Lundin Gold Q3 2024 Earnings Report

Lundin Gold EPS Results

• Actual EPS: C$0.76
• Consensus EPS: C$0.60
• Beat/Miss: Beat by +C$0.16
• One Year Ago EPS: N/A

Lundin Gold Revenue Results

• Actual Revenue: $440.77 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Lundin Gold Announcement Details

• Quarter: Q3 2024
• Date: 11/7/2024
• Time: N/A
• Conference Call Date: Friday, November 8, 2024
• Conference Call Time: 10:00AM ET

Lundin Gold (TSE:LUG), headquartered in Vancouver, Canada, owns the Fruta del Norte gold mine in southeast Ecuador. Fruta del Norte is among the highest-grade operating gold mines in the world. The Company's board and management team have extensive expertise 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 through operational excellence and growth, while simultaneously providing economic and social benefits to impacted communities, fostering a healthy and safe workplace and minimizing the environmental impact. Furthermore, Lundin Gold is focused on continued exploration on its extensive and highly prospective land package to identify and develop new resource opportunities to ensure long-term sustainability and growth for the Company and its stakeholders.

Lundin Gold Q3 2024 Earnings Call Transcript

Key Takeaways

• Record Q3 financials: Lundin Gold reported revenues of $323 million, adjusted EBITDA of $220 million, adjusted earnings of $136 million and generated $182 million in adjusted free cash flow.
• Strong operational performance: The mine produced 122,154 ounces of gold at an 86.8% recovery rate and is on track to reach the top of its 450,000–500,000 ounce production guidance.
• Cost pressures & guidance: Cash operating costs were $6.81 per ounce sold and AISC was $8.77 per ounce, with each $100/oz increase in gold price adding roughly $10/oz to costs due to higher royalties, profit sharing and sustaining capex.
• Plant expansion underway: Tie-ins and commissioning of three new Jameson cells are on schedule for year-end completion, targeting 5,000 tpd throughput and ~3% improvement in metallurgical recoveries.
• Exploration upside: A record 80,000 m drill program continues to delineate a new high-grade vein at FDNS, confirm wide mineralization at Bonso Sur and feed into a resource update planned for Q1 2025.
• Power challenges: Ecuador’s drought-related blackouts (4–14 hrs/day) have led Lundin Gold to deploy four additional diesel generators at an incremental cost of ~$10–15 per ounce.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the Lundin Gold's Q3 of 2024 results call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star followed by zero for the operator. This call is being recorded on Friday, November 8, 2024. I would now like to turn the conference over to Ron Hochstein, President and CEO. Please go ahead.

[Ron Hochstein, President and CEO at Lundin Gold]

Thank you, Dion, and good morning, everyone. Thank you for joining us today. I'm joined by Terry Smith, Chief Operating Officer, and Chester See, our Chief Financial Officer. We're going to take you through our results for the Q3 of 2024. Please note Lundin Gold's disclaimers on this slide. This discussion includes forward-looking information. Actual future results may differ from expected results for a variety of reasons described in the caution regarding forward-looking information and statements section of our press release. Lundin Gold is a U.S. dollar reporting entity, and all amounts in this presentation refer to U.S. dollars unless otherwise indicated. Lundin Gold achieved another strong quarter highlighted by record cash generation revenue and adjusted EBITDA, which was supported by a strong gold price. Cash flow from operations was $218 million, and adjusted free cash flow was $182 million.

[Ron Hochstein, President and CEO at Lundin Gold]

Record quarterly revenues of $323 million were realized during the Q3 from the sale of 125,887 oz at an average realized gold price of $2,615 per ounce. From this, Adjusted EBITDA and Adjusted Earnings of $220 million and $136 million, respectively, were achieved, also a record. The strong financial performance was underpinned by gold production this quarter of 122,154 oz, driven by recoveries of 86.8%, high average mill throughput of 4,623 tonnes per day, and average mill head grade of 10.3 grams per tonne. Having produced approximately 367,000 oz for the year at the end of the Q3, Lundin Gold is on track to achieve the upper end of its production guidance of 450,000-500,000 oz. For Q3, the cash operating cost was $681 per ounce sold, and all-in sustaining cost was $877 per ounce sold.

