In a Jan. 10 research note, Haywood analyst Kerry Smith reported that Lundin Gold Inc. (LUG:TSX) remains on track and on budget to achieve commercial production at its Fruta del Norte project in Ecuador in Q2/20. "Fruta del Norte is one of only a few new large mines being built," Smith highlighted.
Lundin poured first gold from the gravity circuit at Fruta del Norte on Nov. 16, 2019, after which it went on to produce 28,678 ounces of gold in 2019. Of those, 3,411 ounces were made into doré form, and the remaining 25,267 ounces were produced as a concentrate. Of the 3,400 tons of concentrate produced, 2,676 tons were shipped to a smelter in Finland.
Smith also reported on development progress of the mine and infrastructure. At year-end 2019, 13 kilometers of underground mine development were finished. Construction was 99.2% complete, and ore stockpiles amounted to 153,000 tons. Now, the water treatment plant is being commissioned. Boring of the south ventilation raise, in progress, is slated for completion in Q1/20. Lundin should get the paste plant and Zamora River bridge, which still need to be done, completed in Q2/20 and Q3/20, respectively.
The analyst pointed out that Lundin revised its life of mine plan for Fruta del Norte. It raised the all-in sustaining cost (AISC) by about 6.5% to US$621 per ounce from US$583; the new figure is lower than Haywood's revised life of mine AISC of US$635 per ounce.
An increase in the assumed gold price to US$1,400 per ounce from US$1,250 drove the new AISC, which boosted production taxes and royalties and lowered projected byproduct credits.
"Gold prices are moving higher, and timing is looking good for this new producer," commented Smith. Lundin is expected to produce 290,000 ounces of gold at Fruta del Norte in 2020.
Haywood has a Buy rating and a CA$9.25 per share target price on the company, whose stock is currently trading at around CA$9.42 per share.
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Disclosures from Haywood Securities, Lundin Gold Inc., January 10, 2020
Analyst Certification: I, Kerry Smith, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Important Disclosures
Of the companies included in the report the following Important Disclosures apply:
▪ Haywood Securities, Inc. has reviewed lead projects of Lundin Gold Inc. and a portion of the expenses for this travel have been reimbursed by the issuer.
▪ Haywood Securities, Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Lundin Gold Inc. in the last 12 months.
Other material conflict of interest of the research analyst of which the research analyst or Haywood Securities Inc. knows or has reason to know at the time of publication or at the time of public appearance: n/a.
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