Lundin GOLD Reports Third 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 THIRD QUARTER 2018 RESULTS
November 8, 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 nine
months ended September 30, 2018. All amounts are in U.S. dollars unless otherwise
indicated.
“With overall construction just over a third complete and a significant portion of the Project’s
capital committed, Fruta del Norte remains on track for first gold expected around this time
next year. This makes us one of the largest and highest-grade gold projects coming online in
the near term,” said Ron Hochstein, Lundin Gold’s President and CEO. “ Underground mine
development is progressing on schedule and based on planned rates, we anticipate reaching
the orebody in the first quarter of 2019.”
Highlights
Fruta del Norte Gold Project (“Fruta del Norte” or the “Project”)
• Overall engineering was 63% complete and construction 34% complete.
• Cumulative advance in the Kuri and K’isa declines was 3.3 kilometres (“km”).
• Process plant excavation is done, and concrete is 40% complete.
• Grinding building steel erection is underway.
• North Access Road was substantially complete and being used by commercial
vehicles.
• Powerline construction is ongoing on three separate work fronts.
• Updated mine plan and re-estimate of the Project’s capital cost and operating cost were
completed. It resulted in increase s in the Project’s NPV 5% ($786 million from $717
million) and IRR (17.5% from 16.3%). The new capital cost estimate increas ed only
marginally by $8.0 millio n to $692 million . At the same time , the estimated all -in
sustaining cost dropped to $583 per ounce of gold from $609 per ounce of gold.
Exploration
• Mapping, geochemical sampling and permitting required for future drilling continues on
a number of epithermal gold -silver targets in the central and southern Suarez Basin,
and the Gata Salvaje target area to the west of the Basin.
Fruta del Norte Gold Project
Mine Development
As at September 30, a total of 3.3 km of underground mine development had been achieved,
with 1,565 metres (“m”) and 1,760 m in the Kuri and K’isa declines, respectively. Daily advance
rates continued to be above target throughout the quarter with an average advance rate of 6.2
m per day in Kuri and 7.0 m per day in K’isa in September, versus a target of 4.0 m per day
and 3.8 m per day, respectively. The increase in advance rates are the result of better than
anticipated ground conditions, less water than expected and higher contractor productivities.
2
Process Plant Construction
Process plant foundations are well advanced and steel erection has started on the grinding
building. Fabrication of process plant equipment is on track and the flotation cells, mills, CIL
tanks and thickeners are expected to arrive on site by the end of this year.
Major Site Earthworks
The North Access Road was substantially complete and is being used by commercial vehicles.
The tailings storage facility dam and basin clearing has started, while the temporary
construction coffer dams are finished. Work also began on the east diversion ditch. Polishing
pond earthworks are almost done, and liner installation is underway.
Paste plant access road and site preparation has begun and the fresh air raise access road
was completed.
Other
The Company received the Mountain Pass Quarry Environmental License and is in the final
stages of negotiating rights to develop the quarry with local government. Construction of the
powerline started on three fronts in September.
Financial Results
(in thousands, except per share amounts)
Three months ended
September 30,
Nine months ended
September 30,
2018 2017 2018 2017
Results of Operations:
Net income (loss) for the period $ 7,270 $ (16,032) $ 1,423 $ (21,634)
Income (loss) per share
Basic 0.03 (0.13) 0.01 (0.18)
Diluted 0.03 (0.13) 0.01 (0.18)
(in thousands)
As at
September
30 2018
As at
December
31, 2017
Financial Position:
Cash 291,599 35,018
Working capital 290,398 26,794
Property, plant and equipment 368,829 142,598
Mineral properties 256,769 246,387
Total assets 1,007,287 481,729
Long-term debt 351,591 217,940
xxXX
The Company’s net income in the third quarter of 2018 is due to the revaluation of the
Company’s long -term debt , as more fully explained below , and was offset by a foreign
exchange loss from its substantial holdings of U.S. dollar cash at its Canadian entities during
the quarter compared to a foreign exchange loss of only $0.8 million in the third quarter of
2017.
3
The Company generated net income of $1.4 million in the nine months ended September 30,
2018 compared to a loss of $21.6 million in the same period of 2017. This is mainly due to the
revaluation of the Company’s long-term debt and recognition of a substantial foreign exchange
gain. Partially offsetting these gains were higher salaries and benefits during the nine months
ended September 30, 2018 compared to the same period in 2017 due to the performance
incentive plan payment to the Company’s employees.
Derivative gains or losses
During the third quarter of 2018, the Company recorded a derivative gain from the fair value
revaluation of its long-term debt of $17.9 million compared to a derivative loss of $8.3 million
recognized in the third quarter of 2017. For the nine months ended September 30, 2018, the
Company has recorded a derivative gain of $12.8 million compared to a derivative loss of $3.9
million in the same period in 2017.
Liquidity and Capital Resources
As at September 30, 2018, the Company had cash of $291.6 million and a working capital of
$290.4 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 in March 2018 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 $193.3 million, general and administration costs of $14.3 million
and exploration expenditures of $5.0 million.
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 over the next twelve months:
• Completing detailed engineering.
• Completing process plant construction and starting commissioning.
• Starting mine operations and mining ore to stockpiles.
• Advancing underground declines across the ore body to the bottom of the fresh air
raise.
• Completing construction of the site infrastructure buildings such as the laboratory,
reagent storage, mine dry and administration.
• Completing the construction of the power transmission line and connecting to the
national grid at the Bomboiza substation.
• Signing the Mountain Pass Quarry exploitation agreement and developing the quarry.
• Completing construction of the tailing storage facility.
• Completing the design and supply of the paste plant and commencing construction.
• Obtaining permits and starting construction of the Zamora River bridge in El Pindal.
The Company has substantially agreed to the terms of a cost overrun facility (the “COF”) with
a provider. Completion of the COF is a condition precedent to the initial draw down of the
senior debt facility , expected to occur in the first quarter of 2019 , and is now subject to
acceptance by the Company’s lenders and final documentation.
4
Exploration continues to focus on developing drilling targets through mapping and geochemical
sampling at the Suarez Basin and Gata Salvaje targets. Drill permitting continues for a number
of epithermal gold-silver target areas around the Suarez Basin.
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 consolid ated financial statements for the three and nine months
ended September 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
November 8, 2018 at 3:00 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
5
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 informat ion 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 un duly 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 site and powerline
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 the risk to shareholders of dilution from future equity
financings; the ability to maintain its obligations under the gold prepay and stream credit facilities, the
senior debt facility and other debt; 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 commoditi es, 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; 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 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 .
6
Figure 1. Fruta del Norte project site September 2018
Figure 2. North Access Road was substantially complete and being used by commercial
vehicles
7
Figure 3. Process plant grinding building steel is progressing
Figure 4. New permanent maintenance shop will have six bays
8
Figure 5. Powerline construction is ongoing on three fronts