[Ron Hochstein, President and CEO at Lundin Gold]

AISC has trended toward the upper end of guidance due to higher sustaining capital expenditures. Operational excellence initiatives continue to reduce operating costs, offsetting the impact of higher gold prices, resulting in higher royalties and profit sharing, for which the portion attributable to employees is recorded in operating costs, as well as higher diesel consumption due to the operation of our existing power generation units to reduce our power consumption from the national grid. As a reminder, we set our guidance with a gold price assumption of $1,900 per ounce. Due to royalties and profit sharing, every $100 per ounce increase to the gold price results in an increase of approximately $10 to the cash operating cost and AISC per ounce sold.

[Ron Hochstein, President and CEO at Lundin Gold]

With respect to exploration, the company is on track to achieve a minimum of 80,000 meters of drilling for the year across the conversion, near mine, and regional drill programs. Exploration activities during the quarter continue to yield positive results, which demonstrates that the true potential of FDN has yet to be fully discovered. At FDNS, delineation drilling continues to confirm the continuity of a new high-grade vein system with some of the best drill intercepts achieved to date. Conversion drilling has successfully concluded for the year and has defined several wide, high-grade mineralized zones that we expect to convert from Mineral Resources to Mineral Reserves as part of our updated resource estimate planned to be issued in the Q1 of next year. Both programs continue to highlight great potential for additional Mineral reserves at FDN.

[Ron Hochstein, President and CEO at Lundin Gold]

At Bonza Sur, we have drilling results pending, and I look forward to disclosing these in the near future. With that, I'd now like to turn the call over to Terry.

[Terry Smith, COO at Lundin Gold]

Thanks, Ron, and hello all. We had another solid quarter that was highlighted by quarterly gold production totaling approximately 122,000 oz. Along with that great performance, we saw an improvement on safety as there were no lost-time incidents. We had three medical aid incidents, bringing the total recordable incident rate across the company to 0.33 per 200,000 hours worked for the quarter, compared to 0.75 in the Q2. The operations team continues to focus on safety with more leadership presence in the field, as well as a hand injury prevention campaign, as most of our recordable injuries have been hand-related this year. Mine production was near record levels during the quarter, with 427,000 tonnes mined at an average grade of 9.9 grams per tonne.

[Terry Smith, COO at Lundin Gold]

The mill processed 425,340 tonnes at an average throughput rate of 4,623 tonnes per day, which is slightly less than the previous quarter due to a planned shutdown to complete tie-ins relating to the process plant expansion and higher unscheduled mill downtime. The average grade of ore milled was 10.3 grams per tonne, with an average recovery at 86.8%. Recoveries were affected by finely disseminated sulfide minerals in the ore. The addition of three Jameson cells in the process plant flotation circuit is expected to improve recoveries for gold associated with these sulfides. As for the process plant's expansion, we're on track to be substantially complete by the end of the year. Detailed engineering and procurement activities were completed in the Q3.

[Terry Smith, COO at Lundin Gold]

As you can see in the pictures, we've received on-site the major pieces of equipment, including the Jameson cells and the concentrate filter, which have been put in place. Construction of the upgraded tailings pipeline was completed and commissioned during the quarter. We are currently close to commissioning the first of three Jameson cells with the reclaimed water pipeline and third concentrate filter scheduled to be completed and commissioned in Q4. Upon completion, we anticipate operating at higher average throughput of 5,000 tons per day and improving metallurgical recoveries by approximately 3%. Several countries in South America have been experiencing a prolonged drought this year. Given that over 70% of Ecuador's electricity is generated from hydroelectric power plants, the drought has led to reduced electricity generation. The Ecuadorian government has reacted by implementing countrywide power cuts ranging from 4 to 14 hours per day.

[Terry Smith, COO at Lundin Gold]

We are working with the Ecuadorian power authorities to run our existing generators at interim periods to reduce our load. To supplement these generators, four additional diesel power generators were purchased during the Q3. at Fruta del Norte, we have a conversion program, near mine program, and regional program. Conversion is focused on replacing depleted ounces and growing our reserve base through the conversion of Inferred resources. Our near mine program is focused on growing Inferred resources through the identification of new targets, including FDNS, FDN East, FDN North, and Bonza Sur.

[Terry Smith, COO at Lundin Gold]

Lastly, the regional program is targeting new epithermal discoveries like Fruta del Norte, further afield on our large, unexplored land package. Starting with conversion drilling, the recently completed 2024 program was focused on converting inferred mineral resources to indicated in areas immediately beyond the current mineral reserve boundary in the north and central sectors of the FDN deposit.

