Fruta del Norte Financing and Project Update

Transcription

1 Building the future through responsible mining Fruta del Norte Financing and Project Update Investor Update June

2 Disclaimers This presentation includes forward-looking information or forward-looking statements under Canadian and U.S. securities laws that involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause differences may include: the ability to arrange financing and the risk to shareholders of dilution from future equity financings; risks related to carrying on business in an emerging market such as possible government instability and civil turmoil and economic instability; volatility in the price of gold; the timely receipt of regulatory approvals, permits and licenses; risks associated with the performance of the Company s contractors; risks inherent in the development of an underground mine; deficient or vulnerable title to mining concessions and surface rights; shortages of resources, such as input commodities, equipment and skilled labour, and the dependence on key personnel; risks associated with the Company s community relationships; unreliable infrastructure and local opposition to mining; volatility in the market price of the Company s shares; uncertainty with the tax regime in Ecuador; measures required to protect endangered species; difficulty complying with changing government regulations and policies, including without limitation, compliance with environment, health and safety regulations, and the cost of compliance or failure to comply with applicable laws; exploration and development risks; the accuracy of the Mineral Reserve and Resource estimates for FDN and the Company s reliance on one project; the Company s lack of operating history; illegal mining; uncertainty as to reclamation and decommissioning; adverse global economic conditions; risks associated with the Company s information systems; the ability to obtain adequate insurance; risks of bribery or corruption; the potential for litigation; limits of disclosure and internal controls; and the potential influence of the Company s largest shareholders. Additional information about the material factors that could cause the results to differ materially, and the material assumptions that management has made, are contained in the Company s most recent Annual Information Form, which is available at Forward-looking information is designed to help you understand management s current views of the Company s near and longer-term prospects, and it may not be appropriate for other purposes. The Company will not necessarily update this information unless it is required to by securities laws. The technical information contained in this presentation relating to the Fruta Del Norte Project is based on a Technical Report prepared for the Company entitled Fruta del Norte Project, Ecuador, NI Technical Report on Feasibility Study dated June 15, 2016 with an effective date of April 30, 2016 (the "2016 FDN TR"). Information of a scientific and technical nature in this presentation was reviewed and approved by Ron Hochstein, P.Eng., Lundin Gold s President and Chief Executive Officer, and Nicholas Teasdale, MAusIMM CP(Geo), Lundin Gold s Vice-President Exploration, both of whom are Qualified Persons within the meaning of National Instrument Standards of Disclosure for Mineral Projects ( NI ). Unless otherwise indicated, all dollar values herein are in US dollars. Important Information for US Investors This presentation may use the terms measured", indicated, inferred" and historical mineral resources. U.S. investors are advised that, while such terms are recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize them. Inferred mineral resources" and historical estimates have a great amount of uncertainty as to their existence and great uncertainty as to their economic feasibility. It cannot be assumed that all or any part of an inferred mineral resource or a historical estimate will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. Further, historical estimates are not recognized under Canada s NI U.S. investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted to mineral reserves. This presentation is not an offer of securities for sale in the United States or in any other jurisdiction. The Company s securities have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered or sold within the United States absent registration or an application exemption from registration. 2

3 Fruta del Norte is Within a Major Mineralized Trend Bonza Alejandro Puente Princesa Rio Blanco Robles Emperador 3

4 Orion/Blackstone Financing 4

5 High Quality Finance Partners Orion Resource Partners $3.3 billion under management One of the largest miningfocused investment business specializing in providing financing solutions to mining companies in the base and precious metals sector Blackstone $368 billion under management Tactical Opportunities is a $20 billion opportunistic investing platform focused on providing innovative and flexible capital solutions Orion and Blackstone s recent mining investments include Stornoway and Pretium (together) and Premier Gold and Leagold (Orion only). 5

