Lundin Gold sees rising costs, steady output at Fruta del Norte mine in Ecuador

Lundin Gold expects stable gold output but higher costs at Fruta del Norte as royalties and profit sharing rise, while ramping up exploration to extend mine life.

Lundin Gold (TSX: LUG; US-OTC: LUGDF) says production at its flagship Fruta del Norte gold mine in southeast Ecuador will remain broadly stable over the next three years, while unit costs climb as a result of higher royalties and profit-sharing tied to stronger gold prices. The stock traded lower following the update.

In guidance released late Monday, the company said Fruta del Norte is expected to produce between 475,000 and 525,000 oz. of gold annually in 2026, 2027 and 2028, compared with a forecast range of 490,000–525,000 oz. for 2025.

Average head grade is estimated at 8.3 grams of gold per tonne, with some variability expected in 2026 as different zones of the orebody are mined.

Strong operation, but limited near-term growth

Despite the solid operating profile, some analysts remain cautious on the name in the absence of clearer growth catalysts.

RBC Capital Markets analyst Michael Siperco said in a note that, while execution and consistency at Fruta del Norte have been strong, the stable near-term production profile keeps the firm “cautious until there is more visibility into significant incremental growth and district potential to backfill multiples.”

Higher gold prices, higher unit costs

Lundin Gold said unit production costs will rise from 2025 levels largely because higher gold prices increase both the royalties payable to the Ecuadorian government and the amounts paid to employees under profit-sharing schemes.

The company’s 2026 outlook assumes a gold price of US$4,000 per ounce, versus US$2,500 per ounce in its 2025 guidance. That change alone adds about US$150 per ounce to unit costs, Lundin Gold said.

For next year, the company estimates:

• Cash operating costs: US$900 to US$960 per oz. of gold sold
• All-in sustaining costs (AISC): US$1,110 to US$1,170 per oz. sold

According to Siperco, the AISC range is roughly 3% above the current analyst consensus for the company.

Extending mine life at a top-tier high-grade gold operation

The Vancouver-based miner is focused on maintaining or extending Fruta del Norte’s 12-year mine life by expanding resources, drilling off new discoveries and converting inferred resources to indicated.

Fruta del Norte, which Lundin Gold describes as one of the highest-grade operating gold mines in the world, achieved commercial production in 2020 and delivered a record 502,029 oz. of gold last year.

In a February resource update, Lundin Gold reported:

Proven and probable reserves

• 22.1 million tonnes grading 7.81 g/t gold
• 5.54 million oz. of contained gold

Measured and indicated resources, including reserves

• 30.6 million tonnes grading 7.17 g/t gold
• 7.06 million oz. of contained gold

Inferred resources

• 13.9 million tonnes grading 5.27 g/t gold
• 2.36 million oz., largely reflecting growth from the Fruta del Norte South zone

Ecuador reopens to mining investment

The company’s long-term plans are unfolding against a shifting regulatory backdrop in Ecuador. Under President Daniel Noboa, who was re-elected in April, the country reopened its mining concessions registry in June for the first time in more than seven years.

The move is aimed at attracting new investment, streamlining licensing, and cracking down on illegal mining, which has become a major issue across several regions. For Lundin Gold, the policy shift improves the context for near-mine and regional exploration around Fruta del Norte.

Key decisions ahead: FDN South and potential expansion

Lundin Gold said a decision on whether to develop the Fruta del Norte South zone is expected in the first half of 2026, when it plans to update the mine’s life-of-mine plan.

A separate decision on a potential throughput expansion beyond the current 5,500 tonnes per day is expected in the second half of 2026, following completion of an expansion study and associated investment analysis.

Depending on the outcome of that work, 2028 production levels could differ from the current guidance range, the company noted.

Record exploration budget: US$85 million and 133,000 metres of drilling

To support its growth ambitions, Lundin Gold has allocated a record US$85 million exploration budget for Fruta del Norte next year, with plans to drill about 133,000 metres, up from the 120,000 metres targeted this year.

The program includes:

Near-mine exploration:

• About 100,000 metres of underground and surface drilling, targeting high-grade epithermal gold mineralization and advancing work on a promising porphyry corridor.

Resource conversion drilling:

• Around 25,000 metres aimed at converting inferred resources to indicated and supporting future reserve upgrades.

Regional exploration:

• Approximately 8,000 metres to test new targets in the broader district.

Dividend policy and market reaction

Separately, Lundin Gold said it expects to continue paying a fixed quarterly dividend of US$0.30 per share, plus a variable quarterly dividend based on at least 50% of normalized free cash flow.

Following the guidance update, Lundin Gold shares fell 2.4% to C$106.96 on Tuesday morning in Toronto, trimming the company’s market value to around C$26 billion (US$19 billion).

The stock has traded between C$30.04 and C$119.76 over the past 12 months, reflecting both the strong fundamentals of Fruta del Norte and investor debate over rising cost pressures and the upside from future growth and district-scale exploration.