Will 2019 Be Lundin Gold’s Breakthrough Year?


Lundin Gold [stock_market_widget type="inline" template="generic" color="default" assets="LUG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has been flat on the stock market over the past year, but it could come into its own in 2019. That’s because the Vancouver-based company expects its first gold production this year, bringing good news to investors who have been waiting for the kickstart to its operations at the Fruta del Norte gold project in Ecuador.

Let’s take a closer look at where Lundin stands right now and what investors can expect from the company this year.

The Current State of Affairs

Lundin’s first gold at the mine isn’t expected to result in a lot of revenue. Analysts expect the company to deliver C$24.3 million in revenue for 2019 as well as a loss of C$0.14 per share.

According to Lundin Gold’s year-end 2018 results that were released toward the end of February, the company reported that it had completed 85% of the engineering process at Fruta del Norte. It had spent 70% of its committed capital expenditure to get to that level.

The surface work on the site was 75% complete, while the process plant construction was 62% done. Lundin further clarified that its underground mine development is ahead of schedule and the company has reached the orebody at the mine. In all, Lundin expects that it will be able to produce its first gold at the mine in the fourth quarter of 2019.

However, Lundin’s first gold at the mine isn’t expected to result in a lot of revenue. Analysts expect the company to deliver C$24.3 million in revenue for 2019 as well as a loss of C$0.14 per share. However, things are expected to improve big time in 2020 as revenue is expected at C$270 million along with earnings of $0.19 per share.

So, Lundin Gold investors will probably have to wait until the end of the year to witness any notable upside as the beginning of production at Fruta del Norte is its biggest catalyst. But what’s impressive is that the market expects a massive ramp up at the mine in 2020, which will lead to notable top- and bottom-line growth at the company.

More importantly, Lundin is already taking steps to secure long-term production growth.

Focusing on the Long Run

Lundin Gold has revealed that it has signed an earn-in agreement with Newcrest to create a joint venture company that will explore “eight early stage concessions to the north and south of Fruta del Norte, which exclude the large block of concessions surrounding the Fruta del Norte deposit.”

Also, it is conducting geochemical sampling, mapping, and the required permitting for carrying out future drilling at targets that might contain gold and silver.

So it can be concluded that Lundin Gold is probably taking the right steps to boost its gold production profile. The fact that the company is operating in the Fruta del Norte, which is considered to be one of the highest-grade gold projects globally, will be a tailwind going forward.

It is probably because of the high-grade profile of this deposit that analysts are expecting a massive jump in Lundin’s revenue and earnings next year. As such, if the company manages to hit its targets, it won’t be surprising to see its stock zooming higher on the back of impressive financial growth.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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