Lundin Gold Stock’s Dip Is a Buying Opportunity

Lundin Gold [stock_market_widget type="inline" template="generic" color="default" assets="LUG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has taken a dip of late thanks to the company’s weaker-than-expected second-quarter results wherein it missed Wall Street’s GAAP earnings per share forecast by a wide margin of $0.09. The market was originally expecting Lundin Gold to post a smaller loss, but that was not the case despite the recent recovery in gold prices.

However, Lundin Gold is still sitting on pretty gains of more than 50% so far this year, and it could start moving higher once again despite the recent dip. As such, it would be a good idea to buy more Lundin Gold stock at these levels because of potential long-term gains. Let me explain why.

Lundin Gold’s Development Is on Track

Lundin Gold is still a development stage company that’s yet to pour its first gold. But the good part is that the company is making solid progress on this front and could soon begin commercial production.

At its flagship Fruta del Norte mine, Lundin has completed 78% of the overall construction and committed 92% of the project’s total capital expenditure. More importantly, the first production stope is now available at the mine, allowing Lundin to deploy crews to mine. The company will continue deploying more crews as more stopes become available for mining.

On the other hand, Lundin Gold has completed 90% of the power line construction to the substation, while the tailings dam construction is also on schedule. The company specified that peak construction at Fruta del Norte was achieved during the second quarter.

Looking ahead, Lundin expects that it will start producing gold at the Fruta del Norte project in the fourth quarter of the current year. This would be followed by commercial production in the second quarter of fiscal 2020.

According to Lundin Gold’s CEO Ron Hochstein:

During the third quarter, we expect the three major surface projects – process plant, powerline and tailings storage facility – to be completed and undergo commissioning, and first gold pour is anticipated in the fourth quarter of this year.Scott Skinner, General Manager at 48North's Good Farm

Patience Will Pay Off

Analysts expect Lundin Gold’s financial performance to improve dramatically next year, which is definitely not surprising as the company is expected to begin commercial production in 2020.

More specifically, Yahoo Finance analysts expect Lundin to deliver a top line of nearly $282 million along with earnings of $0.19 per share. This would be a big jump over the current year’s projected revenue of $44 million and a loss of $0.12 per share.

Lundin Gold stock can keep going higher once its production starts ramping up.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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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