Lundin Gold exceeds guidance with record production

Lundin Gold (TSX: LUG; US-OTC: LUGDF) exceeded last year’s production guidance with a record output of 502,029 oz. from its Fruta del Norte gold mine in Ecuador. It set its 2024 guidance range at 450,000–500,000 oz.

During the fourth quarter, Lundin produced a total of 135,241 oz. of gold, for a 36% improvement on the same quarter of 2023, owing to an increase in gold head grades, the company reported late Wednesday. 

Lundin Gold’s shares closed 5.9% higher on Thursday in Toronto at $32.87 apiece, and climbed 1.5% on Friday morning to $33.37. Its market capitalization is $8 billion. The stock traded between $14.23 and $35.89 over the past 52 weeks.

“In a relatively short period of time, Lundin Gold has demonstrated its exceptional execution abilities by consistently beating targets through development, ramping up production, and mill throughput expansion at the Fruta del Norte mine,” BMO mining analyst Brian Quast said in a note on Wednesday. “We see upside to shares through further optimization, near-mine and regional exploration, and strong free cash flow generation.”

Bonza Sur

Lundin is planning to update reserves and resources this quarter, while an initial resource estimate for the Bonza Sur project next to Fruta del Norte is expected in by the end of June. It’s to be followed by a preliminary economic assessment (PEA) late this year. 

“Fruta del Norte remains an exceptional, low-cost asset in the hands of an excellent operator,” Cormark Securities mining analyst Nicolas Dion said on Friday. “We recommend it for those looking for a quality name with strong free cash flow. The addition of Bonza Sur (which looks like a future mine) adds a significant element of growth to the Lundin Gold story, while it continues to (selectively) evaluate M&A opportunities.”

Last month, Lundin raised its annual production guidance to 475,000–525,000 oz. for 2025 through 2027 after making progress at expansion projects aimed at improving throughput and recovery.

Investments

Following the expansion, the Fruta del Norte mill is expected to have a throughput of 5,000 tonnes per day on average, the company has said, adding that further investments are planned to increase that to 5,500 tonnes starting in 2026.

In addition to upgrading the mine operation, Lundin also has a three-year greenfield exploration strategy to boost the Fruta del Norte resources.

The company acquired Fruta del Norte in late 2014 from Kinross Gold, which had to halt operations after failing to reach an agreement with Ecuadorian authorities on development terms.

Construction began in July 2017, and the first gold was poured in November 2019. Commercial production commenced in February 2020, making Fruta del Norte Ecuador’s first large-scale gold mine.

Later in 2020, Lundin approved an US$18.6 million mine expansion.