Lundin Gold : 2023 First Quarter Report

Q1 2023

LUNDIN GOLD INC.

Management's Discussion and Analysis

Three Months Ended March 31, 2023

(All dollar amounts are stated in U.S. dollars unless otherwise indicated. Tables are expressed in thousands of U.S. dollars, except share and per share amounts)

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") of Lundin Gold Inc. and its subsidiaries (collectively, "Lundin Gold" or the "Company") provides a detailed analysis of the Company's business and compares its financial results for the three months ended March 31, 2023 with those of the same period from the previous year.

This MD&A is dated as of May 10, 2023 and should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and related notes thereto for the three months ended March 31, 2023, which are prepared in accordance with IAS 34: Interim Financial Statements, and the Company's audited annual consolidated financial statements and related notes thereto, which are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), and the MD&A for the fiscal year ended December 31, 2022.

Other continuous disclosure documents, including the Company's press releases, quarterly and annual reports and annual information form, are available through its filings with the securities regulatory authorities in Canada at www.sedar.com.

Lundin Gold, headquartered in Vancouver, Canada, owns 28 metallic mineral concessions and three construction material concessions covering an area of approximately 64,454 hectares in southeast Ecuador, including the Fruta del Norte gold mine ("Fruta del Norte" or "FDN"). Fruta del Norte is comprised of seven concessions covering an area of approximately 5,566 hectares and is located approximately 140 km east-northeast of the City of Loja. Fruta del Norte is one of the highest-grade gold mines in production in the world today.

The Company's board and management team have extensive expertise and are dedicated to operating Fruta del Norte responsibly and pursuing growth. The Company operates with transparency and in accordance with international best practices. Lundin Gold is committed to delivering value to its shareholders, while simultaneously providing economic and social benefits to impacted communities, fostering a healthy and safe workplace and minimizing the environmental impact. The Company believes that the value created through the operations of Fruta del Norte will benefit its shareholders, the Government and the citizens of Ecuador.

FIRST QUARTER 2023 HIGHLIGHTS AND ACTIVITIES

Lundin Gold's momentum from 2022 continued in the first quarter of 2023 with an all-time high in gold production of 140,021 ounces ("oz") and gold sales of 134,691 oz at a cash operating cost1 of $644 per oz sold and all-in sustaining cost ("AISC")1 of $728 per oz sold. From this, revenues and adjusted earnings1 of $257 million and $67.0 million, respectively, were realized during the quarter.

As at March 31, 2023, the Company maintained a strong cash balance of $210 million compared to $363 million as at December 31, 2022 with the decrease being driven by the use of cash for debt reduction initiatives and dividends to shareholders. During the three months ended March 31, 2023, the Company utilized cash to optimize its balance sheet through the full repayment of the gold prepay facility ("GPP") of $208 million which provides the Company with greater exposure to the positive outlook on gold price. This one-time transaction resulted in additional interest and finance charges of $129 million with a resultant first quarter free cash flow of $(11.7).

Production during the first quarter of 2023 was driven by processing ore with an average grade of 12.3 grams per tonne ("g/t"), the highest quarterly average grade achieved to date. The mine deferred certain lower grade stopes to later this year in order to complete additional geotechnical work to maximize mining recovery, which factored in the average grade processed during the period. Although the robust performance during the first quarter of 2023 provides a strong start for the year, the Company's production guidance of 425,000 to 475,000 oz for 2023 remains unchanged as grade and gold production are expected to vary over the coming quarters. Notwithstanding the reported AISC1 for the quarter, due to the ramp up of sustaining capital activities starting in the second quarter, the most significant being the construction of the fourth tailings dam raise, the Company also maintains its AISC1 guidance.

The following two tables provide an overview of key operating and financial results achieved during the first quarter of 2023 compared to the same period in 2022.

1 Refer to "Non-IFRS Measures" section in this MD&A.

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LUNDIN GOLD INC.

