Fruta del Norte achieves gold production of 233,555 oz and an
AISC¹ of $771/oz sold in the first
half of 2022
VANCOUVER, BC, Aug. 9, 2022
/CNW/ - Lundin Gold Inc. (TSX: LUG) (Nasdaq Stockholm:
LUG) (OTCQX: LUGDF) ("Lundin Gold" or the
"Company") today reports results for the second quarter
and first half of 2022, highlighted by Q2 production of 111,890
ounces ("oz") of gold and sale of 96,291 oz at a cash operating
cost1 of $702 per oz sold
and all-in sustaining cost ("AISC")1 of $864 per oz sold. For the first half of 2022,
Lundin Gold produced 233,555 oz and
sold 215,573 of gold at an AISC of $771 per oz. In the second quarter, the Company
generated cash from operating activities of $60.7 million and free cash flow1 of
$21.2 million resulting in a cash
balance of $301 million at quarter
end. Free cash flow was impacted by the payment in April of annual
income taxes and profit sharing of $60.7
million for 2021. All amounts are in U.S. dollars unless
otherwise indicated. PDF version.
Based on continuing strong operating results for the first half
of 2022, the Company is increasing its production guidance from
405,000 to 445,000 oz to between 430,000 and 460,000 oz and
decreasing its AISC1 guidance from $860 to $930 per oz
sold to between $820 and $870 per oz sold, calculated on a basis
consistent with prior periods.
Ron Hochstein, President and CEO
commented, "As a result of strong operating results in the first
half of 2022 and confidence that our team can continue to deliver
excellent performance, we are increasing production guidance and
reducing AISC guidance. Fruta del Norte continues to generate
significant operating cash flow, which allows us to expand our
exploration programs, pay down our debt aggressively and declare
our inaugural semi-annual dividend equivalent to an annual yield of
approximately 5.6%2. The Company is in a strong
position, and I am excited to take this momentum into the second
half of the year."
Second Quarter of 2022 Financial Overview
- The Company sold a total of 96,291 oz of gold, consisting of
68,598 oz of concentrate and 27,693 oz of doré at an average
realized gold price1 of $1,907 per oz for total gross revenues from gold
sales of $184 million. Net of
treatment and refining charges, revenues were $178 million.
- Cash operating costs1 and AISC1 were
$702 and $864 per oz of gold sold, respectively.
Sustaining capital is expected to increase in the second half of
the year due to the ongoing construction of the third tailings dam
raise and ramp up of other activities.
__________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on pages 13 to 16
of the Company's MD&A for the three and six months ended June
30, 2022 available on SEDAR
|
2 Based on
semi-annual dividends of $0.20 per common share and today's closing
price of the Company's common shares on the Toronto Stock Exchange
of CAD$9.16 and the CAD$ to US$ exchange rate of 1.2880 as provided
by the Bank of Canada
|
- Income from mining operations was $82.5
million. The Company generated cash flow of $60.7 million from operations and ended the
quarter with a cash balance of $301
million. Free cash flow1 for the quarter was
$21.2 million or $0.09 per share. Cash flow in the second quarter
is impacted by the payment of annual income taxes and profit
sharing ($29.2 million and
$31.5 million respectively), which
were due in April.
- Net income was $56.0 million
including derivative gains of $40.0
million, corporate, exploration, finance costs, and
associated taxes on earnings. Adjusted earnings¹, which exclude
derivative gains, were $13.5 million,
or $0.06 per share. Net income was
impacted by the deferral of gold sales because of a national strike
in the second half of June.
While production was not affected by a national strike in
Ecuador, which ended on
June 30th, some gold shipments and
sales, estimated at approximately 16,000 ozs, planned for June were
impeded by blockades on some of Ecuador's major highways and delayed into
July. This short lag resulted in the deferral of some revenues from
Q2 to Q3 2022, thereby affecting the level of income from mining
operations, earnings, and cash flow in Q2 2022.
Second Quarter of 2022 Production Overview
- The mine maintained its strong operating performance during the
quarter with 369,430 tonnes mined at an average grade of 11.4 grams
per tonne. Mine production was reduced slightly near the end of the
quarter to allow the mill to process more tonnes and reduce the run
of mine stockpiles in order to manage the oxidation of the ore,
which has been impacting mill recoveries.
