Momentum From 2022 Continues with Strong Production and Cost
Performance
VANCOUVER, BC, May 10, 2023
/CNW/ - Lundin Gold Inc. (TSX: LUG) (Nasdaq Stockholm:
LUG) (OTCQX: LUGDF) ("Lundin Gold" or the "Company") is
pleased to report results for the first quarter of 2023,
highlighted by all-time high gold production of 140,021 ounces
("oz") and gold sales of 134,691 oz at a cash operating
cost1 of $644 per oz
sold and all-in sustaining cost ("AISC")1 of
$728 per oz sold. Although the robust
performance provides a strong start for the year, the Company's
production guidance for 2023 remains unchanged as grade and gold
production are expected to vary over the coming quarters. Due to
the ramp up of sustaining capital activities starting in the second
quarter, the most significant being the construction of the fourth
tailings dam raise, the Company also maintains its AISC1
guidance. All amounts are in U.S. dollars unless otherwise
indicated. View PDF Version.
As at March 31, 2023, the Company
maintained a strong cash balance of $210
million compared to $363
million as at December 31,
2022 with the decrease being driven by the use of cash for
debt reduction initiatives and dividends to shareholders. During
the three months ended March 31,
2023, the Company utilized cash to optimize its balance
sheet through the full repayment of the gold prepay facility
("GPP") of $208 million which
provides the Company with greater exposure to the positive outlook
on gold price. This one-time transaction resulted in additional
interest and finance charges of $129
million with a resultant first quarter free cash flow of
$(11.7).
Ron Hochstein, President and CEO
commented, "Our strong operating and financial results were
achieved while maintaining our outstanding safety record. On the
heels of an excellent quarter, the operations team at FDN recently
reached the milestone of four million hours worked without a Lost
Time Incident or Medical Aid Incident. We continue to realize
increased cash flows from Fruta del Norte as a result of our
commitment to operational excellence and the full repayment of the
gold prepay at the start of the year. The team at FDN is doing a
great job, and I expect this positive momentum to
continue."
_______________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on page 13 of the
Company's MD&A for the first quarter ended March 31, 2023
available on SEDAR.
|
OPERATING AND FINANCIAL RESULTS SUMMARY
The following two tables provide an overview of key operating
and financial results.
|
Three months
ended
March
31
|
|
2023
|
2022
|
Tonnes ore
mined
|
427,735
|
379,629
|
Tonnes ore
milled
|
392,332
|
373,407
|
Average mill head grade
(g/t)
|
12.3
|
11.2
|
Average
recovery
|
90.6 %
|
90.2 %
|
Average mill throughput
(tpd)
|
4,359
|
4,149
|
Gold ounces
produced
|
140,021
|
121,665
|
Gold ounces
sold
|
134,691
|
119,282
|
|
Three months
ended
March
31
|
|
2023
|
2022
|
Revenues
($'000)
|
256,728
|
216,472
|
Income from mining
operations ($'000)
|
132,708
|
111,207
|
Earnings before
interest, taxes, depreciation, and amortization
($'000)1
|
143,632
|
98,822
|
Adjusted earnings
before interest, taxes, depreciation, and amortization
($'000)1
|
159,066
|
133,546
|
Net income
($'000)
|
51,465
|
23,182
|
Cash flow from
operations ($'000)
|
144,439
|
127,330
|
Free cash flow
($'000)1
|
(11,653)
|
91,806
|
Average realized gold
price ($/oz sold)1
|
1,952
|
1,862
|
Cash operating cost
($/oz sold)1
|
644
|
619
|
All-in sustaining costs
($/oz sold)1
|
728
|
696
|
Free cash flow per
share ($)1
|
(0.05)
|
0.39
|
Adjusted net earnings
($'000)1
|
67,014
|
57,550
|
Adjusted net earnings
per share ($)1
|
0.28
|
0.25
|
Dividends paid per
share ($)
|
0.10
|
-
|
FIRST QUARTER HIGHLIGHTS
Financial Results – Strong Cash Flow From Operations
Underlines Inherent Strength of FDN
- First quarter sales of 134,691 oz gold, consisting of 85,122 oz
in concentrate and 49,569 oz as doré, at an average realized gold
price1 of $1,952 per oz
for total gross revenues from gold sales of $263 million.
