Fruta del Norte achieves gold production of 233,555 oz and an AISC¹ of
Based on continuing strong operating results for the first half of 2022, the Company is increasing its production guidance from 405,000 to 445,000 oz to between 430,000 and 460,000 oz and decreasing its AISC1 guidance from
Second Quarter of 2022 Financial Overview
- The Company sold a total of 96,291 oz of gold, consisting of 68,598 oz of concentrate and 27,693 oz of doré at an average realized gold price1 of
$1,907 per oz for total gross revenues from gold sales of$184 million . Net of treatment and refining charges, revenues were$178 million . - Cash operating costs1 and AISC1 were
$702 and$864 per oz of gold sold, respectively. Sustaining capital is expected to increase in the second half of the year due to the ongoing construction of the third tailings dam raise and ramp up of other activities.
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1 Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found on pages 13 to 16 of the Company's MD&A for the three and six months ended |
2 Based on semi-annual dividends of |
- Income from mining operations was
$82.5 million . The Company generated cash flow of$60.7 million from operations and ended the quarter with a cash balance of$301 million . Free cash flow1 for the quarter was$21.2 million or$0.09 per share. Cash flow in the second quarter is impacted by the payment of annual income taxes and profit sharing ($29.2 million and$31.5 million respectively), which were due in April. - Net income was
$56.0 million including derivative gains of$40.0 million , corporate, exploration, finance costs, and associated taxes on earnings. Adjusted earnings¹, which exclude derivative gains, were$13.5 million , or$0.06 per share. Net income was impacted by the deferral of gold sales because of a national strike in the second half of June.
While production was not affected by a national strike in
Second Quarter of 2022 Production Overview
- The mine maintained its strong operating performance during the quarter with 369,430 tonnes mined at an average grade of 11.4 grams per tonne. Mine production was reduced slightly near the end of the quarter to allow the mill to process more tonnes and reduce the run of mine stockpiles in order to manage the oxidation of the ore, which has been impacting mill recoveries.
- Underground mine development continued as planned with a total of 2,190 metres completed. Development rates averaged 24.0 metres per day in the second quarter.
- The mill processed 385,675 tonnes of ore at an average throughput rate of 4,238 tpd, just above design capacity.
- The average grade of ore milled was 10.3 grams per tonne with average recovery at 87.6%. Recoveries in the second quarter were impacted by the milling of oxidized ore.
- Gold production was 111,890 oz, comprised of 75,730 oz of concentrate and 36,160 oz of doré.
Second Quarter of 2022 Operating and Financial Highlights
The following two tables provide an overview of key operating and financial results during the second quarter and first half of 2022.
Three months ended | Six months ended | |||
2022 | 2021 | 2022 | 2021 | |
Tonnes ore mined | 369,430 | 397,640 | 749,059 | 763,111 |
Tonnes ore milled | 385,675 | 346,561 | 759,082 | 671,152 |
Average head grade (g/t) | 10.3 | 11.1 | 10.8 | 11.2 |
Average recovery | 87.6 % | 88.2 % | 88.9 % | 88.0 % |
Average mill throughput (tpd) | 4,238 | 3,808 | 4,194 | 3,708 |
Gold ounces produced | 111,890 | 108,799 | 233,555 | 212,936 |
Gold ounces sold | 96,291 | 125,412 | 215,573 | 207,217 |
Three months ended | Six months ended | |||
2022 | 2021 | 2022 | 2021 | |
Net revenues ($'000) | 177,808 | 216,145 | 394,280 | 356,136 |
Income from mining operations ($'000) | 82,522 | 110,604 | 193,729 | 174,635 |
Earnings before interest, taxes, depreciation, and amortization ($'000)1 | 144,697 | 109,660 | 243,510 | 239,626 |
Adjusted earnings before interest, taxes, depreciation, and amortization ($'000)1 | 104,711 | 135,259 | 238,248 | 213,702 |
Net income ($'000) | 55,962 | 49,984 | 79,144 | 135,964 |
Free cash flow ($'000)1 | 21,248 | 102,995 | 113,054 | 146,575 |
Average realized gold price ($/oz sold)1 | 1,907 | 1,773 | 1,882 | 1,770 |
Cash operating cost ($/oz sold)1 | 702 | 596 | 656 | 626 |
All-in sustaining costs ($/oz sold)1 | 864 | 720 | 771 | 764 |
Free cash flow per share ($)1 | 0.09 | 0.44 | 0.48 | 0.63 |
Adjusted net earnings ($'000)1 | 13,490 | 74,800 | 71,040 | 112,209 |
Adjusted net earnings per share ($)1 | 0.06 | 0.32 | 0.30 | 0.48 |
Liquidity and Capital Resources
At the end of the second quarter of 2022, the Company is in a strong financial position.
