- On Track to Meet Higher End of Production Guidance

VANCOUVER, BC, Nov. 9, 2021 /CNW/ - Lundin Gold Inc. (TSX: LUG) (Nasdaq Stockholm: LUG) ("Lundin Gold" or the "Company") today reports results for the third quarter of 2021. All amounts are in U.S. dollars unless otherwise indicated. PDF Version

Ron Hochstein, President and CEO commented, "Fruta del Norte has generated significant free cash flow1 of $194 million in the first nine months of 2021, and at current gold prices, will continue to do so for many years. Our throughput expansion program is substantially complete and we continue to push our resource expansion drilling program. We are also focused on our regional exploration program which, based on drilling to date, has been expanded from 9,000 to 11,000 metres for the year."

2021 Third Quarter Financial Overview

The Company sold a total of 111,605 ounces ("oz") of gold, consisting of 78,251 oz of concentrate and 33,354 oz of doré at an average realized gold price[1] of $1,769 per oz for total gross revenues from gold sales of $197.4 million. Net of treatment and refining charges, revenues were $190.8 million.
Income from mining operations was $89.4 million and the Company generated cash flow of $92.7 million from operations and ended the quarter with a cash balance of $221.8 million. Free cash flow1 for the quarter was $47.1 million or $0.20 per share and for the nine month period was $193.7 million or $0.84 per share.
Earnings before interest, taxes, depreciation, and amortization1 ("EBITDA") and adjusted EBITDA1 were $112.8 million and $113.5 million, respectively.
Net income was $56.7 million after deducting derivative losses, corporate, exploration, finance costs, and associated taxes on earnings. Adjusted earnings1, which exclude derivative losses, were $58.8 million, or $0.25 per share.
Cash operating costs1 and all-in sustaining cost ("AISC")1 for the quarter were $650 and $804 per oz of gold sold, respectively.
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1

Refer to "Non-IFRS Measures" section

2021 Third Quarter Production Overview

Gold production was 107,663 oz, comprised of 76,837 oz of concentrate and 30,826 oz of doré.
The mine maintained its strong operating performance with 382,667 tonnes mined.
Underground mine development also continued as planned with a total of 2,148 metres of development completed with development rates averaging 23.3 metres per day in the third quarter.
Ramp up of the mill continued with the mill processing 365,316 tonnes of ore at an average throughput of 3,971 tonnes per day ("tpd").
The average grade of ore milled was 10.3 grams per tonne with average recovery at 88.8%.
Based on results to date, by the end of 2021 the Company anticipates being near the upper end of its stated 2021 production guidance of 380,000 to 420,000 oz of gold produced and the lower end of the AISC³ guidance of between $770 and $830 per oz of gold sold, calculated on a basis consistent with prior periods.

Third Quarter of 2021 Operating and Financial Highlights

The following two tables provide an overview of key operating and financial results achieved during 2021 compared to the same periods in 2020.

Three months ended September 30, Nine months ended September 30, 2021 2020 2021
2020[2]

Tonnes mined (tonnes) 382,667 265,298 1,145,778 462,972
Tonnes milled (tonnes) 365,316 324,143 1,036,468 568,633
Average head grade (g/t) 10.3 10.4 10.9 9.4
Average recovery (%) 88.8% 86.8% 88.2% 84.8%
Average mill throughput (tpd) 3,971 3,340 3,797 3,306
Gold ounces produced 107,663 94,250 320,599 145,570
Gold ounces sold 111,605 62,160 318,822 128,274

Three months ended September 30, Nine months ended September 30, 2021 2020 2021
2020
Net revenues ($'000)

190,753

118,904

546,889

168,906[3]

Income from mining operations ($'000) 89,431 62,751 264,066 77,5292

Earnings before interest, taxes,
depreciation, and amortization ($'000)3 112,832 58,030 352,475 13,652

Adjusted earnings before interest, taxes,
depreciation, and amortization ($'000)3 113,468 76,040 327,187 59,963

Net income (loss) ($'000) 56,673 27,780 192,637 (45,925)

Free cash flow ($'000)3 47,114 (4,295) 193,689 (51,546)
Average realized gold price ($/oz sold) 1,769 1,986 1,770 1,8842

Cash operating cost ($/oz sold)3 650 632 635 7132
All-in sustaining costs ($/oz sold)3 804 728 778 8032

Free cash flow per share ($)3 0.20 (0.02) 0.84 (0.23)
Adjusted net earnings ($'000)3 58,796 45,790 171,005 29,690

Adjusted net earnings per share ($)3 0.25 0.20 0.74 0.13

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1

Refer to "Non-IFRS Measures" section

2

The figures presented are for the nine months ended September 30, 2020 which include the two-month ramp up period before achieving commercial production.

3

Amount relates to the period after achievement of commercial production.

The difference between net income and adjusted earnings during the third quarter and the 2021 Period is due to non-cash derivative losses of $0.6 million and derivative gains of $25.3 million, respectively, associated with fair value accounting for the gold prepay and stream facilities. These non-cash items are driven by numerous factors including anticipated forward gold prices and yields. Non-cash derivative gains (or losses) associated with anticipated decreasing (or increasing) forward gold prices are recorded in the statement of operations, while non-cash derivative gains (or losses) associated with increasing (or decreasing) yields are recorded in the statement of other comprehensive income. These non-cash gains or losses are derived from complex valuation modelling and accounting treatment which are explained in more detail later in the MD&A. Revaluation of these obligations may result in considerable period-to-period volatility in the Company's net income, comprehensive income, current and long term liabilities and do not necessarily reflect the amounts that will actually be repaid when the obligations become due.

