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Project Summary

Fruta del Norte

Fruta del Norte Gold Project


Lundin Gold's property in Southeast Ecuador consists of 33 mining concessions covering an area of approximately 75,000 hectares. From this, the Fruta del Norte Project is comprised of three concessions and covers an area of approximately 5,000 hectares and is located approximately 80 kilometres east of the City of Loja, which is the fourth largest city in Ecuador.

An independent Feasibility Study ("FS") for the Fruta del Norte Project was prepared by Amec Foster Wheeler, with the support of four other globally recognized, leading engineering firms into a Technical Report filed on SEDAR in accordance with National Instrument 43-101 ("NI 43-101").

Feasibility Study Highlights
  • Mineral Reserves totaling 4.82 million ounces of gold and 6.34 million ounces of silver (15.5 million tonnes at 9.67 g/t Au and 12.7 g/t Ag);
  • Average annual gold production of 340,000 ounces at an average life of mine ("LOM") total cash cost of $553/oz and a LOM all-in sustaining cash cost ("AISC") of $623/oz, placing FDN in the lowest cash cost quartile globally;
  • LOM production of approximately 4.4 million ounces of gold and 5.2 million ounces of silver over an initial 13-year mine life using an average gold recovery of 91.7% and average silver recovery of 81.5%;
  • Estimated Project capital cost, including contingency, of $669 million, net of taxes;
  • Targeted start of construction in mid-2017;
  • Expected first gold production in first quarter 2020 with first year of full production in 2021;
  • Project economics at a gold price of $1,250/ounce and a silver price of $20/ounce resulted in the following:
      Pre-tax After Tax
    Net Present Value at a 5% discount rate (NPV5) $1,283 million $676 million
    Internal Rate of Return (IRR) 23.8% 15.7%
    Capital Payback (yrs) 3.7 4.5
    Notes:
    1. All figures are reported on a 100% equity project basis valuation. Capital payback is calculated based on start of production.
    2. Economic valuation is presented using a start date of July 1, 2017.
Further Optimization, Cost Reductions and Project Potential

The Company believes there are potential opportunities to further improve the economics of the FDN Project through:
  • Review of the mine plan to potentially improve the production ramp-up and optimization of the mining methods to increase the use of transverse-long-hole stoping ("TS") over the higher cost, lower productivity drift and fill ("D&F") methods;
  • Further metallurgical testwork to increase the ratio of doré versus gold in concentrate produced through gravity concentration of flotation concentrate to recover additional free gold;
  • Evaluation of aggregate supply for the Project construction and supply of aggregate for backfill. Currently the Project is relying on a quarry operation to be developed on site. Further analysis of alternative sources needs to be completed which could result in lower capital and operating costs;
  • Evaluation of owner self-perform construction, which could result in capital cost savings versus the traditional Engineering, Procurement and Construction Management approach that was used for the FS. The Company will also study other potential ways to reduce the capital cost; and
  • Potential extension of LOM, perhaps materially, in two ways: (i) through the inclusion of significant additional Mineral Resources not included in the initial mine plan; and (ii) through the identification of mineralization as a result of on-going and future exploration on the Company's concessions which could support the conversion of Mineral Resources to Mineral Reserves.

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Lundin Gold Inc.
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