Lundin GOLD Reports Q1 2019 Results Fruta Del Norte Construction ON Schedule and ON Budget
885 West Georgia Street T +1 604 689 7842
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NEWS RELEASE
LUNDIN GOLD REPORTS Q1 2019 RESULTS
FRUTA DEL NORTE CONSTRUCTION ON SCHEDULE AND ON BUDGET
May 10, 2019 (Vancouver, Canada) Lundin Gold Inc. ("Lundin Gold" or the "Company")
(TSX: LUG, Nasdaq Stockholm: LUG) is pleased to announce its results for the first quarter
ended March 31, 2019. All amounts are in U.S. dollars unless otherwise indicated.
“This is a pivotal year for Lundin Gold as we move from construction to production at Fruta del
Norte. During this quarter we accomplished two major milestones with the underground
development reaching the orebody and introduction of the first owner mining crews,” said Ron
Hochstein, Lundin Gold’s President and CEO. “In the next quarter we will reach peak staffing
and reach several other project milestones. We remain on schedule and on budget to
commence commissioning in the third quarter and achieve first gold as expected in the fourth
quarter of this year.”
Highlights
Fruta del Norte Gold Project (“Fruta del Norte” or the “Project”)
• Detailed engineering was 93% complete and approximately 80% of Project capital
expenditure has been committed.
• Overall construction progress was 59% complete.
• Underground development continued ahead of projections, and Company crews
started on February 14, 2019.
• All trades are now active on the construction of the process plant and associated
facilities.
• Powerline construction from Bomboiza to site is 76% complete. Work commenced in
early April on the Bomboiza substation for the connection to the national power grid.
• Construction of tailings dam is progressing on schedule.
• Training and hiring for operations are well underway and staffing of operations positions
continues with key managers in place.
Financing
• Completed a bought deal equity offering of 8,625,000 common shares (the “Bought
Deal”) for aggregate gross proceeds of C$46.6 million on March 1, 2019.
• Entered into a $75 million cost overrun facility (the “COF”) with an insider of the
Company.
• Completed the first draw of $159 million from the senior secured project finance debt
facility (the “Facility”) in early April 2019.
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Exploration
• In anticipation of a drilling campaign later this year, permitting for drill targets continues
on Fruta del Norte type epithermal gold -silver targets in the central and southern
Suarez Pull-Apart basin (the “Basin”).
• Mapping, rock and soil sampling performed on a number of targets around the Basin
and east of Fruta del Norte.
Fruta del Norte Gold Project
Development of the Project remains on track and on budget to deliver first gold production in
the fourth quarter of 2019 and achieve commercial production in the second quarter of 2020.
During the first quarter of 2019 progress continued to ramp up as Fruta del Norte is expected
to reach peak construction in the second quarter of 2019.
Mine Development
As at March 31, 2019 a total of 6.1 kilometres (“km”) of underground mine development had
been completed, of which 1.5 km was completed during the quarter. Total advance for the
quarter continued above target development meters by approximately 25%. Advance rates
exceeded planned rates due to better than expected ground conditions, lower than anticipated
water inflows and greater productivity from the mine contractor.
Drilling was completed on two surface mine dewatering wells in March , and pumps will be
installed in the next quarter. Surface drilling and grouting , and the concrete foundations for
the ventilation shaft collar were completed. Mine development to the bottom location of the
ventilation raise is currently ahead of schedule.
The first Company crews began work in February. They were augmented by the first group of
110 trainees who graduated in March from Lundin Gold’s mining operations training program.
The second cohort of about 110 trainees continues to progress through this program, and the
third cohort of about 100 trainees began classes in March.
Construction
As of quarter end earthworks was 79% complete, concrete 86%, steel 56%, architectural 45%,
mechanical 33%, piping 30%, electrical 55% and instrumentation 17%. Process plant
construction is on track for commissioning of some systems beginning third quarter of 2019.
Site-Wide Infrastructure
The mine dry and administration building was completed and is now in use. Other facilities
under construction include the laboratory, reagent storage building, plant security building,
plant dry and lunchroom.