[Terry Smith, COO at Lundin Gold]

A total of 13,755 meters of underground drilling from 110 drill holes were carried out in 2024, and drilling for this year is now complete, although some results are still pending. The program has defined several wide, high-grade mineralized zones that we expect to convert from mineral resources to mineral reserves as part of our updated resource estimate planned to be issued in the Q1 of next year. With respect to our near mine exploration, since the beginning of the year, we have drilled a total of 45,325 meters across 120 drill holes from surface and underground. In the Q3, surface drilling has been focused along the extension of the east fault, where the Bonza Sur discovery and other prospective sectors like FDN East are located.

[Terry Smith, COO at Lundin Gold]

Underground near mine drilling has focused on FDNS, where we have achieved some significant results this quarter with some of the highest grade intercepts ever achieved. 22 drill holes were completed this quarter, with most confirming gold mineralization. Standout drill holes include 145, which returned an intercept of 53.808 grams per ton over 10.8 meters, and drill hole 175, which returned an intercept of 65.01 grams per ton gold over 5.35 meters. While these are very exciting, I'm even more excited by the fact that the 22 drill hole results occurred in a sector that had been previously defined as lower grade in our current mineral resource envelope. 10 rigs are currently turning on the FDN near mine exploration program, three underground and seven on surface.

[Terry Smith, COO at Lundin Gold]

On slide 13, staying on FDNS, the gray boxes highlight some of the underground drilling that took place in Q3 from levels 1170 and 1080. You can see the two high-grade intercept holes here that I spoke to on the previous slide. But what is striking to us is that when taking all the results into consideration, this has confirmed that FDNS is a high-grade vein system of distinct geometry and style when compared to the FDN deposit. All the recent results are being incorporated into a new geological model for this sector and are expected to be part of the update to the FDN mineral resource estimate to be completed in Q1 of next year. Moving to slide 14, I want to discuss Bonza Sur. Last quarter, we defined Bonza Sur as a new deposit.

[Terry Smith, COO at Lundin Gold]

In Q3, 28 surface drill holes were completed in the central part of the deposit. Drill holes confirmed wide mineralized zones at shallower levels. At depth, the drilling program showed the transition of the wider mineralized zone into a narrower vein-veinlet type system. Furthermore, along the south and east extension of the deposit, the drilling program intercepted the same hydrothermal alteration as that found at Bonza Sur, which indicates a potential for expansion along these directions. Gold mineralization has already been discovered for more than 1.8 km along the north-south strike and for 500 meters along the down dip and remains open mainly to the south and to the east. Several drill holes at Bonza Sur are pending, and we look forward to updating the market on these drill holes in the near future.

[Terry Smith, COO at Lundin Gold]

I want to conclude the exploration section by saying that this is the district's largest ever annual exploration program at a minimum of 80,000 meters and an estimated cost of $44 million, and is continuing to demonstrate the significant untapped exploration potential near, in, and around FDN. These results achieved to date demonstrate that the true potential of FDN and this extensive land package has yet to be fully discovered. With that, I'll turn it over to Chester to talk about the financial results for the quarter.

[Chester See, CFO at Lundin Gold]

Thanks, Ron. And good morning, everyone. In the Q3 of 2024, Lundin Gold recognized record revenues of $323 million from the sale of approximately 126,000 oz of gold. An average realized gold price of $2,615 per ounce was realized, which was positively impacted by rising gold prices on provisionally priced gold sales that exceeded previous fair value estimates. Income from mining operations was $203 million compared to $100 million a year earlier, primarily a result of the higher gold price achieved during the quarter. From this, Lundin Gold generated adjusted earnings of $136 million, or $0.57 per share this quarter, compared to $45 million, or $0.19 per share a year earlier. Adjusted EBITDA was a record $220 million in Q3. The Lundin Gold story continues to be about free cash flow generation, which is now amplified by strong gold prices and a debt-free balance sheet.

[Chester See, CFO at Lundin Gold]

In Q3, we generated a record $218 million net cash from operating activities and $182 million in adjusted free cash flow, or $0.76 per share, compared to adjusted free cash flow of $81 million, or $0.34 per share a year earlier. We expect to continue generating significant free cash flow in the future based on our production and AISC guidance, especially given increased exposure to strong gold prices and no debt service costs. Since the beginning of the year, we have generated $470 million from operating activities, bought out the stream and offtake for $330 million, and doubled our dividends in Q3. Our anticipated free cash flow profile for the future leaves room for increased investment into growth, increased shareholder returns, or both.