- Net of treatment and refining charges, revenues in the first
quarter were $257 million.
- Cash operating costs1 and AISC1 for the
quarter were $644 and $728 per oz of gold sold, respectively.
Sustaining capital is expected to increase significantly in future
periods with the start of the fourth tailings dam raise and ramp up
of other site infrastructure and improvement projects which is
expected to result in higher AISC1 for the remainder of
the year.
- The Company generated cash flow of $144
million from operations and negative free cash
flow1 of $(11.7) million
or $(0.05) per share. Free cash
flow1 was impacted by the full repayment of the GPP
which resulted in additional interest and finance charge paid
during the period of $129
million.
- Notwithstanding the payment of $208
million to extinguish the GPP, the Company ended the quarter
with a cash balance of $210
million.
- Earnings before interest, taxes, depreciation, and
amortization1 ("EBITDA") and adjusted EBITDA1
were $144 million and $159 million, respectively. The difference is the
derivative loss of $15.4 million in
the quarter.
- Net income was $51.5 million
including a derivative loss of $15.4
million, and net of corporate, exploration, finance costs,
and associated taxes on earnings. Adjusted earnings1,
which exclude the derivative loss, were $67.0 million, or $0.28 per share.
_______________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on page 13 of the
Company's MD&A for the first quarter ended March 31, 2023
available on SEDAR.
|
Production Results – All Time Highs Across the Board
- Gold production during the first quarter totalled 140,021 oz,
comprised of 88,236 oz of concentrate and 51,785 oz of doré.
- Mine production ramped up to 427,735 tonnes of ore at an
average grade of 11.7 grams per tonne.
- The mill processed 392,332 tonnes of ore at an average
throughput rate of 4,359 tonnes per day ("tpd"). The throughput
rate was below the guided average for the year of 4,400 tpd due to
the completion of the relining of the SAG and ball mills late in
the quarter.
- The average grade of ore milled was 12.3 grams per tonne with
average recovery at 90.6%. Recoveries were positively impacted by
processing high-grade ore and an ore blending strategy that
improved flotation recoveries.
Liquidity and Capital Resources
At the end of the first quarter of 2023, the Company is in a
strong financial position:
(in thousands of
U.S. dollars)
|
As at March
31,
2023
|
As at December
31,
2022
|
Financial
Position:
|
|
|
Cash
|
209,714
|
363,400
|
Working
capital
|
256,853
|
194,804
|
Total assets
|
1,467,040
|
1,668,865
|
Long-term
debt
|
434,175
|
667,966
|
The change in cash during the first quarter of 2023 was primarily
due to the full repayment of the GPP of $208
million; principal repayments, interest and finance charges,
including associated taxes, under the stream credit facility
totalling $21.0 million; interest and
principal repayments under the senior debt of $42.8 million; dividends of $23.6 million; and cash outflows of $7.2 million for sustaining capital expenditures.
This is offset by cash generated from operating activities of
$144 million and proceeds from the
exercise of stock options and anti-dilution rights of $4.0 million.
Capital Expenditures
- Sustaining Capital:
-
- Preparations were underway for the fourth raise of the tailings
dam late in the first quarter with work starting in the second
quarter and completion expected in the fourth quarter.
- Construction of the new warehouse progressed as planned during
the quarter with completion expected late in the second
quarter.
- Other sustaining capital projects such as a new sewage
treatment plant, underground mine maintenance facility, and other
efficiency improvement projects are expected to ramp up during the
remainder of the year.
