Production and Cost Performance Beats Guidance for Second Year Running

Lundin Gold Inc. (TSX: LUG) (Nasdaq Stockholm: LUG) (OTCQX: LUGDF) is pleased to report results for the fourth quarter and year ended December 31, 2022. Lundin Gold’s year is highlighted by its production of 476,329 oz of gold at an all-in sustaining cost¹ of $805 per oz, beating production guidance of 430,000 to 460,000 oz and AISC guidance of $820 to $870 per oz, respectively, and resulting in free cash flow¹ of $269 million for the year. All amounts are in U.S. dollars unless otherwise indicated.

Ron Hochstein, President and CEO commented, “I am proud to announce that for a second consecutive year, Lundin Gold has beaten its production and cost guidance. In a short two and a half years of operations, the Company has increased average annual throughput at Fruta del Norte (“FDN”) from an initial design capacity of 3,500 tonnes per day  to 4,272 tpd with recoveries now averaging close to 90%. With the gold prepay facility paid back in full and the South Ventilation Raise complete, the Company is firmly positioned to continue generating significant cash flow and creating shareholder value in the years to come.”

OPERATING AND FINANCIAL RESULTS SUMMARY

The following two tables provide an overview of key operating and financial results.

FOURTH QUARTER AND FULL YEAR 2022 HIGHLIGHTS

Financial Results – Strong Free Cash Flow¹ Generation Highlights Strength of FDN

• Fourth quarter sales of 119,890 oz gold, consisting of 77,622 oz of concentrate and 42,268 oz of doré, at an average realized gold price¹of $1,814 per oz for total gross revenues from gold sales of $217 million. For 2022, sales totalled 470,103 oz gold and total revenues from gold sales amounted to $841 million.
• Net of treatment and refining charges, revenues in the fourth quarter and 2022 were $211 million and $816 million, respectively.
• Cash operating costs¹and AISC¹ for the quarter were $713 and $865 per oz of gold sold, respectively. For 2022, cash operating costs¹ were $671 and AISC¹ was $805 per oz of gold sold.
• Income from mining operations was $92.1 million in the fourth quarter, and the Company generated free cash flow¹of $91.2 million from operations, or $0.39 per share. For 2022, income from mining operations was $370 million, and the Company generated free cash flow¹ of $269 million, or $1.15 per share.
• A loss of $68.3 million was incurred in the fourth quarter, after deducting corporate, exploration and finance costs of $142 million, net of derivative gains of $29.2 million, and an income tax expense of $18.3 million. As a result of the early repayment of the gold prepay facility, results for the quarter were impacted by a one-time accrued finance charge, partially offset by a related derivative gain. In addition, net income was affected by a one-time adjustment to deferred income taxes of $24.1 million relating to a revised interpretation of the application of certain tax laws in Ecuador. Net income of $73.6 million was generated in 2022.
• Adjusted earnings¹for the quarter, which exclude the accrued, one-time finance charge on the repayment of the gold prepay facility and derivative gain, were $33.6 million, or $0.14 per share. Adjusted earnings¹ during 2022 were $125 million, or $0.53 per share.
• At the end of the 2022 Year, the Company had a cash balance of $363 million.

Production Results – Continuing to Beat Expectations

• Gold production during the fourth quarter totalled 121,139 oz, comprised of 78,756 oz of concentrate and 42,383 oz of doré. Gold production for 2022 totalled 476,329 oz.
• The mine delivered 365,250 tonnes of ore to the stockpile and mill in Q4. The mining rate was reduced during the quarter to better manage ore stockpiles and reduce the impact of oxidation on mill recoveries. The average throughput at the mill this quarter was 4,574 tpd, its highest since the beginning of operations.
• The average ore grade milled in the fourth quarter was 10.0 g/t, with average recovery at 89.6%. For 2022, the average grade of ore milled was 10.6 g/t with average recovery at 89.5%.

