LUNDIN GOLD REPORTS SECOND QUARTER 2023 RESULTS AND UPDATES 2023 GUIDANCE

2023-08-10

TSX - Toronto Stock Exchange · Gold · Silver · United States

Canada NewsWire

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Fruta del Norte achieves record gold production of 269,752 oz and AISC¹ of $765 per oz sold in the first half of 2023

VANCOUVER, BC , Aug. 9, 2023 /CNW/ - Lundin Gold Inc. (TSX: LUG) (Nasdaq Stockholm: LUG) (OTCQX: LUGDF) ("Lundin Gold" or the "Company") today reports results for the second quarter and first half of 2023, highlighted by Q2 production of 129,731 ounces ("oz") of gold and sales of 128,958 oz, at a cash operating cost 1 of $644 per oz sold and all-in sustaining cost ("AISC") 1 of $802 per oz sold. For the first half of 2023, Lundin Gold produced 269,752 oz and sold 263,649 of gold at an AISC of $765 per oz. Lundin Gold generated $132 million in free cash flow 1 over the three-month period, the highest quarterly free cash flow 1 achieved to date. All amounts are in U.S. dollars unless otherwise indicated. View PDF version .

Based on very strong performance during the first half of 2023, the Company has increased its 2023 production guidance to 450,000 to 485,000 oz. In addition, the Company has reduced its 2023 cash operating cost 1 guidance to $650 to $700 per oz sold and AISC 1 to $820 to $870 per oz sold. This is compared to previous production guidance of 425,000 to 475,000 oz, cash operating cost 1 guidance of $700 to $760 per oz sold and AISC 1 guidance of $870 to $940 per oz sold.

Ron Hochstein , President and CEO commented, " _As a result of strong operating results in the first half of 2023 and confidence that our team can continue to deliver excellent performance, we are increasing production guidance and reducing cash operating cost 1 and AISC 1 guidance. Specifically, we are pleased that the bottom of our original cost guidance range is now the top of our revised cost guidance range. We've said that Lundin Gold is a cash flow story for some time now, and our free cash flow generated during the second quarter highlights that. This free cash flow enables us to fund future highly prospective exploration programs, pay down our debt, pay dividends, and look at potential expansion opportunities. The Company is in a strong position, and I am excited to take this momentum into the second half of the year. _"

| | | 1 Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found on pages 13 to 16 of the Company's MD&A for the three and six months ended June 30, 2023 available on SEDAR |

OPERATING AND FINANCIAL RESULTS SUMMARY

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

| | Three months ended

June 30, | Six months ended

June 30, | | | | | 2023 | 2022 | 2023 | 2022 | | Tonnes ore mined | 404,408 | 369,430 | 832,143 | 749,059 | | Tonnes ore milled | 418,373 | 385,675 | 810,705 | 759,082 | | Average head grade (g/t) | 11.0 | 10.3 | 11.6 | 10.8 | | Average recovery | 88.0 % | 87.6 % | 89.3 % | 88.9 % | | Average mill throughput (tpd) | 4,598 | 4,238 | 4,479 | 4,194 | | Gold ounces produced | 129,731 | 111,890 | 269,752 | 233,555 | | Gold ounces sold | 128,958 | 96,291 | 263,649 | 215,573 |

| | Three months ended

June 30, | Six months ended

June 30, | | | | | 2023 | 2022 | 2023 | 2022 | | Net revenues ($'000) | 243,930 | 177,808 | 500,658 | 394,280 | | Income from mining operations ($'000) | 124,801 | 82,522 | 257,509 | 193,729 | | Earnings before interest, taxes, depreciation, and amortization ($'000) 1 | 149,900 | 144,704 | 293,532 | 243,526 | | Adjusted earnings before interest, taxes, depreciation, and amortization ($'000) 1 | 149,579 | 104,718 | 308,645 | 238,264 | | Net income ($'000) | 63,148 | 55,962 | 114,613 | 79,144 | | Basic income per share ($) | 0.27 | 0.24 | 0.48 | 0.34 | | Cash provided by operating activities ($'000) | 162,352 | 60,686 | 306,791 | 188,016 | | Free cash flow ($'000) 1 | 131,859 | 21,248 | 120,206 | 113,054 | | Free cash flow per share ($) 1 | 0.56 | 0.09 | 0.51 | 0.48 | | Average realized gold price ($/oz sold) 1 | 1,942 | 1,907 | 1,947 | 1,882 | | Cash operating cost ($/oz sold) 1 | 644 | 702 | 644 | 656 | | All-in sustaining costs ($/oz sold) 1 | 802 | 864 | 765 | 771 | | Adjusted net earnings ($'000) 1 | 59,387 | 13,490 | 126,401 | 71,040 | | Adjusted net earnings per share ($) 1 | 0.25 | 0.06 | 0.53 | 0.30 | | Dividends paid per share ($) | 0.10 | - | 0.20 | - |

SECOND QUARTER HIGHLIGHTS

Financial Results – Highest Ever Quarterly Free Cash Flow Generation

The Company sold a total of 128,958 oz of gold, consisting of 84,679 oz of concentrate and 44,279 oz of doré at an average realized gold price 1 of $1,942 per oz for total gross revenues from gold sales of $250 million . Net of treatment and refining charges, revenues were $244 million .

