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2016-06-07

LUNDIN GOLD ANNOUNCES A POSITIVE FEASIBILITY STUDY FOR THE FRUTA DEL NORTE PROJECT AND CONFERENCE CALL

Lundin Gold Inc. Börsmeddelande LUNDIN GOLD ANNOUNCES A POSITIVE
FEASIBILITY STUDY FOR THE FRUTA DEL NORTE PROJECT AND CONFERENCE CALL June
6, 2016 (Vancouver, Canada)… Lundin Gold Inc. ("Lundin Gold" or the
"Company") (TSX: “LUG”, Nasdaq Stockholm: “LUG”) is pleased to announce the
results of an independent Feasibility Study (“FS”) for its 100% owned Fruta
del Norte Project (“FDN” or the “Project”) in Ecuador. The FS has been
prepared by Amec Foster Wheeler, with the support of four other globally
recognized, leading engineering firms, and is being summarized into a
Technical Report (the “FDN Technical Report”) to be filed on SEDAR in
accordance with National Instrument 43-101 (“NI 43-101”). The FS confirms
that the Project will support an economically viable and robust, high grade
underground gold mine. All dollar amounts are quoted in U.S. dollars (“$”)
and all cash cost information is net of silver by-product credits. Lundin
Gold President and Chief Executive Officer, Ron Hochstein, remarked that
“the Feasibility Study provides a solid basis to enable Fruta del Norte to
advance immediately into development, ultimately becoming a landmark, high
quality and profitable mining operation, adding great value to the Company,
its shareholders and the people of Ecuador. With the support of the
Government of Ecuador, we look forward to building a historic high grade
gold mine in Ecuador.” “The Feasibility Study results present a unique
opportunity for the Company and its shareholders”, remarked Lundin Gold
Chairman, Lukas Lundin. “The results confirm our expectations for Fruta del
Norte, which is one of the world’s largest undeveloped gold deposits,
validating the original commitment of the Board of Directors, management,
our investors and Ecuador’s stakeholders to push forward with this exciting
project.” Feasibility Study Highlights --

Mineral Reserves totaling 4.82 million ounces of gold and 6.34 million
ounces of silver (15.5 million tonnes at 9.67 g/t Au and 12.7 g/t Ag);

--

Average annual gold production of 340,000 ounces at an average life of mine
(“LOM”) total cash cost of $553/oz and a LOM all-in sustaining cash cost
(“AISC”) of $623/oz, placing FDN in the lowest cash cost quartile globally;

--

LOM production of approximately 4.4 million ounces of gold and 5.2 million
ounces of silver over an initial 13-year mine life using an average gold
recovery of 91.7% and average silver recovery of 81.5%;

--

Estimated Project capital cost, including contingency, of $669 million, net
of taxes;

--

Targeted start of construction in mid-2017;

--

Expected first gold production in first quarter 2020 with first year of
full production in 2021;

--

Project economics at a gold price of $1,250/ounce and a silver price of
$20/ounce resulted in the following:

Pre-tax After Tax
----------------------------------------------------------------------------
Net Present Value at a 5% discount rate (NPV5) $1,283 million $676 million
----------------------------------------------------------------------------
Internal Rate of Return (IRR) 23.8% 15.7%
----------------------------------------------------------------------------
Capital Payback (yrs) 3.7 4.5
----------------------------------------------------------------------------
Notes: 1. All figures are reported on a 100% equity project basis
valuation. Capital payback is calculated based on start of production. 2.
Economic valuation is presented using a start date of July 1, 2017. -- The
cash flow to be generated over the initial three years, annual average over
the first 10 years and LOM are shown in the following table. $M 2020 2021
2022 Average LOM Yrs 1 – 10
---------------------------------------------------------------- Doré
Revenue 62 121 151 133 1,669 Concentrate Revenue 117 247 314 280 3,631
------------------------------------- -------------------------------------
Total Revenue 179 368 465 414 5,301 Operating Costs 107 151 149 147 1,961
------------------------------------- -------------------------------------
Operating Profit 72 216 316 267 3,339 Taxes & Royalties 16 (6) 16 59 914
Capex 139 16 11 28 975 Changes in Working Capital 46 8 11 6 -
------------------------------------- Cash Flow (After Tax) (129) 198 279
174 1,449 ----------------------------------------------------------------
Note: Numbers may not add due to rounding. Gold Price Sensitivity The
Project sensitivity analysis indicated that a $100/oz variation from the
base case gold price had the following impact on the Project after tax
economics, with silver held at $20/oz. $1,150 oz Au Base Case $1,350 oz Au
$1,250 oz Au ------------------------------------------------------- NPV5
($M) 506 676 844 -------------------------------------------------------
IRR (%) 13.4 15.7 17.8
------------------------------------------------------- Payback (yrs) 5.0
4.5 4.2 ------------------------------------------------------- Further
Optimization, Cost Reductions and Project Potential The Company believes
there are potential opportunities to further improve the economics of the
FDN Project through: --

