Lundin Gold beats production targets in Ecuador

Lundin Gold Inc. [LUG-TSX, Nasdaq Stockholm] said it exceeded the high end of its production targets by producing 476,329 ounces of gold last year at its Fruta del Norte gold mine in Ecuador.

“I am extremely happy to announce that for the second year running, Lundin Gold has beaten its production guidance,’’ said Ron Hochstein, the company’s President and CEO. “We continue to push the boundaries of what Fruta del Norte is capable of, and noteworthy improvements have been made across the board as compared to last year,’’ he said. “Our average throughput of 4,574 tonnes per day this fourth quarter is proof there is a lot more we can get out of Fruta del Norte, and I’m particularly excited to continue building on our success in 2023.’’

Fruta del Norte is one of the highest-grade operating gold mines in the world. The mine reached commercial production in February, 2020. Lundin acquired the asset from Kinross Gold Corp. (K-TSX, KGC-NYSE) in 2014 for $240 million.

Lundin was able to acquire Fruta Del Norte for a fraction of the $1.2 billion that Kinross paid for the asset after Kinross was hit with a 70% revenue-based windfall profits tax and halted development after spending US$225 million on drilling.

Confident that he could secure more favourable terms, Lundin Gold’s late Chairman Lukas Lundin won the right to produce gold at Fruta del Norte for 25 years under an (potentially renewable) exploitation agreement that allows Ecuador to tax the difference between net smelter revenue and what the revenue would be using a base price at a 70% rate. The base price, to be determined on a monthly basis, will equal the trailing 10-year average of the daily price of gold and silver.

The agreement gives Lundin Gold the right to recoup its cumulative costs before the tax kicks in.

“It’s a great orebody. It is going to be a very low-cost producer, sub US$500 an ounce. It will go in any kind of gold environment,” said Lundin, during an interview with Resource World Magazine.

Lundin Gold reported production of 121,139 ounces of gold in the fourth quarter of 2022, resulting in total gold production of 476,329 ounces for the year, a number that exceeded the high end of the company’s 2022 guidance of 460,000 ounces.

Of the total quarterly gold production, 78,756 ounces were produced as a concentrate and 42,383 ounces as dore. During the same quarter in 2021, the company produced 107,915 ounces of gold.

On January 9, 2023, Lundin Gold shares closed at $14.15 and currently trade in a 52-week range of $14.73 and $7.80.