Lundin Gold Annual Report 2020

FY2020 Annual Report · Lundin Gold

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Annual Report 2020

Message from the President

Dear Shareholders,

The COVID-19 pandemic made 2020 a very challenging year for us all and has tested our strength and resilience. While
the challenges of COVID 19 are not behind us, I am proud of how Lundin Gold responded to it and performed last year.

2020 was a year of two parts for Lundin Gold. Early on in the year, Fruta del Norte (“FDN”) operations ramped up and
we declared commercial production in February 2020, ahead of schedule, only to temporarily suspend site activities in
response to the COVID-19 pandemic, less than one month later. By pro-actively prioritizing the well-being of our
workforce through the design and implementation of strict COVID protocols in the second quarter, on July 1st mining and
milling restarted at site. Since then FDN has achieved excellent results, highlighted by second half of the year
production of 191,080 ounces (“oz”) of gold, and average all-in sustaining costs (“AISC”)1 of $740 per oz gold sold. Both
gold production and AISC exceeded our second half of 2020 guidance of 150,000-170,000 oz and $770-850 per oz.
Alongside these encouraging operational results, the Company generated positive operating cash flow in 2020, allowing
us to build steady-state working capital while at the same time satisfying planned capital expenditures and loan facility
obligations. I cannot emphasize enough what a testament this is to the fantastic team at Lundin Gold.

With the first year of production now behind us, Lundin Gold is focused on delivering strong results in 2021 2. Lundin
Gold expects to continue generating strong operating cash flow based on its 2021 production and AISC guidance at
current gold prices. We will continue to optimize our operations, still under strict COVID protocols, and have identified
four key pillars to drive future shareholder value:

1.) Our first pillar is operational excellence. In line with this we have guided towards 2021 production between
380,000-420,000 oz, based on an average head grade of 10.4 g/t gold and average gold recovery of 90%, and AISC
between $770-830 per oz gold sold. We always strive to maximize production and minimize costs, and we will
continue to push the operation towards what we believe is achievable.

2.) The second pillar is throughput expansion, the capital project which aims at increasing mine and mill throughput
by 20% from 3,500 tonnes per day (“tpd”) to 4,200 tpd. This entails a capital expenditure of $18.6 million. The
program is well underway and completion is expected in Q4 2021.

3.) We also see an opportunity to increase our current resources to provide further upside. In line with this, a 10,000
metre underground drill program is underway at FDN to define additional resources, by focusing on opportunities
within the existing current resource boundaries and on the southern extension of FDN, where the Company has
currently estimated inferred mineral resources.

4.) Finally, we believe significant exploration upside exists within our extensive land package in Ecuador, with FDN
located at the north end of a major under explored mineralized trend. With all the necessary permits now in
place, we expect to initiate a 9,000 metre drill program targeting Barbasco and nearby Puente-Princesa, two high
priority targets located 7 kilometres south of FDN along the 16 kilometre long Suarez Pull-Apart Basin structure.
Our objective is to discover another Fruta del Norte.

Our achievements in 2020 and outlook for 2021 and beyond would not be possible without Lundin Gold’s commitment
to responsible mining and our strategy in response to the COVID-19 pandemic. Throughout 2020, Lundin Gold has
continued to invest in local development with a wide range of partners, but, due to the COVID-19 pandemic, priorities
shifted early in the year. From the beginning of the pandemic, Lundin Gold has worked closely with government and
health authorities at the national, provincial and local levels to mitigate its impact, and has contributed to the response
effort though a variety of donations and investments. A few examples of these include medical supplies donated to local
hospitals, disinfection equipment to local authorities, transportation services for doctors to reach rural areas, and food

1 Refer to “Non-IFRS Measures” in the MD&A for FY2020.
2 Refer to “Forward Looking Statements” in the MD&A for FY2020.

support for vulnerable groups. These efforts to help our local communities were amplified through our communication
campaign run during the year in conjunction with local government to promote COVID-19 protective measures in
communities.

Heading into 2021, I am optimistic about Lundin Gold’s future. Lundin Gold is well positioned for another strong year,
and we believe that there is a lot more value to be realized. The future is bright for Lundin Gold!

Thank you for your continued support.

Yours truly,

Ron F. Hochstein
President and Chief Executive Officer

Vancouver, BC
March 15, 2021

LUNDIN GOLD INC.
Management’s Discussion and Analysis
Year Ended December 31, 2020
(All dollar amounts are stated in U.S. dollars unless otherwise indicated. Tables are expressed in thousands of U.S.
dollars, except share and per share amounts)

INTRODUCTION

This Management’s Discussion and Analysis (“MD&A”) of Lundin Gold Inc. and its subsidiary companies (collectively,
“Lundin Gold” or the “Company”) provides a detailed analysis of the Company’s business and compares its financial
results for the year ended December 31, 2020 with those of the same period from the previous year.

This MD&A is dated as of February 24, 2021 and should be read in conjunction with the Company’s audited
consolidated financial statements and related notes thereto for the fiscal years ended December 31, 2020 and 2019.
The audited consolidated financial statements have been prepared using accounting policies consistent with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”). References to the “2020 Year” and “2019 Year” relate to the years ended December 31, 2020 and December
31, 2019, respectively.

Other continuous disclosure documents, including the Company’s news releases, quarterly and annual reports and
annual information form, are available through its filings with the securities regulatory authorities in Canada at
www.sedar.com.

Lundin Gold, headquartered in Vancouver, Canada, owns 29 metallic mineral concessions and three construction
materials concessions covering an area of approximately 64,609 hectares in southeast Ecuador, including the Fruta
del Norte gold mine (“Fruta del Norte” or the “FDN”). Fruta del Norte is comprised of seven concessions covering an
area of approximately 5,566 hectares and is located approximately 140 km east-northeast of the City of Loja. Fruta del
Norte is among the highest-grade operating gold mines in the world.

The Company’s board and management team have extensive expertise in mine operations and are dedicated to
operating Fruta del Norte responsibly. The Company operates with transparency and in accordance with international
best practices. Lundin Gold is committed to delivering value to its shareholders, while simultaneously providing
economic and social benefits to impacted communities, fostering a healthy and safe workplace and minimizing the
environmental impact. The Company believes that the value created through the operation of Fruta del Norte will
benefit its shareholders, the Government and the citizens of Ecuador.

HIGHLIGHTS

2020 was a year of two parts for Lundin Gold. In the first half of the year, the operation ramped up and achieved
commercial production in February 2020, ahead of schedule. Less than one month later, operations were temporarily
suspended in response to the COVID-19 pandemic. Operations were restarted on July 1, 2020 and since then, Fruta
del Norte achieved excellent operating results. These are highlighted by the production and sale of 191,080 and
168,345 ounces (“oz”) of gold, respectively, and average all-in sustaining costs (“AISC”)¹ of $740 per ounce (“oz”) of
gold sold since the restart of operations on July 1, 2020. Both gold production and AISC exceeded guidance of 150,000-
170,000 oz and $770-850 per oz for the same period, as provided by the Company in early July 2020. This resulted in
revenues, net income after tax, and cash flow from operations of $308.2 million, $26.5 million, and $118.4 million,
respectively, for the second half of the year.

Following changes in planned mining method, the Company updated its estimates of Probable Mineral Reserves for
Fruta del Norte ("2020 Reserve") to 5.41 million oz, an increase of 427,000 oz compared to the 2019 year end
reconciliation of Probable Mineral Reserves presented in the Company's Annual Information Form (the "AIF"), dated
March 24, 2020.

The following two tables provide an overview of key operating and financial results during the fourth quarter of 2020,
and the 2020 Year. In addition, operating results are provided for the ten-month operating period from March 1, 2020,
following declaration of commercial production, to December 31, 2020 (the “2020 Operating Period”).

Tonnes mined (tonnes)

Tonnes milled (tonnes)

Average head grade (g/t)

Average recovery (%)

Average mill throughput (tpd)

Gold ounces produced

Gold ounces sold

Three months
ended December
31, 2020

2020 Operating
Period

350,474

337,146

10.1

88.6

3,665

96,830

106,190

672,906

724,007

10.0

87.2

3,448

202,830

199,256

During the 2020 Year, which includes the pre-commercial production period from January 1 to February 28, a total of
242,400 oz of gold was produced and 234,464 oz were sold, including 35,208 oz sold prior to declaration of commercial
production.

Net revenues ($’000)

Income from mining operations ($’000)

Net loss ($’000)

Operating cash flow ($’000)

Average gold sale price ($/oz sold)2

Average cash operating cost ($/oz sold)2

Average all-in sustaining costs ($/oz sold)2

Operating cash flow per share ($)2

Adjusted net earnings ($‘000)2

Adjusted net earnings per share ($)2

Three months
ended December
31, 2020

Year ended
December 31,
2020

189,250

94,857

(1,233)

95,019

1,850

627

747

0.41

76,224

0.33

358,1561

172,3861

(47,158)

113,644

1,8661

6671

773

0.50

105,914

0.47

Results for the year are impacted by non-cash derivative gains and losses associated with fair value accounting for the
gold prepay and stream facilities. These non-cash items are driven by numerous factors including anticipated forward
gold prices and yields. Non-cash derivative losses associated with anticipated increasing forward gold prices are
recorded in the statement of operations, while non-cash derivative gains associated with increasing yields are recorded
in the statement of other comprehensive income. These non-cash gains and losses are derived from complex valuation
modelling and accounting treatment which are more fully explained later in the MD&A. Revaluation of these obligations
may result in considerable period-to-period volatility in the Company’s net income, comprehensive income, current and
long term liabilities.

1 Amount relates to the 2020 Operating Period.
2 Refer to “Non-IFRS Measures” section.

2020 Year (unless 2020 Operating Period, as indicated)

•

The mine delivered a combined 672,906 tonnes of ore to the plant or stockpile during the 2020 Operating
Period.

• Underground mine development remains in line with plan with a total of 4,808 metres of development
completed during the 2020 Operating Period. Good ground conditions allowed for the conversion from drift
and fill mining methods to long-hole stoping in key high-grade areas.
The mill operated at an average throughput of 3,448 tonnes per day during the 2020 Operating Period,
resulting in 724,007 tonnes milled.
The average grade of ore milled during the 2020 Operating Period was 10.0 grams per tonne (g/t) with average
recovery at 87.2%.

•

• Gold production for the 2020 Operating Period was 202,830 oz, comprised of 133,153 oz of concentrate and

69,677 oz of doré.

• During the 2020 Operating Period, the Company sold a total of 199,256 oz of gold, consisting of 136,756 oz
of concentrate and 62,500 oz of doré at an average realized gold price1 of $1,866 per oz for total revenues
from gold sales of $371.8 million. Net of treatment and refining charges, revenues for the 2020 Operating
Period and the 2020 Year were $358.2 million.

• Cash operating costs1 and AISC1 for the 2020 Operating Period were $667 and $773 per oz of gold sold,

•

respectively.
Income from mining operations was $172.4 million and the Company generated cash flow from operations of
$113.6 million, or $0.50 per share1
The Company recorded a net loss of $47.2 million, after deducting finance, corporate, exploration, and other
costs of $66.5 million, as well as derivative losses of $137.0 million and suspension of operations of $29.3
million, from income from mining operations and offset by a deferred income tax recovery of $13.2 million.
• Adjusted earnings¹, which exclude suspension of operations costs and derivative losses, were $105.9 million,

•

or $0.47 per share.

