VANCOUVER, Feb. 20, 2020 /CNW/ - Lundin Gold Inc. ("Lundin Gold" or the "Company") (TSX: LUG, Nasdaq Stockholm: LUG) is pleased to announce that it has achieved commercial production at its Fruta del Norte gold mine ("Fruta del Norte" or the "Project") in Ecuador ahead of schedule. PDF Version.

"Lundin Gold has successfully built the first large-scale underground gold mine in Ecuador and has reached commercial production ahead of schedule and on budget. We are now focused on ramping up to name plate production and optimization. In addition, as soon as we receive the necessary permits, we will start exploration drilling at our high priority, Barbasco target," said Ron Hochstein, President and CEO of Lundin Gold.

In declaring commercial production, management considered a number of factors, including completion of substantially all construction development activities in accordance with design and a production ramp up period which achieved an average throughput of 70% of mill capacity for a period of 90 consecutive days. Management plans to provide guidance for Fruta del Norte when it reports its first quarter 2020 results.

The Company also reports its results for the year ended December 31, 2019. All amounts are in U.S. dollars unless otherwise indicated.

Highlights of Year End 2019 Results

Fruta del Norte
•Produced a total of 28,678 ounces ("oz") of gold by the end of 2019.
•Exported initial production of both gold concentrate and doré to a smelter and a refinery, respectively, in December 2019 resulting in $20.9 million of concentrate sales.
•Continued underground development ahead of projections, with raise boring of the south ventilation raise and permanent ventilation fan installation remaining. The contract mining scope was completed in the third quarter and the mine is now under full owner operations.
•Continued mine production on plan with approximately 153,000 tonnes of ore stockpiled at year end.
•Completed the construction of and energized the powerline that connects the Project to the national electricity grid.
•Overall construction progress was 99.2% at year end.
•Received key permits from La Secretaría Nacional del Agua (SENAGUA), which were required in order to move Fruta del Norte into production.
•Received an award from the United Nations Global Compact Canada ("UNGCC") for the Company's commitment to education and training programs and the Company's efforts to create a network of local suppliers.

Operations
Development of Fruta del Norte has stayed on budget and, subsequent to year-end, Fruta del Norte achieved commercial production.

During the second half of 2019, the Company moved into the commissioning phase of the process plant and in Q4 commenced ramp up of operations, with the focus being on increasing throughput and recoveries to design levels. A total of 28,678 oz of gold was produced by the end of 2019 and of the total gold production, 3,411 oz were produced in the form of doré and 25,267 oz produced as concentrate. In 2019, 3,400 tonnes of concentrate were produced, of which 2,676 tonnes were shipped and sold to a smelter in Finland by year end generating sales of $20.9 million.

Mine Development
As at December 31, 2019, a total of 13 kilometres ("km") of underground mine development had been completed versus a target of 11.9 km. The mine contractor was demobilized earlier in the year, and the mine is now under full owner operations. Raise boring of the south ventilation raise and permanent ventilation fan installation is ongoing and expected to be completed in the second quarter of 2020.

Mine production continues to ramp up and is on plan. As at December 31, 2019, 153,000 tonnes of ore were stockpiled on surface.

Construction
Overall construction progress was 99.2% complete at year end. The remaining areas of focus are completion and commissioning of the paste plant and construction of the Zamora River bridge. The paste plant is expected to be in operation in the first half of 2020 and the bridge is anticipated be completed by the third quarter of 2020.

Community
Lundin Gold's Responsible Mining program focused on transition of local employees as construction was completed resulting in workforce reductions. As of end of the year, 45% of Company employees were from the Zamora Chinchipe province, where the Project is located.

The Company's local procurement programs resulted in the purchase of approximately $2.4 million per month in goods and services from the local communities during the year.

The Company, together with the Lundin Foundation, was recognized by the UNGCC for its contributions to achieving the UN Sustainable Development Goals. This award highlighted the significant positive impacts of the education, training, and local procurement programs associated with Fruta del Norte. These impacts included the graduation of 210 people from local communities from the High School Equivalency Program and the graduation of more than 300 people from the Province of Zamora Chinchipe from the Mining Operations Training Program, most of whom are currently employed by Lundin Gold. Additionally, through its local procurement training and capacity building efforts, the Company has worked with more than 300 local suppliers and has injected more than $68 million into the local economy thorough local purchasing. This is the Company's second award from the UN Global Compact.

