Lundin Gold Reports Fourth Quarter and Full Year Results

Production and Cost Performance Meets Upgraded Guidance

VANCOUVER, BC, Feb. 22, 2024 /CNW/ - Lundin Gold Inc. (TSX: LUG; Nasdaq Stockholm: LUG; OTCQX: LUGDF) ("Lundin Gold" or the "Company") is pleased to report results for the fourth quarter and year ended December 31, 2023. Lundin Gold’s year is highlighted by its production of 481,274 oz of gold at an all-in sustaining cost (“AISC”)1 of $860 per oz sold, meeting upwardly revised production guidance of 450,000 to 485,000 oz and AISC1 guidance of $820 to $870 per oz sold.  Cash from operating activities of $519 million was generated for the year resulting in free cash flow¹ of $263 million which is net of a one-time interest and finance charge payment of $129 million from the full repayment of the gold prepay facility (the “Gold Prepay Facility”). All amounts are in U.S. dollars unless otherwise indicated.

Ron Hochstein, President and CEO commented, “Lundin Gold continues its strong track record by meeting its upgraded production and improved cost guidance for 2023, and in doing so generating significant cash flow. Looking ahead to 2024, we are focused on operational excellence and delivering the Process Plant Expansion Project to achieve increased throughput and recovery improvements. Furthermore, we continue to make significant headway on our exciting exploration programs; 2024 will be the largest drilling program ever conducted in the district that hosts Fruta del Norte.  We expect continued generation of free cash flow, which will enable the Company to continue to pursue debt reduction, M&A and potential increase in returns to shareholders through increased dividends.”

OPERATING AND FINANCIAL RESULTS SUMMARY

The following two tables provide an overview of key operating and financial results.

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

Financial Results – Cash Flow Story Intact

• Fourth quarter gold sales of 98,005 oz, consisting of 65,223 oz of concentrate and 32,782 oz of doré, at an average realized gold price1 of $2,021 per oz for total gross revenues from gold sales of $198 million. For 2023, sales totalled 481,274 oz gold and total revenues from gold sales amounted to $929 million.
• Net of treatment and refining charges, revenues in the fourth quarter and 2023 were $191 million and $903 million, respectively.
• Cash operating costs1 and AISC1 for the quarter were $832 and $1,062 per oz of gold sold, respectively. Both metrics were impacted by a decrease in oz sold compared to previous quarters. In particular, AISC1 was impacted by the timing of sustaining capital expenditures incurred to complete the fourth raise of the tailings dam plus other projects, including the underground maintenance facility. For 2023, cash operating costs1 and AISC1 were $697 and $860 per oz of gold sold, respectively, which are in line with the Company’s improved 2023 guidance.
• Cash provided by operating activities was $92.6 million in the fourth quarter and the Company generated free cash flow1 of $62.3 million from operations, or $0.26 per share. For 2023, cash from mining operations was $519 million, and the Company generated free cash flow1 of $263 million, or $1.11 per share. At the end of 2023, the Company had a cash balance of $268 million.
• Earnings before interest, taxes, depreciation, and amortization1 (“EBITDA”) and adjusted EBITDA1 during the fourth quarter were $67.3 million and $95.9 million, respectively, with the difference resulting from derivative losses recognized during the year. For the year, EBITDA1 and adjusted EBITDA1 were $494 million and $526 million, respectively.

• In the fourth quarter, net income was $11.1 million including a derivative loss of $28.6 million, and net of corporate, exploration, finance costs, and associated taxes. Adjusted earnings1, which exclude the derivative loss, were $33.2 million. In 2023, net income and adjusted earnings1 were $179 million and $204 million, respectively, or $0.86 per share.

Production Results – Another Strong Quarter, Room to Improve

• Gold production during the fourth quarter totalled 98,310 oz, comprised of 65,298 oz in concentrate and 34,012 oz as doré. Gold production for 2023 was 481,274 oz, achieving the upper end of upgraded production guidance.
• During the fourth quarter, 405,705 tonnes of ore were mined while the mill processed 427,743 tonnes of ore at an average throughput of 4,649 tpd. In 2023, a total of 1,635,550 and 1,654,520 tonnes of ore were mined and processed, respectively. Ore inventory management is the primary reason for the difference between ore mined and processed. Both the fourth quarter and annual processing tonnages are records for FDN.
• The average ore grade milled in the fourth quarter was 8.2 g/t, with average recovery at 88.1%. For 2023, the average grade of ore milled was 10.2 g/t with average recovery at 88.4%. The lower ore grade experienced during the quarter was expected based on the current mine plan while recoveries were affected by processing of ore from sectors that contain higher levels of finely disseminated sulphide minerals which impacted flotation recovery.

