Lundin drilling signals strong resource growth ahead at Fruta del Norte

Lundin Gold (TSX: LUG) released a fresh set of drill results from its Fruta del Norte (FDN) gold mine in southeast Ecuador on Thursday suggesting significant resource growth potential for an update early in the new year.

“The conversion program has defined several wide, high-grade mineralized zones in distinct sectors outside the current reserve that we expect to underpin further future conversion of resources to reserves,” president and CEO Ron Hochstein said in a news release.

The continued exploration success bodes well for adding to and converting current resources, Canaccord Genuity Capital Markets mining analyst Jeremy Hoy said in a note to clients Thursday.

The company has been building substantial exploration momentum with its near-mine targets at FDN recently, culminating in a positive reserve and resource update in February. In September, Lundin expanded its drill program for the second time this year, to 50,000 metres.

As of February, the FDN mine boasts resources of 32.2 million tonnes grading 8.21 grams gold per tonne for 8.5 million oz. gold, and reserves of 17.98 million tonnes grading 8.68 grams gold for 5.02 million oz. of metal. FDN is considered among the highest-grade operating gold mines in the world.

The company’s near-mine program continues to explore individual sectors along trend of the FDN deposit and within extensions of its major controlling structures. The company has drilled 26,361 metres out of a planned 30,000 metres here this year across 46 holes as of the end of October, both underground and from surface.

Drilling earlier this year discovered a new exploration target, Bonza Sur, which has been a primary focus over the last few months. The results continue to define a new epithermal system only 1 km south of the FDN deposit, and the company believes the same volcanic sequence hosts mineralization.

The epithermal system is thought to extend to surface and stretches 850 metres, striking north-south, for a minimum of 500 metres depth in the central area.

Highlights from the near-mine results include 7.44 grams gold per tonne over 8.8 metres from 620.2 metres depth, including 34.68 grams gold per tonne over 1.8 metres in hole BLP-2023-042; and 5.87 grams gold over 11.9 metres from 168.4 metres depth, including 14.39 grams gold over 4 metres.

In the coming months, Bonza Sur drilling will focus on better understanding the zone with tighter spacing and testing the envelope at depth and along strike. Two rigs continue to work on the target.

Meanwhile, an underground conversion drill program at FDN has concluded. It was focused on inferred resources within the FDN deposit, completing 11,233 metres of underground drilling across 79 holes. The results will feed into the expected updated reserve and resource estimate early in 2024.

Highlights from the underground conversion program include an intersection of 48.5 metres grading 6.92 grams gold per tonne from 50.6 metres depth, including 8.7 metres grading 22.88 grams gold in hole FDN-C23-062; and 37.9 metres grading 6.49 grams gold 123.3 metres depth, including 6.6 metres at 12.59 grams gold per tonne in hole FDN-C23-048.

Lundin Gold reported its production for the quarter ending Sept. 30 early in October, mainly outlining consistent output across the portfolio.

Gold production came in at 112,711 oz., compared with 121,635 oz. in the same quarter of 2022. Contributing to the slight decrease in production was a drop in the average gold recovery rate, from 90.3% to 86.5%. However, this was partially offset by an increase in the average throughput.

As a result, gold output from FDN is still expected to meet Lundin’s 2023 guidance of 450,000 to 485,000 oz. gold.

Canaccord’s Hoy has a ‘buy’ rating on the stock, which last traded at $16.84, with the analyst maintaining a price target of $20.25. Lundin Gold has a market capitalization of $4 billion.