Management's Discussion and Analysis

Three Months Ended March 31, 2023

(All dollar amounts are stated in U.S. dollars unless otherwise indicated. Tables are expressed in thousands of U.S. dollars, except share and per share amounts)

	Three months ended
	March 31,
	2023	2022
Tonnes ore mined	427,735	379,629
Tonnes ore milled	392,332	373,407
Average mill head grade (g/t)	12.3	11.2
Average recovery	90.6%	90.2%
Average mill throughput (tpd)	4,359	4,149
Gold ounces produced	140,021	121,665
Gold ounces sold	134,691	119,282

	Three months ended
	March 31,
	2023	2022
Revenues ($'000)	256,728	216,472
Income from mining operations ($'000)	132,708	111,207
Earnings before interest, taxes, depreciation, and
amortization ($'000)1	143,632	98,822
Adjusted earnings before interest, taxes,
depreciation, and amortization ($'000)1	159,066	133,546
Net income ($'000)	51,465	23,182
Basic income per share ($)	0.22	0.10
Cash provided by operating activities ($'000)	144,439	127,330
Free cash flow ($'000)1	(11,653)	91,806
Average realized gold price ($/oz sold)1	1,952	1,862
Cash operating cost ($/oz sold)1	644	619
All-in sustaining costs ($/oz sold)1	728	696
Free cash flow per share ($)1	(0.05)	0.39
Adjusted earnings ($'000)1	67,014	57,550
Adjusted earnings per share ($)1	0.28	0.25
Dividends paid per share ($)	0.10	-

1 Refer to "Non-IFRS Measures" section.

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LUNDIN GOLD INC.

Management's Discussion and Analysis

Three Months Ended March 31, 2023

(All dollar amounts are stated in U.S. dollars unless otherwise indicated. Tables are expressed in thousands of U.S. dollars, except share and per share amounts)

The difference between net income and adjusted earnings1 during the first quarter of 2023 is due to non-cash derivative losses of $15.4 million associated with fair value accounting of the stream facility. This non-cash item is driven by numerous factors including expected production profile, anticipated forward gold and silver prices, and yields. Non- cash derivative gains (or losses) associated with decreased (or increased) short-term production and anticipated decreasing (or increasing) forward gold and silver prices are recorded in the statement of operations, while non-cash derivative gains (or losses) associated with increasing (or decreasing) yields are recorded in the statement of other comprehensive income.

These non-cash gains or losses are derived from complex valuation modelling and accounting treatment which are explained in more detail later in this MD&A. Revaluation of these obligations has and will continue to result in considerable period-to-period volatility in the Company's net income, comprehensive income, current and long-term liabilities and do not necessarily reflect the amounts that will actually be repaid when the obligations become due.

Operating and Financial Results During the First Quarter of 2023

• Mine production ramped up to 427,735 tonnes of ore at an average grade of 11.7 grams per tonne.
• The mill processed 392,332 tonnes of ore at an average throughput rate of 4,359 tpd. The throughput rate was below the guided average for the year of 4,400 tpd due to the completion of the relining of the SAG and ball mills late in the quarter.
• The average grade of ore milled was 12.3 grams per tonne with average recovery at 90.6%. Recoveries were positively impacted by processing high-grade ore and an ore blending strategy that improved flotation recoveries.
• Gold production was 140,021 oz, comprised of 88,236 oz in concentrate and 51,785 oz as doré. The Company sold a total of 134,691 oz of gold, consisting of 85,122 oz in concentrate and 49,569 oz as doré at an average realized gold price1 of $1,952 per oz for total gross revenues from gold sales of $263 million. Net of treatment and refining charges, revenues were $257 million.
• Cash operating costs1 and AISC1 were $644 and $728 per oz of gold sold, respectively. Sustaining capital is expected to increase significantly in future periods with the start of the fourth tailings dam raise and ramp up of other site infrastructure and improvement projects which is expected to result in higher AISC1 for the remainder of the year.
• The Company generated cash flow of $144 million from operations and negative free cash flow¹ of $(11.7) million or $(0.05) per share. Free cash flow1 was impacted by the full repayment of the gold prepay facility which resulted in additional interest and finance charge paid during the period of $129 million.
• Notwithstanding the payment of $208 million to extinguish the gold prepay facility, the Company ended the quarter with a cash balance of $210 million.
• Earnings before interest, taxes, depreciation, and amortization1 ("EBITDA") and adjusted EBITDA1 were $144 million and $159 million, respectively. The difference is the derivative loss of $15.4 million in the quarter.
• Net income was $51.5 million including a derivative loss of $15.4 million, and net of corporate, exploration, finance costs, and associated taxes on earnings. Adjusted earnings¹, which exclude the derivative loss, were $67.0 million, or $0.28 per share.

