Lundin Gold steps up drilling effort in Ecuador

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Lundin Gold Inc. [LUG-TSX, Nasdaq Stockholm] has announced promising results from the first round of near-mine exploration drilling at its flagship Fruta del Norte gold mine in Ecuador.

The company said results from the drill program identified new mineralized zones to the south and at depth of Fruta del Norte’s currently defined mineral resources.

Highlights of drilling to the south of the known resource include hole FDN2022-009 which intersected 5.11 g/t gold over 30.3 metres from a depth of 267.7 metres, including 9.79 g/t gold over 14 metres from 284.0 metres.

Highlights from holes drilled under the southern portion of the known resource envelope include hole UGE-DD-22-008, which intersected 4.11 g/t over 23 metres from 197.7 metres, including 6.03 g/t gold over 10.0 metres from 202.7 metres.

“These early drill results highlight the significant potential of the largely unexplored area surrounding the Fruta del Norte mineral resource envelope,’’ said Lundin Gold President Ron Hochstein.

“Results demonstrate the significant potential of the epithermal system beyond the known limits of the Fruta del Norte deposit and support our belief that the near-mine program will enable expansion of current mineral resources,’’ he said.

“To advance this objective, we are increasing our near-mine exploration efforts with a minimum of 15,500 metres of drilling in 2023, compared to 8,600 metres drilled in 2022.’’

The near-mine drilling results were released after the close of trading on January 26, 2023, when Lundin Gold shares closed at $15.21. The shares are currently trading in a 52-week range of $16 and $7.80.

Lundin Gold recently exceeded the high end of its production targets by producing 476,329 ounces of gold last year at Fruta del Norte.

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.

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