Early Repayment in Full of the Gold Prepay Facility

• In late December, Lundin Gold delivered an irrevocable notice to fully repay the gold prepay facility. On January 5, 2023, the Company settled amounts due under the gold prepay facility by paying a total of $207.5 million, inclusive of applicable taxes of $16.2 million and interest of $0.1 million accrued between December 31, 2022 and January 5, 2023.
• The repayment amount of the gold prepay facility was the product of (a) the gold price on a pre-determined date in late December 2022, and (b) an amount of equivalent gold ounces, which was a negotiated number between 9,775 and 11,500 oz per quarter for the last ten remaining quarters to maturity of the facility, plus applicable taxes.
• The early repayment of the gold prepay facility resulted in the one-time accrual of a finance charge of $128 million and a derivative gain of $71 million in 2022. No future payments at the then-applicable gold prices will be due under this facility going forward, including interest and finance charges that would have been incurred over the next ten quarters until its originally scheduled maturity.
• Payment was made early in the first quarter of 2023, from the Company’s strong treasury of $363 million at year end. This strategic transaction is expected to result in increased net cash flows, to provide the Company with greater exposure to the positive outlook on gold price, and to give Lundin Gold greater flexibility in its capital structure to pursue operational and corporate opportunities for the benefit of the Company and its shareholders.

Liquidity and Capital Resources

At the end of 2022, the Company is in a strong financial position:

The increase in cash during the 2022 Year was primarily due to cash generated from operating activities of $426 million and proceeds from the exercise of stock options, warrants and anti-dilution rights of $11.2 million. This is offset by scheduled principal, interest and finance charges paid under the loan facilities totalling $228 million, dividends of $47 million, and cash outflows of $60.1 million for capital expenditures which include sustaining capital of $35.5 million and costs for completion of the SVR.

Capital Expenditures

• South Ventilation Raise:The SVR was completed and fully commissioned in the fourth quarter, bringing the last element of FDN’s original construction project to its conclusion. As a result, ventilation in the mine has increased significantly resulting in improved efficiencies and enabling mining activities on all levels.
• Sustaining Capital:
  • The third raise of the tailings dam was completed during the fourth quarter at a cost of approximately $19.9 million.
  • The 2022 conversion drilling program at FDN was completed during the third quarter, and final assay results have been received. This conversion drilling campaign provided additional data for an updated geological model. The Company anticipates announcing an updated estimate of Mineral Resources and Reserves for FDN and filing a technical report prepared in accordance with National Instrument 43-101 (“NI_43-101”) before the end of Q1 2023. Based on the new geological model, further conversion drilling targets will be defined for 2023 and 2024.
  • Other sustaining capital projects, such as construction of a new warehouse and improvements in the sewage treatment plants, were initiated in 2022 and will continue in 2023.

Health and Safety

During the fourth quarter there were no Lost Time Incidents (“LTIs”) and Medical Aid Incidents (“MAIs”). For 2022, the Company recorded two LTIs and four MAIs. The Total Recordable Incident Rate for 2022 was a very low 0.24 per 200,000 hours worked.

As a result of the Company’s success in facilitating the provision of COVID-19 vaccines to its workforce and subcontractor personnel, including booster shots, COVID-19 protocols were essentially eliminated as 2022 progressed.

Community

Various community projects supported by the Company have progressed over the course of 2022. Several new micro businesses have been established by local entrepreneurs and supported to facilitate the process of becoming a supplier to FDN. A local textile manufacturer, fire extinguisher maintenance company, and pest control/fumigation company have all secured contracts with Lundin Gold. Additional efforts to promote the integration of local farmers into the FDN supply chain are also in place to create local benefits.

Longstanding projects such as road maintenance, educational support to promote access to higher education, improving the efficiency of the agricultural sector and addressing infrastructure challenges also progressed through the year.

The Company continues to engage with local indigenous peoples, especially the Shuar Federation of Zamora Chinchipe, to jointly implement projects that promote economic opportunities and the Shuar culture.

Corporate

The Company paid an inaugural dividend of $0.20 per share on September 13, 2022 for a total of $47.0 million under its newly established dividend. With the release of its 2022 year end results, the Company has declared a cash dividend of $0.10 per share which is payable on March 31, 2023 (April 4, 2023 for shares trading on Nasdaq Stockholm) to shareholders of record on March 13, 2023. The Company anticipates declaring quarterly dividends of at least $0.10 per share, equivalent to approximately $100 million annually based on currently issued and outstanding shares.