6 Financing Package Gold Pre-pay non-revolving term facility of $150 million Principal and interest paid over 19 quarters equivalent to 11,500 Au oz. based on spot at time of payment starting Dec 2020 and ending 2025 Stream facility of $150 million Cash equivalent of 7.75% of Au oz and 100% of Ag oz based on spot at time of payment less $400/oz Au and $4.00/oz Ag starting Dec 2020, capped at 350,000 oz Au and 6.0 million oz Ag Option to buy back 50% of the stream in June 2024 and 50% in June 2026 First draw completed and second draw on or before June 30, 2018 Offtake agreement for up to 2.5 million oz refined gold 6

7 Equity Investment Participation Orion and Blackstone committed to 20% participation in future equity raises, subject to certain minimum and maximum thresholds Aggregate total of $100 to $150 million Term of subscription equal to market terms 7

8 Project Update 8

9 Start of Portal Construction Contractor mobilized to site in April Work on portals began May 1st Site facilities under construction 9

10 Probable Reserves Feasibility Study (FS) Tonnes (kt) Au Grade (g/t) Ounces (Koz) Tonnes (kt) Update Au Grade (g/t) Changes to Feasibility Study Probable Reserve Lost 32,000 oz - TS profile change to 4m x 4m (from 5m x 5m) Lost 30,000 oz Conversion from D&F to TS Gained 184,000 oz - Lower cut off grade Ounces (Koz) Transverse Stope (TS) 8, ,424 11, ,314 Overhand Drift & Fill (D&F) 5, ,983 3, ,301 Underhand D&F Development Ore (> 4.7 g/t) 1, Development Low Grade (> 2.7 g/t) TOTAL 15, ,816 16, ,940 Source: 2016 Fruta del Norte Technical Report 10

11 Mine Design Modifications Unchanged FS Twin Decline Dewatering galleries Changes Eliminated north vent raise (RAR) Update Location of internal ramp New escapeway 11

12 Better Development Rates Total Development Meters Domain Units FS Update Poor m 1, Fair m 3,754 2,154 Good m 1,608 5,309 Total m 6,462 8,102 Average Development Rates Domain FS Update Good Fair Poor Meters per month for single heading 5m x 5.5m profile Location of internal ramp moved to area of more competent rock Removal of north ventilation development and raise Addition of secondary egress Included minor infrastructure e.g. substations, sumps, muck bays etc. on declines Lower contractor rates mostly offset increased meters of development Rates based on contractor estimates 12

13 Mine Production Feasibility Study (May 2016) Underground Production tpd Project Update (May 2017) Underground Production tpd , , tpd Au g/t tpd 3,000 2,500 2,000 1,500 1, Au g/t TS-DR DF-DR au-dr TS-DR DF-DR au-dr Faster ramp-up in production Re-balanced distribution and conversion of TS and D&F Incorporation of Underhand cut & fill mining method More robust technically sound mine plan 13

14 Gold Production 450 GOLD PRODUCTION (Au koz) ,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, FS Production Updated Prod FS Cum. Prod ,257 1,640 2,029 2,396 2,751 3,105 3,451 3,797 4,136 4,368 4,418 4,418 4,418 Upd. Cum. Prod ,014 1,367 1,739 2,078 2,395 2,725 3,057 3,414 3,788 4,039 4,259 4,400 4,528 4,528-14

15 Environmental Environmental Licence received in October 2016 Outstanding licenses Power Line draft EIA submitted Mountain Pass Quarry to be submitted early July Numerous permits in process 15

16 Schedule Overview Commercial production defined as three consecutive months at 70% of 3,500 tpd Critical path remains mine development First ore to plant in Q versus Q Commercial production projected over six months earlier 16

17 Capital Expenditures (excl. taxes, advance royalties, working capital & financing costs) (IN MILLIONS USD) FS Changes Update TOTAL CAPEX PER FS RE-SCHEDULED FROM SUSTAINING 58.0 SCOPE CHANGES (2.5) 55.5 DESIGN AND ESTIMATE CHANGES 6.1 TOTAL CAPEX PER Project Update PRE-PRODUCTION REVENUE (131.4) PRE-PRODUCTION RAMP UP COSTS 85.1 TOTAL PRE-PRODUCTION TO COMMERCIAL PRODUCTION (46.3) TOTAL PROJECT ESTIMATE