Fourth Quarter 2020

• During the fourth quarter, the mine continued to operate according to plan, resulting in 350,474 tonnes of ore

mined.

• Underground mine development also continued as planned with a total of 2,201 metres of development
completed during the quarter with development rates averaging 23.9 metres per day in December.
The mill processed 337,146 tonnes of ore at an average throughput of 3,665 tonnes per day during the quarter.
The average grade of ore milled was 10.1 grams per tonne with average recovery at 88.6% which is higher
than previous periods.

•
•

• Gold production during the quarter was 96,830 oz, comprised of 56,900 oz of concentrate and 39,930 oz of

doré.

• During the fourth quarter, the Company sold a total of 106,190 oz of gold, consisting of 70,540 oz of
concentrate and 35,650 oz of doré at an average realized gold price¹ of $1,850 per oz for total gross revenues
from gold sales of $196 million. Net of treatment and refining charges, revenues for the quarter were $189.3
million.

• Cash operating costs1 and AISC1 for the quarter were $627 and $747 per oz of gold sold, respectively. Higher
than planned recovery rates combined with the processing of high grade ore during the quarter contributed to
these good results.
Income from mining operations was $94.9 million and the Company generated cash flow of $95.0 million from
operations, or $0.41 per share1.

•

• Net loss after tax was $1.2 million, after deducting corporate, exploration and finance costs, and derivative
losses, partially offset by the income tax recovery recognized during the period. Adjusted earnings¹ for the
quarter, which excludes derivative losses, were $76.2 million, or $0.33 per share.

1 Refer to “Non-IFRS Measures” section.

Increase in Mineral Reserves

The 2020 Reserve is primarily the result of converting a significant portion of sections of the ore body originally to be
mined by drift and fill to long-hole stoping, due to the good ground conditions experienced in the mine to date. This
resulted in a reserve increase as well as a slight increase in dilution and decrease in average grade. There was no
increase in estimates of Mineral Resources for Fruta del Norte.

Probable Mineral Reserves(1)(2)(3)(4)(5)(6)(7)

December 31, 2019

2020 Reserve

Au (g/t)

Au (Moz)

Ag (g/t)

Ag (Moz)

17.6

8.74

4.99

12.1

6.92

20.8

8.1

5.41

11.8

7.68

Notes to Table: Probable Mineral Reserves

(1) The 2020 Reserve has been estimated in accordance with the standards of the Canadian Institute of Mining, Metallurgy and
Petroleum (CIM) and NI 43-101. The 2020 Reserve is as at July 31, 2020 and reflects mill feed from January 1, 2020 to July
31, 2020.

(2) Additional information on Mineral Resource and Mineral Reserve estimates for Fruta del Norte is contained in the in the
Technical Report which is available under the Company's profile at www.sedar.com. Except as set out below, the
assumptions, parameters and risks associated with the Company's Mineral Reserve estimates set out herein are as set out
in the Technical Report.

(3) All Mineral Reserves in this table are Probable Mineral Reserves. No Proven Mineral Reserves were estimated.
(4) Mineral Reserves were estimated using key inputs listed in the table below:

Key Input
Gold Price
TS
D&F
Process, Surface Ops,
G&A
Dilution Factor
Concentrate Transport &
Treatment
Royalty
Gold
Recovery

Metallurgical

December 31, 2019
1,250
48
81
58

2020 Reserve
1,400
47
69
57

Unit
$/oz
$/t
$/t
$/t

10
68

71
91.7

8
92

77
91.7

percent
$/oz

$/oz
percent

(5) Gold cut-off grades for the different mining methods are listed in the table below:
2020 Reserve
3.8
4.4

December 31, 2019
3.8
5.0

Gold Cut-off Grade
Transverse Stope
Drift and Fill

(6) Silver was not considered in the calculation of the cut-off grade.
(7) Tonnages are rounded to the nearest 1,000 t, gold grades are rounded to two decimal places, and silver grades are
rounded to one decimal place. Tonnage and grade measurements are in metric units; contained gold and silver are
reported as thousands of troy ounces. Rounding as required by reporting guidelines may result in summation
differences.

Health and Safety and Community

Health and Safety

•

•
•

The health and safety of personnel at site is of paramount importance, and stringent procedures were put in
place prior to the re-start of operations in July 2020 to minimize the impact of COVID-19 on the workforce.
These procedures include off-site quarantine followed by a Polymerase Chain Reaction (PCR) test for all
employees and contractors before accessing Fruta del Norte, mandatory use of masks, health monitoring,
physical distancing, and enhanced disinfection and restricted access to common areas. To date, only 34 cases
have been identified at site, with no cases identified at site since August 2020. These enhanced protocols
continue to remain in place.
There were two lost time incidents and five medical aid incidents during the year.
The Total Recordable Incident Rate for the year was 0.41 per 200,000 hours worked.

Community
•

In response to the COVID-19 pandemic, the Company’s community activities in 2020 shifted to supporting the
local government and Ministry of Health initiatives. An example of one of the many programs being undertaken
in this respect was the Neighbourhood Doctor program whereby the Company provides transportation for
medical professionals, allowing them to access families in rural areas. Moreover, Lundin Gold also provides
essential equipment to frontline workers in the communities surrounding the Mine.

• During the fourth quarter of 2020, a public bridge over the Zamora River, which connected local communities
and was used in part for access to Fruta del Norte, collapsed, with no reported injuries. Lundin Gold is
supporting the affected communities by assisting with transportation of people and supplies and has reaffirmed
its commitment to fund the replacement of the public bridge being constructed under the authority of the
provincial government, estimated at $3.0 million.
Following the collapse of the bridge, a group of local residents erected an illegal blockade on the public road
used to access Fruta del Norte. A resolution was reached through the efforts of the Company and the national
government and the blockade was removed after 15 days. The blockade had little impact on site operations.

•

Exploration
•

In September, the Company received the permit for drilling two of its priority targets, Barbasco and Puente-
Princesa, located 7 kilometres (“km”) from Fruta del Norte along the 16 km long Suarez Pull-Apart Basin
structure. Plans for a 9,000 metre drilling campaign, which involves establishing COVID-19 protocols for these
activities, are underway. The Company is targeting a start date for this regional exploration in the first quarter
of 2021.

SELECTED ANNUAL FINANCIAL INFORMATION

(Expressed in thousands of U.S. dollars, except
share and per share amounts)
Revenues

2020

2019

2018

Income from mining operations

172,386

358,156 $

- $

Derivative loss for the year

(136,984)

(93,120)

(15,731)

Net loss for the year

(47,158)

(118,945)

(22,068)

Basic and diluted loss per share

(0.21) $

(0.54) $

(0.12)

Weighted-average number of common shares

outstanding

Total assets

Long-term debt
Working capital

227,500,029

221,247,101

191,390,673

1,505,360 $

1,408,961 $

1,012,461

857,094
56,603

878,586
32,800

364,252

153,186

Year ended December 31, 2020 compared to the year ended December 31, 2019

The 2020 Year marked the start of operations at Fruta del Norte which resulted in net revenues of $358.2 million and
income from mining operations of $172.4 million. With this said however, in the 2020 Year the Company generated a
loss of $47.2 million (2019: $118.9 million), principally as a result of a derivative loss of $137.0 million (2019: $93.1
million), due to a change in fair value of the Company’s gold prepay and stream credit facilities (explained in more detail
below) and costs of $29.3 million incurred during the suspension of operations in the second quarter of 2020. In addition,
following the achievement of commercial production, the Company began expensing the cost of its loan facilities, which
has resulted in a finance expense of $44.9 million compared to a finance income of $1.8 million in 2019. Finance costs
were previously capitalized during the construction period. With the cumulative gains in other comprehensive income
driven by derivative gains from changes to the Company’s credit risk, a deferred income tax recovery of $13.2 million
was also recognized in the 2020 Year as an offset to a deferred income tax expense in other comprehensive income,
driven by the derivative gains recorded as part of the fair value calculation of the gold prepay and stream obligations.

Income from mining operations

Effective March 1, 2020, following declaration of commercial production in February 2020, net proceeds from sales of
mineral material and expenditures of an operating nature were recognized as revenues and cost of sales, instead of
being deducted from or added to the capitalized cost of FDN, as applicable, during the final few months of construction,
commissioning and ramp up of Fruta del Norte. As a result, revenues of $358.2 million were recognized during the
2020 Year based on sales of 199,256 oz of gold. After deducting cost of goods sold of $185.8 million, the Company
generated income from mining operations during the 2020 Year of $172.4 million. More generally, revenues and net
income from mining operations for the 2020 Year were significantly impacted by the suspension of operations for the
entire second quarter of 2020 due to the COVID-19 pandemic.

Corporate administration

Corporate administration costs of $17.8 million were incurred during the 2020 Year compared to $23.0 million during
the 2019 Year. The decrease of $5.2 million is mainly attributable to training costs, which decreased by $3.1 million
during the 2020 Year due to the training program for operations being completed in the third quarter of 2019, as well
as lower professional fees and certain costs now being classified as operating expenses as a result of reaching
commercial production. These are partly offset by the payment of $2.8 million in milestone bonuses to the Company’s
senior employees for achieving commercial production.

Suspension of operations

In response to the COVID-19 pandemic, operations at Fruta del Norte were suspended throughout the second quarter
of 2020. The Company continued to pay all personnel during the period of temporary suspension and retained a
minimal number of staff at Fruta del Norte to undertake necessary care and maintenance, as well as other activities to
ensure the efficient restart of operations. Suspension costs of $29.3 million were principally comprised of wages, site
maintenance activities, COVID-19 related costs and ongoing fixed costs such as insurance and property taxes.

Finance expense (income)

With the start of commercial production, finance expense is recognized in the Company’s consolidated statement of
loss. This resulted in a finance expense of $44.9 million during the 2020 Year which includes interest of $33.9 million
on the Company’s loan facilities as well as other finance costs of $7.7 million in support of the loan facilities.

Derivative gains or losses

Derivative losses and gains in the statements of operations or other comprehensive income, respectively, are driven
by the Company’s debt obligations classified as financial liabilities measured at fair value. During the 2020 Year, the
Company made the first scheduled principal and interest repayments totaling $18.3 million under its gold prepay facility
and $18.0 million under its stream facility, based on gold and silver prices at the time of repayment. However, the
reduction in the amount of these debt obligations on the balance sheet is smaller due to a change in their estimated
fair values during the 2020 Year. This variation is recorded as a derivative gain or loss in the statements of operations
and other comprehensive income in the applicable period. The fair values calculated under the Company’s accounting
policies are based on numerous estimates noted below as of the balance sheet date and are, therefore, subject to
further future variations until the debt obligations are repaid by the Company.

