Lundin GOLD Reports Q1 2020 Results
885 West Georgia Street T +1 604 689 7842
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Vancouver, BC [email protected]
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NEWS RELEASE
LUNDIN GOLD REPORTS Q1 2020 RESULTS
May 7, 2020 (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, 2020. All amounts are in U.S. dollars unless otherwise indicated.
“We are working towards the restart of operations and we believe our financial position is
sufficient to support the Company until production resumes at Fruta de Norte . We have a
dedicated team of employees at site carrying out activities to mitigate the impact of the
suspension on our operations and we have reduced costs in other areas.” said Ron Hochstein,
Lundin Gold President and CEO. “The Company is contributing to the fight against the
pandemic and has partnered with the provincial and local health authorities to provide aid to
the local communities in response to COVID-19.”
Operating Results
• Achieved commercial production on February 20, 2020.
• Mine production of 198,000 tonnes of ore.
• Ore stockpiles, as of the end of March 2020, was 97,000 tonnes at an average grade
of 7.1 grams per tonne (“g/t”).
• Processed 244,000 tonnes of ore at an average daily rate of 3, 018 tonnes per day at
an average head grade of 7.9 g/t.
• Gold production totalled 51,320 ounces (“oz”), of which 37,568 oz were produced as
concentrate and 13,752 oz were produced in the form of doré.
• Sold 59,317 oz of gold at an average price of $1,564 per oz1.
• Temporarily suspended production activities at site on March 22, 2020.
Financial Results
• Generated sales of $89.3 million of which $52.4 million were deducted from capitalized
construction costs up to February 29, 2020.
• Recognized revenues of $36.9 million based on sales of 8,297 oz of gold in doré and
15,812 oz of gold in concentrate in March 2020.
• Incurred operating expenses and royalty expenses of $18.1 million and $2.1 million in
March 2020, respectively, resulting in a cash operating cost of $839 per oz1.
• All-in sustaining cost (“AISC”) was $908 per oz of gold sold1 for March 2020.
• Ended the quarter with $57.5 million in cash and $39.6 million in working capital.
Fruta del Norte Mine (“Fruta del Norte” or the “Mine”) Development
As at March 31, 2020, a total of 14.7 kilometres (“km”) of underground mine development had
been completed and development was well advanced in a high grade area which will now be
mined using long-hole stoping methods versus drift and fill. Due to an unexpected ground fall,
the south ventilation raise i s now anticipated to be completed in the fourth quarter of 2020.
The installation of the permanent ventilation fans underground was near completion by the end
of the quarter.
1 Refer to “Non-IFRS Measures” section at the end of this news release
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Construction
During the first quarter of 2020, Fruta del Norte construction advanced to effective completion,
with end of commissioning and ramp-up of the process plant and ancillary facilities. The only
remaining projects to be completed are the paste plant and Zamora River bridge. Paste plant
commissioning was nearing completion at the time of the COVID -19 suspension and is now
expected to be in operation within a few weeks after the restart of operations. The Zamora
River bridge is anticipated to be completed by the end of 2020.
Community
In response to the COVID-19 pandemic, the Company’s community activities have shifted to
supporting the local government and Ministry of Health initiatives. Several programs have
been undertaken, such as the Neighbourhood Doctor program whereby the Company provides
transportation for medical professionals, allowing them to access families in rural areas.
Lundin Gold is also providing essential equipment to fr ont-line workers in the communities
surrounding the Mine. To date, the Company has donated 10 thermo -nebulizers, 1,200 N95
masks, 850 pairs of gloves, 85 gallons of antiseptic alcohol, 15 cans of disinfectant and 800
protective gowns and disposable caps. Lundin Gold will continue to work with the Zamora
Chinchipe provincial health authorities on a comprehensive support plan to contribute to the
well-being of those in its neighbouring communities during the COVID-19 pandemic.
As of the date of this press release, there have been no confirmed cases of COVID-19 at Fruta
del Norte.
Exploration
As a result of the COVID-19 pandemic, all exploration activities have also been suspended.
Financial Results
(in thousands, except per share amounts)
Three months ended
March 31,
2020 2019
Results of Operations:
Revenues $ 36,856 $ -
Income from mining operations 10,336 -
Derivative gain (loss) (2,569) 468
Net loss for the period (9,331) (7,711)
Basic and diluted loss per share (0.04) (0.04)
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(in thousands)
As at
March 31,
2020
As at
December
31, 2019
Financial Position:
Cash 57,467 75,684
Working capital 39,581 32,800
Property, plant and equipment 876,463 924,982
Mineral properties 238,598 240,665
Total assets 1,403,192 1,408,961
Long-term debt 698,226 821,008
With the achievement of commercial production , effective March 1, 2020, revenues, cost of
goods sold, and debt service costs are recognized in the consolidated statements of income
(loss) and comprehensive income (loss). As a result, the Company recognized revenues of
$36.9 million during the first quarter of 2020 which then generated $10.3 million of income from
mining operations. This is offset by finance expense of $4.7 million associated with interest
on the Company’s debt facilities that are no longer capitalized. In addition, other expenses
included costs relating to the temporary suspension of Fruta del Norte of $3.4 million which
includes salaries and benefits of personnel during the suspension as well as care and
maintenance costs; corporate administration costs of $9.0 million; and a derivative loss of $2.6
million.