On site electrical distribution construction continues. The mine substation is complete while
work progresses on the main Fruta del Norte power substation and sitewide power distribution.
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Powerline
Progress continued on the construction of the 42 km powerline connecting the Project to
Ecuador’s national power grid with 86 of 107 towers built and overall work at 76% complete.
Cable stringing between the towers also commenced. Bomboiza substation connection
detailed engineering was complete d and the substation construction contract was awarded.
Construction started on April 1, 2019 and the powerline is expected to be connected to the
national grid in the third quarter of 2019.
Tailing Storage Facility
Construction of tailings storage facility is progressing on schedule and is expected to be ready
for commissioning in the third quarter.
Health and Safety
On March 1, 2019, an employee of Lundin Gold lost his life in a tragic accident. While operating
a loader clearing a landslide on the North Access Road, a second landslide occurred which
swept the loader over the edge of the road, burying it in mud and debris.
Environment and Permitting
Lundin Gold r eceived environmental register approval for the Zamora River Bridge
construction and s tarted to advance various operations chemical use and cyanide
transportation permits.
Numerous inspections were completed by the Ministry of Environment during the quarter with
zero major non-compliances recorded.
Community
As of quarter end, the Company estimates that 50% of its employees were from the Province
of Zamora Chinchipe . Lundin Gold’s procurement programs resulted in the purchase of on
average $1.8 million per month in goods and services from the local communities during the
quarter.
Exploration
With the underground mine reaching the Fruta del Norte orebody, additional structural and
mineralogical information is being gained from the mapping of the ore drives by mine
geologists. This additional information increases the geological knowledge of the Fruta del
Norte orebody and will assist with the exploration for similar deposits elsewhere within the
Basin.
Additional mapping, rock sampling and the extension of soil grids was conducted on a number
of targets around the Basin. Permitting in preparation for scout drill testing continues in
anticipation of a drilling campaign later this year, with the Barbasco, Fruta del Norte southwest,
Puente-Princesa and Gata Salvaje being the priority drill targets for Fruta del Norte type
epithermal gold-silver mineralization.
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Financial Results
(in thousands, except per share amounts) Three months ended
March 31,
2019 2018
Results of Operations:
Derivative gain (loss) $ 468 $ (23,993)
Net loss for the period (7,711) (25,588)
Basic and diluted loss per share (0.04) (0.20)
(in thousands)
As at
March 31,
2019
As at
December
31, 2018
Financial Position:
Cash 82,962 167,513
Working capital 59,889 153,186
Property, plant and equipment 603,486 480,921
Mineral properties 240,665 240,665
Total assets 1,062,931 1,012,461
Long-term debt 388,106 364,252
During the first quarter of 2019, the Company recorded a derivative gain of $0.5 million
compared to a derivative loss of $24.0 million in the first quarter of 2018 relating to its long -
term debt which is measured at fair value on a quarterly basis . In addition, with the hiring of
operating personnel and starting in the fourth quarter of 2018, the Company is now incurring
training costs as training programs for operations have begun. The Company also recognized
other income of $2.5 million relating to the recovery of capital outflow tax paid from the
Company’s repatriation of capital from Ecuador in the third quarter of 2017. These movements
are offset by a foreign exchange loss of $2.5 million in the first quarter of 2019 compared to a
foreign exchange gain of $6.3 million in the first quarter of 2018. Foreign exchange gains or
losses are driven by the quantum the Company’s U.S. dollar cash held by its Canadian entities
and movements in the foreign exchange rate. As the functional currency of the Canadi an
entities is the Canadian dollar, a weakening of the U.S. dollar against the Canadian dollar
during the period generates an unrealized loss in terms of Canadian dollars.
Liquidity and Capital Resources
As at March 31, 2019, the Company had cash of $83.0 million and a working capital of $60.0
million compared to cash of $167.5 million and a working capital balance of $153.2 million at
December 31, 2018. The change in cash was due to net proceeds from the Bought Deal in
March 2019 of $33.9 million offset by costs incurred for the development of the Fruta del Norte
Project of $113.3 million, general and administration costs of $6.6 million and exploration
expenditures of $1.4 million.