These balances are valued using Monte Carlo simulation valuation models. The key inputs used by the Monte Carlo
simulation include: the gold and silver forward prices, the Company’s expectation about long-term gold yields, gold and
silver volatility, risk-free rate of return, risk-adjusted discount rate, and production expectations. Relatively small
variations in some of these inputs can give rise to significant variations in the fair value of financial liabilities; hence, the
large derivative gains and losses recorded in the accounts to date.

Two key drivers of current fair values are gold and silver prices and the Company’s risk adjusted discount rate:

•

Future repayments under the gold prepay and stream credit facilities are based on forward gold and silver
price estimates at time of repayment. During periods of increasing gold and silver prices, their forecast
forward prices will also generally increase. This, combined with a factor for volatility, results in a higher
estimated fair value of the debt obligations at the current balance sheet date and the recognition of derivative
losses in the statement of operations, although it does not necessarily reflect the amounts that will actually
be repaid when the obligations become due in the future. The potentially more significant impact of the same
change in forward gold and silver prices on the value of future production and revenue forecasts to be
generated during the same periods when the debt obligations will be repaid cannot be recognized because
of the inherent uncertainty and risks associated with actually realizing such production and sales.

The discount rate used to determine the current fair value of future payments under the gold prepay and
stream credit facilities is dependent not only on the Company’s own weighted average cost of capital, but
also on market conditions. These include inflation, economic conditions, both local and industry specific, and
other factors outside of the Company’s control like the COVID-19 pandemic. The pandemic has negatively
impacted global financial markets in 2020, and may continue to do so, causing an increase and higher
volatility in yields and credit risk. An increase in yields would generally cause a decrease in the fair value of
financial instruments like the gold prepay and stream credit facilities. This decrease in fair value must be
recorded as a gain in Other Comprehensive Income rather than offsetting the derivative loss in the statement
of operations. The tax impact of this cumulative gain to December 2020 must also be recorded, resulting in
an offsetting tax recovery in the statement of operations in the 2020 Year.

On a net basis, after accounting for the 2020 repayments under the two facilities, this results in a $10.5 million increase
in their fair value during the 2020 Year.

SUMMARY OF QUARTERLY FINANCIAL RESULTS

The Company’s quarterly financial statements are reported under IFRS as issued by the IASB as applicable to interim
financial reporting. The following table provides highlights from the Company’s financial statements over the past eight
quarters (unaudited).

Revenues

Income from mining operations

Derivative loss for the period

Net income (loss) for the period

Basic income (loss) per share
Diluted income (loss) per share

Weighted-average number of common
shares outstanding

Basic
Diluted

2020
Q4

2020
Q3

2020
Q2

2020
Q1

$
$

189,250

118,904

13,146

36,856

94,857 $

62,751 $

4,442 $

10,336

(90,673) $

(18,010) $

(25,732) $

(2,569)

(1,233) $

27,780 $

(64,374) $

(9,331)

(0.01) $
(0.01) $

0.12 $
0.12 $

(0.29) $
(0.29) $

(0.04)
(0.04)

230,039,327
230,039,327

229,936,873
233,264,544

225,724,679
225,724,679

224,244,554
224,244,554

Additions to property, plant and equipment $

23,307 $

3,790 $

9,386 $

5,347

Total assets

Long-term debt

Working capital

Revenues

Derivative gain (loss) for the period

Net income (loss) for the period

Basic income (loss) per share
Diluted income (loss) per share

Weighted-average number of common
shares outstanding

Basic
Diluted

$
$

1,505,360 $

1,452,070 $

1,407,231 $

1,403,192

857,094 $

808,770 $

790,285 $

808,251

56,603 $

31,172 $

(7,205) $

39,581

2019
Q4

2019
Q3

2019
Q2

2019
Q1

(35,120) $

(33,723) $

(24,745) $

468

(40,765) $

(39,672) $

(30,797) $

(7,711)

(0.18) $
(0.18) $

(0.14) $
(0.14) $

(0.04)
(0.04)

223,339,447
223,339,447

222,953,642
222,953,642

222,535,083
222,535,083

216,061,503
216,061,503

Additions to property, plant and equipment $

98,642 $

109,996 $

118,520 $

124,069

Total assets

Long-term debt

Working capital

1,408,961 $

1,344,528 $

1,343,799 $

1,062,931

878,586 $

772,526 $

722,689 $

388,106

32,800 $

124,586 $

222,056 $

59,889

Three months ended December 31, 2020 compared to the three months ended December 31, 2019

The Company generated a net loss of $1.2 million during the fourth quarter of 2020 compared to a net loss of $40.8
million during the fourth quarter of 2019. Net income was generated from the recognition of revenues of $189.3 million
and income from mining operations of $94.9 million. This is offset by a derivative loss of $90.7 million and finance
expense of $12.9 million. In addition, a deferred income tax recovery of $13.2 million was recognized to offset the
deferred income tax expense relating to derivative gains in other comprehensive income. Ramp up of operations
commenced in the third quarter of 2020 following the temporary suspension of operations in the second quarter of 2020
in response to the COVID-19 pandemic. Prior to that, Fruta del Norte was under construction and therefore, the
Company did not generate income. The loss in the fourth quarter of 2019 was mainly driven by a derivative loss of
$35.1 million and corporate administration costs of $4.1 million.

Income from mining operations

During the fourth quarter of 2020, the Company recognized revenues of $189.3 million from the sale of 106,190 oz of
gold. This is offset by cost of goods sold of $94.4 million which is comprised of operating expenses of $55.5 million;
royalties of $11.1 million; and depletion and amortization of $27.8 million. During the same period in 2019, revenues
and cost of sales were deducted from or added to the capitalized cost of FDN, as applicable, considering that the
Company was in the final few months of construction, commissioning and ramp up of Fruta del Norte.

Corporate administration

Corporate administration costs decreased from $4.1 million during the fourth quarter of 2019 to $2.8 million during the
fourth quarter of 2020. This decrease is attributable to lower professional fees and the classification of certain costs to
operating expenses after the start of commercial production.

Finance expense (income)

Finance expense of $12.9 million was incurred during the fourth quarter of 2020, which is comprised of costs under the
Company’s loan facilities including accrued interest expense totaling $9.6 million and related fees of $2.3 million. These
amounts were previously capitalized during the construction period.

Derivative loss

Derivative loss of $90.7 million was recorded during the fourth quarter of 2020 compared to a derivative loss of $35.1
million in the fourth quarter of 2019. The derivative loss is due to the change in estimated fair values of the gold prepay,
stream, and offtake facilities which are accounted for as financial liabilities measured at fair value and is more fully
explained above.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2020, the Company had cash of $79.6 million and a working capital balance of $56.6 million
compared to cash of $75.7 million and a working capital balance of $32.8 million at December 31, 2019. The change
in cash in the 2020 Year was primarily due to cash proceeds from operating activities of $113.6 million and net proceeds
from a bought deal equity financing which closed on June 11, 2020 of $41.4 million. This is offset by principal and
interest repayments under the loan facilities totaling $77.7 million and costs incurred for the development of Fruta del
Norte of $79.6 million which includes recoverable VAT paid on development costs.

Trade receivables

The majority of trade receivables represent the value of concentrate sold as at period end for which the funds are not
yet received. Consistent with industry standards, these sales have relatively long payment terms and are not fully
settled until concentrates are received by the customer and related final assays confirmed, generally two to four months
after the export sale occurs. There is no recorded allowance for credit losses. In determining the recoverability of trade
receivables, the Company assesses the credit quality of the counterparty, with the concentration of the credit risk limited
due to the nature of the counterparties involved and a history of no credit losses.

VAT receivables

VAT paid in Ecuador by the Company after January 1, 2018 will be refunded or applied as a credit against other taxes
payable based on export sales. As the Company is starting to generate sales, a portion of the VAT recoverable has
been reclassified as current assets based on the Company’s assessment of the estimated time for processing current
VAT claims and forecast future sales.

Advanced royalties

Advance royalties are deductible against future royalties on sales payable to the Government of Ecuador at a rate equal
to the lesser of 50% of the actual future royalties payable in a six-month period or 10% of the total advance royalty
payment. As the Company is generating sales, a portion of the advance royalty payment is classified as current assets.

Inventories

Gold inventory is recognized in the ore stockpiles and in production inventory, comprised principally of concentrate and
doré at site or in transit to port or the refinery, with a small component of gold-in-circuit. The high value of material and
supplies, comprised of consumables and spare parts, reflects the Company’s assessment of the procurement cycles
due to the remoteness of FDN. Inventories are now at expected levels.

Investment activities

Investment activities for the 2020 Year are comprised principally of costs for the construction and development of Fruta
del Norte, as well as some costs incurred to date on sustaining capital. In the 2020 Year, the remaining work on FDN
focused on the following:

• The South Ventilation Raise (“SVR”), for which construction resumed in June following the temporary
suspension of operations and is ongoing. Progress is slower than anticipated and the Company continues to
expect its completion in the second quarter of 2021. The timing of this work does not currently impact planned
production.

• Commissioning and ramp up of the paste plant which were completed during the fourth quarter of 2020,

resulting in the plant being fully operational by year end and paste poured in the mine.

• Construction of the Company’s Zamora River bridge which commenced with strict COVID-19 protocols in
place to minimize health risks to the nearby communities. The bridge is expected to be completed in the
second quarter of 2021.

Liquidity and capital resources

The Company’s treasury was sufficient to support the Company during the first half of the year, which included the
temporary suspension and re-start of operations in July 2020. The treasury was supplemented by an equity financing
of $41.4 million in June 2020 when the Company closed a bought deal equity offering for gross proceeds of C$57.5
million, by issuing a total of 4,772,500 common shares at a price of C$12.05 per share.

Following the re-start of operations in early July, the Company generated $118.4 million of net cash from its operating
activities, which also involved an increase in working capital while at the same time satisfying planned capital
expenditures and loan facilities obligations. For the 2020 Year, the Company made scheduled principal and interest
payments under its debt facilities totaling $77.7 million, which included monthly payments under the stream facility that
commenced in February 2020 and totaled $18.0 million. In December, a payment under the gold prepay facility totaling
$18.3 million and principal repayments totaling $22.8 million under the senior debt facilities were also made, as
scheduled. Repayments of the gold prepay and senior debt facilities are due quarterly.

The Company expects to generate strong operating cash flow during 2021 based on its production and AISC guidance
at current gold prices. This strong operating cash flow will support debt repayments, exploration program costs, and
planned capital expenditures, including an expansion project to increase the mill throughput from 3,500 to 4,200 tonnes
per day.

Monthly payments under the stream facility will be based on 7.75% and 100% of gold and silver ounces sold,
respectively, calculated at the current gold and silver prices at the end of each month, less $400 and $4 per oz,
respectively. Quarterly payments under the gold prepay facility are expected to be based on the current value of 9,7751
oz of gold at the end of each quarter. Scheduled variable quarterly principal repayments of the senior debt facilities will
total $59.5 million for 2021. The Company is working towards achieving construction completion, as defined under the
senior debt facilities, in 2021. Depending on the timing of this milestone, additional quarterly principal repayments based
on 30% of Fruta del Norte’s free cash flow could also occur. An accelerated reduction in the senior facilities would
reduce the Company’s related finance cost going forward.

