Lundin GOLD Reports Second Quarter 2018 Results
885 West Georgia Street T +1 604 689 7842
Suite 2000 F +1 604 689 4250
Vancouver, BC [email protected]
Canada V6C 3E8 lundingold.com
NEWS RELEASE
LUNDIN GOLD REPORTS SECOND QUARTER 2018 RESULTS
August 10, 2018 (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, 2018. All amounts are in U.S. dollars unless otherwise indicated.
“During the quarter, we continued to de-risk the Project. Site earthworks are nearly complete
and we began work on the powerline. Underground development rates exceeded our target
advance rates and today we are more than half-way to the orebody and remain on track for
first gold production in the fourth quarter of next year ,” said Ron Hochstein, Lundin Gold’s
President and CEO. “In addition, we signed an offtake agreement with Boliden for a significant
portion of our gold concentrate earlier this month. Combined with the Orion offtake agreement,
we have now secured contracts for about 80% of our anticipated production. Most importantly,
in July we closed the $350 million senior debt package which completes funding for Fruta del
Norte.”
Highlights
Fruta del Norte Gold Project (“Fruta del Norte” or the “Project”)
• Overall engineering was 48% complete and construction 21% complete.
• Cumulative advance in the K’isa and Kuri declines was 2.2 kilometres (“km”).
• Process plant excavation is nearly complete.
• Process plant ball mill piers were poured.
• Grinding building foundations and carbon-in-leach tank foundations were well
underway.
• North Access road was 70% complete.
• Tailings storage facility access road construction was completed, and polishing pond
and diversion ditch construction began.
• Clearing of the powerline route from site began.
• New camp kitchen and dining facility was completed.
Financing
• Closed a $350 million senior secured project finance debt facility (the “Facility”) with a
syndicate of seven lenders. In addition, the Company executed a gold concentrate
offtake agreement with Boliden.
Exploration
• Scout drilling of the El Puma target, located in the southern Suarez Basin, was
completed with a total of 6,245 metres (“m”) in six drill holes.
• Mapping, geochemical sampling and the permitting required for future drilling continues
on a number of epithermal gold-silver targets around the Suarez Basin.
Corporate
• Istvan Zollei of Orion Mine Finance Group and Mi chael Nossal and Craig Jones of
Newcrest Mining Limited joined the board of the Company following the closing of the
equity financing.
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Fruta del Norte Gold Project
Mine Development
As at June 30, a total of 2.2 km of underground mine development had been achieved, with
1,030 m and 1,167 m in the Kuri and K’isa declines, respectively. The daily advance rates
improved steadily throughout the quarter achieving an average advance rate of 5.9 m per day
in Kuri and 6.6 m per day in K’isa in June, versus a target of 5.16 m per day.
The Company also awarded the mine service fleet in May. With this award, nearly all of the
mining equipment purchase orders have been placed.
Process Plant Construction
Process plant and main substation excavation progressed and was nearly complete at the end
of the quarter. Construction moved ahead with the ball mill piers and grinding building
foundations being poured and were 84% complete. In addition, the carbon-in-leach tank bases
were 20% complete. Process plant equipment fabrication is on track and the first equipment
(thickeners and the primary jaw crusher) is expected to arrive on site in the third quarter.
Major Site Earthworks
The North Access road was an estimated 70% complete with less than 2 km remaining until it
is done. The remaining section of the North Access road includes a steep escarpment which
requires careful attention for technical and safety reason s. Road construction through this
section is progressing well, and the Company remains on track to finish the road by the end of
the third quarter of 2018.
The tailings storage facility, polishing pond and east diversion ditch access roads were
completed, and work commenced on clearing and grubbing in the polishing pond area.
Powerline
The regulatory process of formalizing all easements required for the powerline from the
Bomboiza substation to the Project is near complete. The contractor has mobilized and started
clearing the powerline route from site in June.
Anciliary Facilities
Work started on the permanent mine maintenance shop, mine substation an d mine
compressor station. The fuel storage station is almost finished and is in the final
commissioning stages.
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Financial Results
(in thousands, except per share amounts)
Three months ended
June 30,
Six months ended
June 30,
2018 2017 2018 2017
Results of Operations:
Net income (loss) for the period $ 19,741 $ 785 $ (5,847) $ (5,602)
Income (loss) per share
Basic 0.09 0.01 (0.03) (0.05)
Diluted 0.09 0.01 (0.03) (0.05)
(in thousands)
As at
June 30
2018
As at
December
31, 2017
Financial Position:
Cash 393,488 35,018
Working capital 377,265 26,794
Property, plant and equipment 284,871 142,598
Mineral properties 252,093 246,387
Total assets 994,583 481,729
Long-term liabilities 349,032 217,940
The Company’s net income in the second quarter of 2018 is mainly due to the revaluation of
the Company’s long -term debt as more fully explained below. In addition, the Company
generated a foreign exchange gain of $7.1 million from its substantial holdings of U.S. dollar
cash at its Canadian entities during the quarter compared to a foreign exchange gain of only
$0.7 million in the second quarter of 2017. As the functional currency of these Canadian
entities is the Canadian dollar, a strengthening of the U .S. dollar against the Canadian dollar
during the period generates an unrealized gain in terms of Canadian dollars. This is offset by
an increase in office and general expenses of $0.8 million mainly due to an increase in
payments to foreign vendors which resulted in an increase in capital outflow tax paid.