- Underground mine development continued as planned with a total
of 2,190 metres completed. Development rates averaged 24.0 metres
per day in the second quarter.
- The mill processed 385,675 tonnes of ore at an average
throughput rate of 4,238 tpd, just above design capacity.
- The average grade of ore milled was 10.3 grams per tonne with
average recovery at 87.6%. Recoveries in the second quarter were
impacted by the milling of oxidized ore.
- Gold production was 111,890 oz, comprised of 75,730 oz of
concentrate and 36,160 oz of doré.
Second Quarter of 2022 Operating and Financial
Highlights
The following two tables provide an overview of key operating
and financial results during the second quarter and first half of
2022.
|
Three months
ended June
30,
|
Six months
ended June
30,
|
|
2022
|
2021
|
2022
|
2021
|
Tonnes ore
mined
|
369,430
|
397,640
|
749,059
|
763,111
|
Tonnes ore
milled
|
385,675
|
346,561
|
759,082
|
671,152
|
Average head grade
(g/t)
|
10.3
|
11.1
|
10.8
|
11.2
|
Average
recovery
|
87.6 %
|
88.2 %
|
88.9 %
|
88.0 %
|
Average mill throughput
(tpd)
|
4,238
|
3,808
|
4,194
|
3,708
|
Gold ounces
produced
|
111,890
|
108,799
|
233,555
|
212,936
|
Gold ounces
sold
|
96,291
|
125,412
|
215,573
|
207,217
|
|
Three months
ended June
30,
|
Six months
ended June
30,
|
|
2022
|
2021
|
2022
|
2021
|
Net revenues
($'000)
|
177,808
|
216,145
|
394,280
|
356,136
|
Income from mining
operations ($'000)
|
82,522
|
110,604
|
193,729
|
174,635
|
Earnings before
interest, taxes, depreciation, and amortization
($'000)1
|
144,697
|
109,660
|
243,510
|
239,626
|
Adjusted earnings
before interest, taxes, depreciation, and amortization
($'000)1
|
104,711
|
135,259
|
238,248
|
213,702
|
Net income
($'000)
|
55,962
|
49,984
|
79,144
|
135,964
|
Free cash flow
($'000)1
|
21,248
|
102,995
|
113,054
|
146,575
|
Average realized gold
price ($/oz sold)1
|
1,907
|
1,773
|
1,882
|
1,770
|
Cash operating cost
($/oz sold)1
|
702
|
596
|
656
|
626
|
All-in sustaining costs
($/oz sold)1
|
864
|
720
|
771
|
764
|
Free cash flow per
share ($)1
|
0.09
|
0.44
|
0.48
|
0.63
|
Adjusted net earnings
($'000)1
|
13,490
|
74,800
|
71,040
|
112,209
|
Adjusted net earnings
per share ($)1
|
0.06
|
0.32
|
0.30
|
0.48
|
Liquidity and Capital Resources
At the end of the second quarter of 2022, the Company is in a
strong financial position.
(in thousands of
U.S. dollars)
|
As at June
30, 2022
|
As at December
31, 2021
|
Financial
Position:
|
|
|
Cash
|
301,032
|
262,608
|
Working
capital
|
253,921
|
217,221
|
Total assets
|
1,664,030
|
1,685,113
|
Long-term
debt
|
645,724
|
739,977
|
As at June 30, 2022, the Company
had cash of $301 million and a
working capital balance of $254
million compared to cash of $263
million and a working capital balance of $217 million at December
31, 2021. The change in cash during the first half of 2022
was primarily due to cash generated from operating activities of
$188 million and proceeds from the
exercise of stock options, warrants, and anti-dilution rights of
$9.4 million. This is offset by
principal repayments, interest and finance charges, including
associated taxes, under the gold prepay and stream credit
facilities totalling $67.6 million,
interest and principal repayments under the senior debt of
$65.8 million, and cash outflows of
$25.3 million for capital
expenditures, which include costs for the South Ventilation Raise
("SVR") and sustaining capital.
The Company's strong operating cash flow during the first half
of 2022 is expected to continue for the remainder of the year based
on its production and AISC guidance. This strong operating cash
flow will continue to support aggressive debt repayments, regional
and near mine exploration, underground expansion drilling at FDN,
planned capital expenditures, growth initiatives and regular
dividend payments under the dividend policy approved in the second
quarter of this year.