Review of the mine plan to potentially improve the production ramp-up and
optimization of the mining methods to increase the use of
transverse-long-hole stoping (“TS”) over the higher cost, lower
productivity drift and fill (“D&F”) methods;

--

Further metallurgical testwork to increase the ratio of doré versus gold in
concentrate produced through gravity concentration of flotation concentrate
to recover additional free gold;

--

Evaluation of aggregate supply for the Project construction and supply of
aggregate for backfill. Currently the Project is relying on a quarry
operation to be developed on site. Further analysis of alternative sources
needs to be completed which could result in lower capital and operating
costs;

--

Evaluation of owner self-perform construction, which could result in
capital cost savings versus the traditional Engineering, Procurement and
Construction Management approach that was used for the FS. The Company will
also study other potential ways to reduce the capital cost; and

--

Potential extension of LOM, perhaps materially, in two ways: (i) through
the inclusion of significant additional Mineral Resources not included in
the initial mine plan; and (ii) through the identification of
mineralization as a result of on-going and future exploration on the
Company’s concessions which could support the conversion of Mineral
Resources to Mineral Reserves.

Benefits to Ecuador The FS confirms that FDN will provide significant
benefit to Ecuador at the local, provincial and national levels. Some of
the direct benefits include: --

During construction direct employment, including employees of the Company
and contractors is estimated to peak at approximately 2,000;

--

During operations the estimated employment is approximately 900, including
employees of the Company and contractors. This does not take into account
the numerous indirect jobs created with suppliers, services, etc. for the
mine operations;

--

Improvement of local and regional infrastructure;

--

Continuation of existing community investment programs, small business
development and support of cultural development; and

--

Based on a gold price of $1,250 per ounce, the Project is anticipated to
generate payments to the Government in the form of royalties, taxes and
profit sharing of approximately $928 million over the LOM.

Feasibility Study Details Mineral Resources Mineral Resources for the FDN
deposit were estimated using drill hole data available to December 31, 2015
as shown in Tables 1 and 2 at a cutoff grade of 3.5 g/t Au. The Mineral
Resources are contained within three main geological domains; Xh_Vn, Xh_Ip,
and M_South. The Xh_Vn domain represents 85% of the tonnage classified
within the Indicated Mineral Resource category. It also has the highest
average gold grade compared to the other two domains. More than half the
tonnage in Xp_Ip is classified into the Indicated Mineral Resource
category. All of M_South domain is classified as Inferred Mineral
Resources. Table 1 – Mineral Resources, inclusive of Mineral Reserves as at
December 31, 2015
----------------------------------------------------------------- Category
Tonnage Grade Contained Metal Grade Contained Metal ---------- (M t) (g/t
Au) (M oz Au) (g/t Ag) (M oz Ag)
=========================================================== Indicated 23.8
9.61 7.35 12.9 9.89
---------------------------------------------------------------------------
Inferred 11.6 5.69 2.13 10.8 4.05
---------------------------------------------------------------------------
Table 2 – Mineral Resources by Domain as at December 31, 2015 Category
Tonnage Grade Contained Metal Grade Contained Metal (Mt) (g/t Au) (M oz Au)
(g/t Ag) (M oz Ag)
----------------==============================================================
Indicated
-------------------------------------------------------------------------------
Xh_Vn 20.2 9.94 6.44 13.0 8.46
------------------------------------------------------------------------------
Xp_Ip 3.6 7.70 0.91 12.3 1.43
------------------------------------------------------------------------------
Total Indicated 23.8 9.61 7.35 12.9 9.89
------------------------------------------------------------------------------
Inferred
-------------------------------------------------------------------------------
Xh_Vn 3.0 5.67 0.55 6.0 0.58
------------------------------------------------------------------------------
Xp_Ip 2.3 6.48 0.49 10.5 0.79
------------------------------------------------------------------------------
M South 6.3 5.41 1.09 13.3 2.68
------------------------------------------------------------------------------
Total Inferred 11.6 5.69 2.13 10.8 4.05
------------------------------------------------------------------------------
Notes: 1. The Qualified Person for the estimate is David Ross, P.Geo., an
employee of Roscoe Postle and Associates (“RPA”). The estimate has an
effective date of December 31, 2015. 2. Mineral Resources are reported
inclusive of those Mineral Resources that were converted to Mineral
Reserves; Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability. 3. Mineral Resources are reported at a
cut-off grade of 3.5 g/t Au; which was calculated using a long-term gold
price of $1,500/oz. 4. Mineral Resources are constrained within underground
mineable shapes that assume a minimum thickness of 2 m; metallurgical
recovery of 94%; total operating costs of $145/t milled (mining cost of
$...

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