- The 2023 conversion drilling program completed eight drill
holes of approximately 1,400 metres during the quarter in distinct
sectors of the FDN deposit. In the north-central sector, four drill
holes were completed with positive assay results associated with
hydrothermal breccias that confirmed mineralization continuity
along the downdip extension. In the southern sector, four drill
holes were completed and intercepted veins and veinlets hosted in
volcanic rocks, generally associated to the gold mineralization at
FDN. A complete table of results received to date can be found in
Lundin Gold's press release dated
May 4, 2023.
Health and Safety
During the first quarter there were no Lost Time Incidents
("LTIs") and one Medical Aid Incident ("MAIs") on exploration
activities. The Total Recordable Incident Rate across exploration
and operations was 0.15 per 200,000 hours worked. In April 2023, the FDN operations reached a
significant milestone of 4.0 million hours worked with neither an
LTI nor a MAI.
Community
Various community projects supported by the Company continued to
progress in the first quarter. Micro businesses established by
local entrepreneurs and supported by the Company and Lundin
Foundation have successfully become suppliers to FDN. The local
textile manufacturer, fire extinguisher maintenance company, and
pest control / fumigation company continue to work with the mine.
Also in the first quarter, the evaluation of potential new areas
for local businesses has commenced. Efforts have continued to
ensure that local farmers retain access to local, national, and
international markets.
Longstanding projects such as road maintenance, educational
support to promote access to higher education, efficiency
improvements in the agricultural sector and addressing
infrastructure challenges continue to progress.
The Company continues to engage with local indigenous peoples,
especially the Shuar Federation of Zamora Chinchipe, to jointly
implement projects that promote economic opportunities and the
Shuar culture. In the first quarter, the Shuar Cultural Centre,
which was constructed and is managed in partnership with the Lundin
Foundation, hosted multiple events and received an increased number
of visitors.
Corporate
The Company paid its quarterly dividend of $0.10 per share on March
31, 2023 (April 4 for shares
trading on Nasdaq Stockholm) based on a record date of March 13, 2023, for a total of $23.6 million. With the release of its first
quarter 2023 results, the Company has declared a cash dividend of
$0.10 per share, which is payable on
June 27, 2023 (June 30 for shares trading on Nasdaq Stockholm)
to shareholders of record on June 13,
2023.
Several Board and Management changes were also made in the first
quarter. At the end of the quarter, one of Newcrest's
representatives, Mr. Robert Thiele,
resigned from the board of directors, and Ms. Jill Terry was appointed as his replacement. The
Company also appointed Mr. Terry
Smith as Chief Operating Officer and Mr. Chester See as Interim Chief Financial Officer
during the quarter, concurrent with the retirement of Mr.
Alessandro Bitelli, Executive Vice
President and Chief Financial Officer. In April 2023, the Company announced that Mr.
Christopher Kololian was hired as
the Company's Chief Financial Officer and is expected to commence
in the role on July 1, 2023.
Chester See will continue in the
role of Senior Vice President, Finance.
EXPLORATION – EXCITING DEVELOPMENTS BEING MADE IN HIGHLY
PROSPECTIVE LAND PACKAGE
Near-Mine Exploration Program
The near mine
drilling program restarted in February, following a change in
drilling contractors at year end, and continues to explore
extensions of major controlling structures of the FDN deposit
targeting distinct sectors near FDN. In the first quarter, the
program completed a total of 3,660 metres across eight holes, from
surface and underground.
- The surface drilling program is focused along the south
extension of the East Fault. A total of six drill holes were
completed with most intercepting significant hydrothermal
alteration from epithermal systems. Initial positive intercepts
indicate a new mineralized zone, FDN Sur ("FDNS"), and identified
targets for further evaluation, Bonza Sur and Castillo. Three
surface rigs are currently drilling, two of them exploring the
extensions of FDNS and another at Bonza Sur.
-
- At FDNS, three surface drill holes were completed, and all
successfully intercepted hydrothermal alteration zones of similar
composition to that found at FDN. The most recent results from hole
FDNS-2023-19 point to significant exploration potential to be
developed along the north strike and at depth, parallel to the
operating mine. Remaining results from drill holes completed in the
first quarter are pending.
