Robust free cash flow generation underpins decision to extinguish bank debt
OPERATING AND FINANCIAL RESULTS SUMMARY
The following two tables provide an overview of key operating and financial results.
Three months ended | Nine months ended | |||
2023 | 2022 | 2023 | 2022 | |
Tonnes ore mined | 397,702 | 377,921 | 1,229,845 | 1,126,980 |
Tonnes ore milled | 416,072 | 379,258 | 1,226,777 | 1,138,340 |
Average head grade (g/t) | 9.7 | 11.0 | 10.9 | 10.9 |
Average recovery | 86.5 % | 90.3 % | 88.5 % | 89.4 % |
Average mill throughput (tpd) | 4,523 | 4,122 | 4,494 | 4,170 |
Gold ounces produced | 112,212 | 121,635 | 381,964 | 355,190 |
Gold ounces sold | 112,711 | 134,640 | 376,360 | 350,213 |
Three months ended | Nine months ended | |||
2023 | 2022 | 2023 | 2022 | |
Net revenues ($'000) | 211,172 | 210,425 | 711,830 | 604,705 |
Income from mining operations ($'000) | 99,620 | 83,930 | 357,129 | 277,659 |
Earnings before interest, taxes, depreciation, and amortization ($'000)[2] | 133,170 | 158,877 | 426,702 | 402,403 |
Adjusted earnings before interest, taxes, depreciation, and amortization ($'000)1 | 121,492 | 117,039 | 430,137 | 355,303 |
Net income ($'000) | 53,782 | 62,673 | 168,395 | 141,817 |
Basic income per share ($) | 0.23 | 0.27 | 0.71 | 0.60 |
Cash provided by operating activities ($'000) | 120,030 | 104,739 | 426,821 | 292,755 |
Free cash flow ($'000)1 | 80,937 | 65,202 | 201,143 | 178,256 |
Free cash flow per share ($)1 | 0.34 | 0.28 | 0.85 | 0.76 |
Average realized gold price ($/oz sold)1 | 1,931 | 1,618 | 1,942 | 1,781 |
Cash operating cost ($/oz sold)1 | 704 | 656 | 662 | 656 |
All-in sustaining costs ($/oz sold)1 | 907 | 807 | 807 | 785 |
Adjusted net earnings ($'000)1 | 44,673 | 20,379 | 171,074 | 91,419 |
Adjusted net earnings per share ($)1 | 0.19 | 0.09 | 0.72 | 0.39 |
Dividends paid per share ($) | 0.10 | 0.20 | 0.30 | 0.20 |
THIRD QUARTER HIGHLIGHTS
Financial Results – Strong Free Cash Flow Generation Enables Deleveraging Strategy
- Gold sales of 112,711 oz of gold, consisting of 70,981 oz in concentrate and 41,730 oz as doré, resulted in gross revenues of
$218 million at an average realized gold price1 of$1,931 per oz. Net of treatment and refining charges, revenues were$211 million . - Cash operating costs1 and AISC1 were
$704 and$907 per oz of gold sold, respectively, which are both higher than previous periods albeit in line with expectations. Cash operating costs1 per oz sold was impacted by lower gold production due to expected lower grade and recoveries partially offset by increased mill throughput, while the higher AISC1 also reflects the increase in sustaining capital activities during the quarter. - The Company generated cash from operating activities of
$120 million and free cash flow1 of$80.9 million or$0.34 per share resulting in a cash balance of$302 million atSeptember 30, 2023 . - Earnings before interest, taxes, depreciation, and amortization1 ("EBITDA") and adjusted EBITDA1 were
$133 million and$121 million , respectively, with the difference resulting from derivative gains recognized in the quarter. - Net income was
$53.8 million including a derivative gain of$11.7 million , and net of corporate, exploration, finance costs, and associated taxes. Adjusted earnings1, which exclude the derivative gain and related taxes, were$44.7 million , or$0.19 per share.
Production Results – Focussing on Improving Recoveries
- Mine ore production was 397,702 tonnes at an average grade of 9.3 grams per tonne, a reduction in production compared to previous periods, which was planned in order to reduce the ore stockpiled on surface.
- The mill processed 416,072 tonnes of ore at an average throughput rate of 4,523 tpd which is consistent with the throughput rate achieved during the second quarter.