[Chester See, CFO at Lundin Gold]

We continue to see tremendous organic opportunities with our successful near mine exploration program, which could lead to investments into the development of new satellite deposits. And we continue to assess the M&A landscape. We are extremely well positioned, and we will remain disciplined with respect to capital allocation. For a more detailed discussion of our financial results, I encourage you to turn to the MD&A. Now I'd like to turn the call back over to Ron for his concluding remarks.

[Ron Hochstein, President and CEO at Lundin Gold]

Thank you, Chester. Another strong operating and financial quarter for Lundin Gold. With three quarters of the year behind us, I'm excited by the prospect of achieving the high end of our production guidance of 450,000-500,000 oz. Record gold prices and the cleaning up of our balance sheet have allowed the company to achieve record revenues, adjusted earnings, and free cash flow. The increased gold price has resulted in increased royalties and accrued profit sharing. These costs have an impact on the company's cash operating costs and AISC per ounce sold that were set based on a gold price assumption of $1,900 per ounce. Irrespective, through continued cost reduction measures, we are still confident that we'll meet our cash operating cost guidance of $680-$740 per ounce and AISC cost guidance of $820-$890 per ounce sold.

[Ron Hochstein, President and CEO at Lundin Gold]

The process plant expansion project to increase plant throughput to 5,000 tonnes per day and improve metallurgical recoveries with the addition of the Jameson Cell technology remains on track, and we're looking forward to bringing the major components online by year-end. Ten rigs are currently turning across the near mine and regional programs, and we're looking forward to sharing with you the pending drill results of Bonza Sur and the updated mineral resource and mineral reserve statements in the Q1 of 2025 from the largest annual drilling program ever conducted at FDN. Our financial performance this year has been strong, and with current gold price, we need to remain focused. We know there are areas for improved productivity and cost reduction at FDN and we will continue to target them. With respect to capital allocation, we will remain disciplined and pursue growth that makes sense both organic and inorganic.

[Ron Hochstein, President and CEO at Lundin Gold]

Thank you all for joining us and for your continued support. With that, I'll now turn the call over to Dion for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Kerry Smith of Haywood Securities. Please go ahead.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

Thanks, operator. Hi, Ron. And Chester and Terry, thanks for the update and congratulations on good quarter. So the first question I had was, on the expected downtime in Q4 for the rest of the tie-ins in the plant, how many days do you think that might be in terms of full days of lost production? Would it be a couple of three or might it be more than that?

[Terry Smith, COO at Lundin Gold]

Hey, Kerry, it's Terry here. We've got three days scheduled for tie-ins this quarter.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

Okay, perfect. Thank you. That's good. And Terry, you can probably answer this one too. How much power do you actually need to run the plant? What is the draw? Just remind me.

[Terry Smith, COO at Lundin Gold]

Our peak load is around.

[Ron Hochstein, President and CEO at Lundin Gold]

We're on the site.

[Terry Smith, COO at Lundin Gold]

Yeah, our peak load is around 18 meg and our nominal is 16.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

Okay. So you'll have enough then to push these four gensets that you're putting in. Okay, great. And then maybe the last question. Maybe Ron can answer. What gold price are you thinking you'll use when you update your reserves and resources next year in Q1?

[Ron Hochstein, President and CEO at Lundin Gold]

We're not changing our gold price assumptions, Kerry. We're going to stay at the $1,400 that we've had for the last couple of years. We're not modifying.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

Okay. I mean, it's not sensitive. I just wondered if you might change. Okay. That's great. Thanks very much.

[Ron Hochstein, President and CEO at Lundin Gold]

You're welcome, Kerry. Thanks, Kerry.

[Operator]

Your next question comes from Don DeMarco of National Bank Financial. Please go ahead.

[Don DeMarco, Precious Metals Equity Research Analyst at National Bank Financial]

Thank you, Operator. And Ron and team, thank you for taking my question. First question, I got a few on the status of the power brownouts in Ecuador. Are there certain hydro generating stations that are more important than others for the grid powered FDN? And has there been rain at these? Do you watch the reservoir levels? And then also, what's the expected cost per ounce increase in a worst-case scenario if you had to run all four gensets 14 hours per day versus current grid power?