Cash operating costs 1 and AISC 1 were $644 and $802 per oz of gold sold, respectively. While cash operating costs 1 per oz sold remained consistent with the previous quarter, the ramp up of sustaining capital activities resulted in a higher AISC 1 albeit still below expected levels for the quarter.

The Company generated cash flow of $162 million from operations and record free cash flow 1 of $132 million or $0.56 per share resulting in a cash balance of $275 million at June 30, 2023 .

Earnings before interest, taxes, depreciation, and amortization 1 ("EBITDA") and adjusted EBITDA 1 were $149.9 million and $149.6 million , respectively with the difference resulting from derivative gains recognized in the quarter.

Net income was $63.1 million including a derivative gain of $0.3 million , and net of corporate, exploration, finance costs, and associated taxes on earnings. Adjusted earnings 1 , which exclude the derivative gain and related taxes, were $59.4 million , or $0.25 per share.

| _ | | 1 Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found on pages 13 to 16 of the Company's MD&A for the three and six months ended June 30, 2023 available on SEDAR |

Production Results – Strong Grades and Throughput Offset Weaker Recoveries

Mine production of 404,408 tonnes of ore at an average grade of 9.0 grams per tonne.

The mill processed 418,373 tonnes of ore at an average throughput rate of 4,598 tpd. Inclusive of the relining of the SAG and ball mills during the first quarter, the mill has averaged a throughput rate of 4,479 tpd during the first half of 2023.

The average grade of ore milled was 11.0 grams per tonne with average recovery at 88.0%. Recoveries were affected by processing of ore from sectors that contain higher levels of finely disseminated sulphide minerals which are impacting both gravity and flotation recovery.

Gold production was 129,731 oz which was comprised of 85,395 oz in concentrate and 44,336 oz as doré.

Liquidity and Capital Resources

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

| (in thousands of U.S. dollars) | As at June 30,

2023 | As at December 31,

2022 | | Financial Position: | | | | Cash | 274,968 | 363,400 | | Working capital | 268,095 | 194,804 | | Total assets | 1,508,831 | 1,668,865 | | | | | | Long-term debt | | | | Senior debt facility | 91,676 | 172,854 | | Fair value of stream credit facility and offtake | 304,912 | 287,666 | | Fair value of gold prepay credit facility | - | 207,446 | | Total long-term debt | 396,588 | 667,966 |

The change in cash during the 2023 Period was primarily due to the full repayment of the gold prepay facility of $208 million ; principal repayments, interest and finance charges, including associated taxes, under the stream credit facility totaling $39.0 million ; interest and principal repayments under the senior debt of $91.1 million ; dividends of $47.4 million ; and cash outflows of $20.4 million relating to sustaining capital expenditures. This is offset by cash generated from operating activities of $307 million and proceeds from the exercise of stock options and anti-dilution rights totaling $9.8 million .

Capital Expenditures

Sustaining Capital:

Health and Safety

During the second quarter there were no Lost Time Incidents ("LTIs") and no Medical Aid Incident ("MAIs"). The Total Recordable Incident Rate across exploration and operations was 0.00 per 200,000 hours worked for the quarter and 0.07 for the first six months of 2023. In early July 2023 , FDN operations surpassed 365 days without an LTI or MAI with over 5.1 million hours worked.

Community

Various community projects supported by the Company continued to progress in the second quarter including support for micro businesses established by local entrepreneurs in conjunction with the Lundin Foundation. The local textile manufacturer, fire extinguisher maintenance company, and pest control / fumigation company continue to work with the mine. Feasibility studies of potential new areas for local businesses continue. Efforts have continued to ensure that local farmers retain access to local, national, and international markets.

Longstanding projects such as road maintenance, educational support to promote access to higher education, efficiency improvements in the agricultural sector and addressing infrastructure challenges remain on track.

The Company continues 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. In the second quarter, the Shuar tourism company continued in its efforts to diversify its lines of business and to create additional employment opportunities.

Corporate

The Company paid a quarterly dividend of $0.10 per share on June 27, 2023 ( June 30 for shares trading on Nasdaq Stockholm) based on a record date of June 13, 2023 , for a total of $23.7 million . With the release of its second quarter 2023 results, the Company has declared a cash dividend of $0.10 per share, which is payable on September 26, 2023 ( September 29 for shares trading on Nasdaq Stockholm) to shareholders of record on September 11, 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.

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 is 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.

EXPLORATION – CONTINUING TO MAKE PROGRESS

_Near-Mine Exploration Program _The near mine drilling program continues to explore extensions of major controlling structures surrounding the FDN deposit. In the second quarter, a total of 8,609 metres across sixteen drill holes, from surface and underground, were completed at several targets near FDN.