(in thousands of U.S. dollars)
As at September 30, 2021 As at December 31, 2020
Financial Position:
Cash 221,828 79,592
Working capital 136,139 56,603
Total assets 1,630,830 1,505,360
Long-term debt 748,856 857,094

Liquidity and Capital Resources

As at September 30, 2021, the Company had cash of $221.8 million and a working capital balance of $136.1 million compared to cash of $79.6 million and a working capital balance of $56.6 million at December 31, 2020. The change in cash during the 2021 Period was primarily due to cash generated from operating activities of $309.7 million and proceeds from the exercise of stock options and anti-dilution rights of $16.1 million. This is offset by principal and interest repayments under the loan facilities totaling $129.0 million and cash outflows of $54.3 million for capital expenditures which include costs for remaining initial construction activities, the expansion project, and sustaining capital.

The Company has generated strong operating cash flow during 2021 and expects to continue to do so for the remainder of the year based on its production and AISC guidance. This strong operating cash flow will support debt repayments, regional exploration and underground expansion drilling at FDN, and planned capital expenditures.

Capital Expenditures

South Ventilation Raise ("SVR"): The SVR progressed in accordance with the revised work plan, and completion is still expected in the second quarter of 2022. Raise boring to a diameter of 2.1 metres was completed near the end of the third quarter and the 2.1 metre raise was shotcreted shortly after the end of the quarter. Contractor award and mobilization for the slash and line to a diameter of 5.1 metres is expected in the fourth quarter. There is no anticipated impact on production forecasts for the remainder of 2021 and 2022 as a result of the revised work plan.
Expansion Project: The mine operated at the higher 4,200 tpd for the quarter and the mill expansion advanced during the third quarter and was substantially completed early in the fourth quarter of 2021 as scheduled and on budget.
Sustaining Capital: Sustaining capital during the third quarter of 2021 mainly focused on the second raise of the Fruta del Norte tailings dam and the resource expansion drilling program. The second raise of the tailings dam was completed shortly after quarter end. Resource expansion drilling at Fruta del Norte continued to progress during the quarter, targeting conversion of a portion of the inferred resource at the south end of the deposit. Initial results of this program are expected in the fourth quarter of 2021.
Health and Safety

The health and safety of personnel at site is of paramount importance, and stringent procedures remain in place to minimize the impact of COVID-19 on the workforce. Through vaccination campaigns by the Ecuador's Ministry of Public Health, 99.7% of the Company's employees and on-site contractors were vaccinated as at September 30, 2021.

During the quarter there were zero Lost Time Incidents and one Medical Aid Incident. Fruta del Norte has reached over 3 million hours worked without a Lost Time Incident near the end of the third quarter. The Total Recordable Incident Rate was 0.16 per 200,000 hours worked during the third quarter of 2021 and 0.55 per 200,000 hours worked during the 2021 Period.

Community

Progress continued during the third quarter of 2021 on the internet connectivity project for 21 local communities surrounding Fruta del Norte, culminating in its completion in October 2021. Teachers now have high speed internet connection in the school, students in local communities are equipped with a tablet, and internet speed has been upgraded using fibre optic infrastructure. This project addresses the challenges that local schools continue to face due to the COVID-19 pandemic.

Furthermore, construction of the public bridge over the Zamora River advanced under the authority of the provincial government to replace the bridge that collapsed during the fourth quarter of 2020. Lundin Gold has provided the funding for this work to date. Lundin Gold has also been supporting the affected communities by assisting with transportation of people and supplies.

Exploration

The Company's 9,000 metre regional exploration program, which has now been expanded to 11,000 metres, continued during the third quarter and is focused on the Puente Princesa target, with two drill holes completed and two in progress. Results from the Puente Princesa drilling are expected in the first quarter of 2022.

Drilling at the Barbasco target ended during the third quarter. Six diamond drill holes totalling 5,387 metres were completed at Barbasco with all of the assays received. Initial interpretation of the results is as follows:

The holes intersected the late Fruta del Norte andesites, Suarez basin fill sediments and the Santiago Formation andesites and sediments (the host rock for Fruta del Norte).
Zones of epithermal related alteration were intersected in all three rock types and multiple narrow (generally 2 metres or less), widely spaced epithermal quartz-carbonate-sulphide veins and some broader intervals of epithermal crackle brecciation were also intersected. Most of the veins are mildly anomalous in gold, silver and the epithermal pathfinder elements arsenic and antimony.
The frequency of the veining and the intensity of the epithermal alteration increases to the south into an area completely covered by post-mineralization rocks. It is interpreted that the narrow veins and associated epithermal alteration have a component of lateral flow from further south along the eastern edge of the basin.
Drilling is planned to continue in 2022 on the more remote and steep southern area of the Barbasco target once new access tracks are constructed.
Qualified Persons

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 & 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.