18 Operating Cost Comparison Reduced AISC Update FS Surface costs, 4.21$/t, 4% G&A, 20.21$/t, 18% Process, 32.44$/t, 29% Surface costs, 9.22$/t, 8% G&A, 15.12$/t, 13% Process, 33.37$/t, 28% Mining, 54.98$/t, 49% Mining, 60.32$/t, 51% Project Update OPEX (US$/t) Total cash costs = $561 per oz. AISC = $609 per oz. Total cash costs = $553 per oz. AISC = $623 per oz. OPEX* (US$/oz Au payable) Mining Process G&A Surface Cost Total Feasibility Study Note: Figures might not add due to rounding OPEX (US$/t) OPEX* (US$/oz Au payable) Mining Process G&A Surface Cost Total Note: Figures might not add due to rounding *NOTE: Unit costs stated in dollars per ounce are based on payable gold 18

19 Project Economics Feasibility Study: VALUATION INDICATORS LOM UNITS PRETAX NPV5 1,283 US$M Payback period 3.7 Years PRETAX IRR 23.8 Percent AFTER TAX NPV5 676 US$M Payback period 4.5 Years AFTER TAX IRR 15.7 Percent CAPITAL COSTS (Net of Taxes) VALUE UNITS Initial Capital 669 US$M Sustaining Capital + Closure 306 US$M LOM Captial 975 US$M Project Update: VALUATION INDICATORS LOM UNITS PRETAX NPV5 1,323 US$M Payback period 3.1 Years PRETAX IRR 24.7 Percent AFTER TAX NPV5 717 US$M Payback period 4.0 Years AFTER TAX IRR 16.3 Percent CAPITAL COSTS (Net of Taxes) VALUE UNITS Initial Capital 684 US$M Sustaining Capital + Closure 213 US$M LOM Captial 897 US$M For Feasibility Study and Project Update Gold Price of $1,250 per oz. and Silver price of $20 per oz. 19

20 And we ve just scratched the surface 70,000 ha of prospective exploration acreage including the Bonza Las Peñas trend which hosts FDN Pull-Apart Basin extending 16 km south of FDN doubling the most prospective trend Numerous key targets with epithermal geochemical signatures along the trend have yet to be drilled 20

21 Launch of Inaugural Sustainability Report 21

22 1st Sustainability Report: Building the Future through Responsible Mining Highlights our corporate responsibility approach & performance Delivers on our commitment to transparency Early adopter of GRI Standards (Core) 22

23 Lundin Family is investing in Fruta del Norte Lundin Gold Inc. 119 million shares outstanding 124 million shares fully diluted Lundin Family is the largest shareholder at over 30% 23

24 Analyst Coverage ABG Sundal Collier Olof Grenmark Buy, $7.23* BMO Capital Markets Brian Quast Outperform Buy, $7.50 CIBC World Markets David Haughton Outperform Buy, $7.00 Cormark Securities Tyron Breytenbach Buy, $8.00 Echelon Wealth Partners Matt O Keefe Speculative Buy $9.00 VIII Capital Craig Stanley Buy, $7.75 GMP Securities Steve Butler Buy, $9.00 Haywood Securities Kerry Smith Buy, $8.25 Nordea Equity Research Christian Kopfer Buy, $7.23* Paradigm Capital Don MacLean Speculative Buy, $9.00 Pareto Securities John McClintock Buy, $7.10 Scotia Capital Inc. Trevor Turnbull Buy, $7.00 Swedbank Ola Sodermark Buy, $7.38* TD Securities Daniel Earle Buy, $8.00 * Note: ABG, Nordea, and Swedbank price target converted from SEK to CAD (6.5 SEK = 1 CAD) Lundin Gold is followed by the analysts listed above. Note that any opinion, estimates or forecasts regarding the Company made by these analysts are the analysts opinions and do not represent opinions, estimates or forecasts of the Company or its management. Lundin Gold does not imply endorsement by the analyst coverage referenced above. 24

