On Wednesday, Scotiabank reiterated its Sector Perform rating on Lundin Gold (OTC:LUGDF) Inc. (LUG:CN) (OTC: FTMNF), with a steady price target of Cdn$25.50. The firm's positive outlook follows Lundin Gold's third-quarter performance, which surpassed expectations. The gold producer reported a production of 122.2 thousand ounces (koz), which was higher than the anticipated 112.5 koz. Sales figures also exceeded forecasts, with 125.9 koz sold compared to the estimated 110.1 koz.
The company's production success was attributed to various factors, including a higher than expected throughput rate of 4,623 tonnes per day (tpd) and a head grade of 10.3 grams per tonne (g/t). These figures outperformed the estimated rates of 4,500 tpd and 9.55 g/t, respectively. However, the recovery rate was slightly lower at 86.8%, compared to the expected 88.5%.
Lundin Gold also benefited from a favorable gold market, realizing an average gold price of $2,615 per ounce in the third quarter. This price point was notably higher than the average price of approximately $2,485 per ounce, thanks to provisionally priced gold sales that exceeded fair value estimates as of June 30, 2024.
With the third quarter's strong performance, Lundin Gold has produced approximately 77% of the midpoint of its annual guidance, which ranges between 450 and 500 koz. The company requires roughly 108 koz in the fourth quarter to meet the midpoint of this target. Scotiabank forecasts that Lundin Gold's full-year production will reach 485.5 koz, indicating confidence that the company could hit the upper end of its guidance.
In light of these results, Scotiabank has adjusted its third-quarter earnings per share (EPS) estimate upward and anticipates that Lundin Gold will generate a free cash flow (FCF) of approximately $500 million at current spot gold prices for the full year 2024.
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