Lundin GOLD Reports Year End 2018 Results Fruta Del Norte ON Track FOR First GOLD IN Q4 2019
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NEWS RELEASE
LUNDIN GOLD REPORTS YEAR END 2018 RESULTS
FRUTA DEL NORTE ON TRACK FOR FIRST GOLD IN Q4 2019
February 19, 2019 (Vancouver, Canada) Lundin Gold Inc. ("Lundin Gold" or the "Company")
(TSX: LUG, Nasdaq Stockholm: LUG) is pleased to announce its results for the year ended
December 31, 2018. All amounts are in U.S. dollars unless otherwise indicated.
“During 2018 the team focused on the critical undergr ound development and the start of
construction on surface, and we are now halfway through construction ,” said Ron Hochstein,
Lundin Gold’s President and CEO. “ This year will see Lundin Gold achieve many important
milestones, including mining its first development stopes and commissioning the process plant,
all of which will lead to first gold expected in the fourth quarter of this year.”
Highlights
Fruta del Norte Gold Project (“Fruta del Norte” or the “Project”)
• Overall engineering 85% complete as of year end and approximately 70% of Project
capital expenditure committed.
• Underground development continued ahead of projections, both declines have reached
the orebody and development of the primary levels have begun.
• Site earthworks is 75% complete, including completion of the River and North Access
roads and construction of the tailings dam is underway.
• The process plant construction is well progressed with concrete 62% complete and
mechanical equipment (grinding mills and carbon-in-leach tank) erection started in the
fourth quarter.
• Surface mobile equipment is on site and the mine operating fleet began arriving on site
in the fourth quarter.
• The Bomboiza to site p owerline construction started and by year -end was 27%
complete. Work is also underway on the site -wide electrical distribution network
including power lines, main and mine substations.
• Key permits received and agreements signed for the powerline and Mountain Pass
Quarry.
• Updated mine plan and re -estimate of the Project’s capital cost and operating cost
completed.
Financing
• Drew the final $110 million under the gold prepay and stream credit facilities with Orion
Mine Finance Group (“Orion”) and Blackstone Tactical Opportunities.
• Closed a $400 million equity private placement financing with Newcrest Mining Limited
(“Newcrest”), Zebra Holdings and Investments S.à.r.l. and Lorito Holdings S.à.r.l., and
Orion.
• Closed a $350 million senior secured project finance debt facility with a syndicate of
seven lenders (the “Facility”), with first draw expected in the first quarter of 2019.
• Executed a gold concentrate offtake agreement with Boliden for approximately 50% of
Fruta del Norte’s gold concentrate production over its first eight years of operations.
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Exploration
• Signed an earn-in agreement with Newcrest to form a joint venture company to explore
eight early stage concessions to the north and south of Fruta del Norte, which exclude
the large block of concessions surrounding the Fruta del Norte deposit.
• Completed 6,245 metres (“m”) of drilling in six drill holes at the El Puma target, located
in the southern Suarez Pull -Apart basi n. Results indicated epithermal indicator
elements; however, no significant mineralization was found. The drilling indicated that
further follow-up drilling is required.
• Mapping, geochemical sampling and permitting required for future drilling continues on
a number of epithermal gold-silver targets.
Corporate
• Istvan Zollei of Orion and Michael Nossal and Craig Jones of Newcrest joined the board
of the Company pursuant to board representation rights as part of the equity financing.
Fruta del Norte Gold Project
In 2018, progress continued on the Project in all areas of engineering, procurement and
construction.
Mine Development
As at December 31, 2018 a total of 4.5 k ilometres (“km”) of underground mine development
had been completed. Average advance rate in 2018 on declines and primary development
was 9.8 m per day versus a target of 6.6 m per day, while advance rates on total development
including auxiliary work was 11.6 m per day versus a target of 7.9 m per day. The advance
rates exceeded the planned rates due to better than expected ground conditions, lower than
anticipated water inflows and greater productivity from the mine contractor.
The mine operating equipment fleet also started to arrive in the fourth quarter of 2018. Over
200 mining operator trainees began the Company’s training progra m, with the first group of
100 beginning the final part of their training. This takes place on site and includes classroom
sessions and experience with simulators and in the field.
Site Earthworks
As at the end of 2018 , earthworks were 75% complete. Projects that were completed during
the year include:
• River Road which connects the camp to the plant site.
• North Access Road, which improves logistics and shortens the distance to the national
highway system.
• Process plant and paste plant site preparations.
• Ventilation shaft access road and platform.
• Three major water storage and sedimentation ponds as part of the overall site water
management.
The t ailings storage facility is one of the final major site earthworks projects and is well
underway.
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Process Plant Construction
Site-wide concrete is 69% complete and process plant concrete 62% complete as at the end
of 2018, while s ite-wide steel 38% complete and process plant steel 18% complete . During
the fourth quarter of 2018, process plant mechanical equipment (grinding mills and carbon-in-
leach tank) erection began. The majority of process plant equipment has been delivered, with
the remainder in transit from factories.
Site-Wide Infrastructure
Infrastructure completed in 2018 and currently in use includes: mobile equipment maintenance
shop, mine compressor station, mine wash bay, mine fuel station, tailings maintenance shop
and process plant maintenance shop. Infrastructure that is under construction includes: mine
dry and administration building, laboratory, reagent storage building and gatehouse.
Site-wide electrical distribution network is also under construction. T he mine substation is
substantially complete, while the main Fruta del Norte power substation concrete is done, and
main transformers have been placed on the foundations.
Powerline
In 2018, the Company m ade significant progress on the 42 km powerline connecting the
Project to the national grid and obtained the following permits and agreements:
• Construction permit from the Ministry of Energy and Non -Renewable Natural
Resources.