The loss for the six months ended June 30, 2018 is higher by $0.2 million compared to that of
the six months ended June 30, 2017 due to the revaluation of the Company’s long-term debt
and recognition o f a substantial foreign exchange gain as noted above. In addition, the
Company also incurred higher salaries and benefits during the six months ended June 30,
2018 due to the performance incentive plan payment to the Company’s employees.
Derivative gains or losses
During the second quarter of 2018, the Company recorded a derivative gain from the fair value
revaluation of its long-term debt of $18.8 million compared to a derivative gain of $4.4 million
recognized in the second quarter of 2017. For the six months ended June 30, 2018 , the
Company has recorded a derivative loss of $5.1 million compared to a derivative loss of $4.4
million in the six months ended June 30, 2017 . The derivative gain or loss are driven by the
valuation of the Company’s long -term debt. Key inputs used by the Monte Carlo simulation
include the gold and silver forward prices, gold and silver volatility and other variables.
Relatively small variations in these inputs can give rise to significant variations in the fair value
of financial liabilities; hence, the large derivative gains and losses recorded in the accounts to
date.
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Liquidity and Capital Resources
As at June 30, 2018, the Company had cash of $393.5 million and a working capital of $377.3
million compared to cash of $35.0 million and a working capital balance of $26.8 million at
December 31, 2017. The change in cash was primarily due to net proceeds from the Private
Placement of $396.5 million and the final drawdown of $110 million under the gold prepay and
stream credit facilities. This is offset by costs incurred for the development of the Fruta del
Norte Project of $121.0 million, general and administration costs of $9.9 million and exploration
expenditures of $4.2 million.
Outlook
The Company is focussed on advancing the Project on schedule through to first gold
production in 2019. To achieve that goal, the following activities are planned over the next
twelve months:
• Completing detailed engineering of the process plant, tailings storage facility and site-
wide water management.
• Completing the North Access road.
• Completing process plant concrete foundations and advancing steel and equipment
erection.
• Receiving the majority of the process plant equipment and mine mobile equipment
onsite.
• Advancing construction of the site infrastructure buildings such as the laboratory,
reagent storage, mine dry and administration.
• Continuing to advance und erground mine development, as well as the underground
services and facilities.
• Completing the construction of the 42 km, 230 kilovolt power transmission line to
connect to the national grid.
• Receiving approval of the Mountain Pass Quarry Environmental Lic ense and
developing the quarry.
• Awarding the contracts for the design and supply of the paste plant and water treatment
plant, advancing the engineering and equipment procurement and begin ning
earthworks and site preparation for the two plants.
• Advancing construction of the tailings storage facility.
• Completing the engineering and starting construction for the Zamora River bridge near
Los Encuentros.
The Company is also in discussions with selected potential parties in order to establish a cost
overrun facility which is a condition precedent to the initial draw down of the Facility, expected
to occur in the first quarter of 2019.
Exploration is currently focused on mapping and geochemical sampling of the Puente-Princesa
target. Other targets may be mapp ed and sampled during 2018 depending on results. Drill
permitting continues for a number of epithermal gold -silver target areas around the Suarez
basin.
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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 MD&A 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 three and six months ended June
30, 2018 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 publication
August 10, 2018 at 2:00 p.m. PT through the contact persons set out below.
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.
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
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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 stateme nts 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.
This press release contains forward-looking information in a number of places, such as in statements
pertaining to: the anticipated timing of production and the progress of the development, construction and
operation of the Project, improvements to site logistics and completion of camp infrastructure and the
acquisition of land and surface rights , the success of the Company ’s exploration plans and activities,
exploration and development expenditures and reclamation costs, timing and success of permitting and
regulatory approvals, project financing and future sources of liquidity, capital expenditures and
requirements, 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 th e risk to shareholders of dilution from future equity
financings; the ability to maintain its obligations under the gold prepay and stream credit facilities, the
Facility and other debt; risks related to carrying on business in Ecuador; volatility in the p rice 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; unreliabl e 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; un certainty as to
reclamation and decommissioning; risks associated with the Company's information systems;
competition in the mining industry; the ability to obtain adequate insurance; risks of bribery or corruption;
the potential for litigation; and limits of disclosure and internal controls.
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 resu lt 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 .
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Figure 1. Ground support installation in the K’isa decline
Figure 2. Ball mill piers
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Figure 3. North Access road at kilometer 14
Figure 4. Polishing pond area and diversion ditch