the Company's reliance on one project;
risks related to artisanal and illegal mining; uncertainty as to reclamation and decommissioning; risks
associated with the Company's information systems; competition in the mining industry; the ability to
obtain adequate insurance; ris ks of bribery or corruption; the potential for litigation; and limits of
disclosure and internal controls.
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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 20, 2018, which is available under the Company’s profile at www.sedar.com .
Figure 1. Fruta del Norte project site as at August 2018
Figure 2. Underground mine development in the Kuri decline
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Figure 3. Grinding building steel erection is underway
Figure 4. Carbon-in-leach tank foundations