- The average grade of ore milled was 9.7 grams per tonne with average recovery at 86.5%. Recoveries were affected this quarter by processing of ore from sectors that contain higher levels of finely disseminated sulphide minerals which are impacting flotation recovery.
- Gold production was 112,212 oz which was comprised of 71,902 oz in concentrate and 40,310 oz as doré.
Liquidity and Capital Resources
At the end of the third quarter of 2023, the Company is in a strong financial position.
(in thousands of | As at 2023 | As at 2022 |
Financial Position: | ||
Cash | 302,465 | 363,400 |
Working capital | 313,794 | 194,804 |
Total assets | 1,516,866 | 1,668,865 |
Long-term debt | ||
Senior debt facility | ||
Principal and accrued interest | 71,369 | 183,638 |
Deferred transaction costs | (5,392) | (10,784) |
Fair value of stream credit facility and offtake | 295,132 | 287,666 |
Fair value of gold prepay credit facility | - | 207,446 |
Total long-term debt | 361,109 | 667,966 |
As at
The Senior Facility had a principal balance of
Capital Expenditures
Sustaining Capital
- Significant progress was made on the construction of the fourth raise of the tailings dam with completion expected in the latter half of the fourth quarter.
- Commissioning of the underground mine maintenance facility has commenced, which is expected to provide additional efficiencies and cost savings.
- Other sustaining capital projects such as extending two underground levels to the south for the 2024 conversion drill program, implementation of a mine dispatch system, upgrades to the sewage treatment plants, purchase of mobile equipment, and other efficiency improvement projects are expected to ramp up during the remainder of the year, with some projects carrying over to 2024.
- The 2023 conversion drilling program continued to advance during the third quarter in distinct sectors of the FDN deposit. The program focused on the northern-central and southern extension with approximately 6,203 metres across 46 holes completed. During the nine months ended
September 30, 2023 , 10,814 metres across 74 holes have been completed.- In the southern sector, 27 drill holes were completed and mostly intercepted the mineralized zones associated with manganoan carbonate, chalcedony veins and sulphides.
- In the north-central sector, 19 drill holes were completed and positive assay results are associated with zones of hydrothermal breccias along the downdip extension of FDN.
- In the southern sector, 27 drill holes were completed and mostly intercepted the mineralized zones associated with manganoan carbonate, chalcedony veins and sulphides.
Health and Safety
During the third quarter there were no Lost Time Incidents ("LTIs") and no Medical Aid Incident ("MAIs"). The Total Recordable Incident Rate across exploration and operations was 0.00 per 200,000 hours worked for the quarter and 0.05 for the first nine months of 2023. FDN operations has had more than 1 year without an LTI or MAI with over 6.3 million hours worked, since the last LTI, as of
Community
Various community projects supported by the Company progressed well in the third quarter, including initiatives focused on community health and education.
Infrastructure investment continues to be a priority for
Following the election of new local authorities, the round table dialogue process restarted during the third quarter, with high participation rates by local community members.
During the quarter,
Corporate
The Company paid a quarterly dividend of
Near the end of the quarter, Mr.
Upon the acquisition of the Company's largest shareholder, Newcrest Mining Limited ("Newcrest"), by Newmont Corporation ("Newmont") on
EXPLORATION
Near-Mine Exploration Program
In the third quarter, the Company completed a total of 9,664 metres across 14 holes from surface and underground. Drilling from underground explored to the east, west and at depth of the FDN deposit, while drilling from surface tested along the extensions of the controlling structures of the FDN deposit.
- The surface drilling program continues along the south extension of the East Fault, where
Bonza Sur and the FDN South ("FDNS") targets were identified. During the third quarter, 10 surface drill holes were completed, mostly at Bonza Sur where the drilling program continues to indicate the continuity of the mineralization. Exploratory holes were also completed along the north and south extensions of the FDN deposit. Five surface rigs are currently drilling, two of them exploringBonza Sur , two along the south and north extensions of FDN respectively, and one at FDN East.- At
Bonza Sur , located only one kilometre from FDN, seven surface drill holes were completed and continue to expand the recently discovered epithermal system. Drilling continues to record multiple positive intersections which extend along strike and at depth. The mineralized zones are represented by veins/veinlets of quartz and minor chalcedony and manganoan-carbonate associated with the occurrences of sulphides. This epithermal system has already been identified for more than 700 metres along the north-south strike and for at least 500 metres along the downdip and remain open in all directions. - At FDNS, two surface drill holes were completed along the south extension and both intercepted narrow hydrothermal alteration zones with no significant results. This vein system remains open for expansion along the northeastern-southwestern direction and at depth.