The surface drilling program continues along the south extension of the East Fault, where the FDN South ("FDNS") and Bonza Sur targets were identified in the previous quarter. During the quarter, twelve surface drill holes were completed and indicated continuity of mineralization at Bonza Sur and FDNS. An exploratory hole was also completed along the north extension of the Fruta del Norte deposit. Four surface rigs are currently drilling with two rigs at Bonza Sur, one at FDNS, and the fourth testing new near mine sectors.

The underground drill program continues to explore the continuity of the FDN deposit at depth and beyond the major faults. Four drill holes were completed and intercepted structures and hydrothermal alteration beyond the FDN limits. In the central part of FDN, two drill holes confirmed the hydrothermal alteration zones at depth with low-grade gold values. Two other drill holes intercepted zones of hydrothermal alteration with vein/veinlets hosted on volcanic rocks or intrusive rocks to the east of the FDN East Fault. Results are pending.

A complete table of results received to date can be found in Lundin Gold's press release dated August 3, 2023 .

_Regional Exploration Program _The regional drilling program continues to advance in distinct sectors along the southwestern border of the Suarez basin and a total of 2,264 metres across three drill holes were completed in the second quarter. The program focused on the Quebrada La Negra and the newly defined Crisbel targets, where detailed geological interpretation of exploration data and additional surface works identified major structures and zones of hydrothermal alteration.

At Quebrada La Negra, two drill holes were completed which intercepted wide zones of hydrothermal alteration with breccias and/or veins and disseminated sulfides. Drill results returned low values of gold associated with epithermal pathfinder elements, such as zinc and lead, and a recent interpretation point to new areas for further detailing farther north.

At Crisbel, one drill hole was completed testing an unexplored geochemical soil anomaly (gold and epithermal pathfinder elements such as antimony and arsenic) disposed along the contact between the Suarez Border and the volcanic sequence. The drill hole intercepted hydrothermal alteration zones with important quantities of sulfides hosted in brecciated volcanic rocks. Results are pending.

_Newcrest Earn-In Agreement _On the concessions held by the Company's subsidiary, SurNorte S.A., a second phase of scout drilling commenced at the Gamora Project, located in southeast Ecuador . This work is being conducted by Newcrest Mining Limited ("Newcrest") as the operator under an earn-in agreement with Lundin Gold pursuant to which Newcrest can earn up to a 50% interest in eight exploration concessions located to the north and south of Fruta del Norte. A second phase of scout drilling was completed in the quarter at the Gamora Project, which was focused on testing priority copper-gold targets in the Mirador copper porphyry district.

OUTLOOK – GUIDANCE INCREASED FOLLOWING STRONG FIRST HALF

Achievements during the first half of 2023 provide the Company with a positive outlook for the remainder of the year and as a result, production guidance is increased to 450,000 to 485,000 oz while cost guidance is decreased for both cash operating cost and AISC to $650 to $700 per oz sold and $820 to $870 per oz sold, respectively. Production for the second half of 2023 is expected to decrease relative to the first half of the year driven by a combination of lower grades and lower recoveries due to processing of ore from certain sectors of the mine with less favourable geology.

In addition, AISC1 is expected to increase with continued ramp up of sustaining capital activities and lower expected gold production levels. Sustaining capital is expected to increase substantially during the second half driven by construction of the fourth raise of the tailings dam as well as several other capital projects. In addition, the conversion drilling program, aiming to convert Inferred to Indicated Mineral Resources, is planned to continue with results expected to be incorporated into the geological model and in the new resource estimate in the first quarter of 2024.

The near mine drilling program plans to continue to delineate the FDNS and Bonza Sur targets, where systems of epithermal veins/veinlets have been identified and remain open. Three rigs are dedicated to the detailing and expansion of the mineralized zones at depth and along strike. Another surface rig and underground rig continue to explore for major discoveries in the near mine district targeting the extension of major controlling structures at FDN in new sectors. The near mine program is expected to comprise a total of 23,000 metres of drilling for 2023.

The regional drilling program continues to focus on the southern Suarez Basin, advancing along the eastern and western borders of the Basin. A second rig is expected to be added to advance numerous target areas identified during the previous quarters. The regional drilling program continues to be expected to comprise a total of 12,500 metres for the year, with two rigs currently operating. The combined near mine and regional exploration budget for 2023 remains at $24.6 million .

The Company anticipates declaring quarterly dividends of $0.10 per share, equivalent to approximately $100 million annually, based on currently issued and outstanding shares.

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 Thursday, August 10 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 the completion of the call until August 24, 2023 .

| Toll Free North America Replay Number: | +1 888-390-0541 | | International Replay Number: | +1 416-764-8677 | | Replay passcode: | 558460 # |

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 .

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, with the achievement of commercial production, 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 13 of the Company's MD&A for the three and six months ended June 30 , 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 August 9, 2023 at 5:00 p.m. Pacific Time through the contact persons set out below.