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TICKERS: LUG; FTMNF

On-Track Construction and Improved Economics at 'Highly Attractive Project'
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CIBC raised its target price on this Canadian company and provided an update on its anticipated mine.

In a Sept. 19 research note, CIBC analyst Bryce Adams reported that Lundin Gold Inc. (LUG:TSX) updated its forecasted economics on Fruta del Norte in southeast Ecuador, and remains on track and on budget with construction there.

CIBC revised its model to reflect the changes and, consequently, raised its target price on Lundin to CA$6 per share from CA$5.50. The mining company's stock is currently trading at CA$4.91 per share. "At spot prices, Lundin Gold now trades in line with its developer peers at 0.9x price:net present value 5% (NPV5%)," Adams noted.

As for the adjusted project economics, Lundin's new NPV5% for Fruta del Norte is $786 million. This 10% increase is driven by the company's use of primary and secondary stopes rather than end slicing stoping. The approach allows for greater operating flexibility and a lower backfill expense.

Regarding projected costs, Lundin has reduced them in light of optimized mining methods and reduction in estimated use of reagents. Operating costs dropped 7% to $537 per ounce, and all-in sustaining cost (AISC) dropped 4% to $583 per ounce. "Lower costs have lowered the cutoff grade and increased the mineable resource slightly," Adams explained.

With respect to construction at Fruta del Norte, it is more than a quarter done. "Both declines have crossed the Machinaza Fault with no significant water inflows," wrote Adams. Completed underground development stands at about 2.9 kilometers. Concrete work at the processing plant is about 30% finished.

Because continued construction progress will be Lundin's main priority for the next 12 to 18 months, CIBC maintains its Neutral rating on the company. "Longer term, we view Fruta del Norte as a highly attractive project, as one of the highest-grade, undeveloped gold projects globally," Adams concluded.

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Disclosures from CIBC, Lundin Gold Inc., September 19, 2018

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Lundin Gold Inc. (LUG)

· CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Lundin Gold Inc. in the next 3 months.





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