Notwithstanding forecasting strong cash flows from operations, the Company cannot be certain that an escalation of
the COVID-19 pandemic will not have an impact on operations or on the Company’s financial position in the future.
The Company’s continuing operations and the underlying value and recoverability of the amount shown for the mineral
interests and property, plant and equipment are ultimately dependent upon the ability of the Company to operate FDN
without extended interruptions and on future profitable production.

TRANSACTIONS WITH RELATED PARTIES

During the 2020 Year, the Company paid $0.4 million (2019 – $0.3 million) to Namdo Management Services Ltd.
(“Namdo”), a private corporation associated with an officer of the Company in 2020. The Company occupies office
space in the Namdo offices in Vancouver for the Company’s management, investor relations personnel and support
staff. Namdo charges a service fee and recovers out of pocket expenses related to the Company.

FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, cash equivalents and receivables, which are categorized as
financial assets at amortized cost, and accounts payable and accrued liabilities, which are categorized as financial
liabilities at amortized cost. The fair value of these financial instruments approximates their carrying values due to the
short-term nature of these instruments. In addition, the gold prepay credit facility; stream loan credit facility; and offtake
commitment have been classified as financial liabilities measured at fair value. The senior debt facilities have been
classified as a financial liability at amortized cost.

The Company’s financial instruments are exposed to a variety of financial risks by virtue of its activities.

Currency risk

Lundin Gold is a Canadian company, with foreign operations in Ecuador. Revenues generated and expenditures
incurred in Ecuador are primarily denominated in U.S. dollars, as are its loan facilities. However, equity capital, if
needed, is typically raised in Canadian dollars. As such, the Company is subject to risk due to fluctuations in the
exchange rates of foreign currencies. Although the Company does not enter into derivative financial instruments to
manage its exposure, the Company tries to manage this risk by maintaining most of its cash in U.S. dollars.

Credit risk

Credit risk is the risk of a financial loss to the Company if a counterparty to a financial instrument fails to meet its
contractual obligations. The majority of the Company’s cash is held in large financial institutions with a high investment
grade rating. The Company is also subject to credit risk associated with its trade receivables. The Company manages
this risk by only selling to a small group of reputable customers with strong financial statements.

1 This parameter increases to 11,500 oz and 13,225 if the gold price during the immediately preceding quarter is less
than $1,436 and less than $1,062, respectively.

Interest rate risk

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. Cash flow
forecasting is performed regularly to monitor the Company’s liquidity requirements to ensure it has sufficient cash to
meet its operational needs at all times. In addition, management is actively involved in the review, planning and
approval of significant expenditures and commitments.

Commodity price risk

The Company is subject to commodity price risk from fluctuations in the market prices of gold and silver. Commodity
price risks are affected by many factors that are outside the Company’s control including global or regional consumption
patterns, the supply of and demand for metals, speculative activities, the availability and costs of substitutes, inflation,
and political and economic conditions. The Company has not hedged the price of any commodity at this time.

The fair value of the gold prepay and the stream credit facilities, which is accounted for at fair value through profit or
loss, is impacted by fluctuations of commodity prices.

COMMITMENTS

Significant capital expenditures contracted as at December 31, 2020 but not recognized as liabilities are as follows:

2021
2022
2023

Total

Development
costs

11,009
-

11,009

The Company’s sales are subject to a 5% net smelter royalty payable to the Government of Ecuador and a 1% net
revenue royalty payable to third parties.

OFF-BALANCE SHEET ARRANGEMENTS

During the years ended December 31, 2020 and December 31, 2019 there were no off-balance sheet transactions.
The Company has not entered into any specialized financial arrangements to minimize its currency risk.

OUTSTANDING SHARE DATA

As at the date of this MD&A, there were 230,604,087 common shares issued and outstanding and outstanding warrants
to purchase a total of 411,441 common shares. There were also stock options outstanding to purchase a total of
5,720,500 common shares, 148,000 restricted share units with a performance criteria, 3,100 restricted share units
settled by issuance of shares, and 1,639 deferred share units.

OUTLOOK

Guidance for 2021 remains unchanged with expected production of 380,000 to 420,000 oz of gold at Fruta del Norte
based on an average head grade of 10.4 g/t and average gold recovery of 90%. AISC is forecasted between $770 and
$830 per oz of gold sold, calculated on a basis consistent with prior periods.

The following capital project activities, which are still part of the construction scope of Fruta del Norte, are planned for
completion in 2021:

•
•

the construction of the Company’s bridge over the Zamora River early in the second quarter of 2021.
the SVR in the second quarter of 2021.

Engineering and procurement of additional equipment are underway on the expansion project designed to increase the
mill throughput from 3,500 to 4,200 tpd, which is expected to be completed before the end of 2021. The throughput
expansion modifications are also expected to improve mill recoveries through the addition of retention time in the
flotation process of the plant.

Under its sustaining capital activities for 2021, the Company has also planned a 10,000 metre drill program, targeting
conversion and expansion of the Fruta del Norte mineral resource, and the completion of the first and second raises of
the FDN tailings dam.

Furthermore, the reactivation of the exploration program, focused on drilling the Barbasco and Puente-Princesa targets,
has commenced and drilling of these targets is expected to start in the first quarter of 2021.

NON-IFRS MEASURES

This MD&A refers to certain financial measures, such as average realized gold price, cash operating cost per oz. and
all-in sustaining cost per oz, which are not recognized under IFRS and do not have a standardized meaning prescribed
by IFRS. These measures may differ from those made by other companies and accordingly may not be comparable
to such measures as reported by other companies. These measures have been derived from the Company’s financial
statements because the Company believes that, with the achievement of commercial production, they are of assistance
in the understanding of the results of operations and its financial position.

Average realized gold price per oz sold

Average realized gold price is a metric used to better understand the gold price realized during a period. This is
calculated as revenues for the period plus treatment and refining charges less silver sales divided by gold oz sold.

October 1 to December 31,
2019

2020

March 1 to December 31,
2019

2020

Revenues

189,250

358,156

Treatment and refining charges
Less: silver revenues

9,290
(2,133)

Gold sales

Gold oz sold

196,407

106,190

Average realized gold price

1,850

-
-

17,608
(3,985)

371,779

199,256

1,866

-
-

Adjusted Earnings and adjusted basic earning per share

Adjusted earnings and adjusted basic earnings per share can be used to measure and may assist in evaluating
operating earning trends in comparison with results from prior periods by excluding specific items that are significant,
but not reflective of the underlying operating activities of the Company. Presently, these include: the second quarter
suspension of operations and derivative losses, and related income tax effects, from accounting for the gold prepay
and stream facilities at fair value. Adjusted basic earnings per share is calculated using the weighted average number
of shares outstanding under the basic method of earnings per share as determined under IFRS.

Three months ended
December 31,

2020

2019

Year ended
December 31,

2020

2019

Net income (loss) for the period

(1,233)

(40,765)

(47,158)

(118,945)

Adjusted for:

Suspension of operations
Derivative loss
Deferred income tax recovery

-
90,673
(13,216)

-
35,120
-

29,304
136,984
(13,216)

-
93,120
-

Adjusted earnings (loss)

76,224

(5,645)

105,914

(25,825)

Basic weighted average shares
outstanding

Adjusted basic earnings (loss) per
share

Cash operating cost per oz

230,039,327

223,339,447

227,500,029

221,247,101

0.33

(0.03)

0.47

(0.12)

Cash operating cost per oz sold, combined with revenues, can be used to evaluate the Company’s performance and
ability to generate operating income and cash flow from operating activities. Cash operating costs include operating
expenses and royalty expenses from March 1, 2020 after the achievement of commercial production.

For the three
months ended
December 31,
2020

For the six
months ended
December 31,
2020

2020 Operating
Period

Operating expenses
Royalty expenses

Cash operating costs

Gold oz sold

Cash operating cost per oz sold

55,527
11,030

87,908
17,914

66,557

105,822

106,190

168,345

627

629

112,132
20,750

132,882

199,256

667

All-in sustaining cost

AISC provides information on the total cost associated with producing gold since March 1, 2020. The Company
calculates AISC as the sum of total cash operating costs (as described above), corporate social responsibility costs,
treatment and refining charges, accretion of restoration provision, and sustaining capital, less silver revenue, all divided
by the gold ounces sold to arrive at a per oz amount.

Other companies may calculate this measure differently as a result of differences in underlying principles and policies
applied.

For the three
months ended
December 31,
2020

For the six
months ended
December 31,
2020

2020 Operating
Period

66,557
197
9,290
10
5,374
(2,133)

105,822
392
15,258
19
6,638
(3,568)

79,295

124,561

106,190

168,345

747

740

132,882
814
17,608
39
6,638
(3,985)

153,996

199,256

773

Cash operating costs
Corporate social responsibility
Treatment and refining charges
Accretion of restoration provision
Sustaining capital
Less: silver revenues

All-in sustaining costs

Gold oz sold

All-in sustaining cost per oz sold

Operating cash flow per share

Operating cash flow per share can be used to evaluate the Company’s ability to generate cash flow from operations.
The Company calculates operating cash flow per share as net cash provided by or used for operating activities divided
by its basic weighted-average number of common shares outstanding.

Three months ended
December 31,

2020

2019

Year ended
December 31,

2020

2019

Net cash provided by (used for)
operating activities

Basic weighted average shares
outstanding

95,019

(2,873)

113,644

(18,433)

230,039,327

223,339,447

227,500,029

221,247,101

Operating cash flow per share

0.41

(0.01)

0.50

(0.08)

CRITICAL ACCOUNTING ESTIMATES

The Company's significant accounting policies are presented in Note 3 in the Notes to the audited consolidated financial
statements for the year ended December 31, 2020.

The preparation of consolidated financial statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and further periods if the review affects both current and future periods.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at
the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities
in the event that the actual results differ from assumptions made, relate to, but are not limited to, the following:

Mineral reserves and resources

The Company estimates its mineral reserves and resources based on information compiled and reviewed by qualified
persons as defined in accordance with NI 43-101 requirements. The estimation of mineral reserves and resources
requires judgment to interpret geological data and metallurgical testing, design of appropriate mining methods, recovery
methods and establishment of a life of mine production schedule. The estimation of recoverable reserves is also based
on assumptions such as capital costs, operating costs and metal pricing. New geological data or changes in the above
assumptions may change the economic viability of reserves and may, ultimately, result in the reserves being revised.
Changes in the reserve or resource estimates may impact the fair value of financial instruments, the valuation of
property, plant and equipment and mineral properties, the depletion and depreciation of property, plant and equipment
and mineral properties, utilization of tax losses and decommissioning and site restoration provisions.

Fair value of financial instruments

The fair value of financial instruments that are not traded in an active market are determined using valuation techniques.
The Company uses its judgment to select a variety of methods and makes significant assumptions that are mainly
based on market conditions existing at initial recognition and at the end of each reporting period. Refer to Note 20 of
the audited consolidated financial statements for the year ended December 31, 2020 for further details on the methods
and assumptions utilized.

Commercial production

The determination of when a mine is operating in the manner intended by management (referred to as “commercial
production”) is a matter of significant judgement. In making this determination, management considered specific facts
and circumstances. These factors included, but were not limited to, whether substantially all construction development
activities had been completed in accordance with design and a period of commissioning which achieved consistent
operating results for a period of time in relation to design capacity.