Near the end of Q2 2022, the Company upgraded the trading of common shares in the U.S. to the OTCQX Market under the symbol LUGDF. In Q3 2022, its common shares also became eligible for electronic clearing and settlement in the U.S. through the Depository Trust Company simplifying the process of trading with the objective of enhancing the liquidity of Lundin Gold shares.

During 2022 and in line with the conclusion of the FDN construction and expansion projects, Mr. Dave Dicaire, the Company’s Vice President Projects, departed Lundin Gold. After the end of the year, Iliana Rodriguez, Vice President Human Resources, also left the Company.

EXPLORATION – VALUE CREATION AND UPSIDE OPTIONALITY UNDERPINNING FDN

Near-Mine Exploration Program

The near-mine exploration program commenced in the third quarter of 2022 and has focused on expanding the FDN mineral resource envelope and testing several unexplored sectors near the mine site. In 2022, approximately 8,600 metres were drilled across 16 holes, from surface and underground.

• The surface drilling program completed nine drill holes in 2022. Its objective is to explore sectors along the two main controlling structures of the FDN deposit, the East and West faults. Along the southern extension of the East fault a new mineralized zone has been intercepted. Initial promising results suggest continuity of the epithermal system in this southern direction as most of the drill holes intercepted wide hydrothermal alteration zones of similar characteristics to those found at FDN deposit. This zone remains open at depth, along strike to the north and to the south. The 2023 surface drilling program has already started, with two rigs drilling on this new zone.
• The underground drilling program focused on the continuity of the FDN deposit and west structure at depth. A total of seven drill holes were completed under the southern portion of the FDN mineral resource envelope. Most of the results obtained from underground drilling exhibit the same mineral hydrothermal alteration to that related to mineralization in the southern extension of FDN’s Mineral Resource and confirm the continuity of the deposit at depth, below the current resource. Underground drilling is being expanded in 2023 to continue to explore at depth. The initial focus will be to the north-central sector, with one rig currently drilling, below the highest-grade portion of the mineral deposit, where the mine is currently operating.

Regional Exploration Program

A total of 17,600 metres across 25 drill holes were drilled under the 2022 regional program, of which approximately 4,490 metres across seven holes were drilled in the fourth quarter. The program has successfully advanced in the identification of important indicators that point toward the presence of buried epithermal deposits in the southern basin. Through a detailed geological interpretation of exploration data and additional surface works, several targets of interest have been identified, tested and resulted in locating new potentially mineralized structures. They include:

• Along the southwestern basin border, the Quebrada La Negra and Puente Princesa targets were investigated with a total 6,987 metres drilled across nine holes. At Quebrada La Negra, the drilling program identified a new structure associated to the west border, represented by wide hydrothermal alteration zones with breccias and/or veins and disseminated sulfides. The program also drilled an arsenic soil anomaly, where drilling intercepted a major structure with quartz veins, hydrothermal carbonate-silica breccias and sulfides hosted in the Santiago formation, which is also the FDN hosting sequence. This hydrothermal alteration zone possibly represents the north continuity of the Puente Princesa structure, defined in the second quarter and located one kilometre (km) further south. All results are pending.
• Four drill holes were completed at Barbasco Norte for a total of 2,123 metres to test a continuous geochemical gold soil anomaly at the eastern edge of the Suarez Basin. The drilling program intercepted low grade values of gold and the epithermal pathfinder element arsenic in narrow hydrothermal alteration zones of similar composition to that found in epithermal systems like FDN. The obtained geological data suggests an increase of the hydrothermal alteration toward the east, close to the basin border and where additional drilling is being planned in 2023.
• At Barbasco, the program explored for several indicators of epithermal systems in distinct sectors of the target. Nine drill holes for a total of 6,351 metres were completed. Drilling only intercepted few and limited zones of hydrothermal alteration at depth and the current interpretation suggests additional drilling is required to explore untested sectors located further east.

