Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canada’s Lundin Gold (TSX: LUG) expects to achieve the high-end of its gold production guidance for 2022 as the impact of road blockades in Ecuador earlier this year eased in the third quarter.
The Vancouver-based miner, which owns and operates the Fruta del Norte gold-silver mine in Ecuador, said it would meet the upper end of its forecast production of between 430,000 and 460,000 ounces of gold this year.
Lundin still missed earnings per share expectations due to higher taxes. It reported adjusted net earnings per share (EPS) in the three months to the end of June at $0.09, down from $0.25 in the same period of 2021 and missing the market consensus.
Adjusted Q3 earnings before interest, taxes, depreciation, and amortization (EBITDA) of $117 million, was higher than $113 million a year earlier thanks mainly to the sale of additional ounces produced late in the second quarter, but not shipped and sold until the third quarter.
Lundin noted that blockades on some of Ecuador’s major highways during a national strike in the country, which ended on June 30th, impacted positively revenues, income from mining operations, earnings, and cash flow in Q3 2022.
Production at Fruta del Norte reached 355,190 ounces in the first nine months of the year at an all-in sustaining cost (AISC) of $785 per ounce.
“We continue to strive for operational excellence at Fruta del Norte, and remain focused on further optimization, improved efficiencies and lowering costs,” president and CEO Ron Hochstein said.
He added that with the South Ventilation Raise now complete, the company will have more flexibility to mine on all levels.
As the operation generated sizeable free cash flow and considering the existing cash balance, Lundin Gold paid an inaugural semi-annual dividend of $0.20 a share.
Under the recently established dividend policy, Lundin anticipates continuing to pay dividends of at least $0.40 a share a year, equivalent to about $100 million, based on current gold prices, expected production levels and current issued and outstanding shares.
The company acquired Fruta del Norte in 2014 for $240 million from fellow Canadian miner Kinross Gold (TSX:K) (NYSE:KGC), which had to halt operations after being unable to reach an agreement with authorities regarding the terms for developing the asset.
The underground gold and silver mine, discovered in 2006, contains six of Lundin’s 29 mining concessions in Ecuador and covers 70,000 hectares of land.
Located in southeastern Zamora Chinchipe province, the mine is Ecuador’s largest and one of the biggest and highest-grade gold projects in the world currently in production.