25 TSX and Nasdaq Stockholm: LUG 25

26 Additional Slides 26

27 Resource Details 27

28 Compact Orebody South Domain (mostly inferred resources), not fully defined to South FDN - Main Area of Reserves and Resources Grade of Ore Blocks gm/t Au gm/t Au >10 gm/t Au 28

29 Production of both gold doré and gold concentrate 29

30 Low Tonnage / High Production Source: Company Filings, SNL and 2016 Fruta del Norte Technical Report 30

31 Site Plan Improvements Tailings Hollin Quarry FS Camp Quarry Road Quarry Waste Plant & Waste Dump Portal and Mine Facilities Paste Plant Significantly less earthworks and roads Relocation of Process Plant Elimination of Construction Camp with expansion of existing Las Peñas Elimination of Hollin Quarry with Mountain Pass Quarry River Road Camp Expansion Mountain Quarry 31

32 Process Plant Optimization Overlain on FS Layout Feasibility Study New Location About 40% less footprint area 32

33 Offsite Infrastructure - Access Road 33

34 Offsite Infrastructure Power Supply Agreement in principle with CELEC Draft EIA Submitted to MOE Public Participation Process to begin EPC Request for Bids Outstanding 34

35 Design Optimizations Discipline Unit of Measure FS Update Civil and Earthworks m 3 7,240,000 4,000,000 Concrete m 3 23,800 18,300 Steel Mt 1,500 1,660 Piping m 58,000 77,500 Electrical Cable m 240,000 (MV and HV only) 315,000 Steel added for overhead cranes and compacted layouts Piping increase mainly due to water management Electrical cable increase for powerline and grounding 35

36 Major CAPEX Changes Scope and Re-scheduled from Sustaining Category Changes in Scope/ Rescheduled Changes from FS Major Changes Mine Equipment: re-scheduled from sustaining; additional equipment; buy instead of lease Paste Plant: re-scheduled from sustaining and increased size of plant Addition of costs for training programs not previously included in the FS Amount ($) Millions Change in execution strategy from EPCM to Direct Hire model and change in (10.0) road infrastructure Total

37 Major CAPEX Changes Design and Estimates Category Update of Estimate Changes in Quantities More Detailed Engineering Major Changes New estimates due to more defined engineering, updated quotations and reduced site infrastructure requirements $ (Millions) (54.2) Reduction of Earthwork Quantities (25.8) Changes in Process Plant layout (14.0) Surface/quarry detailed estimates versus allowances 44.9 Owner costs estimated from first principles versus allowance 29.0 Indirect construction support such as camp catering, transportation, fuel, pricing increases Contingency 1.3 Total

38 Material Sustainability Topics Corporate governance Stakeholder engagement Local procurement, jobs Health & safety Human rights assessment Indigenous people Artisanal mining Water use & quality Biodiversity Economic impacts Corporate Responsibility Commitments 38

39 Education and Training Objective: Enable Local Hiring In partnership with Government and NGOs, created an accelerated high school program for local communities for adults who had previously dropped out 150+ adults are currently enrolled Hope to see more than 200 local community members graduate by 2018 Working with partners to enable vocation training and competency validation Assisting 18 local heavy equipment operators to obtain formal license Working with local high school to help students pass the exit exam and qualify for university entrance 39

40 Local Procurement Objective: Promote broad-based sustainable economic development Together with local communities developed a local procurement strategy Implemented certification program for local businesses In 2017 have implemented a training program for local suppliers in partnership with the Lundin Foundation and a local university 40

41 Economic Diversification Objective: Improve livelihoods and reduce future dependence upon mining Targeted interventions in partnership with the Lundin Foundation and other institutions Catering Las Peñas Former employees were assisted in the establishment of an independent catering company Now has additional contracts and more than 60 employees Ecolac Improvements to local dairy practices Establishment of a local milk collection center Increased income for local dairy farmers APEOSAE Assistance to local organic coffee, cocoa and plantain cooperative to improve farming methods Increased productivity is expected 41

42 TSX and Nasdaq Stockholm: LUG 42