[Ron Hochstein, President and CEO at Lundin Gold]

Yeah. Good morning, Don, and thanks for the questions. Yeah, the power situation is, to use the words in Ecuador, a crisis. You could only imagine citizens and businesses that are having to face power outages of 14 hours per day. There are two major reservoirs, a major river, which the Coca Codo Sinclair Power Facility is a run-of-river project, which is about 1,300 meg. And then there's a couple of reservoirs, three reservoirs. It's a chain system more closer in the Azuay Province, which is around Cuenca. That's a big power generation as well. Thankfully, we have been seeing a lot of rain in the highlands, both up in the north and south, over the last week to 10 days.

[Ron Hochstein, President and CEO at Lundin Gold]

But the problem was these reservoirs are so low that it's where they had talked about reducing the power outages per household, but now they're talking about maybe having to increase that again because the forecast for the latter half of November and December are not good. It's a real challenge. They are looking for other sources, and they have some other sources available, but they've been delayed in that because, as Terry said, this is not an Ecuador issue. Colombia is having a similar issue, and so is Bolivia. But yeah, they have some plans to try to help that, but again, we're more or less at nature, and hopefully we start to see some rainfalls. When we look at the power generation, it's roughly about $10-$15 an ounce, about that range cost for us, additional cost.

[Don DeMarco, Precious Metals Equity Research Analyst at National Bank Financial]

Okay, and what would that scenario be like if you're running all four for half, for 12-14 hours a day type thing? It doesn't really seem material, frankly.

[Ron Hochstein, President and CEO at Lundin Gold]

It might be closer to 10 if it was running all four for part of the day. There are times now we are in discussions with the local utility to maybe have to increase the number of hours run to try and help out even more. We've built a good relationship with the utility because we've been able to try and if they need help, we try to help, so we run our generators a little bit more, so.

[Don DeMarco, Precious Metals Equity Research Analyst at National Bank Financial]

Okay, and just to be clear, I mean, you have some generators right now, but then there are the ones that you procured that are going to be commissioned in Q1, so I'm referring to if you were to run those ones, right, that's about $10 an ounce?

[Ron Hochstein, President and CEO at Lundin Gold]

Yeah. And we'll get closer to the $15 an ounce when you start running more of them. Yeah.

[Don DeMarco, Precious Metals Equity Research Analyst at National Bank Financial]

Okay. Okay. Thanks for that, Ron. That's helpful.

[Ron Hochstein, President and CEO at Lundin Gold]

Yeah. And we're looking at maybe even commissioning one of the four here sooner than Q1 of next year. The team's looking at that right now because the situation in Ecuador is just not getting any better.

[Don DeMarco, Precious Metals Equity Research Analyst at National Bank Financial]

Okay. Well, nice you could get that contingency in place. Just moving to my second question. At FDNS, congratulations on the intercepts there. Could you just repeat your comparison to FDNS? Were you saying it looks like it might even be higher grade than FDN? I mean, it still seems a little bit early, the number of holes and all that, and we look forward to the resource update, but if you could just add a little more color in your comparison there. Thank you.

[Ron Hochstein, President and CEO at Lundin Gold]

It's higher grade. I don't know if it's necessarily higher grade than FDN total. It's higher grade than that area that was previously part of the Inferred Mineral Resource Envelope. That southern extension of the mineral resource envelope was running around four to five, average grade four to five grams per ton, and you can see by the results that we've had to date that those vein systems are significantly higher than that, so what that's going to mean, Don, is that southern end of that resource envelope when we bring FDNS now into the FDN resource is definitely going to bring the grade up on that southern part of the resource.

[Don DeMarco, Precious Metals Equity Research Analyst at National Bank Financial]

Okay. Thank you for clarifying that. Well, good luck with Q4 and the tie-in. That's all for me.

[Ron Hochstein, President and CEO at Lundin Gold]

Yeah. Thanks, Don.

[Operator]

Your next question comes from Ovais Habib of Scotiabank. Please go ahead.

[Ovais Habib, Precious Metals Analyst at Scotiabank]

Thanks, Operator. Hi, Ron, and the Lundin Gold team. Really, congrats to you and your team on another great quarter. Just a couple of questions for me, just following up on Kerry's question in regards to the shutdown. Just wanted to see if you can provide a little bit more color in terms of how should we be looking at the throughput rates as well as grades for this quarter. Recall you had stated that grades are expected to decline sequentially from the Q2 results around the 11 grams per ton. So just some color there, that would be great.

