Gold Investment Day Keynote Drops into The Roadhouse Enroute to Singapore

COMMODITY CAPERS: For those who may not have been paying as close attention as they should have been the gold price recently tipped over the US$3000 per ounce barrier.

There are plenty of reasons being bandied about for this event with many analysts pointing the finger at one person in particular who they say has given the world order too much of a shake in the past few months.

This will be one of the points of discussion to be dissected at the Singapore Mining Club Gold Investment Day – the opener to the Resource Connect Asia Tribeca Future Facing Commodities Conference in Singapore next week.

In the lead up to the conference, The Resources Roadhouse caught up with Keynote Speaker Ron F. Hochstein president CEO and director of Vancouver based Lundin Gold.

Lundin Gold operates the 100 per cent-owned Fruta del Norte gold mine, located in southeast Ecuador which has been in production since late 2019, and is among the highest-grade operating gold mines in the world.

Resources Roadhouse: It would be no surprise to hear that you are bullish on gold at present. How far do you think the gold price can go?

Ron F. Hochstein: Yes, it’s accurate to say that we are indeed bullish on the prospects for gold. While predicting the exact peak of any commodity price is inherently challenging, and we don’t have a specific target for how high the gold price can ultimately go, we believe the current macroeconomic environment presents a compelling case for continued strength.

From Lundin Gold’s perspective, our focus remains on operational excellence and maintaining our position as a low-cost producer. With production guided at 475,000 to 525,000 ounces per year for the period of 2025 to 2027, and an all-in sustaining cost consistently under $1,000 per ounce of gold, we are exceptionally well-positioned to benefit from any upward movement in the gold price.

To illustrate the potential, at a gold price of $3,000 per ounce, our operations would be capturing a significant margin. This substantial difference between our production cost and the market price would translate directly into significant free cash flow generation for the company.

While we refrain from speculating on precise price targets, our low-cost base and consistent production provide a strong foundation for significant profitability in a rising gold price environment.

RR: What do you believe is driving the current gold price?

RFH: We believe several interconnected factors are currently contributing to the strength in the gold price.

Firstly, heightened geopolitical and economic uncertainty is playing a significant role. In the current global landscape, marked by ongoing regional conflicts, trade tensions, and general economic anxieties, gold is once again being sought after as a traditional safe-haven asset. Investors tend to gravitate towards gold during times of instability to preserve capital.

Secondly, inflationary pressures, concerns about currency devaluation, and increased money supply remain relevant. While inflation rates may have cooled somewhat in some regions, the cumulative effect of past inflation, the potential for future price increases, and the expansion of the money supply continue to make gold an attractive hedge against the erosion of purchasing power of fiat currencies.

Thirdly, central bank buying is a crucial element. We’ve observed a trend of central banks increasing their gold reserves. This accumulation can provide significant support to gold prices.

Finally, investment demand is picking up, with both institutional and retail investors starting to buy again. The increasing accessibility of gold through various investment vehicles like ETFs has broadened investor participation.
It’s likely a combination of these factors, rather than a single driver, that is underpinning the current gold price environment.

RR: Are investors still focused on bullion, or are they looking at gold mining/exploration company investment opportunities?

RFH: We believe there’s currently interest in both physical bullion and gold mining/exploration company investment opportunities. While bullion remains a core safe-haven asset, we are seeing a notable shift with generalist investors starting to look at the gold mining industry to get exposure to the gold price again after a prolonged period of underinvestment.

This renewed interest in gold equities is driven by the characteristics of this cycle, with generalists particularly focused on free cash flow yield and dividend yield. Low-cost gold miners are of significant interest as they are best positioned to generate substantial free cash flow in the current environment.

This strong cash flow potential supports attractive dividend yields, making well-positioned, low-cost producers like Lundin Gold increasingly appealing to a broader investment audience beyond traditional precious metals investors.

RR: Lundin Gold’s Fruta del Norte gold mine in southeast Ecuador continues to lay eggs at a rate that would exhaust any golden goose. What expansion plans do you currently have underway at the mine to keep production on track?

RFH: We are incredibly pleased with the consistent performance of our Fruta del Norte mine, and we are actively pursuing strategies to ensure its continued success and longevity.

Currently, our plant expansion project is being commissioned, which is a key initiative to maintain and potentially grow our production profile. This expansion will initially increase mill throughput to 5,000 tonnes per day (tpd) for the year 2025, and we anticipate a further increase to 5,500 tpd from 2026 onwards. This increased processing capacity will be instrumental in sustaining our strong production rates.

Beyond the plant expansion, we are also very encouraged by the results of our near-mine exploration program. We are having great success through the exploration drill bit, actively defining several promising targets including FDNS, FDN East, Bonza Sur, and Trancaloma. These exploration areas hold significant potential to provide incremental production in the future and contribute to extending the overall mine life of Fruta del Norte.

Our strategy involves a two-pronged approach: optimizing our existing operations and aggressively pursuing near-mine exploration to unlock further value and ensure a sustainable production profile for years to come.