Outlook

• Gold production at FDN in 2024 is projected to be between 450,000 to 500,000 oz based on an average throughput rate of 4,500 tpd, average recoveries of 89% and average head grade of 9.9 g/t.
• Completion by the end of the year the $36 million Process Plant Expansion Project to increase plant throughput to 5,000 tpd and improve metallurgical recoveries by approximately 3%.
• 2024 cash operating costs3 are estimated to average between $680 and $740 per oz of gold sold and AISC1 is expected to average between $820 and $890 per oz of gold sold.  Both cash operating costs1 and AISC1 will vary throughout the year.
• Total sustaining capital in 2024 is expected to range between $35 to $45 million and will include conversion drilling, preliminary works for future TSF expansion, implementation of a mine dispatch system, and upgrade of camp facilities.
• The Company intends to release updated estimates of Mineral Reserves and Resources for FDN near the end of the first quarter of 2024 based on the results of its 2023 conversion drilling program.
• Expansion of the near-mine and regional exploration programs with a planned 56,000 metres of drilling in 2024 and a budget of $42 million, the largest program in the history of FDN since its discovery in 2006.
• Continued focus on deleveraging the balance sheet, including assessing options related the potential buyback of the Stream Facility, which has a 50% buyback option for $150 million in June 2024 and a further 50% buyback option for $225 million in June 2026.
• The Company anticipates continuing to declare quarterly dividends of at least $0.10 per share, which is equivalent to approximately $100 million annually.

Liquidity and Capital Resources

At the end of 2023, the Company is in a strong financial position.

As at December 31, 2023, the Company had cash of $268 million and a working capital balance of $347 million compared to cash of $363 million and a working capital balance of $195 million at December 31, 2022.

The change in cash during 2023 was primarily due to the full repayment of the Gold Prepay Facility of $208 million; full repayment of the Senior Facility totalling $193 million, including interest; principal repayments, interest and finance charges, including associated taxes, under the Stream Facility totalling $79.9 million; dividends of $94.9 million; and cash outflows of $53.5 million relating to investing activities. This is offset by cash generated from operating activities of $519 million, which is net of a $25 million voluntary advance income tax payment to the Government of Ecuador during the fourth quarter that will reduce the Company’s corporate income tax payment due in April 2024, and proceeds from the exercise of stock options and anti-dilution rights totalling $14.2 million.

The Stream Facility is the last remaining debt on the Company’s balance sheet following the full repayment of both the Gold Prepay Facility and Senior Facility during 2023. The Company has the option to repay (i) 50% of the Stream Facility outstanding on June 30, 2024 for $150 million and / or (ii) the other 50% outstanding on June 30, 2026 for $225 million.

Capital Expenditures

Sustaining Capital

• Total sustaining capital spent during the year was $47.9 million, of which $14.5 was spent during the fourth quarter.

• The fourth raise of the tailings dam and underground mine maintenance facility were completed during the fourth quarter. The new warehouse was completed during the second quarter.
• Other sustaining capital projects such as extending two underground levels to the south for the 2024 conversion drill program, implementing a mine dispatch system, upgrading the sewage treatment plants, and other efficiency improvement projects were well-advanced in 2023 and are expected to be completed in 2024.
• The 2023 conversion drilling program focused on the north-central and southern extension of FDN with approximately 11,233 metres drilled across 79 holes.

• In the southern sector, 51 drill holes were completed and mostly intercepted the mineralized zones associated with manganoan carbonate, chalcedony veins and sulphides.
• In the north-central sector, 28 drill holes were completed and positive assay results are associated with zones of hydrothermal breccias along the downdip extension and the north limit of FDN.
• The geological and mineral resource model is nearly complete, and an updated Mineral Resources and Reserves estimate is expected before the end of the first quarter of 2024.

Process Plant Expansion Project

The Process Plant Expansion Project is expected to deliver increased plant throughput to 5,000 tpd and increased metallurgical recoveries of approximately 3% by the end of 2024 with upgrades to the concentrate dewatering, new tailings and reclaim lines, the addition of three Jameson cells, and other ancillary works.  During the fourth quarter, expenditures of $0.9 million were incurred of the total estimated expansion project capital estimate of $36.0 million.

Health and Safety

During 2023 there were no Lost Time Incidents (“LTIs”) and seven Medical Aid Incident (“MAIs”). The Total Recordable Incident Rate across exploration and operations was 0.24 per 200,000 hours worked during 2023. FDN operations had more than one year and over 7.6 million hours worked without a LTI as of December 31, 2023.  Subsequent to year end, FDN operations experienced an LTI on February 2, 2024.