Newcrest Earn-In Agreement

Early in the second quarter, Newcrest International Pty Ltd. a wholly owned subsidiary of Newcrest Mining Limited, met the first expenditure requirement of $4.0 million under the Earn-In Agreement covering eight of Lundin Gold’s early-stage concessions to the north and south of FDN. Newcrest exercised its option to proceed to the second stage of the earn-in on May 28, 2022. Through completion of the second stage, which requires the expenditure of a further $6.0 million, Newcrest would earn an initial 25% interest in the eight concessions indirectly through a subsidiary of Lundin Gold. To date, drill testing of two copper-gold porphyry targets has detected low-level porphyry style copper mineralization. This work is being conducted by Newcrest as the operator under the earn-in agreement. The next phase of drilling will focus on testing priority copper-gold porphyry targets starting in the first quarter of 2023.

OUTLOOK – POSITIONED TO GENERATE STRONG SHAREHOLDER VALUE FOR YEARS TO COME

Consistent with previously announced guidance, gold production at FDN for 2023 is estimated to be between 425,000 to 475,000 oz based on an average throughput rate of 4,400 tpd, an increase from the average throughput of 4,274 tpd achieved in 2022. The head grade is estimated to average 9.67 g/t, with fluctuations expected during the year as different sections of the ore body are mined. Average mill recovery for the year is estimated at 90%.

Cash operating costs¹ are estimated to range between $700 and $760 per oz of gold sold in 2023, with variability expected during the year. Sustaining capital for 2023 is estimated at $45 to $55 million and AISC¹ is expected to range between $870 and $940 per oz of gold sold, based on an assumed gold price of $1,650 per oz and silver price of $18.50 per oz. The projected increase in AISC¹ in 2023 can be attributed principally to higher unit costs compared to 2022 due to mining and milling ore with lower grade, inflationary pressures resulting in increased costs of consumables and transportation, higher maintenance requirements as equipment ages and higher sustaining capital expenditures.

The early repayment of the gold prepay facility is expected to result in increased net cash flow, providing Lundin Gold with greater flexibility to pursue operational and corporate opportunities for the benefit of the Company and its shareholders.

The Company is also continuing its regional and near mine exploration drilling programs with a total of 28,000 metres of drilling planned for 2023. The near-mine program will include underground and surface drilling to further investigate the significant potential for the extension of FDN Mineral Resources. At depth, the initial focus will be below the north-central sector of the FDN deposit, the highest-grade portion of the mineral deposit. Surface drilling will continue to investigate a potential extension of FDN to the east, west and south of the current mineral resource envelope. The 2023 near-mine program is targeting at least 15,500 metres of drilling with an estimated cost of $9.4 million. The regional drilling program will consist of approximately 12,500 of drilling with an estimated cost of $11.7 million and focus on the southern basin, advancing toward the east and west border sectors. Its objective is to follow up on the numerous target areas identified during the 2022 program and test new and unexplored targets.

In 2023, dividends of at least $0.10 per share are expected to be declared on a quarterly basis totalling approximately $100 million for the year. The first quarterly dividend in 2023 is payable on March 31, 2023 (April 4, 2023 for shares trading on Nasdaq Stockholm) based on record date of March 13, 2023.

The Company anticipates updating its estimates of Mineral Resources and Reserves and filing a technical report prepared in accordance with NI 43-101 before the end of Q1 2023.

Qualified Persons

The technical information relating to FDN contained in this News Release has been reviewed and approved by Ron Hochstein P. Eng, Lundin Gold’s President and CEO who is a Qualified Person under NI 43-101. The disclosure of exploration information contained in this press release was prepared by Andre Oliveira, P.Geo, Lundin Gold’s V.P. Exploration, who is a Qualified Person in accordance with the requirements of NI 43-101.

About Lundin Gold

Lundin Gold, headquartered in Vancouver, Canada, owns the Fruta del Norte gold mine in southeast Ecuador and a large exploration land package that hosts the Fruta del Norte deposit at its northern edge. Fruta del Norte is among the highest-grade operating gold mines in the world.

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. 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 development of Fruta del Norte will benefit its shareholders, the Government and the citizens of Ecuador.