Update to Mineral Reserve and Mineral Resource Estimates

On March 31, 2023, the Company filed a new technical report prepared in accordance with NI 43-101 for the Fruta del Norte mine. This report entitled "Amended NI 43-101 Technical Report Fruta del Norte Mine Ecuador" (the "FDN Technical Report")2, replaces the Company's previous technical report entitled "Fruta del Norte Project Ecuador NI 43- 101 Technical Report on Feasibility Study", dated June 2016 with an effective date of April 30, 2016, filed on SEDAR under the Company's profile at www.sedar.com (the "2016 Technical Report").

The conversion drilling program at Fruta del Norte successfully resulted in the replacement of all mined Mineral Reserves since the beginning of operations and added additional Mineral Reserves.

1. Refer to "Non-IFRS Measures" section.
2. This report supersedes the report dated March 29, 2023, titled "NI 43-101 Technical Report Fruta del Norte Mine Ecuador" in its entirety.

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LUNDIN GOLD INC.

Management's Discussion and Analysis

Three Months Ended March 31, 2023

(All dollar amounts are stated in U.S. dollars unless otherwise indicated. Tables are expressed in thousands of U.S. dollars, except share and per share amounts)

Comparison of Reserve Estimates(3)(4)(5)(6)(7)

	Tonnage	Grade	Contained Metal	Grade	Contained Metal
	(M t)	(g/t Au)	(M oz Au)	(g/t Ag)	(M oz Ag)
2016 Reserve(1)
Proven	0	0	0	0	0
Probable	15.49	9.67	4.82	12.7	6.34
Total	15.49	9.67	4.82	12.7	6.34
2022 Reserve(2)
Proven	10.75	9.95	3.44	11.6	4.00
Probable	7.23	6.81	1.58	11.2	2.60
Total	17.98	8.68	5.02	11.4	6.60

Notes:

1. For details of the 2016 estimate, see the 2016 Technical Report.
2. For details of the 2022 estimate, see the FDN Technical Report. The Qualified Person for the estimate is Jason Cox, P.Eng., an employee of SLR Consulting. The estimate has an effective date of December 31, 2022.
3. Mineral Reserves were estimated using key inputs listed in the table below:

Key Input	2016 Technical	FDN Technical	Unit
Report	Report
Gold Price	1,400	1,400	$/oz
Transverse Stoping Mining Cost	61	51	$/t
Drift & Fill Mining Cost	80	77	$/t
Process, Surface Ops, G&A Cost	75.8	64	$/t
Dilution Factor	8	8	Percent
Concentrate Transport & Treatment	65.9	80	$/oz
Royalty	77	76	$/oz
Gold Metallurgical Recovery	93.9	88.5	Percent

4. Gold cut-off grades for the different mining methods are listed in the table below:

Gold Cut-off Grade	2016 Technical	FDN Technical	Unit
Report	Report
Transverse Stope	4.7	4.2	g/t
Drift and Fill	5.3	5.0	g/t

1. Silver was not considered in the calculation of the cut-off grade.
2. Tonnages are rounded to the nearest 1,000 t, gold grades are rounded to two decimal places, and silver grades are rounded to one decimal place. Tonnage and grade measurements are in metric units; contained gold and silver are reported as thousands of troy ounces.
3. Rounding as required by reporting guidelines may result in summation differences.

Capital Expenditures

Sustaining Capital

• Preparations were underway for the fourth raise of the tailings dam late in the first quarter with work starting in the second quarter and completion expected in the fourth quarter.
• Construction of the new warehouse progressed as planned during the quarter with completion expected late in the second quarter.
• Other sustaining capital projects such as a new sewage treatment plant, underground mine maintenance facility, and other efficiency improvement projects are expected to ramp up during the remainder of the year.

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