- At Bonza Sur, three surface drill holes were completed, and
initial results suggest a new mineralized zone located only one
kilometre south from FDN. The intercepted gold mineralization is
hosted in a wide hydrothermal alteration zone along the north-south
strike direction. This is coincident with a large soil gold anomaly
that extends continuously for more than 1.2 kilometres.
- At Castillo, drill results indicate a new mineralized zone to
the south of FDN. This sector is located underneath the Suarez
Basin and to the west of the East Fault, in a similar geological
setting to FDN and FDNS.
- The underground drilling program focused on the continuity of
FDN at depth and explored new areas across the West Fault. Two
drill holes were completed in the north central part of FDN, and
drill hole UGE-W-23-018 intercepted narrow gold mineralization
located west from the West Fault, which will be followed up with
further drilling during the year.
A complete table of results received to date can be found in
Lundin Gold's press release dated
May 4, 2023.
Regional Exploration Program
The regional
drilling program restarted late in the first quarter with one drill
hole in progress at Quebrada La Negra located along the
southwestern basin border. The drill hole is investigating the
northern continuity of a major fault where wide hydrothermal
alteration zones with breccias and/or veins and disseminated
sulfides were intercepted during the 2022 drilling
program.
The regional program will continue to advance in the
identification of important indicators that point toward the
presence of buried epithermal deposits in the southern basin. New
targets of interest have been identified and will be tested
targeting new potentially mineralized structures.
Newcrest Earn-In Agreement
On the concessions
held by the Company's subsidiary, Surnorte S.A., a second phase of
scout drilling commenced at the Gamora Project, located in
southeast Ecuador. This work is
being conducted by Newcrest Mining Limited ("Newcrest") as the
operator under an earn-in agreement with Lundin Gold pursuant to which Newcrest can earn
up to a 50% interest in eight exploration concessions located to
the north and south of Fruta del Norte. The current phase of
diamond core drilling at Gamora is focused on testing priority
copper-gold targets in the Mirador copper porphyry district. The
program is planned to finish in June
2023.
OUTLOOK – POSITIONED TO GENERATE STRONG SHAREHOLDER VALUE FOR
YEARS TO COME
Consistent with previously announced guidance, gold production
at FDN for 2023 is estimated to be between 425,000 to 475,000 oz
based on an average throughput rate of 4,400 tpd, an increase from
the average throughput of 4,274 tpd achieved in 2022. The head
grade is estimated to average 9.67 g/t, with fluctuations expected
during the year as different sections of the ore body are mined.
Average mill recovery for the year is estimated at 90%.
Lundin Gold's performance in the
first quarter of 2023 provides a strong foundation for the rest of
the year, and the Company's production guidance of 425,000 to
475,000 oz and AISC11 of $870 to $940 for
2023 remain unchanged.
Sustaining capital is expected to increase over the remaining
quarters of 2023 with construction of the fourth raise of the
tailings dam starting in the second quarter as well as several
other capital projects. In addition, the conversion drilling
program, aiming to convert Inferred to Indicated Mineral Resources
is planned to continue.
Exploration drilling, on the near mine program, is planned to
increase from 15,500 metres to 23,000 metres of drilling for 2023
as a result of positive results recently received. The near mine
drilling program will continue to advance exploration of the
recently identified FDNS, Bonza Sur, and Castillo targets near FDN.
Another rig is planned to be incorporated in the second quarter,
bringing the total number of surface rigs to four. The regional
drilling program is planned to focus on the southern Suarez Basin,
advancing along the eastern and western borders of the Basin. Its
objective is to follow up on the numerous target areas identified
during the 2022 program and test new and unexplored targets. The
regional drilling program is planned to comprise a total of 12,500
metres for the year, with one rig currently operating. The
estimated exploration budget for 2023 is anticipated to increase
from $21.1 million to $24.6 million.
The Company anticipates declaring quarterly dividends of at
least $0.10 per share, equivalent to
approximately $100 million annually,
based on currently issued and outstanding shares.