Capital Expenditures
- South Ventilation Raise: Work on the SVR continues with
completion now expected to occur in early Q4. Progress on the SVR
during the quarter was affected by difficulties stemming from a
blockage, which has now been cleared, that had stopped slash and
lining activities. There is no expected impact on production
because of this change in timing.
- Sustaining Capital: The third raise of the tailings dam
started during the second quarter and construction is anticipated
to be completed in Q4. Resource expansion/conversion drilling at
Fruta del Norte continued to progress with 4,096 metres completed
during the quarter focusing on expansion or conversion of the
Inferred Resource at the south end of the deposit. Expenditures for
other sustaining capital projects will ramp up throughout the
remainder of the year.
_________________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on pages 13 to 16
of the Company's MD&A for the three and six months ended June
30, 2022 available on SEDAR
|
Health and Safety
Stringent health and safety procedures remain in place to
protect our personnel, including minimizing the impact of COVID-19
on the workforce. Through vaccination campaigns by Ecuador's Ministry of Public Health, 100% of
the Company's employees and on-site contractors were vaccinated
and, as at June 30, 2022, 84% had
received at least one booster shot.
During the quarter there was one Lost Time Incident and four
Medical Aid Incidents. The Total Recordable Incident Rate was 0.57
per 200,000 hours worked during the 2022 Period.
Sustainability
The inaugural Climate Change (the "TCFD Report") and the 2021
Sustainability Reports were published. The TCFD Report details
Lundin Gold's governance, climate
strategy around climate change risks and opportunities, risk
management and metrics and how the Company is working towards
establishing targets. The 2021 Sustainability Report highlights
accomplishments and progress achieved by the Company on several
initiatives and programs during its first full year of
operations.
Various community business projects supported by the Company are
under way, including sponsoring the establishment of micro
businesses providing ancillary services to Fruta del Norte and the
community, such as a textile manufacturer and fire extinguisher
maintenance provider. These are in addition to the ongoing projects
such as road maintenance, education projects, and economic
development.
The Company has also continued or restarted many community
initiatives. They include working with Shuar indigenous communities
to promote improved agricultural practices and with Junior
Achievement Ecuador to prepare local students graduating from high
school for the national exit exam (and thus access to
post-secondary education), as well as support of after-school
activities in the local town of Los Encuentros such as music,
soccer, boxing, and English programs.
Exploration
A recent exploration data review demonstrated a much wider
mineralization footprint nearby the FDN deposit. Several targets of
interest are essentially untested, with similar geological
conditions to those at FDN, and present significant new exploration
opportunities. Shortly after quarter end, the Company's announced
the start of a near mine program focused on targets within and
around the existing FDN operation and exploring sectors in the
continuities of the FDN deposit and along the extension of major
structures. The program, which is expected to cost $4 million
in 2022, is planned to include over 6,000 metres of drilling from
both underground and surface, new geophysical surveys, geological
mapping, and geochemical sampling.
The Company's 2022 regional exploration program continued on the
Barbasco and Puenta Princesa targets. Drilling is ongoing with two
rigs turning and a third rig now added. During the first half of
2022, 7,240 metres were drilled across nine holes, mainly at
Puente-Princesa and Barbasco. A summary of results from drilling to
date can be found in the news release dated August 4, 2022.
Early in the second quarter, Newcrest International Pty Ltd.
("Newcrest"), a wholly owned subsidiary of Newcrest Mining Limited,
met the first expenditure requirement of $4.0 million under the Earn-In Agreement covering
eight of Lundin Gold's early-stage
concessions to the north and south of Fruta del Norte. Newcrest
exercised its option to proceed to the second stage of the earn-in
on May 28, 2022. Through completion
of the second stage, an exploration commitment of a further
$6 million, Newcrest would earn an
initial 25% interest in the eight concessions indirectly through a
subsidiary of Lundin Gold. The
current program is focused on drill testing priority copper-gold
porphyry targets which to date detected low-level porphyry style
copper mineralization. Drilling is ongoing.
Corporate
On July 26, 2022, Lundin Gold's founder and former Chairman, Mr.
