Lundin Gold sees higher costs, stable output in Ecuador

Lundin Gold (TSX: LUG) said output at its Fruta del Norte gold mine in southeast Ecuador should remain flat over the next three years while unit costs climb due to increased royalties.

Fruta del Norte is expected to produce between 475,000 and 525,000 oz. annually in 2026, 2027 and 2028, Lundin Gold said late Monday in a statement. This compares with the company’s 490,000–525,000 oz. output range for 2025. Head grade is estimated to average 8.3 grams gold per tonne, with fluctuations expected during 2026 as different sections of the ore body are mined. 

“Despite the strong execution and consistent results, the stable near-term production profile keeps us cautious until there is more visibility into significant incremental growth and district potential to backfill multiples,” RBC Capital Markets analyst Michael Siperco said Tuesday in a note.

Unit production costs should be higher than in 2025 because rising gold prices increase the amount of royalties that must be paid to the government – as well as the amounts that employees receive under profit-sharing programs, Lundin Gold said. A higher assumed gold price of $4,000 per oz. adds about $150 per oz. to unit costs compared with the company’s 2025 guidance, which was based on a gold price of $2,500 per ounce.

Cash operating costs next year are estimated to range between $900 and $960 per oz. of gold sold, Lundin said. All-in sustaining costs should range between $1,110 and $1,170 per oz. sold – about 3% higher than the consensus estimate of analysts who cover the company, Siperco said.

Longer life

Vancouver-based Lundin Gold is working to maintain or extend Fruta del Norte’s 12-year mine life by expanding resources, detailing new discoveries and converting inferred resources to indicated. 

The operation — which the company has described as being among the world’s highest-grade operating gold mines — began commercial production in 2020 and churned out a record 502,029 oz. gold last year. 

Under President Daniel Noboa, who was re-elected in April, Ecuador reopened its mining concessions registry in June for the first time in more than seven years in a bid to attract investment, streamline licensing and crack down on illegal mining — a long-standing issue across the country.

Decision due

A decision on whether to develop the Fruta del Norte South zone is expected in the first half of 2026, when the company is due to update its life-of-mine plan. A decision on potentially expanding mine-to-mill throughput beyond 5,500 tonnes per day should follow in the second half.

Production levels for 2028 could vary depending on the outcome of the expansion study and its investment decision, Lundin Gold said.

Lundin Gold updated Fruta del Norte’s resource estimate in February, reporting proven and probable reserves of 22.1 million tonnes grading 7.81 grams gold for 5.54 million oz. contained gold.

Measured and indicated resources, including reserves, stand at 30.6 million tonnes grading 7.17 grams gold for 7.06 million oz., with a further 13.9 million inferred tonnes at 5.27 grams for 2.36 million oz. — largely reflecting growth from Fruta del Norte South.

Drilling program

Management has set aside a record $85 million for exploration at Fruta del Norte next year. Crews are planning to drill some 133,000 metres, up from this year’s planned 120,000-metre program.

Near-mine exploration drilling should cover 100,000 metres of both underground and surface drilling as crews target high-grade epithermal gold deposits and advance exploration of a promising porphyry corridor. Another 25,000 metres will consist of resource conversion drilling, while regional exploration drilling covers about 8,000 metres.

Separately, Lundin Gold said Monday it expects to continue paying a fixed quarterly dividend of $0.30 per share and a variable quarterly dividend based on at least half of the company’s normalized free cash flow.

Lundin Gold shares fell 4.6% to C$104.53 Tuesday morning in Toronto, cutting the company’s market value to about C$25 billion ($18.1 billion).