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2017-05-30

LUNDIN GOLD ANNOUNCES START OF CONSTRUCTION OF MINE FACILITIES AND COMPLETION OF PROJECT UPDATE FOR FRUTA DEL NORTE

Lundin Gold Inc. Övrig information som ska lämnas enligt börsens regler
LUNDIN GOLD ANNOUNCES START OF CONSTRUCTION OF MINE FACILITIES AND
COMPLETION OF PROJECT UPDATE FOR FRUTA DEL NORTE May 30, 2017 (Vancouver,
Canada)… Lundin Gold Inc. ("Lundin Gold" or the "Company") (TSX: “LUG”,
Nasdaq Stockholm: “LUG”) is pleased to report the start of construction of
the mine development support facilities on its 100% owned Fruta del Norte
Project (“FDN” or the “Project”) in Ecuador. In addition, the Company has
completed a project update for FDN. The update is based on advancing the
design and estimates from the Technical Report entitled "Fruta del Norte -
NI 43-101 Technical Report on Feasibility Study" (the “FS”) filed by the
Company in June 2016. The updated results include a revised mine plan,
updated capital and operating costs and a new execution plan based on a
self-perform approach versus EPCM. All dollar amounts are quoted in U.S.
dollars (“$”) and all cash cost information is net of silver by-product
credits. This update should be read in conjunction with the FS. Lundin Gold
President and Chief Executive Officer, Ron Hochstein, remarked that “A
remarkable amount of work has been accomplished over the past year to
provide a comprehensive update to the project. The result of these efforts
has led to a more technically robust and constructible project with an
improved execution plan. In addition, first gold production is now
scheduled for Q4 2019, versus Q1 2020, and commercial production is
achieved over six months sooner than anticipated in the FS. In addition,
the update results in an improvement in the economics of the Project.”
Highlights --

Based on field investigations and improved mine design, the expected first
gold production has been moved forward several months, from first quarter
2020 to fourth quarter 2019;

--

The mining rate is expected to ramp up quicker, over a twelve-month period,
to an extraction rate of 3,500 tonnes per day (“tpd”) until 2022, when the
extraction rate is planned to reach 3,600 tpd ;

--

Average annual gold production is anticipated to exceed 300,000 ounces over
15 years (13 years in the FS) at an average life of mine (“LOM”) total cash
cost of $561/oz and a LOM all-in sustaining cash cost (“AISC”) of $609/oz;

--

LOM production is expected to be approximately 4.5 million ounces of gold
and 5.5 million ounces of silver;

--

Estimated Project capital cost, including contingency and pre-production
costs and revenues, is $684 million, net of taxes, compared to $669 million
in the FS. This revised estimate includes the cost of mining equipment and
the paste plant, estimated at $58 million, previously included in
sustaining capital;

--

Project economics show an improvement over the FS, at the same gold and
silver price assumptions used in the FS ($1,250/ounce of Au and $20/ounce
of Ag):

Pre-tax After Tax
----------------------------------------------------------------------------
Net Present Value at a 5% discount rate (NPV5) $1,323 million $717 million
----------------------------------------------------------------------------
Internal Rate of Return (IRR) 24.7% 16.3%
----------------------------------------------------------------------------
Capital Payback (yrs) 3.1 4.0
----------------------------------------------------------------------------
Notes: 1. All figures are reported on a 100% equity project basis
valuation. Capital payback is calculated based on start of commercial
production. 2. Economic valuation is presented using a start date of July
1, 2017. Project Update Details Mining As a result of a complete review of
the mine plan, the updates to the FS are: --

The development schedule was shortened by several months as a result of
improved ground conditions based on further field investigations,
relocation of certain infrastructure into better ground conditions and
better than anticipated contractor development rates.

--

Conversion of approximately 1.5 Mt from drift & fill to transverse stoping
mining method.

--

The revised mine plan has a more even distribution of transverse stoping
and drift & fill over the entire life of mine. The Company believes that
the extraction sequence is more geotechnically stable and carries less risk
than the sequence contemplated in the FS.

--

Detailed ventilation modelling resulted in reduced power requirements and
the elimination of the north vent raise.