(in thousands of | As at | As at |
Financial Position: | ||
Cash | 301,032 | 262,608 |
Working capital | 253,921 | 217,221 |
Total assets | 1,664,030 | 1,685,113 |
Long-term debt | 645,724 | 739,977 |
As at
The Company's strong operating cash flow during the first half of 2022 is expected to continue for the remainder of the year based on its production and AISC guidance. This strong operating cash flow will continue to support aggressive debt repayments, regional and near mine exploration, underground expansion drilling at FDN, planned capital expenditures, growth initiatives and regular dividend payments under the dividend policy approved in the second quarter of this year.
Capital Expenditures
- South Ventilation Raise: Work on the SVR continues with completion now expected to occur in early Q4. Progress on the SVR during the quarter was affected by difficulties stemming from a blockage, which has now been cleared, that had stopped slash and lining activities. There is no expected impact on production because of this change in timing.
- Sustaining Capital: The third raise of the tailings dam started during the second quarter and construction is anticipated to be completed in Q4. Resource expansion/conversion drilling at Fruta del Norte continued to progress with 4,096 metres completed during the quarter focusing on expansion or conversion of the Inferred Resource at the south end of the deposit. Expenditures for other sustaining capital projects will ramp up throughout the remainder of the year.
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1 Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found on pages 13 to 16 of the Company's MD&A for the three and six months ended |
Health and Safety
Stringent health and safety procedures remain in place to protect our personnel, including minimizing the impact of COVID-19 on the workforce. Through vaccination campaigns by
During the quarter there was one Lost Time Incident and four Medical Aid Incidents. The Total Recordable Incident Rate was 0.57 per 200,000 hours worked during the 2022 Period.
Sustainability
The inaugural Climate Change (the "TCFD Report") and the 2021 Sustainability Reports were published. The TCFD Report details
Various community business projects supported by the Company are under way, including sponsoring the establishment of micro businesses providing ancillary services to Fruta del Norte and the community, such as a textile manufacturer and fire extinguisher maintenance provider. These are in addition to the ongoing projects such as road maintenance, education projects, and economic development.
The Company has also continued or restarted many community initiatives. They include working with Shuar indigenous communities to promote improved agricultural practices and with Junior Achievement Ecuador to prepare local students graduating from high school for the national exit exam (and thus access to post-secondary education), as well as support of after-school activities in the local town of Los Encuentros such as music, soccer, boxing, and English programs.
Exploration
A recent exploration data review demonstrated a much wider mineralization footprint nearby the FDN deposit. Several targets of interest are essentially untested, with similar geological conditions to those at FDN, and present significant new exploration opportunities. Shortly after quarter end, the Company's announced the start of a near mine program focused on targets within and around the existing FDN operation and exploring sectors in the continuities of the FDN deposit and along the extension of major structures. The program, which is expected to cost $4 million in 2022, is planned to include over 6,000 metres of drilling from both underground and surface, new geophysical surveys, geological mapping, and geochemical sampling.
The Company's 2022 regional exploration program continued on the Barbasco and Puenta Princesa targets. Drilling is ongoing with two rigs turning and a third rig now added. During the first half of 2022, 7,240 metres were drilled across nine holes, mainly at Puente-Princesa and Barbasco. A summary of results from drilling to date can be found in the news release dated
Early in the second quarter,
Corporate
On
Outlook
The SVR is the last remaining scope of work under the original FDN construction project. Completion of the SVR is anticipated early in the fourth quarter of 2022 with no anticipated impact on production in 2022.