Community

Various community projects supported by the Company progressed during the year including initiatives focused on community health and education. Lundin Gold continued to support an innovative program which provides mental health services to local community members. Education programs sponsored by the Company which improve local student access to higher education continued to show success as a cohort of local students prepare to graduate from university in the coming months, a significant milestone for the Los Encuentros Parish. The Company also launched a complementary program designed to improve the quality of local education during the year.

Infrastructure investment continues to be a priority for Lundin Gold. In addition to the Company’s long-standing commitment to support road maintenance, Lundin Gold co-funded with the Ministry of Education the rehabilitation of the local school, which more than 1,300 children from the Los Encuentros Parish attend. Work on this project was nearing completion at the end of the year.

Lundin Gold continued to support local businesses in conjunction with the Lundin Foundation, including women-led businesses through the third series of the program “Soy Emprendadora”. Among the supported businesses, the local textile manufacturer, fire extinguisher maintenance company, and pest control/fumigation company all increased their business activities during the year with Lundin Gold as an anchor client. Efforts have continued to ensure that local farmers retain access to local, national, and international markets. The Company also continued to engage with local indigenous people, especially the Shuar Federation of Zamora Chinchipe, to jointly implement projects that promote economic opportunities and the Shuar culture.

Following the election of new local authorities, the round table dialogue process restarted during the third quarter, with high participation rates by local community members.

EXPLORATION

Near-Mine Exploration Program

During the year, the Company completed a total of 35,305 metres across 68 holes from surface and underground, of which approximately 13,372 metres across 31 holes were drilled in the fourth quarter. Drilling from underground explored to the east and at depth of the FDN deposit, while drilling from surface continued to test along the extensions of the controlling structures of the FDN deposit.

• The surface drilling program continues along the south extension of the East Fault, where Bonza Sur and the FDN South (“FDNS”) targets were discovered. During the fourth quarter, 14 surface drill holes were completed, mostly at Bonza Sur, where the drilling program continues to indicate continuity of mineralization. Exploratory holes were also completed along the north and south extensions of the FDN deposit and at the FDN East target.

• At Bonza Sur, located only one kilometre from FDN, seven surface drill holes were completed and continue to expand the recently discovered epithermal system. Drilling continued to achieve multiple positive intersections and has extended mineralization along north-south strike as well as at depth. The mineralized zones are represented by veins/veinlets of quartz and minor chalcedony and manganoan-carbonate associated with the occurrence of sulphides. The Bonza Sur mineralization has already been identified for more than 1.1 kilometres along the north-south strike and for at least 500 metres along the downdip and remains open in all directions.

• At FDNS, three surface drill holes were completed along the south extension which intercepted gold mineralization with variable widths. This vein system remains open along the northeast-southwest direction and at depth.

• The exploratory drilling program aimed to explore new sectors advanced on distinct targets near the FDN deposit. At FDN East, one drill hole intercepted zones of hydrothermal alteration hosted on volcanic rocks associated to gold mineralization. In the north extension of the FDN deposit, three exploratory holes were completed and intercepted large zones of hydrothermal alteration with narrow intervals of gold mineralization.

• The underground drilling program continues to explore the continuity of the FDN deposit at depth and beyond the major east and west faults. During the fourth quarter of 2023, a total of 17 drill holes were completed. At depth, in the north sector of the FDN deposit, the drilling program confirmed hydrothermal alteration zones and gold mineralization below the mineral envelope of FDN. In the southern sector, the drill holes intercepted hydrothermal alteration zones represented by manganoan-carbonate veins/veinlets with sulfides and narrow intervals of gold mineralization along the downdip extension. Furthermore, the drilling program continued to explore the continuity of the FDN mineral envelope beyond the East fault and one drill hole intercepted narrow zones of hydrothermal alteration with no significant gold mineralization.

Regional Exploration Program

The regional program continued to advance the identification of important indicators that point toward the presence of buried epithermal deposits in the southern basin. The 2023 drilling program focused on distinct sectors along the southeastern and southwestern borders of the Suarez basin and a total of 3,120 metres across five drill holes were completed in the fourth quarter resulting in 8,461 metres completed under the 2023 program across 12 drill holes. Regional drilling focused on the Crisbel, Barbasco SE and Quebrada La Negra targets.

• At the Crisbel target, two drill holes were completed testing a geochemical soil anomaly (gold and epithermal pathfinder elements such as Sb, As) along the southwest contact between the Suarez Border and the volcanic sequence. Limited hydrothermal alteration was intercepted and no significant results were returned.

• At Barbasco SE, one drill hole was completed and tested the extension of the FDN East Fault along the southeastern extension of the Suarez basin. Zones of hydrothermal alteration with illite-silica was intercepted, suggesting the presence hydrothermal activity in this sector.

