Why Lundin Gold Stock Could Fly Higher

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 done well on the stock market in 2019, but problems have started creeping in lately as the recent price action suggests. Lundin stock has remained flat over the past three months, which is not surprising given the problems the company is facing at Fruta del Norte.

Let’s take a look at what’s going on with Lundin Gold and if the company can resume its run higher in the coming months.

Civil Unrest Has Put Lundin on the Back Foot

In mid-October, Lundin Gold reported that the civil unrest in Ecuador is negatively impacting the company’s development activities at the Fruta del Norte project. The company had clarified that it has stopped some of its activities at the mine, and this seems to have given investors’ confidence a knock.

However, Lundin had also clarified that it doesn’t expect any impact on its first gold production at Fruta del Norte thanks to the unrest and stoppage. And just sometime later, Lundin clarified that operations at Fruta del Norte have started returning to normal.

Should Investors Remain Invested?

Lundin remains a good bet despite the recent operational bottlenecks, especially considering that the company has clarified that it is getting out of the problems that it was facing.

I’m saying this because Lundin trades at just 25 times next year’s earnings. And more importantly, the company expects to begin gold production in 2020. That’s because when Lundin had released its last quarterly report, it clarified that 78% of the overall construction was done at Fruta del Norte.

We will get to know the latest state of affairs when the company releases its results later this month. However, it remains to be seen if Lundin will begin producing gold at Fruta del Norte this quarter as it was originally anticipating. The company was on track to pour its first gold at the mine in the fourth quarter of 2019, and it won’t be surprising to see it hit that target as the last press release regarding the civil unrest shows us.

More importantly, Lundin is expected to begin commercial gold production at Fruta del Norte in the second quarter of 2020. This is the reason why analysts expect the company to deliver revenue of nearly $270 million next year as compared to nothing in 2019. This is why it makes sense for investors to remain invested in Lundin Gold stock as it has the potential to step on the gas from next year.

Its earnings are also expected to increase to $0.31 per share in 2020 as compared to a projected loss of $0.14 per share in 2019. So, Lundin Gold stock could deliver more upside in the coming year thanks to the beginning of commercial production.

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.


Please enter your comment!
Please enter your name here