Sustaining capital will ramp up substantially in Q3 2022 with construction of the third raise of the TSF anticipated to be completed in Q4 2022. The drilling program at FDN for the conversion of Inferred Resources and definition of additional resources is ongoing. Several other capital projects are underway and planned for 2022, contributing to an expected increase in sustaining capital costs during the balance of the year.
The 16,500-metre regional exploration drill program is continuing with four additional targets of interest identified: Barbasco Norte, Capullo, Puma and Quebrada La Negra. A third rig has been added in order to expand the program with one hole already completed at Barbasco Norte. Results are pending and additional drilling at this target is underway. At Capullo, a first hole was recently started. Drill programs at Puma and Quebrada La Negra are expected to be initiated in the third quarter and fourth quarter, respectively.
Exploration data review carried out during the first quarter has indicated several potential targets in areas immediately near the Fruta del Norte deposit. These targets, located in areas coincident with geochemical anomalies on surface, display similar geological characteristics to the Fruta del Norte deposit but have not been tested by drilling. Based on this review, an additional near mine exploration program was planned in the second quarter and has recently started with a combined anticipated 6,000 metres of drilling both underground and from surface with an expected cost of
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1 Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found on pages 13 to 16 of the Company's MD&A for the three and six months ended |
Qualified Persons
The technical information relating to Fruta del Norte contained in this News Release has been reviewed and approved by
Webcast and Conference Call
The Company will host a conference call and webcast to discuss its results on
Conference Call Dial-In Numbers:
+1 416-764-8659 | |
+1 888-664-6392 | |
Participant Dial-In Sweden: | 0200899189 |
Conference ID: |
A link to the webcast is available on the Company's website, www.lundingold.com. A replay of the conference call will be available two hours after the completion of the call until
Toll Free North America Replay Number: | +1 888-390-0541 |
International Replay Number: | +1 -416-764-8677 |
Replay passcode: | 801963 # |
About
The Company's board and management team have extensive expertise in mine operations and are dedicated to operating Fruta del Norte responsibly. The Company operates with transparency and in accordance with international best practices.
Non-IFRS Measures
This news release refers to certain financial measures, such as average realized gold price per oz sold, cash operating cost per oz sold, all-in sustaining cost, operating cash flow per share, and adjusted net earnings, which are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These measures may differ from those made by other companies and accordingly may not be comparable to such measures as reported by other companies. These measures have been derived from the Company's financial statements because the Company believes that, with the achievement of commercial production, they are of assistance in the understanding of the results of operations and its financial position. Please refer to the Company's MD&A for the second quarter of 2021 for an explanation of non-IFRS measures used.
Additional Information
The information in this release is subject to the disclosure requirements of
Caution Regarding Forward-Looking Information and Statements
Certain of the information and statements in this press release are considered "forward-looking information" or "forward-looking statements" as those terms are defined under Canadian securities laws (collectively referred to as "forward-looking statements"). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as "believes", "anticipates", "expects", "is expected", "scheduled", "estimates", "pending", "intends", "plans", "forecasts", "targets", or "hopes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "will", "should" "might", "will be taken", or "occur" and similar expressions) are not statements of historical fact and may be forward-looking statements. By their nature, forward-looking statements and information involve assumptions, inherent risks and uncertainties, many of which are difficult to predict, and are usually beyond the control of management, that could cause actual results to be materially different from those expressed by these forward-looking statements and information.
This press release contains forward-looking information in a number of places, such as in statements relating to Company's 2022 production outlook, including estimates of gold production, grades recoveries and AISC; expected sales receipts, cash flow forecasts and financing obligations; its estimated capital costs and the expected timing and impact of completion of capital projects including the south ventilation raise; the recovery of VAT; the Company's declaration and payment of dividends pursuant to its dividend policy; the timing and the success of its drill program at Fruta del Norte and its other exploration activities; and the Company's efforts to protect its workforce from COVID-19. There can be no assurance that such statements will prove to be accurate, as
SOURCE
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