Process There were no changes to the proposed flowsheet. However, the
optimization of the process plant layout resulted in significant reductions
in earthwork, concrete and piping quantities. Capital & Operating Costs As
compared to the FS, LOM capital costs decreased from $932 million to $854
million. The revised pre-production capital cost is estimated to be $684
million, inclusive of contingency and pre-production expenses and revenues,
and net of taxes. Consistent with the FS, this capital cost was estimated
on the basis that any expenditures by the Company prior to July 1, 2017 are
not included in the estimate. While the FS was developed under an EPCM
execution platform, this updated estimate is based on a self-perform /
direct hire strategy. Initial capital cost increased approximately $15
million due to reallocating mine equipment purchases and the paste backfill
plant from sustaining capital to initial capital, offset by reductions due
to changes in scope, reduction in equipment quotations and the inclusion of
pre-production costs and revenues. This capital cost estimate includes all
direct and indirect costs to be expended throughout the project execution,
starting July 1, 2017 and ending when the plant production reaches
commercial production, defined as 70% of the nominal nameplate capacity for
three consecutive months, estimated to occur by mid-2020. The capital cost
estimate of $669 million in the FS was based on costs up to first
production. By comparison, if the FS estimate were stated at commercial
production to align with the basis in the project update, the FS estimated
capital cost would have been $704 million. The sustaining capital is
estimated to be $169 million (FS - $262 million) and reclamation and
closure costs are projected to be $44 million (unchanged from FS). Capital
Cost Summary ($ M) Capital Items Initial Sustaining Closure & Capital
Capital Severance
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Underground Mine 147 86 Process Plant 71 2 Tailings / Reclaim Water 45 42
Facilities Surface Operations 46 39 Infrastructure 48 1 Power & Electrical
67 Mine Closure 44 --------------------------------------------------
-------------------------------------------------- Sub-Total - Direct Costs
424 169 44 Indirect Costs & 120 Commissioning Owners Costs 118 Contingency
69 -------------------------------------------------- Sub-Total Indirect
Costs 307 - - --------------------------------------------------
Pre-Production Net Revenue (46) Total Capital Costs 684 169 44
--------------------------------------------------------------------------------
Note: Numbers may not add due to rounding. The capital cost estimate does
not include advance royalty payments, working capital requirements,
corporate costs, $108 million in indirect taxes and the remaining 2017
Early Works program. Approximately $73 million of taxes will be recovered
once production begins. The LOM operating costs and all-in sustaining costs
estimates have also improved compared to the FS. Operating costs are now
estimated at $111.84/t of ore, versus $118.04/t in the FS. All costs are in
Q2 2017 dollars. LOM Operating Cost by Area Area Operating Cost ($/t)
----------------------- ----------------------- Mining 54.98 Process 32.44
Surface 4.21 G&A 20.21 --------------- Total 111.84 -----------------------
LOM All in Sustaining Cash Cost ($/oz Au payable) Area Cash Cost ($/oz Au)
---------------------------------------
--------------------------------------- On site operating cost 424
Treatment & Refining charges 84 Royalties & production taxes 76 By-product
silver credit (22) ---------- ---------- Cash Cost 561 Sustaining Capital
39 Closure costs 10 ---------- AISC per oz 609
--------------------------------------- Note: Numbers may not add due to
rounding. This press release has been reviewed and approved by Ron
Hochstein, P. Eng., a metallurgical engineer and the Company’s President
and Chief Executive Officer, who is a Qualified Person under NI 43-101. For
information with respect to the key assumptions, parameters and risks
associated with the results of the FS for the Project, the Mineral Resource
and Mineral Reserve estimates included therein and other technical
information, please refer to the Technical Report entitled "Fruta del Norte
- NI 43-101 Technical Report on Feasibility Study" dated effective April
30, 2016 filed on SEDAR at www.sedar.com. About the Company Lundin Gold
Inc. owns the Fruta del Norte (”FDN”) gold project located in southeast
Ecuador. FDN is one of the largest and highest grade undeveloped gold
projects in the world. The Company is advancing FDN in order to realize the
significant potential of this asset. The Company believes that the value
created will not only greatly benefit shareholders, but also the Government
and people of Ecuador who are the Company's most important stakeholders in
this project. Lundin Gold views its commitment to corporate social
responsibility as a strategic advantage that enables it both to access and
effectively manage business opportunities in increasingly complex
environments. Lundin Gold is committed to addressing the challenge of
sustainability - delivering value to its shareholders, while simultaneously
providing economic and social benefits to impacted communities and
minimizing its environmental footprint. Additional Information The
information in this release is subject to the disclosure requirements of
Lundin Gold under the EU Market Abuse Regulation and the Swedish Securities
Market Act. This information was publicly communicated on May 30, 2017,
2:00 a.m. Eastern Time. For more information, please contact Lundin Gold
Inc. Ron F. Hochstein President and CEO +593-2-299-6400 +1-604-806-3589
Lundin Gold Inc. Sophia Shane Corporate Development +1-604-689-7842
info@lundingold.com www.lundingold.com Caution Regarding Forward-Looking
Statements This press release contains or refers to forward-looking
information under Canadian securities legislation, including statements
regarding the results of the project update, including, but not limited to,
timing of first gold production and commercial production, scheduling, gold
price and exchange rate assu...

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