Lundin Gold Eyes Fruta del Norte Expansion to Sustain 500,000-Ounce Output

Key Points

• Lundin Gold plans to expand Fruta del Norte’s processing capacity from roughly 5,500 tonnes per day to 6,500–7,000 tonnes, aiming to sustain annual production near 500,000 ounces as new discoveries and reserves support mine life. Most work is expected through 2027, with additional ore potentially contributing from 2028.
• The company is investing nearly $100 million in exploration and drilling about 130,000 meters this year, including work on the Sandia copper porphyry system and other deposits that could form a longer-term growth pipeline.
• Lundin Gold continues to generate strong cash flow, supported by approximately $1,100-per-ounce all-in sustaining costs and lower-cost power secured through a new agreement. It plans to return at least 50% of free cash flow to shareholders while discussing a tax-related “sovereign adjustment” with Ecuador’s government.

Lundin Gold TSE: LUG said it is moving ahead with plans to expand processing capacity at its Fruta del Norte gold mine in Ecuador, supported by exploration success at nearby deposits and a larger reserve base than the company had when it approved construction.

During an investor discussion, a company representative said Fruta del Norte entered production around 2019 based on a reserve base of just under 5 million ounces. The mine has since produced more than 3 million ounces while its current reserve base has grown to approximately 6 million ounces. The representative described the operation as one of Ecuador’s first large-scale mining projects and said it is among the province’s highest-grade, lowest-cost gold mines.

Fruta del Norte’s La Zarza concession covers roughly 6,500 hectares and forms part of Lundin Gold’s broader 65,000-hectare land package in Ecuador, according to the company.

Expansion Plan Targets Sustained Gold Output

The company said its mill has been operating at about 5,500 tonnes per day and that it is evaluating an expansion to between 6,500 and 7,000 tonnes per day. While final sizing will depend on engineering constraints and the mine’s ability to supply ore, the representative said the decision to proceed with an expansion has effectively already been made.

Lundin Gold is integrating discoveries at Fruta del Norte South and Fruta del Norte East into its plans. Increased throughput is expected to help the company maintain production at about 500,000 ounces annually for an extended period as the mine matures and reserve grades become more representative of production.

The company expects to provide additional details later this year on the plant expansion, capital requirements and project sequencing. Most of the work is expected to take place through 2027, with Fruta del Norte East or Fruta del Norte South potentially beginning to contribute to the mine plan in 2028.

As development advances southward, Lundin Gold is also reassessing the Bonza Sur area. Bonza Sur had originally been viewed as a lower-grade, bulk-tonnage open-pit opportunity, but the company said it is examining whether more discrete, higher-grade vein-style portions could be mined and processed through the existing Fruta del Norte mill.

Exploration Spending Supports Gold and Copper Pipeline

Lundin Gold said it is conducting about 130,000 meters of drilling this year under an exploration program valued at just under $100 million. The company said its all-in sustaining cost is approximately $1,100 per ounce, and that current gold prices have provided financial flexibility to pursue exploration, development work and shareholder returns simultaneously.

The company’s capital return policy calls for at least 50% of free cash flow to be returned to shareholders through dividends. It also began share repurchases under its normal course issuer bid during the prior quarter. The representative said the company has returned 100% of free cash flow through dividends in recent quarters, while noting that its variable dividend could be reduced if capital is needed for future development.

On the eastern portion of its land package, Lundin Gold has identified seven predominantly copper porphyry centers spanning about 10 kilometers north to south. The company expects to publish an initial mineral resource estimate for the Sandia porphyry, located northeast of Fruta del Norte, in the first quarter of 2027, with the possibility of accelerating that timeline.

Sandia has some of the property’s higher grades near surface and could be suitable for a higher-grade, early open-pit starter pit, according to the company. The representative said the porphyry systems could collectively become multi-billion-tonne deposits over time, though the company is still working to define their scale and development potential.

Costs, Ecuador Discussions and Future Growth

Lundin Gold said it has been relatively insulated from several cost pressures affecting other mining companies. Ecuador uses the U.S. dollar, reducing foreign-exchange volatility, while the company said limited mining competition in the country has helped contain labor inflation.

The company also recently signed a power purchase agreement with Barka Capital for the full electricity needs of Fruta del Norte. Under the arrangement, power from a hydroelectric plant will be supplied through Ecuador’s grid at costs below current spot-market pricing, Lundin Gold said.

Separately, the company is working with Ecuador’s government regarding a notice of assessment tied to a “sovereign adjustment” mechanism intended to divide benefits from natural-resource projects equally between the state and project owner. The representative said Fruta del Norte is likely the first project to trigger the mechanism and that discussions have been open and collaborative. The principal issue involves how historical expenditures and other inputs are calculated on a present-value basis.

Looking beyond organic growth, Lundin Gold said it remains open to acquisitions but does not face pressure to pursue an immediate transaction because of its existing cash generation and exploration pipeline. The company said it would consider opportunities in Ecuador as well as elsewhere, with South America and North America its primary areas of focus.

On metal prices, the representative declined to forecast gold or copper markets, saying the company’s focus remains on controlling mine-site costs and maintaining margins through commodity-price cycles.

About Lundin Gold (TSE:LUG)

Lundin Gold, 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.

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