• At Quebrada La Negra, two drill holes tested a Au-As-Sb soil anomaly and silicified conglomerate outcrops. The drilling intercepted zones of hydrothermal alteration represented by silica-illite-marcasite with associated chalcedony veinlets, suggesting further follow up drilling is required in this sector.  Results are pending.

Newcrest Earn-In Agreement

At the end of the fourth quarter, Newcrest Mining Limited (“Newcrest”), a subsidiary of Newmont Corporation (“Newmont”), elected not to exercise its option to proceed to earn a 25% interest in Surnorte S.A., which holds eight exploration concessions located to the north and south of Fruta del Norte. As a result, the earn-in agreement has been terminated. The Company is now assessing various options for some or all of these concessions.

CORPORATE

The Company paid quarterly dividends of $0.10 per share for a total of $94.9 million during the year. With the release of its 2023 year-end results, the Company has declared a cash dividend of $0.10 per share which is payable on March 25, 2024 (March 28, 2024 for shares trading on Nasdaq Stockholm) to shareholders of record on March 8, 2024.

The Company’s second TCFD-aligned climate change report and seventh annual sustainability report were published in May. Based on publicly available data from 152 gold mines that reported their Scopes 1 and 2 greenhouse gas emissions in 2021 and on Lundin Gold's 2022 emissions performance, the emissions intensity of Fruta del Norte was among the lowest in the industry. The Company has set a target to be carbon neutral by 2030 with respect to its Scopes 1 and 2 emissions based on its current life of mine plan.

A number of changes to the Company’s directors took place in 2023. At the Company’s annual shareholders’ meeting on May 15, 2023, Ms. Angelina Mehta was elected as a director, replacing Ms. Chantal Gosselin who did not stand for re-election. Furthermore, upon the acquisition of the Company’s largest shareholder, Newcrest Mining Limited (“Newcrest”), by Newmont Corporation (“Newmont”) on November 6, 2023, the Company appointed two new directors to the Board as Newmont nominees: Ms. Melissa Harmon and Mr. Scott Langley. Mr. Craig Jones and Ms. Jill Terry, the former Newcrest nominees, resigned from the Board on the same day.

The Company also announced several changes to the Company’s officers during the year including the appointment of Mr. Christopher Kololian as Chief Financial Officer, shortly after the retirement of Mr. Alessandro Bitelli, and Mr. Terry Smith as Chief Operating Officer. With the departure of Mr. Nathan Monash, Vice President, Sustainability, Ms. Sheila Colman took on the role of Vice President, Legal and Sustainability and Corporate Secretary, while Ms. Iliana Rodriguez, Vice President, Human Resources, departed the Company early in the first quarter.

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 Friday, February 23 at 7:00 a.m. PT, 10:00 a.m. ET, 4:00 p.m. CET.

Conference Call Dial-In Numbers:

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 its completion until February 28, 2024.

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 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 16 of the Company's MD&A for the year ended December 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 February 22, 2024 at 4:00 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 2024 production outlook, including estimates of gold production, grades recoveries and AISC; operating plans and costs; cash flow forecasts and financing obligations; the potential to exercise the buyback of the Stream Facility; the Company’s estimated capital and sustaining costs;  completion of sustaining capital projects; 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; estimates of Mineral Resources and Reserves at Fruta del Norte and plans to update the same; and completion of the process plant expansion project and benefits to be derived therefrom.  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 Mangement’s Discussion and Analysis dated February 22, 2024 which is available at www.lundingold.com or on SEDAR+ at www.sedarplus.ca.

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: instability in Ecuador; community relations; forecasts relating to production and costs; mining operations; security; non-compliance with laws and regulations and compliance costs; tax changes in Ecuador; waste disposal and tailings; government or regulatory approvals; environmental compliance; gold price; infrastructure; dependence on a single mine; exploration and development; control of Lundin Gold; availability of workforce and labour relations; dividends; information systems and cyber security; Mineral Reserve and Mineral Resource estimates; title matters and surface rights and access; health and safety; human rights; employee misconduct; measures to protect biodiversity; endangered species and critical habitats; global economic conditions; shortages of critical resources; competition for new projects; key talent recruitment and retention; market price of the Company’s shares;  social media and reputation; insurance and uninsured risks;  pandemics, epidemics or infectious disease outbreak; climate change; illegal mining;  conflicts of interest; ability to maintain obligations or comply with debt; violation of anti-bribery and corruption laws; internal controls; claims and legal proceedings; and reclamation obligations.   

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For more information, please contact

Ron F. Hochstein
President and CEO
Tel (Ecuador): +593 2-299-6400
Tel (Canada): +1-604-806-3589
ron.hochstein@lundingold.com

Finlay Heppenstall
Director, Investor Relations and Corporate Development
Tel: +1 604 806 3089
finlay.heppenstall@lundingold.com

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.