• Requisite access rights obtained from all landowners.
• Execution of Cooperation Agreement for the Taday to Bomboiza powerline and
substation with La Corporación Eléctrica del Ecuador (CELEC).
Powerline construction started in September and is progressing on three fronts with 28 out of
107, or 27% of powerline infrastructure, being complete as of December 31, 2018. The
Bomboiza substation connection equipment has been ordered and detailed engineering is
underway.
Construction Camp
The new 1,000-person construction camp was completed and the new kitchen and dining room
is done, feeding on average 1,500 people per day.
Environment and Permitting
The Company obtained the Environment Licence for the power transmission line. P ermits
were also granted, and agreements were also signed for the Mountain Pass Quarry including:
• Environmental licence, water permit and administrative act.
• Exploitation agreement.
Progress continues on several SENAGUA water permits and the Company s ubmitted
explosives storage magazine expansion and explosive importation permits. The Ministry of
Transport approved the design for the Zamora River bridge. In addition, numerous inspections
were completed b y the Ministry of Environment during the year with zero major non -
compliances recorded.
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Health and Safety
As of year-end, over 3.5 million hours have been incurred without a lost time accident. The
total-incident rate was 0.40 at year end versus a target of 0.80.
Community
During 2018, the Company continued to invest in numerous projects in the local communities,
such as road maintenance, programs for the students and elderly and programs directing at
helping small businesses. The activities focused o n local hiring, local procurement and
economic diversification. As of year -end, the Company estimates that 54% of its employees
were from local communities. Lundin Gold’s local procurement program resulted in the
purchase of approximately $2.3 million pe r month in goods and services during 2018. The
economic diversification activities focused on agricultural programs in the province of Zamora-
Chinchipe.
Financial Results
(in thousands, except per share amounts)
Three months ended
December 31,
Year ended
December 31,
2018 2017 2018 2017
Results of Operations:
Derivative loss $ (28,508) $ (14,135) $ (15,731) $ (18,034)
Net loss for the period $ (23,491) $ (19,505) $ (22,068) $ (41,140)
Basic and diluted loss per share (0.11) (0.16) (0.12) (0.35)
(in thousands)
As at
December
31 2018
As at
December
31, 2017
Financial Position:
Cash 167,513 35,018
Working capital 153,186 26,794
Property, plant and equipment 480,921 142,598
Mineral properties 240,665 246,387
Total assets 1,012,461 481,729
Long-term debt 364,252 217,940
xxXX
During the fourth quarter of 2018, the Company recorded a derivative loss of $ 28.5 million
compared to a derivative loss of $14.1 million in the fourth quarter of 2017 relating to its long-
term debt which is measured at fair value on a quarterly basis. This increase in the derivative
loss is offset by a foreign exchange gain of $8.6 million in the fourth quarter of 2018 from the
Company’s substantial holdings of U.S. dollar cash by its Canadian entities compared to a
foreign exchange gain of $0.1 million in the fourth 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.
The loss during the year ended December 31, 2018 is lower compared to the previous year
due to a foreign exchange gain of $17.0 million compared to a minimal amount in 2017 from
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the Company’s substantial holdings of U.S. dollar cash at its Canadian entities. 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. In addition, the Company recorded a derivative loss from the fair value
revaluations of its long -term debt of $ 15.7 million in 2018 compared to a derivative loss of
$18.0 million in 2017.
Liquidity and Capital Resources
As at December 31, 2018, the Company had cash of $167.5 million and working capital of
$153.2 million compared to cash of $35.0 million and working capital 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 $396.4 million and the final drawdown o f $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 $280.2 million, general and administration costs of $16.7 million
and exploration expenditures of $6. 2 million. The Company incurred higher general and
administrative costs mainly due to the payment of performance incentives in the year, which
also included payments deferred from 2017, to the Company’s employees and due to the
commencement of the mine operator training program.
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 contractor mine development, initiating work on the south ventilation raise
and completing two of the mine dewatering wells.
• Completing training and hiring of mine and plant operations personnel.
• Commencing mine operations and mining ore per mine plan.
• Completing process plant and water treatment plant construction.
• Completing the construction of the power transmission line and connection to the
national grid at the Bomboiza substation and completing the site electrical distribution
facilities.
• Completing construction of the tailing storage facility including tailings and reclaim
water systems.
• Commencing and substantial advancing the construction of the paste plant.
• Commissioning and begin ning plant operations, including the planned pouring first
gold.
• Obtaining final permits to start operations.
• Obtaining permits and starting construction for the Zamora River bridge near El Pindal.
The Company has substantially agreed to the terms of the cost overrun facility (“COF”) with a
provider. Completion of the COF is a condition precedent to the initial draw down of the Facility,
expected to occur in the first quarter of 2019. The COF is subject to acceptance by the
Company’s lenders and is at the final documentation stage.
Exploration continues to focus on developing drilling targets through mapping and geochemical
sampling of several targets. 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 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 year ended December 31, 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
February 19, 2019 at 6:30 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. T he 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 an d 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 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”, “s cheduled”, “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 site and powerline
infrastructure and the acquisition of land and surface rights , the success of the Company’s explo ration
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: risks associated with the Company's com munity relationships ; risks 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 related 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; shortages 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 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 required to protect endangered species ; exploration and development risks ; the
Company'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 and 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.
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 Management
Discussion and Analysis dated February 19, 2019, which is available under the Company’s profile at
www.sedar.com.
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Figure 1. Fruta del Norte Project as at January 2019
Figure 2. The declines have reached the orebody - development on primary levels underway