[Ron Hochstein, President and CEO at Lundin Gold]

Terry, do you want to take that?

[Terry Smith, COO at Lundin Gold]

Yeah, sure. Thanks for the question. We were in and around 430,000 tonnes last quarter. With the tie-ins and sort of the commissioning around the plant, we're really trying to hit that number, if not exceed it a little bit, in terms of throughput, if that's helpful.

[Ron Hochstein, President and CEO at Lundin Gold]

Part of that is because we now have the new tailings line commissioned, right, which came in near the end of Q3, so that will help us to maybe up the throughput a little bit on the days when we are running.

[Terry Smith, COO at Lundin Gold]

Yeah. Thanks, Ron. Yeah, that's a good point.

[Ovais Habib, Precious Metals Analyst at Scotiabank]

Perfect. Perfect. And just.

[Terry Smith, COO at Lundin Gold]

Grades will be consistent with where we were in Q3, I would say.

[Ron Hochstein, President and CEO at Lundin Gold]

So we're going to be back up around 10.

[Terry Smith, COO at Lundin Gold]

Yeah.

[Ovais Habib, Precious Metals Analyst at Scotiabank]

Perfect. Okay. And just kind of moving on to some of your capital allocation priorities. And just again, once again, well done on completing the new gold stream facility payment, and you've achieved the debt-free status as well. So how do we look at your capital allocation priorities kind of going forward? Again, you talked a little bit about M&A as well. Does Bonza Sur kind of deter you or kind of change how you're thinking about M&A? Any sort of color there, Ron?

[Ron Hochstein, President and CEO at Lundin Gold]

I wouldn't say it deters us. I think we're in a—I don't mean to be facetious or anything, but we're in a good situation that we're generating the cash flow that we're generating and credit to the team at site to continue to look for ways to reduce our operating costs, that we're generating the cash that we have the flexibility to look at either/or or both. It's not a case of us that we have to really make some decisions where we know with the clean balance sheet, the cash flow we're generating, we have a lot of flexibility. The key is to stay disciplined and to ensure that we're pursuing the right opportunities. So we can look at both. It's not going to deter us from M&A by looking at the development of Bonza Sur.

[Ovais Habib, Precious Metals Analyst at Scotiabank]

Perfect. Again, thanks for taking my questions, and look forward to the site trip next week.

[Ron Hochstein, President and CEO at Lundin Gold]

Yeah. Look forward to seeing you and Don next week.

[Operator]

Your next question comes from Anita Soni of CIBC World Markets. Please go ahead.

[Anita Soni, Managing Director of Gold and Base Metals Research at CIBC Capital Markets]

Morning, Ron and team. Thanks for taking my questions and congratulations on a solid quarter. Most of the questions have been asked and answered. I just was wondering about the sustaining capital that you mentioned that the AISC is climbing a little bit because of increased sustaining capital. Can you provide a little bit more color on that?

[Ron Hochstein, President and CEO at Lundin Gold]

Thanks, Anita, for the question, and welcome to the team of analysts covering Lundin Gold. It's mostly the power generation, which added approximately, Chester, how much?

[Chester See, CFO at Lundin Gold]

15.

[Ron Hochstein, President and CEO at Lundin Gold]

About $15 million to our sustaining CapEx. That's really the big one. There were some other small things. We did purchase a scoop, which was not in the original budget, which was roughly about another million.

[Chester See, CFO at Lundin Gold]

1.8 million.

[Ron Hochstein, President and CEO at Lundin Gold]

Or $1.8 million. Thanks, Chester. So a couple of things, but it's primarily the power generation, this decision to bring those additional generators and the infrastructure around those.

[Anita Soni, Managing Director of Gold and Base Metals Research at CIBC Capital Markets]

Okay. And then would that carry through, do you think, to 2025?

[Ron Hochstein, President and CEO at Lundin Gold]

There's five, go ahead, Chester.

[Chester See, CFO at Lundin Gold]

With regards to the gensets, as we mentioned, we will be commissioning it to be up and running by the end of Q1 of next year. So there's about $5 million of those costs that will carry over to next year's sustaining capital.

[Ron Hochstein, President and CEO at Lundin Gold]

They'll be in our sustaining capital budget that will be part of our 2025 budget that we'll be announcing.

[Chester See, CFO at Lundin Gold]

Later this year.

[Ron Hochstein, President and CEO at Lundin Gold]

Later this year.