Valuation of mineral properties

The Company carries the acquisition costs of its mineral properties, property, plant, and equipment at cost less
depletion and depreciation and any impairment losses. The Company undertakes a periodic review of the carrying
values of these assets and whenever events or changes in circumstances indicate that their carrying values may
exceed their recoverable amount. In undertaking this review, management of the Company is required to make
significant judgments, including estimates of mineral reserves and resources. These judgments are subject to various
risks and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values of
these assets.

Utilization of tax losses

The Company is subject to income taxes in a number of jurisdictions and has had a history of tax losses. These tax
losses are only recognized to the extent that expected future taxable profits are available. Judgment is required in
assessing whether deferred tax assets and certain deferred tax liabilities are recognized on the balance sheet and what
tax rate is expected to be applied in the year when the related temporary differences reverse. Deferred tax liabilities
arising from temporary differences are recognized unless the reversal of the temporary differences is not expected to
occur in the foreseeable future and can be controlled. As the Company has not yet had a history of taxable profits as
at December 31, 2020, the Company has not recognized any tax losses on its financial statements except those
expected to be utilized as a result of cumulative derivative gains within other comprehensive income.

Stock-based compensation

The fair value of stock options is determined using the Black-Scholes option pricing model and are expensed over their
vesting periods. In estimating fair value, management of the Company is required to make certain assumptions and
estimates regarding the life of the options, volatility and forfeiture rates. Changes in the assumptions used could result
in materially different results.

Decommissioning and site restoration

The Company has obligations for site restoration and decommissioning related to Fruta del Norte. The future
obligations for decommissioning and site restoration activities are estimated by the Company using mine closure plans
or other similar studies which outline the requirements that will be carried out to meet the obligations. Because the
obligations are dependent on the laws and regulations of the country in which the project is located, the requirements
could change as a result of amendments in the laws and regulations relating to environmental protection and other
legislation affecting resource companies. As the estimate of obligations is based on future expectations, a number of
assumptions and judgments are made by management in the determination of closure provisions. The
decommissioning and site restoration provisions are more uncertain the further into the future the mine closure activities
are to be carried out.

QUALIFIED PERSON

The technical information relating to Fruta del Norte contained in this MD&A, including the 2020 Reserve, has been
reviewed and approved by Ron Hochstein P. Eng, Lundin Gold’s President & CEO who is a Qualified Person under NI
43-101. The disclosure of exploration information contained in this MD&A was prepared by Stephen Leary, MAusIMM
CP(Geo), a consultant to the Company, who is a Qualified Person in accordance with the requirements of NI 43-101.

FINANCIAL INFORMATION

The report for the three months ended March 31, 2021 is expected to be published on or about May 12, 2021.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Disclosure controls and procedures

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be
disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities
legislation is recorded, processed, summarized and reported within the time periods specified in the securities
legislation and include controls and procedures designed to ensure that information required to be disclosed by the
Company in its annual filings, interim filings or other reports filed or submitted under securities legislation is accumulated
and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the
design and operation of the Company’s disclosure controls and procedures. As of December 31, 2020, the Chief
Executive Officer and Chief Financial Officer have each concluded that the Company’s disclosure controls and
procedures, as defined in NI 52-109 - Certification of Disclosure in Issuer’s Annual and Interim Filings, are effective to
achieve the purpose for which they have been designed.

Internal controls over financial reporting

Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with IFRS. Management is also
responsible for the design of the Company’s internal control over financial reporting in order to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with IFRS.

The Company’s internal controls over financial reporting include policies and procedures that: pertain to the
maintenance of records that, in reasonable detail accurately and fairly reflect the transactions and disposition of assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial
statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with
authorization of management and directors of the Company; and provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the
financial statements.

Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the
design and operation of the Company’s internal controls over financial reporting. As of December 31, 2020, the Chief
Executive Officer and Chief Financial Officer have each concluded that the Company’s internal controls over financial
reporting, as defined in NI 52-109 - Certification of Disclosure in Issuer’s Annual and Interim Filings, are effective to
achieve the purpose for which they have been designed.

Because of their inherent limitations, internal controls over financial reporting can provide only reasonable assurance
and may not prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

RISKS FACTORS

There are a number of factors that could negatively affect Lundin Gold’s business and the value of the common shares,
including the factors listed below. The following information pertains to the outlook and conditions currently known to
Lundin Gold that could have a material impact on the financial condition of the Company. Other factors may arise that
are not currently foreseen by management of Lundin Gold that may present additional risks in the future. Current and
prospective security holders of Lundin Gold should carefully consider these risk factors.

Pandemic Virus Outbreak

Global markets have been adversely impacted by COVID-19 and could be impacted by other emerging infectious
diseases and/or the threat of outbreaks of viruses, other contagions or epidemic diseases in the future. The COVID-19
pandemic has resulted in a widespread crisis that has adversely affected the economies and the financial markets of
many countries, resulting in an economic downturn which could adversely affect the Company’s business and the
market price of its Shares. Many industries, including the mining industry, have been impacted by these market
conditions. Continuing or increased levels of volatility or a rapid destabilization of global economic conditions could
result in a material adverse effect on commodity prices, demand for metals, availability of credit, investor confidence
and general financial market liquidity, all of which may adversely affect the Company’ business and the market price of
its Shares.

In 2020, aspects of the Company’s operations were impacted by COVID-19 for a variety of reasons, such as
government and other restrictions on transportation and the mobility of personnel and mandatory quarantine periods
and border closures. Until such time as countries around the world successfully contain the spread of COVID-19,
significant restrictions imposed by governments will likely remain in place and could increase. Possible impacts of the
continuing or worsening spread of COVID-19, including new variants of the virus, may include mandated or voluntary
closures of operations, illness among the Company’s workforce, restricted mobility of personnel, interruptions in the
Company’s logistics and supply chain, delay at or closure of the Company’s refining and smelting service providers
and global travel restrictions, all of which could disrupt the Company’s operations and negatively impact its financial
performance of the value of its Shares. The ultimate economic viability of the Company’s business is impacted by its
ability to operate Fruta del Norte and/or to maintain adequate liquidity through potential sources of financing.

Instability in Ecuador

The Company is subject to certain risks and possible political and economic instability specific to Ecuador, arising from
change of government, political unrest, labour disputes, invalidation of government orders, permits or property rights,
local legal proceedings and referendums seeking to suspend mining activities, unsupportive local and regional
governments, risk of corruption, military repression, war, civil disturbances, criminal and terrorist acts, hostage taking,
changes in laws, expropriation, nationalization, renegotiation or nullification of existing concessions, agreements,
licenses or permits and changes to monetary or taxation policies. The occurrence of any of these risks may adversely
affect the mining industry, mineral exploration and mining activities generally or the Company and could result in the
impairment or loss of mineral concessions or other mineral rights.

Exploration, development or operations may also be affected to varying degrees by government regulations with
respect to, but not limited to, restrictions on future exploitation and production, price controls, export controls, income
taxes, labour and immigration, and by delays in obtaining or the inability to obtain necessary permits, opposition to
mining from environmental and other non-governmental organizations, limitations on foreign ownership, expropriation
of property, ownership of assets, environmental legislation, labour relations, limitations on repatriation of income and
return of capital, high rates of inflation, increased financing costs and site safety. These factors may affect both Lundin
Gold’s ability to undertake exploration and development activities in respect of future properties in the manner
contemplated, as well as its ability to continue to explore, develop and operate those properties in which it has an
interest or in respect of which it has obtained exploration and development rights to date.

Ecuador is holding presidential elections this year, which will result in a change in government. Any shifts in political
attitudes or changes in laws that may result in, among other things, significant changes to mining laws or any laws,
regulations or policies are beyond the control of Lundin Gold and may adversely affect its business. The Company
faces the risk that governments may adopt substantially different policies, which might extend to the expropriation of
assets or increased government participation in the mining sector. In addition, changes in resource development or
investment policies, increases in taxation rates, higher mining fees and royalty payments, revocation or cancellation of
mining concession rights or shifts in political attitudes in Ecuador may adversely affect Lundin Gold’s business.

Production Estimates

Forecasts of future production are estimates based on interpretation and assumptions, and actual production may be
less than estimated. Unless otherwise noted, the Company’s production forecasts are based on full production being
achieved from Fruta del Norte. Lundin Gold’s ability to achieve and maintain full production rates at Fruta del Norte is
subject to a number of risks and uncertainties. The Company’s production estimates are dependent on, among other
things, the completion of the south ventilation raise, the completion of the Expansion Project, the accuracy of Mineral
Reserve and Mineral Resource estimates, the accuracy of assumptions regarding ore grades and recovery rates,
ground conditions, physical characteristics of ores, such as hardness and the presence or absence of particular
metallurgical characteristics, the accuracy of estimated rates and costs of mining and processing and mill availability,
and the receipt and maintenance of permits. The Company’s actual production may vary from its estimates for a variety
of reasons, including those identified under the heading “Operating Risks”. The failure of the Company to achieve its
production estimates could have a material adverse effect on the Company’s prospects, results of operations and
financial condition.

Mining Operations

The first few years of operations from Fruta del Norte are subject to a number of inherent risks. It is not unusual in the
mining industry for new mining operations to experience unexpected problems during the early stages of the production
phase, including failure of equipment, insufficient inventory of spare parts, machinery, the processing circuit or other
processes to perform as designed or intended, insufficient ore stockpile or grade, and failure to deliver adequate tonnes
of ore to the mill, any of which could result in delays, slowdowns or suspensions and require more capital than
anticipated. In addition, estimated mineral reserves and mineral resources and anticipated costs, including, without
limitation, operating expenses, cash costs and all-in sustaining costs, anticipated mine life, projected production,
anticipated production rates and other projected economic and operating parameters may not be realized, and the level
of future metal prices needed to ensure commercial viability may deteriorate.

Beyond the initial years of operations, the Company’s operations will continue to be subject to risks and hazards that
are inherent in the mining industry, including, but not limited to, unanticipated variations in grade and other geological
problems, surface and ground water conditions, water balance and water chemistry, backfill quality or availability,
underground conditions, metallurgy, ore hardness and other processing issues, critical equipment or process failure,
the lack of availability of input materials and equipment, disruption to power supply, geotechnical incidents such as
ground subsidence or landslides, accidents, labour force disruptions, supply chain/logistics disruptions, force majeure
events, unanticipated transportation disruptions or costs, consumable prices or availability and weather conditions, any
of which can materially and adversely affect, among other things, the safety of personnel, production quantities and
rates, costs and expenditures, contractual obligations and financial covenants.

Consequently, there is a risk that Fruta del Norte may encounter problems or be subject to delays or suspensions
resulting from these operating risks which could occur both during the initial few years of operations and beyond and
which may have material adverse consequences for Lundin Gold, including its operating results, cash flow and financial
condition.