_______________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on page 13 of the
Company's MD&A for the first quarter ended March 31, 2023
available on SEDAR.
|
Qualified Persons
The technical information relating to FDN 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 NI 43-101. The disclosure of exploration
information contained in this press release was prepared by
Andre Oliveira, P.Geo, Lundin Gold's V.P. Exploration, who is a
Qualified Person in accordance with the requirements of NI
43-101.
Webcast and Conference Call
The Company will host a conference call and webcast to discuss
its results on Thursday, May 11 at
7:00 a.m. PT, 10:00 a.m. ET, 4:00 p.m.
CET.
Conference Call Dial-In Numbers:
Participant Dial-In
North America:
|
+1
416-764-8659
|
Toll-Free Participant
Dial-In North America:
|
+1
888-664-6392
|
Participant Dial-In
Sweden:
|
0200899189
|
Conference
ID:
|
Lundin Gold /
42623507
|
A link to the webcast will be available on the Company's website,
www.lundingold.com.
A replay of the conference call will be available two hours
after the completion of the call until Thursday, May 25, 2023.
Toll Free North America
Replay Number:
|
+1
888-390-0541
|
International Replay
Number:
|
+1
416-764-8677
|
Replay
passcode:
|
623507 #
|
About Lundin Gold
Lundin Gold, headquartered
in Vancouver, Canada, owns
the Fruta del Norte gold mine in southeast Ecuador and a large
exploration land package that hosts the Fruta del Norte deposit at
its northern edge. Fruta del Norte is among the highest-grade
operating gold mines 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 development 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, EBITDA, adjusted EBITDA,
cash operating cost per oz sold, all-in sustaining cost, free cash
flow, free cash flow per share, and adjusted earnings, 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 other 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, they are of assistance in the understanding of the
results of operations and its financial position. Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on page 13 of
the Company's MD&A for the three months ended March 31, 2023 available on SEDAR.
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 10, 2023 at
4:30 p.m. Pacific Time through the
contact persons set out below.
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.
This press release contains forward-looking information in
several places, such as in statements relating to the Company's
2023 production outlook, including estimates of gold production,
grades recoveries and AISC; operating plans; expected sales
receipts, cash flow forecasts and financing obligations; its
estimated capital costs; expected management changes; benefits of
the Company's community programs; the Company's declaration and
payment of dividends pursuant to its dividend policy; the timing
and the success of its drill program at Fruta del Norte and its
other exploration activities; and estimates of Mineral Resources
and Reserves at Fruta del Norte. 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 31,
2023, 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 related to
political and economic instability
in Ecuador; risks associated with the Company's
community relationships; risks related to estimates of
production, cash flows and costs; risks inherent to mining
operations; shortages of critical supplies; the cost of
non-compliance and compliance costs; control of the Company's
largest shareholders; volatility in the price of gold;
failure of the Company to maintain its obligations under its debt
facilities; risks related to Lundin Gold's
compliance with environmental laws and liability for environmental
contamination; the lack of availability of infrastructure; the
Company's reliance on one mine; security risks to the Company, its
assets and its personnel; risks related to illegal mining;
exploration and development risks; the impacts of a pandemic virus
outbreak; risks related to the Company's ability to obtain,
maintain or renew regulatory approvals, permits and licenses;
uncertainty with and changes to the tax regime in Ecuador; the reliance of the Company on its
information systems and the risk of cyber-attacks on those systems;
the imprecision of Mineral Reserve and Resource estimates;
deficient or vulnerable title to concessions, easements and surface
rights; inherent safety hazards and risk to the health and safety
of the Company's employees and contractors; risks related to the
Company's workforce and its labour relations; key talent
recruitment and retention of key personnel; volatility in the
market price of the Company's shares; measures to protect
endangered species and critical habitats; social media and
reputation; the adequacy of the Company's insurance; risks relating
to the declaration of dividends; 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; limits of disclosure and
internal controls; the potential for litigation; and
risks due to conflicts of interest.
SOURCE Lundin Gold Inc.