[Anita Soni, Managing Director of Gold and Base Metals Research at CIBC Capital Markets]

Okay. That's it for my questions. Thank you.

[Ron Hochstein, President and CEO at Lundin Gold]

Thanks, Anita.

[Operator]

Your next question comes from Kerry Smith of Haywood Securities. Please go ahead.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

Thank you. Chester, maybe I missed it, but what was the capital cost for the four more gensets, the 10 MW that you've bought and plan to install?

[Chester See, CFO at Lundin Gold]

Yeah. In total, it's about $20 million. $15 million of that is being incurred this year, and the remaining $5 million is next year.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

Okay. Gotcha. And just to be clear, in the slide deck, you say those generators will be up and running in Q4, but I know Ron made a comment that it would be Q1 off of Don's question. So just to clarify, which is it?

[Ron Hochstein, President and CEO at Lundin Gold]

No, they're purchased in Q4, but they're installed and commissioned in Q1.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

There's a lot. Okay.

[Ron Hochstein, President and CEO at Lundin Gold]

Because it's the electrical switchgear. It's the electrical switchgear in that we need to tie them in. The delivery times on that are longer.

[Kerry Smith, Senior Mining Analyst at Haywood Securities]

Gotcha. Okay. Okay. That's good. Okay. Great. Thank you, guys. Appreciate it.

[Operator]

Your next question comes from Jeremy Hoy of Canaccord Genuity. Please go ahead.

[Jeremy Hoy, VP of Mining and Metals Equity Research at Canaccord Genuity]

Hi, Ron, Terry, Chester. Appreciate you taking my question. A lot of good discussion. Just two quick ones from me on the exploration. One, wondering what you guys are thinking about in terms of exploration budget next year. Are we going to see a step up versus the record program you guys had this year, or were you at about the right level? And two, just wondering if you could provide a bit more color on FDNS for our understanding. I'm just curious how the strategy changed to be able to better define that vein system and understand it's a higher grade versus the lower grade inferred before. Thanks. That's it for me.

[Ron Hochstein, President and CEO at Lundin Gold]

Thanks, Jeremy. Right now, based on the philosophy that Andre has and the team, is that for our budget, our exploration program will likely be roughly in and around the same levels as the current one, around the 80,000 meters. But quite frankly, Jeremy, if I was a betting man, it's going to increase because we continue, what we do is we base the budget on what we know today and what we want to drill based on what we know today. But then, as we did this year, when we have success, then we have the flexibility again because of the cash flow we're generating to be able to expand it. So that's the philosophy we're taking. With regards to FDNS, what's really changed a lot was all the drilling in that southern part of that resource was all done by Kinross, and that was all done from surface.

[Ron Hochstein, President and CEO at Lundin Gold]

We've extended out the 1080 and the 1170 levels. We kind of finished that development about partway through the year, and so by that development and being able to drill from underground really has enabled us to really drill this out and really see what this system is. That's been a big part.

[Jeremy Hoy, VP of Mining and Metals Equity Research at Canaccord Genuity]

Okay. That's great color, Ron. Thank you. Appreciate it, and I'll step back in the queue.

[Operator]

Once again, should you have a question, please press star followed by one on your touch-tone phone. Should you wish to decline from the polling process, please press star followed by number two. Thank you, ladies and gentlemen. That concludes our question-and-answer session. I will now turn the conference back over to Ron Hochstein, President and CEO. Please go ahead.

[Ron Hochstein, President and CEO at Lundin Gold]

Thank you, Dion. And thank you, everyone, for attending the call this morning and providing the great questions. And look forward to seeing some of you next week in Ecuador. And yeah, as Chester mentioned, we anticipate a 2025 budget coming out later this year, which would probably be our next, and the Bonza Sur results as well over the next four to six weeks. So thank you again, everyone, and have a great day and a great weekend.

[Operator]

This concludes today's conference. Thank you for attending. You may now disconnect your lines.

Participants

Executives

• Terry Smith, COO
• Chester See, CFO
• Ron Hochstein, President and CEO

Analysts

• Kerry Smith, Senior Mining Analyst at Haywood Securities
• Jeremy Hoy, VP of Mining and Metals Equity Research at Canaccord Genuity
• Ovais Habib, Precious Metals Analyst at Scotiabank
• Don DeMarco, Precious Metals Equity Research Analyst at National Bank Financial
• Anita Soni, Managing Director of Gold and Base Metals Research at CIBC Capital Markets