Community Relations

The Company’s relationships with communities near where it operates and other stakeholders are critical to ensure the
future success of Fruta del Norte and the exploration and development of the Company’s other concessions. The
Company’s mineral concessions, including Fruta del Norte, are located near rural communities, some of which contain
groups that have been opposed to mining activities from time to time in the past, which may affect the operations at
Fruta del Norte and its exploration and development activities on its other concessions in the short and long term.
Furthermore, local communities may be influenced by external entities, groups or organizations opposed to mining
activities. In recent years, anti-mining nongovernmental organization (“NGO”) and indigenous group activities in
Ecuador have increased. These communities, NGOs and indigenous groups have taken such actions as civil unrest,
road closures and work stoppages. Such actions may have a material adverse effect on Lundin Gold’s operations at
Fruta del Norte and on its exploration activities and on its financial position, cash flow and results of operations. While
the Company is committed to operating in a socially responsible manner, there can be no assurance that the Company’s
efforts in this respect will mitigate against this potential risk.

Ability to Maintain Obligations or Comply with Debt

Lundin Gold is subject to restrictive covenants under the gold prepay and stream facilities, the senior debt facility and
the cost overrun facility. The Company’s project financing is secured by a first ranking charge over the assets of the
subsidiaries related to Fruta del Norte (collectively, the “Operating Subsidiaries”), by a pledge of the shares of the
Operating Subsidiaries and by guarantees of Lundin Gold and the Operating Subsidiaries. In addition, Lundin Gold
may from time to time enter into other arrangements to borrow money to fund its operations at Fruta del Norte or the
exploration and development activities on its other concessions, and such arrangements may include covenants that
have similar obligations or that restrict its business in some way.

Events may occur in the future, including events out of Lundin Gold's control, that could cause Lundin Gold to fail to
satisfy its obligations under the gold prepay and stream facilities, the senior debt facility or other debt instruments that
may arise. In such circumstances, amounts drawn under Lundin Gold's debt agreements may become due and payable
before the agreed maturity date, and Lundin Gold may not have the financial resources to repay such amounts when
due. If Lundin Gold were to default on its obligations under either the gold prepay and stream facilities, the senior debt
facility, the cost overrun facility or other secured debt instruments in the future, the lender(s) under such debt
instruments could enforce their security and seize Lundin Gold’s assets.

Financing Requirements

A substantial portion of Lundin Gold’s revenues and cash flows are committed to satisfying its obligations under the
Prepay and Stream Loans and the Senior Facility. To the extent that Lundin Gold does not generate sufficient revenues
and operating cash flow to satisfy its debt obligations, it will require additional capital to fund its debt obligations and
costs and activities not related to Operations, respectively. If Lundin Gold raises additional capital by issuing equity,
such financing may dilute the interests of shareholders and reduce the value of their investment. Moreover, Lundin
Gold may not be successful in locating suitable additional or alternate financing when required or at all or, if available,
Lundin Gold may incur substantial fees and costs and the terms of such financing might not be favourable to Lundin
Gold. A failure to raise capital when needed could have a material adverse effect on Lundin Gold’s business, financial
condition and results of operations.

Gold Price

The Company’s earnings, cash flow and financial condition are subject to risk due to fluctuations in the market price of
gold. Gold prices have historically fluctuated widely. The price of gold is affected by numerous factors beyond Lundin
Gold’s control, including levels of supply and demand, global or regional consumptive patterns, purchases or sales by
government central banks, increased production due to new mine developments and improved mining and production
methods, speculative activities related to the sale of metals, availability and costs of metal substitutes, international
economic and political conditions, interest rates, currency values and inflation.

A significant decline in the gold price could cause Fruta del Norte operations to be uneconomic. Depending on the price
of gold, the Company’s cash flow may be insufficient to meet its operating needs, debt obligations and capital
expenditures, and as a result the Company could experience financial difficulties and may suspend some or all of
mining activities or otherwise revise its mine plan and exploration and development plans. In addition, (i) there is a time
lag between the shipment of gold and final pricing, and changes in pricing can impact the Company’s revenue and
working capital position, and (ii) cash costs and all-in sustaining costs of gold production are calculated net of silver by-
product credits, and therefore may also be impacted by downward fluctuations in the price of silver. Any of these factors
could result in a material adverse effect on the Company’s results of operations and financial condition.

The estimation of economically viable identified Mineral Reserves requires certain assumptions, including gold price.
A revised estimate of identified Mineral Reserves due to a substantial decline in the gold price could result in the
decrease in the estimates of the Company’s Mineral Reserves, subsequent write downs and negative impact on mine
life.

Shortages of Critical Resources

Disruptions in the supply of products or services required for the Company’s activities could adversely affect the
Company’s operations, financial condition and results of operations. This may be the result of industry-wide shortages
of certain goods or services, interruption in supplier operations or in transportation methods of certain goods, the risk
of failure of certain long-lead items or the failure to obtain necessary permits for the supply of regulated goods. The
Company’s costs may also be affected by the prices of commodities and other inputs it consumes or uses in its
operations. The prices and availability of such commodities and inputs are influenced by supply and demand trends
affecting the mining industry in general and other factors outside the Company’s control. Increases in the price for
materials consumed in the Company’s mining and production activities could materially adversely affect the Company’s
results of operations and financial condition.

Environmental Compliance

All of Lundin Gold’s exploration, development and production activities are subject to extensive environmental
regulation. These regulations address, among other things, the emissions into the air, discharges into water,
management of waste, management of tailings, management and shipment of hazardous substances, protection of
natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations.

Some laws and regulations may impose penalties for environmental contamination, which could subject the Company
to liability for the conduct of others or for its own actions that followed all applicable laws at the time such actions were
taken. Environmental legislation is evolving in a manner that will result in stricter standards and enforcement, increased
fines and penalties for non-compliance, potential to temporary shutdown of a portion or all of the operations at Fruta
del Norte until non-compliance is corrected, more stringent environmental assessments of proposed projects and mine
closure plans and a heightened degree of responsibility for companies and their officers, directors and employees. Any
future changes in environmental regulation could adversely affect the Company’s ability to conduct its operations.

The Company may need to address contamination at Fruta del Norte in the future, either for existing environmental
conditions or for leaks or discharges that may arise from ongoing operations or other contingencies. Contamination
from hazardous substances at Fruta del Norte may subject it to material liability for the investigation or remediation of
contamination, as well as for claims seeking to recover for related property damage, personal injury or damage to
natural resources.

Infrastructure

Mining, processing, development and exploration activities depend, to one degree or another, on adequate
infrastructure. Reliable roads, bridges, and power sources are important elements of infrastructure, which affect capital
and operating costs. The lack of availability on acceptable terms or the delay in the availability of any one or more of
these items could prevent or delay or otherwise adversely impact the Company’s exploration, development or operating
activities. If adequate infrastructure is not available in a timely manner, there is a risk that (i) the operations at Fruta del
Norte will not achieve anticipated production, (ii) the operating costs associated with Fruta del Norte will be higher than
anticipated, or (iii) the Company’s exploration and development activities will be not carried out as anticipated, or at all.
Furthermore, unusual or infrequent weather phenomena, sabotage, community uprisings, government or other
interference in the maintenance or provision of necessary infrastructure could adversely affect the operations at Fruta
del Norte, cash flow and Lundin Gold’s financial position.

Dependence on Single Mine

The only material property interest of the Company is Fruta del Norte. Unless the Company acquires additional property
interests or advances its other exploration properties, any adverse developments affecting Fruta del Norte could have
a material adverse effect upon the Company and would materially and adversely affect the profitability, financial
performance and results of operations of the Company. While the Company may seek to develop and acquire additional
mineral properties that are consistent with its business objectives, there can be no assurance that Lundin Gold will be
able to identify suitable additional mineral properties or, if it does identify suitable properties, that it will have sufficient
financial resources to acquire such properties or that such properties will be available on terms acceptable to the
Company or at all.

Title Matters and Surface Rights and Access

There is a risk that title to the mining concessions, the surface rights and access rights comprising Fruta del Norte and
its related infrastructure or the concessions and access rights relating to Lundin Gold’s exploration concessions may
be deficient or subject to dispute. The procurement or enforcement of such rights can be costly and time consuming.
In areas where there are local populations or landowners, it may be necessary, as a practical matter, to negotiate or
enforce surface access. In addition, in circumstances where such access is denied, or no agreement can be reached,
Lundin Gold may need to rely on the assistance of local officials or the courts in such jurisdictions, which may delay or
impact exploration or mining activities as planned.

There is also a risk that the Company’s exploration, development and mining authorizations and surface rights may be
challenged or impugned by third parties. Finally, there is a risk that developing laws and movements respecting the
acquisition of lands and other rights of indigenous communities may alter the arrangements made by prior owners of
the lands where Fruta del Norte is located. Future laws and actions could have a material adverse effect on Lundin
Gold’s operations at Fruta del Norte or on its financial position, cash flow and results of operations.

Tax Regime in Ecuador

Tax regimes in Ecuador may be subject to differing interpretations and are subject to change without notice. The
Company’s interpretation of tax law as applied to its transactions and activities may not coincide with that of the tax
authorities. As a result, the taxation applicable to transactions and operations may be challenged or revised by the tax
authorities, which could result in significant additional taxes, penalties and/or interest.

There is a risk that restrictions on the repatriation of earnings from Ecuador to foreign entities will be imposed in the
future and Lundin Gold has no control over withholding tax rates. In addition, there is a risk that laws and regulations
in Ecuador may result in a capital gains tax on profits derived from the sale of shares, ownership interests and other
rights, such as exploration rights, of companies with permanent establishments in the country. It is unknown at this time
what, if any, liability the Company or its subsidiaries may be subject to as a result of the application of this law. There
is a risk that the Company’s access to financing may be limited as a result of the indirect taxation.

Availability of Workforce and Labour Relations

The Company’s gold production and its exploration and development activities depend upon the efforts of Lundin Gold’s
employees and contractors. The Company competes with mining and other companies on a global basis to attract and
retain employees at all levels with appropriate technical skills and operating experience necessary to operate its mines.
The conduct of the Company’s operations is dependent on access to skilled labour. Access to skilled labour may prove
particularly challenging for Lundin Gold given the remote location of Fruta del Norte and local laws which impose
thresholds for the representation of certain groups of people on Lundin Gold’s workforce in Ecuador and the ability of
foreign skilled labour to obtain visas to work in Ecuador. Shortages of suitably qualified personnel could have a material
adverse effect on the Company’s business and results of operations.

The Company’s operations personnel are working, stationed and travel to and from Fruta del Norte, which is located in
a remote region of Ecuador. While at site, these personnel are exposed to concentrated groups of people for lengthy
periods of time. Any personnel or visitor becoming infected with a serious illness that has the potential to spread rapidly,
like the current COVID-19 virus, could place other personnel and the Company’s operations at risk. Although the
Company takes every precaution to strictly follow health regulations and guidelines, there can be no assurance that
COVID-19 or other infectious illnesses will not negatively impact Lundin Gold’s personnel or its operations.