Corporate administration costs increased from $7.6 million during the first quarter of 2019 to
$9.0 million during the first quarter of 2020. This increase is mainly due t o the payment of
milestone bonuses of $2.8 million for the achievement of commercial production to the
Company’s employees and stock-based compensation of $1.2 million due to the grant of cash-
settled stock-based compensation (restricted share units). This is a non-cash cost due to the
recognition of a liability at fair value on grant date and subsequent revaluation at March 31 ,
2020. These increases are offset by a decrease in training costs of $1.3 million as the
extensive training programs for operatio ns implemented by the Company were completed in
the third quarter of 2019. Professional fees also decreased by $1.1 million as additional costs
were incurred during the first quarter of 2019 to complete the first draw under the senior debt
facility.
Overall, the Company reported a net loss of $9.0 million in the first quarter of 2020 compared
to a net loss of $7.7 million in the first quarter of 2019.
Liquidity and Capital Resources
As at March 31, 2020, the Company had cash of $57.5 million and a working capital balance
of $39.6 million compared to cash of $75.7 million and a working capital balance of $32.8
million at December 31, 2019. The change in cash was primarily due to costs incurred, net of
sales generated, for the development of Fruta del Norte of $23.0 million. This is offset by cash
provided by operating activities of $11.6 million which commenced following the achievement
of commercial production in February 2020. In a ddition, the Company received proceeds of
$2.5 million from stock option exercises and made $1.5 million of repayments against its long-
term debt.
Management believes that the current treasury is sufficient to support the Company’s reduced
activities duri ng a temporary suspension and gradual re -start of operations and to meet
obligations under its existing loans. However, as the situation is dynamic and dependent on
the progression of the pandemic and actions by local, provincial, and national governments ,
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the international supply chain and international personnel travel, the Company cannot be
certain of the period of time it will require to restore operations nor of the full impact of the
suspension and gradual re-start on the Company’s financial position.
Outlook
The Company will be focused on implementing a plan to re-start operations at Fruta del Norte,
initially re -establishing transportation of supplies and product, mobility of personnel and
procurement activities, as soon as restrictions are lifted. This will be done with a focus on the
health and safety of its personnel to minimize the risks of a breakout of COVID-19 at site and
in the local communities. Following this, the Company will focus on ramping up operations in
conjunction with improving recoveries to target levels. The following capital project activities
are also planned:
• Complete paste plant commissioning.
• Complete the Zamora River Bridge construction.
• Complete the South Ventilation Raise and installation of the permanent mine ventilation
fans.
The reactivation of the exploration program will also occur after restrictions are lifted and
regulatory approvals are received.
Qualified Person
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.
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 largest and highest -grade gold deposits 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 operation 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, cash operating cost per oz sold, and all-in sustaining cost, 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 othe r 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, with the
achievement of commercial production, t hey are of assistance in the understanding of the
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results of operations and its financial position. Please refer to the Company's MD&A for the
first quarter of 2020 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 May 7,
2020 at 3:00 p.m. Pacific Time 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
+1-604-806-3589
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 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.
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This press release contains forward -looking information in a number of places, such as in statements
relating to the duration of the temporary suspension of activities at the Mine and efforts to mitigate the
impacts of the suspension, the Company’s ability to r e-start operations, the sufficiency of treasury to
support the Company and meet obligations under its existing loans, completion of capital projects
activities, the Company’s continued support to community initiatives , plans to ramp up operations and
improving recoveries to target levels, the reactivation of exploration activities and the receipt of permits.
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 24, 2020, 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; risks associated with the Company's community relationships ; risks related to financing
requirements; failure by the Company to maintain its obligations under its credit facilities; operating risks;
risks associated with the ramp up of mining operations; risks related to political and economic instability
in Ecuado r; risks related to production estimates ; risks related to Lundin Gold’s compliance with
environmental laws and liability for environmental contamination; volatility in the price of gold; shortages
of critical supplies; lack of availability of infrastructure; deficient or vulnerable title to mining concessions;
easements and surface rights; risks related to the Company’s workforce and its labour relations; inherent
safety hazards and risk to the health and safety of the Company’s employees and contractors ; risks
related to 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 Company’s shares ; the potential influence of the
Company's largest shareholders ; uncertainty with the tax regime in Ecuador ; measures to protect
endangered species and critical habitats; the cost of non-compliance and compliance costs; exploration
and development risks ; the Company's reliance on one project ; risks related to illegal mining ; t he
reliance of the Company on its information systems and the risk of cyber-attacks on those systems; 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; the risk that the Company
will not declare dividends; and social media and the Company’s reputation.