In April 2019, the Company completed the first draw down of $159 million from the Facility,
which will be used to fund the construction of the Fruta del Norte Project. The Company has
$191 million remaining under the Facility available to be drawn at its option. In addition, at the
end of March the Company entered into a $75 million COF with an insider of the Company,
which fulfilled a condition precedent to first draw under the Facility. In accordance with the
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terms of the COF, the Company issued the insider 300,000 common shares and 300,000
warrants ("Warrants") in lieu of fees. Each Warrant has a term of three years from the date of
issue and is exercisable for a common share upon payment of the exercise price of C$5.98.
The COF is available once the Facility is fully drawn and can only be used to fund a potential
cost overrun related to the development of the Fruta del Norte Project.
Outlook
The Company is focused on advancing the Project on schedule through to first gold production
in the fourth quarter of 2019. The following activities are planned going forward:
• Completing detailed engineering.
• Completing process plant construction and starting commissioning.
• Advancing mine development towards first production areas and to the bottom of the
south ventilation raise.
• Commencing mine operations and mining ore to stockpiles.
• Completing construction of the site infrastructure buildings such as the laboratory ,
reagent storage, and plant ancillary buildings.
• Completing construction of the powerline and the Bomboiza substation.
• Advancing construction of the tailing storage facility.
• Advancing paste plant construction.
• Starting construction of the Zamora River bridge.
• Advancing permits required for operations.
Drill permitting of selected epithermal gold-silver targets continues in preparation for a drilling
program anticipated to start later this year, while the mapping and sampling of additional target
areas to develop them into drill targets will also continue.
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. The disclosure of exploration information contained
in this Press Release was prepared by Stephen Leary, MAusIMM CP(Geo), a consultant to
the Company, who is a Qualified Person in accordance with the requirements of NI 43-101.
Additional Information
The Company's consolidated financial statements for the quarter ended March 31, 2019 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. This information was submitted for pu blication
May 10 at 2:30 p.m. PT through the contact persons set out below.
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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
this 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 citizens 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.
Sabina Srubiski
Manager, Investor Relations
+1-604-806-3089
www.lundingold.com
Follow Lundin Gold on Twitter
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) a re 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 b e
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.
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This press release contains forward -looking information in a number of places, such as in statements
pertaining to the progress of the development, construction and operation of the Project, improvements
to site logistics and completion of site and powerline in frastructure, the Company’s exploration plans
and activities, the availability of the COF, the timing and success of permitting and regulatory approvals
and the timing of first gold and commercial production. 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 27, 2019, 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: receipt of regulatory approvals, risks
associated with the Company's community relationships; ris ks and hazards inherent in mining and
processing; lack of availability of or interference with infrastructure; risks related to Lundin Gold's
compliance with increasingly strict environmental laws and liability for environmental contamination;
risks relate d political and economic instability in Ecuador; deficient or vulnerable title to mining
concessions and surface rights; risk to shareholders of dilution from future equity financings; failure to
maintain its obligations under its debt facilities; shortag es of critical resources, such as skilled labour
and supplies, consumables and equipment; inherent safety hazards and risk to the health and safety of
the Company's employees and contractors; volatility in the price of gold; the cost of compliance or
failure to comply with applicable laws; the timely receipt of regulatory approvals, permits and
licenses; risks associated with the performance of the Company's contractors; the imprecision of
Mineral Reserve and Resource estimates; dependence on key personn el; 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; exploration and
development risks; the C ompany's reliance on one project risks related to artisanal and illegal mining;
the reliance of the Company on its information systems and the risk of cyber-attacks on those systems;
the ability to obtain adequate insurance; uncertainty as to reclamation a nd decommissioning; the
uncertainty regarding risks posed by climate change; the ability of Lundin Gold to ensure compliance
with anti-bribery and anti- corruption laws; the potential for litigation; and limits of disclosure and internal
controls.
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Figure 1. Fruta del Norte overall construction well advanced
Figure 2. Construction as of the end of March is at 59% complete