Lundin Gold’s operations at Fruta del Norte depend upon the efforts of its employees, and the Company’s operations
would be adversely affected if it failed to maintain satisfactory labour relations. The Company’s labour force is not
unionized, and the introduction of a labour union could result in a disruption to production and/or higher costs and
reduced flexibility. In addition, relations between the Company and its employees may be affected by changes in labour
and employment laws. Changes in such legislation or in the relationship between the Company and its employees may
have a material adverse effect on the Company’s business, results of operations, financial condition or prospects.

Health and Safety

Exploration and mining development and operating activities represent inherent safety hazards and maintaining the
health and safety of the Company’s employees and contractors is of paramount importance to the Company. Health
and safety hazard assessments are carried out regularly throughout the lifecycle of the Company’s activities, and robust
policies, procedures and controls are in place. Notwithstanding continued efforts to adhere to the Company’s “zero
harm” policy, safety incidents may still occur. Significant potential risks include, but are not limited to, surface or
underground fires, rock falls underground, blasting accidents, vehicle accidents, unsafe road conditions or events, fall
from heights, contact with energized sources, and exposure to infectious or occupational disease. Employees involved
in activities in remote areas may also be exposed to attacks by individuals or violent opposition by local communities
that may place the employees at risk of harm. Any incident resulting in serious injury or death could result in litigation
and/or regulatory action (including, but not limited to suspension of development activities and/or fines and penalties),
or otherwise adversely affect the Company’s reputation and ability to meet its objectives.

Government or Regulatory Approvals

Lundin Gold’s exploration and development activities and its operations depend on its ability to obtain, maintain or
renew various mineral rights, licenses, permits, authorizations and regulatory approvals (collectively, “Rights” and
individually a “Right”) from various governmental and quasi-governmental authorities. Government work stoppages
may also impact the Company’s ability to obtain, maintain or renew certain Rights. Lundin Gold’s ability to obtain,
maintain or renew such Rights on acceptable terms and on a timely basis is subject to changes in regulations and
policies and to the discretion of the applicable governmental and quasi-governmental bodies. Lundin Gold may not be
able to obtain, maintain or renew its Rights or its Rights may not be obtainable on reasonable terms or on a timely
basis. It is possible that previously issued Rights may become suspended or revoked for a variety of reasons, including
through government or court action. A delay in obtaining any such Rights, the imposition of unfavourable terms or
conditions on any Rights or the denial of any Right may have a material adverse effect on Lundin Gold’s business,
financial condition, results of operations and prospects and, in particular, the development and operations of Fruta del
Norte.

Mineral Reserve and Resource Estimates

Mineral Reserve and Mineral Resource figures are estimates, and there is a risk that any of the Mineral Resources and
Mineral Reserves identified at Fruta del Norte to date will not be realized. Until a deposit is actually mined and
processed, the quantity of Mineral Resources and Mineral Reserves and grades must be considered as estimates only.
In addition, the quantity of Mineral Resources and Mineral Reserves may vary depending on, among other things,
precious metal prices. Any material change in quantity of Mineral Resources, Mineral Reserves or percent extraction
of those Mineral Reserves recoverable by underground mining techniques may affect the economic viability of any
project undertaken by Lundin Gold. In addition, there is a risk that metal recoveries during production do not reach
anticipated rates.

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability, and there is a risk that
they will never be mined or processed profitably. Further, there is a risk that Inferred Mineral Resources will not be
upgraded to proven and probable Mineral Reserves as a result of continued exploration.

Fluctuations in gold prices, results of drilling, metallurgical testing and preparation and the evaluation of studies, reports
and plans subsequent to the date of any estimate may require revision of such estimate. Any material reductions in
estimates of Mineral Reserves could have a material adverse effect on Lundin Gold’s results of operations and financial
condition.

Key Talent Recruitment and Retention

Recruiting and retaining qualified personnel is critical to Lundin Gold’s success. Lundin Gold is dependent on the
services of key executives, including its President and Chief Executive Officer, and other highly skilled and experienced
executives and personnel focused on managing Lundin Gold’s interests. The number of persons skilled in the financing,
development, operations and management of mining properties is limited and competition for such persons is intense.
The inability of Lundin Gold to successfully attract and retain highly skilled and experienced executives and personnel
could have a material adverse effect on Lundin Gold’s business, financial condition and results of operations.

Market Price of the Company’s Common Shares

Securities of mineral companies have always experienced substantial volatility, often based on factors unrelated to the
financial performance or prospects of the companies involved. These factors include macroeconomic conditions in
North America and globally, and market perceptions of the attractiveness of particular industries or sectors. The price
of the Company’s common shares is also likely to be significantly affected by short-term changes in gold price, currency
exchange fluctuations, or its financial condition or results of operations and exploration activities on its projects. Other
factors unrelated to the performance of the Company that may have an effect on the price of the Company’s common
shares include: the extent of analyst coverage available to investors concerning the business of the Company may be
limited if investment banks with research capabilities do not follow the Company; lessening in trading volume and
general market interest in the Company’s common shares may affect an investor's ability to trade significant numbers
of common shares of the Company; the size of the Company's public float and whether it is included in market indices
may limit the ability of some institutions to invest in the Company’s common shares; and the evaluation of the
Company’s performance and practices by third party rating agencies on ESG matters, which may limit the ability of
some institutions or other investors to invest in the Company’s common shares. If an active market for the Shares does
not continue, the liquidity of an investor's investment may be limited, and the price of the Company’s common shares
may decline. If an active market does not exist, investors may lose their entire investment in the Company. As a result
of any of these factors, the market price of the Company’s common shares at any given point in time may not accurately
reflect the long-term value of the Company. Securities class-action litigation often has been brought against companies
following periods of volatility in the market price of their securities. The Company may in the future be the target of
similar litigation. Securities litigation could result in substantial costs and damages and divert management's attention
and resources.

Control of Lundin Gold

As at the date hereof, Newcrest Mining Limited and the Lundin Family Trust are control persons of Lundin Gold. As
long as these shareholders maintain their significant positions in Lundin Gold, they will have the ability to exercise
influence with respect to the affairs of Lundin Gold and significantly affect the outcome of matters upon which
shareholders are entitled to vote.

As a result of the holdings in the Company of control persons, there is a risk that the Company’s securities are less
liquid and trade at a relative discount compared to circumstances where these persons did not have the ability to
influence or determine matters affecting Lundin Gold. Additionally, there is a risk that their significant interests in Lundin
Gold discourages transactions involving a change of control of Lundin Gold, including transactions in which an investor,
as a holder of the Company’s securities, would otherwise receive a premium for its Company’s securities over the then-
current market price.

Measures to Protect Endangered Species and Critical Habitats

Ecuador is a country with a diverse and fragile ecosystem and the national government, regional governments,
indigenous groups and NGOs are vigilant in their protection of endangered species and critical habitats. The existence
or discovery of an endangered species or critical habitats at Fruta del Norte or any of its exploration concessions may
have a number of adverse consequences to the Company’s plans and operations. For instance, the presence of an
endangered species could require the Company to take additional measures to protect the species or to cease its
activities at Fruta del Norte temporarily or permanently, which would impact production from Fruta del Norte and would
have an adverse economic impact on the Company, which could be material. The existence or discovery of an
endangered species or critical habitat at Fruta del Norte or the Company’s exploration concessions could also ignite
NGO and local community opposition to the Company’s activities, which could impact its plans and operations and the
Company’s financial condition and global reputation.

Information Systems and Cyber Security

The Company's operations depend on information technology (“IT”) systems. These IT systems could be subject to
network disruptions caused by a variety of sources, including computer viruses, security breaches and cyber-attacks,
as well as disruptions resulting from incidents such as cable cuts, damage to physical plants, natural disasters,
terrorism, fire, power loss, vandalism and theft. The Company's operations also depend on the timely maintenance,
upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to
mitigate the risks of failures. Any of these and other events could result in IT system failures, delays and/or increase in
capital expenses. The failure of IT systems or a component of information systems could, depending on the nature of
any such failure, adversely impact the Company's reputation and results of operations.

Although to date the Company has not experienced any material losses relating to cyber-attacks or other information
security breaches, there can be no assurance that the Company will not incur such losses in the future. The Company's
risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of
these threats. As a result, cyber security and the continued development and enhancement of controls, processes and
practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized
access remain a priority. As cyber threats continue to evolve, the Company may be required to expend additional
resources to continue to modify or enhance protective measures or to investigate and remediate any security
vulnerabilities.

Non-Compliance and Compliance Costs

Lundin Gold, its subsidiaries, its business and its operations are subject to various laws and regulations. The costs
associated with compliance with such laws and regulations may cause substantial delays and require significant cash
and financial expenditure, which may have a material adverse effect on the Company or the operation of Fruta del
Norte.

There is a risk that the Company may fail to comply with a legal or regulatory requirement, which may lead to the
revocation of certain rights or to penalties or fees and in enforcement actions thereunder, including orders issued by
regulatory or judicial authorities causing operations to cease or be curtailed and may include corrective measures
requiring capital expenditures, installation of additional equipment, or remedial actions. In addition, the Company may
be required to compensate those suffering loss or damage arising from its non-compliant activities and may have civil
or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental
laws. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights could result
in loss, reduction or expropriation of entitlements. Any of the foregoing may have a material adverse effect on the
Company or the operation of Fruta del Norte.

Exploration and Development Risks

The Company has the rights to 25 mineral concessions targeted for exploration outside of Fruta del Norte. The
exploration for, and development of, new mineral deposits involves significant risks which, even with a combination of
careful evaluation, experience and knowledge, may not be eliminated. Few exploration properties are ultimately
developed into producing mines. Whether a mineral deposit will be commercially viable depends on a number of factors,
including but not limited to: the particular attributes of the deposit, such as quantity and quality of the minerals,
metallurgy and proximity to infrastructure and labour; mineral prices, which are highly cyclical; and government
regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of
minerals, and environmental protection. There is a risk that the exploration and development efforts and expenditures
made by Lundin Gold will not result in any new discoveries of other mineral occurrences or new estimates of Mineral
Resources or Mineral Reserves.

Illegal Mining

Mining by illegal miners occurs on and near some of Lundin Gold’s mineral concessions in Ecuador. While this activity
is monitored by both the Company and the government, the operations of artisanal and illegal miners could interfere
with Lundin Gold’s activities and could result in conflicts. These potential activities could cause damage to Fruta del
Norte, including road blockages, pollution, environmental damage or personal injury or death, for which Lundin Gold
could potentially be held responsible. The presence of illegal miners can lead to delays and disputes regarding the
development or operation of gold deposits. Illegal mining can also result in mine stoppages, environmental issues and
could have a material adverse effect on Lundin Gold’s results of operations or financial condition.

Insurance and Uninsured Risks

Exploration, development and production operations on mineral properties involve numerous risks including, but not
limited to, unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, landslides,
earthquakes and other environmental occurrences, risks relating to the storage and shipment of precious metal
concentrates or doré bars, and political and social instability. Such occurrences could result in damage to mineral
properties, damage to underground development, damage to production or infrastructure facilities, personal injury or
death, environmental damage to Lundin Gold’s properties or the properties of others, delays in the ability to undertake
exploration and development, monetary losses and possible legal liability. Should such liabilities arise, they could
reduce or eliminate future profitability and result in increasing costs and a decline in the value of the Company’s
Common Shares.