Financial Results
(in thousands, except per share amounts)
Three months ended December 31, Year ended December 31,
2019 2018 2019 2018
Results of Operations:

Derivative loss $ (35,120) $ (28,508) $ (93,120) $ (15,731)
Net loss for the period (40,765) (23,491) (118,945) (22,068)
Basic and diluted loss per share (0.18) (0.11) (0.54) (0.12)

(in thousands)
As at December 31, 2019 As at December 31, 2018
Financial Position:

Cash 75,684 167,513
Working capital 32,800 153,186
Property, plant and equipment 924,982 480,921
Mineral properties 240,665 240,665
Total assets 1,408,961 1,012,461
Long-term debt 821,008 364,252

As at December 31, 2019, sales of $20.9 million have been recognized as a reduction of capitalized construction costs under property, plant and equipment.

Derivative gains or losses

During the year, the Company drew $350 million from the senior secured project finance debt facility (the "Facility"). It also did not repay or increase its gold prepay and stream credit facilities during the year ended December 31, 2019. The variation in the amount of these debt obligations is due to a change in their estimated fair values as they are accounted for as financial liabilities measured at fair value. This variation is recorded as a derivative gain or loss in the applicable period. The fair values calculated under the Company's accounting policies are based on numerous estimates as of the balance sheet date and are, therefore, subject to further future variations until the debt obligations will actually be repaid by the Company.

Two key drivers of current fair values are gold and silver prices because future repayments under the gold prepay and stream credit facilities are based on forward gold and silver price estimates at time of repayment. During periods of increasing gold and silver prices as in the year ended December 31, 2019, their forecast forward prices will also generally increase. This results in a higher estimated fair value of the debt obligations at the current balance sheet date and the recognition of derivative losses, although it does not necessarily reflect the amounts that will actually be repaid when the obligations become due in the future. It should also be noted that the potentially more significant impact of the same change in forward gold and silver prices on the value of future production and revenues forecast to be generated during the same periods when the debt obligations will be repaid cannot be recognized because of the inherent uncertainty and risks associated with actually realizing such production and sales.

Other than the effect of derivative losses, the remainder of the Company's net loss is made up of exploration and general and administrative expenses which includes professional fees incurred for the maintenance of the Facility and the cost of training programs for operations which were completed in the third quarter of 2019.

Liquidity and Capital Resources

As at December 31, 2019, the Company had cash of $75.7 million and a working capital of $32.8 million compared to cash of $167.5 million and a working capital balance of $153.2 million at December 31, 2018. The change in cash was due to costs incurred, net of sales generated, for the development of Fruta del Norte of $408.6 million, general and administration costs of $19.4 million and exploration expenditures of $3.7 million. This is offset by drawdowns from the Facility totalling $350.0 million, which is being used to fund the construction of Fruta del Norte, and net proceeds of $33.9 million from an equity financing in March 2019. In addition, the Company received proceeds of $3.3 million from the exercise of stock options and $2.3 million for the issuance of shares and warrants to Newcrest under the anti-dilution rights related to its shareholding in the Company.

As at December 31, 2019, the Facility was fully drawn. In 2019, the Company entered into a $75 million cost overrun facility (the "COF") with Nemesia S.à.r.l., a company owned by a trust whose settlor was the late Adolf H. Lundin, which is available to be drawn to fund a potential cost overrun related to the development of Fruta del Norte. The Company expects the current cash balance and proceeds from sales to be sufficient to complete the development of Fruta del Norte and does not expect to utilize the COF.

Outlook
The Company will be focused on ramping-up of operations to achieve name plate capacity by the end of the year. Also, the Company plans to complete the remaining construction activities and demobilize and close out the construction phase of the Project.
•Complete paste plant and permanent explosives magazine construction.
•Complete the Zamora River Bridge construction.
•Complete the permanent mine ventilation system.
•Closeout and demobilization of the construction team and activities.


Mapping and sampling of various drill targets is ongoing, with a significant scout drilling program planned once permits are received.

Qualified Person
The technical information relating to Fruta del Norte 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.

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