- As part of the exploratory program aiming to explore new sectors within the near mine area, one hole was completed along the north extension of the FDN deposit, which intercepted a narrow hydrothermal alteration zone. Results are pending.
- At
- The underground drilling program continues to explore the continuity of the FDN deposit at depth and beyond the major east and west faults. Four drill holes were completed and all intercepted structures, zones of hydrothermal alteration, and gold mineralization beyond the current limits of the FDN resource boundary. At depth in the north part of FDN, one drill hole confirmed hydrothermal alteration zones related to breccias and veins, below the mineral envelope of FDN. In the central part, another drill hole intercepted hydrothermal alteration zones along the downdip extension. Furthermore, two drill holes completed at the FDN East target intercepted a new mineralized zone represented by breccias, veins and veinlets with sulphides hosted on porphyritic intrusive rocks or in volcanic rocks.
A complete table of results received to date can be found in
Regional Exploration Program
The regional drilling program continues to advance in distinct sectors along the southeastern and southwestern borders of the Suarez basin and a total of 2,544 metres across four drill holes were completed in the third quarter. Regional drilling focused on the Crisbel target, where detailed geological interpretation of exploration data and additional surface works identified major structures and zones of hydrothermal alteration.
- At the Crisbel target, three drill holes were completed testing an unexplored geochemical soil anomaly (gold and epithermal pathfinder elements such as Sb, As) along the southwest contact between the Suarez Border and the volcanic sequence. All drill holes intercepted hydrothermal alteration zones with important quantities of sulphides hosted on brecciated volcanic rocks. One drill hole returned low grade values of gold. Results remain pending for the other drill holes.
- At Barbasco SE, one drill hole was completed and tested the extension of the FDN East Fault along the southeastern extension of the Suarez basin. No significant zone of hydrothermal alteration was intercepted. Results remain pending.
Newcrest Earn-In Agreement
On the concessions held by the Company's subsidiary,
OUTLOOK – ON TRACK FOR ANNUAL PRODUCTION TO BE NEAR THE UPPER END OF REVISED GUIDANCE
Operating performance during the nine months ended
The near mine drilling program is expected to continue to delineate the Bonza Sur target, where the recently discovered epithermal system remains open. Two rigs are expected to continue to be dedicated to the detailing and expansion of the mineralized zones at depth and along strike at this target. The near mine drilling program will also continue to explore the extension of FDN mineralization along the south-southwestern and north directions. The underground drilling program is expected to continue to explore for new discoveries and extensions of the FDN resource envelope.
In light of continued success of the near mine program, the Company has expanded the program twice during the nine months ended
The regional drilling program continues to focus on the southern
A minimum of 50,000 metres of drilling is planned across the conversion, near-mine and regional programs in 2023. This represents the largest drill program in the district since FDN's discovery. As a result of improved productivities in the field, the expanded near-mine and regional drilling programs are expected to be completed within the revised total budget of
The Company has elected to fully repay the remaining principal balance of
The Company anticipates continuing to declare quarterly dividends of
Qualified Persons
The technical information relating to FDN 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 will be available on the Company's website, www.lundingold.com.
A replay of the conference call will be available two hours after its completion until
Toll Free North America Replay Number: | +1 888-390-0541 |
International Replay Number: | +1 416-764-8677 |
Replay passcode: | 687438 # |
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, EBITDA, adjusted EBITDA, cash operating cost per oz sold, all-in sustaining cost, free cash flow, free cash flow per share, and adjusted 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 they are of assistance in the understanding of the results of operations and its financial position. Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found on page 14 of the Company's MD&A for the three and nine months ended
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 several places, such as in statements relating to the Company's 2023 production outlook, including estimates of gold production, grades recoveries and AISC; operating plans; expected sales receipts, cash flow forecasts and financing obligations; the benefits to be derived from the repayment of the Senior Facility; its estimated capital costs; benefits of the Company's community programs; 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 estimates of Mineral Resources and Reserves at Fruta del Norte. There can be no assurance that such statements will prove to be accurate, as
1 | Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found on pages 14 to 17 of the Company's MD&A for the three and nine months ended |
SOURCE
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