Lundin Gold Inc. (LUG:TSX) will use the monies from a recent financing to begin exploring its 64,400-hectare gold property in Ecuador, according to a Haywood March 4 research note. "Commencement of exploration activities on the company's highly prospective land package should bear results, and we look forward to the first meaningful exploration budget for quite some time," analyst Kerry Smith reported.
Lundin Gold's bought-deal equity financing grossed CA$46.6 million from 8.625 million shares being issued at CA$5.40 per share, Smith indicated. These funds will be used "to fund exploration activities as well as general corporate purposes." No substantial exploration efforts have occurred on the property since the Fruita del Norte gold deposit was discovered.
Smith described that over the next two years, Lundin Gold will strategically and systematically explore the basin for systems geologically similar to Fruita del Norte. It will drill high-priority targets pinpointed along the Suarez pull-apart basin and conduct mapping and sampling to determine additional prospective targets.
The budget for exploration in 2019 is roughly US$4–6 million and for 2020, US$10–12 million, "but the programs will be results driven," Smith clarified.
As for the Fruita del Norte project, it remains on track for first production by year-end 2019. Engineering work is 85% done, earthworks is 75% complete and power line construction is 27% finished. Process plant construction continues to progress. "Gold prices are moving higher, and timing is looking good for this new producer to start production later this year," noted Smith.
The Fruta del Norte project "ranks as one of the largest and highest-grade undeveloped gold projects in the world," Smith wrote.
Smith highlighted that Lundin Gold's financial picture, cash balance plus debt, is sufficient to finish construction and take the Fruita del Norte mine through commissioning. Of the US$692 million capex budget for the project, US$372 million are unused. At year-end 2018, the company had US$168 million in cash.
Haywood has a Buy rating on Lundin Gold, and a CA$7.50 per share target price, recently lowered from CA$7.75. The company "will be a new producer with 290,000 ounces expected in 2020," Smith wrote. Lundin Gold's stock is currently trading at around CA$5.28 per share, a good point for accumulating shares, the analyst added.
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Disclosures from Haywood Securities, Lundin Gold Inc., March 4, 2019
Analyst Certification: I, Kerry Smith, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
The following Important Disclosures apply for Juggernaut Exploration:
▪The Analyst(s) preparing this report (or a member of the Analysts' households) have a financial interest in Roxgold Inc.
▪ Haywood Securities, Inc. has reviewed lead projects of Asanko Gold Inc., Lundin Gold Inc. and Roxgold Inc. and a portion of the expenses for this travel have been reimbursed by the issuer.
▪ Haywood Securities, Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Lundin Gold Inc. in the last 12 months.
Other material conflict of interest of the research analyst of which the research analyst or Haywood Securities Inc. knows or has reason to know at the time of publication or at the time of public appearance: n/a.
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