Lukas H. Lundin, passed away in
Geneva, Switzerland at the age of
64, following a 2-year battle with brain cancer. In his role as
Chairman, Lukas oversaw the development of Lundin
Gold's Fruta del Norte gold mine in Ecuador and the
successful establishment of the Company as a significant gold
producer with strong cash flows and a focus on responsible mining.
Through Lukas' vision and perseverance, the construction and
operation of Fruta del Norte has changed thousands of lives in
Zamora Chinchipe and changed Ecuador to be a new frontier
for the responsible mining sector.
Outlook
Lundin Gold's strong performance
in the 2022 Period provides a robust foundation for the rest of the
year, and as a result, the Company is increasing its production
guidance to between 430,000 and 460,000 from 405,000 to 445,000 oz
and decreasing its AISC1 guidance to between
$820 and $870 from $860 to
$930.
The SVR is the last remaining scope of work under the original
FDN construction project. Completion of the SVR is anticipated
early in the fourth quarter of 2022 with no anticipated impact on
production in 2022.
Sustaining capital will ramp up substantially in Q3 2022 with
construction of the third raise of the TSF anticipated to be
completed in Q4 2022. The drilling program at FDN for the
conversion of Inferred Resources and definition of additional
resources is ongoing. Several other capital projects are underway
and planned for 2022, contributing to an expected increase in
sustaining capital costs during the balance of the year.
The 16,500-metre regional exploration drill program is
continuing with four additional targets of interest identified:
Barbasco Norte, Capullo, Puma and Quebrada La Negra. A third rig
has been added in order to expand the program with one hole already
completed at Barbasco Norte. Results are pending and additional
drilling at this target is underway. At Capullo, a first hole was
recently started. Drill programs at Puma and Quebrada La Negra are
expected to be initiated in the third quarter and fourth quarter,
respectively.
Exploration data review carried out during the first quarter has
indicated several potential targets in areas immediately near the
Fruta del Norte deposit. These targets, located in areas coincident
with geochemical anomalies on surface, display similar geological
characteristics to the Fruta del Norte deposit but have not been
tested by drilling. Based on this review, an additional near mine
exploration program was planned in the second quarter and has
recently started with a combined anticipated 6,000 metres of
drilling both underground and from surface with an expected cost of
$4 million to be incurred during the
remainder of the year. As of the date of the press release, two
rigs are turning, one underground and one on surface.
______________________
|
1 Certain
additional disclosures for these specified financial measures have
been incorporated by reference and can be found on pages 13 to 16
of the Company's MD&A for the three and six months ended June
30, 2022 available on SEDAR
|
Qualified Persons
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. 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, August 10,
2022 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 /
88801963
|
A link to the webcast is 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
August 24, 2022.
Toll Free North America
Replay Number:
|
+1
888-390-0541
|
International Replay
Number:
|
+1
-416-764-8677
|
Replay
passcode:
|
801963 #
|
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
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, cash operating cost per oz
sold, all-in sustaining cost, operating cash flow per share, and
adjusted net 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. Please refer to the Company's MD&A for
the second quarter of 2021 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 August 9, 2022 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 a
number of places, such as in statements relating to
Company's 2022 production outlook, including estimates of gold
production, grades recoveries and AISC; expected sales receipts,
cash flow forecasts and financing obligations; its estimated
capital costs and the expected timing and impact of completion of
capital projects including the south ventilation raise; the
recovery of VAT; 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 the Company's efforts to protect its
workforce from COVID-19. 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 21, 2022, 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, political and economic
instability in Ecuador, production
estimates, mining operations, the Company's community
relationships, ability to maintain obligations or comply with debt,
financing requirements, volatility in the price of gold, shortages
of critical supplies, compliance with environmental laws and
liability for environmental contamination, lack of availability of
infrastructure, the Company's reliance on one mine, deficient or
vulnerable title to concessions, easements and surface rights,
uncertainty with the tax regime in Ecuador, the Company's workforce and its
labour relations, inherent safety hazards and risks to the health
and safety of the Company's employees and contractors, 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 shares, the
potential influence of the Company's largest shareholders, measures
to protect endangered species and critical habitats, the reliance
of the Company on its information systems and the risk of
cyber-attacks on those systems, the cost of non-compliance and
compliance costs, exploration and development risks, risks related
to illegal mining, 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, risks that the Company will not declare dividends and
social media and reputation.
SOURCE Lundin Gold Inc.