Although Lundin Gold maintains insurance to protect against certain risks in such amounts as it considers reasonable,
its insurance policies do not cover all the potential risks associated with a mining company’s operations. The Company
may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage
may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against
risks such as environmental pollution or other hazards as a result of exploration, development and production may not
be available to the Company on acceptable terms. Lundin Gold might also become subject to liability for pollution or
other hazards which it may not be insured against or which the Company may elect not to insure against because of
premium costs or other reasons.

Insurance limits currently in place may also not be sufficient to cover losses arising from insured events. Losses from
any of the above events may cause the Company to incur significant costs that could have a material adverse effect
upon its financial performance and results of operations.

Reclamation Obligations

Reclamation requirements are designed to minimize long-term effects of mining exploitation and exploration
disturbance by requiring the operating company to control possible deleterious effluents and to re-establish to some
degree pre-disturbance land forms and vegetation. Lundin Gold is subject to such requirements in connection with its
activities at Fruta del Norte and may be liable for actions and activities and disturbances caused by artisanal and illegal
miners on the Company’s property. Any significant environmental issues that may arise, however, could lead to
increased reclamation expenditures and could have a material adverse impact on Lundin Gold’s financial resources.
Furthermore, environmental hazards may exist on the properties in which Lundin Gold holds interests which are
unknown to Lundin Gold at present and which have been caused by previous or existing owners or operators of the
properties.

There can also be no assurance that closure estimates prove to be accurate. The amounts recorded for reclamation
costs are estimates unique to a property based on estimates provided by independent consulting engineers and Lundin
Gold’s assessment of the anticipated timing of future reclamation and remediation work required to comply with existing
laws and regulations. Actual costs incurred in future periods could differ from amounts estimated. Additionally, future
changes to environmental laws and regulations could affect the extent of reclamation and remediation work required to
be performed by Lundin Gold. Any such changes in future costs could materially impact the amounts charged to
operations for reclamation and remediation.

Violation of Anti-Bribery and Corruption Laws

The Company’s operations are governed by, and involve interactions with, many levels of government in numerous
countries. The Company is required to comply with anti-corruption and anti-bribery laws, including the Criminal Code,
the Canadian Corruption of Foreign Public Officials Act and the U.S. Foreign Corrupt Practices Act, as well as similar
laws in the countries in which Lundin Gold conducts its business. In recent years, there has been a general increase in
both the frequency of enforcement and the severity of penalties under such laws, resulting in greater scrutiny and
punishment to companies convicted of violating anti-corruption and anti-bribery laws. Furthermore, a company may be
found liable for violations not only by its employees, but also by its contractors and third-party agents. Although Lundin
Gold has adopted steps to mitigate such risks, such measures may not always be effective in ensuring that the
Company, its employees, contractors and third-party agents will comply strictly with such laws. If the Company finds
itself subject to an enforcement action or is found to be in violation of such laws, this may result in significant penalties,
fines and/or sanctions imposed on the Company resulting in a material adverse effect on the Company’s reputation
and results of its operations.

Climate Change

Changes in climate conditions could adversely affect Lundin Gold’s business and operations through the impact of (i)
more extreme temperatures, precipitation levels and other weather events; (ii) changes to laws and regulations related
to climate change; and (iii) changes in the price or availability of goods and services required in its business.

Physical risks related to climate change may include more extreme temperatures, precipitation levels and other weather
events. Extreme high or low temperatures could impact the operation of equipment and the safety of personnel at Fruta
del Norte, which could result in damage to equipment, injury to personnel and production disruptions. Increased in
precipitation levels or extreme weather events, such as severe storms or floods, which may be more probable and
more extreme due to climate change, may negatively impact operations, disrupt production, lead to water management
challenges, landslides or breach of containment facilities. Significant capital investment may be required to address
these occurrences and to adapt to changes in average operating conditions caused by these changes to the climate.

Increased environmental regulation and/or the use of fiscal policy by regulators in response to concerns over climate
change and other environmental impacts, such as additional taxes levied on activities deemed harmful to the
environment, could have a material adverse effect on Lundin Gold’s financial condition or results of operations.

Climate change may lead to changes in the price and availability of goods and services required for Fruta del Norte’s
operations, which requires the regular supply of consumables such as diesel, electricity, sodium cyanide and other
supplies to operate efficiently. The Company’s operations also depend on service providers to transport these
consumables and other goods to Fruta del Norte and to transport doré and concentrate produced by the Company to
refiners and smelters, respectively. The effects of extreme weather described above and changes in legislation and
regulation on the Company’s suppliers and their industries may cause limited availability or higher price for these goods
and services, which could result in higher costs or production disruptions.

The Company is working towards implementing the recommendations of the Task Force on Climate-related Financial
Disclosure (TCFD), the purpose of which is to provide a framework to assess and disclose climate resilience. Even
after completing this undertaking, the Company cannot be certain that it will have adequately assessed the risks of
climate change on its business or that its efforts to mitigate the risks of climate change will be adequate or effective.

Claims and Legal Proceedings

Lundin Gold may be subject to claims or legal proceedings in multiple jurisdictions covering a wide range of matters
that arise in the ordinary course of its current business or the Company’s previous business activities which could
materially adversely impact Lundin Gold.

Internal Controls

Internal controls over financial reporting are procedures designed to provide reasonable assurance that transactions
are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are properly
recorded and reported. A control system, no matter how well designed and operated, can only provide reasonable, not
absolute, assurance with respect to the reliability of financial reporting and financial statement preparation.

Security

The Company is exposed to various levels of safety and security risks which could result in injury or death, theft or
damage to property, work stoppages, or blockades of its mining operations. Risks and uncertainties include, but are
not limited to, terrorism, hostage taking, local drug gang activities, military repression, labour unrest and war or civil
unrest. Opposition to mining could arise and such opposition may be violent. Resistance or unrest in Ecuador could
have a material adverse effect on our operations and profitability.

Conflicts of Interest

Certain directors and officers of Lundin Gold are or may become associated with other mining and/or mineral
exploration and development companies, which may give rise to conflicts of interest. Directors who have a material
interest in any person who is a party to a material contract or a proposed material contract with the Company are
required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to
approve such a contract. In addition, directors and officers are required to act honestly and in good faith with a view to
the best interests of the Company. Some of the directors and officers of the Company have either other full-time
employment or other business or time restrictions placed on them and, accordingly, the Company will not be the only
business enterprise of these directors and officers. Further, any failure of the directors or officers of the Company to
address these conflicts in an appropriate manner or to allocate opportunities that they become aware of to the Company
could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows
or prospects.

Dividends

Any payments of dividends on the common shares will be dependent upon the financial requirements of the Company
to finance future growth, the financial condition of the Company, restrictions under gold prepay and stream facilities,
and the senior debt facility, and other factors which the Board may consider appropriate in the circumstance.

Social Media and Reputation

As a result of the increased usage and the speed and global reach of social media and other web-based tools used to
generate, publish and discuss user-generated content and to connect with other users, companies today are at much
greater risk of losing control over how they are perceived in the marketplace. Damage to reputation can be the result
of the actual or perceived occurrence of any number of events, and could include any negative publicity (for example,
with respect to handling of environmental matters or Lundin Gold’s dealings with community groups), whether true or
not. The Company places a great emphasis on protecting its image and reputation but does not ultimately have direct
control over how it is perceived by others. Reputation loss may lead to increased challenges in developing and
maintaining community relations, maintaining a positive relationship with government authorities, decreased investor
confidence and an impediment to the overall success of Fruta del Norte in Ecuador, thereby having a material adverse
impact on financial performance, cash flows and growth prospects.

FORWARD LOOKING STATEMENTS

Certain of the information and statements in this MD&A are considered “forward-looking information” or “forward-looking
statements” as those terms are defined under Canadian securities laws (collectively referred to as “forward-looking
statements”). Any statements that express or involve discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words
or phrases such as “believes”, “anticipates”, “expects”, “is expected”, “scheduled”, “estimates”, “pending”, “intends”,
“plans”, “forecasts”, “targets”, or “hopes”, or variations of such words and phrases or statements that certain actions,
events or results “may”, “could”, “would”, “will”, “should” “might”, “will be taken”, or “occur” and similar expressions) are
not statements of historical fact and may be forward-looking statements.

By their nature, forward-looking statements and information involve assumptions, inherent risks and uncertainties,
many of which are difficult to predict, and are usually beyond the control of management, that could cause actual results
to be materially different from those expressed by these forward-looking statements and information. Lundin Gold
believes that the expectations reflected in this forward-looking information are reasonable, but no assurance can be
given that these expectations will prove to be correct. Forward-looking information should not be unduly relied upon.
This information speaks only as of the date of this MD&A, and the Company will not necessarily update this information,
unless required to do so by securities laws.

This MD&A contains forward-looking information in a number of places, such as in statements pertaining to: estimates
of gold production, grades and recoveries, expected sales receipts, cash flow forecasts and financing obligations, its
capital costs and the expected timing of completion of capital projects including the SVR, the Company's bridge over
the Zamora River and the throughput expansion project, the timing and the success of its drill program at Fruta del
Norte and its other exploration activities, the completion of construction and the Company’s efforts to protect its
workforce from COVID-19.

Lundin Gold’s actual results could differ materially from those anticipated. Management has identified the following
risk factors which could have a material impact on the Company or the trading price of its shares: risks relating to the
impacts of a pandemic virus outbreak, political and economic instability in Ecuador, production estimates, mining
operations, the Company's community relationships, ability to maintain obligations or comply with debt, financing
requirements, volatility in the price of gold, shortages of critical supplies, compliance with environmental laws and liability
for environmental contamination, lack of availability of infrastructure, the Company's reliance on one mine, deficient or
vulnerable title to concessions, easements and surface rights, uncertainty with the tax regime in Ecuador, the
Company’s workforce and its labour relations, inherent safety hazards and risks to the health and safety of the
Company’s employees and contractors, the Company’s ability to obtain, maintain or renew regulatory approvals,
permits and licenses, the imprecision of mineral reserve and resource estimates, key talent recruitment and retention
of key personnel, volatility in the market price of the shares, the potential influence of the Company's largest
shareholders, measures to protect endangered species and critical habitats, the reliance of the Company on its
information systems and the risk of cyber-attacks on those systems, the cost of non-compliance and compliance costs,
exploration and development risks, risks related to illegal mining, the adequacy of the Company’s insurance, uncertainty
as to reclamation and decommissioning, the ability of Lundin Gold to ensure compliance with anti-bribery and anti-
corruption laws, the uncertainty regarding risks posed by climate change, the potential for litigation, limits of disclosure
and internal controls, security risks to the Company, its assets and its personnel, conflicts of interest, risks that the
Company will not declare dividends and social media and reputation.

There can be no assurance that such statements will prove to be accurate, as Lundin Gold's actual results and future
events could differ materially from those anticipated in this forward-looking information as a result of the factors
discussed under the heading “Risk Factors” in this MD&A.

Independent auditor’s report

To the Shareholders of Lundin Gold Inc.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Lundin Gold Inc. and its subsidiaries (together, the Company) as at December 31,
2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS).

What we have audited
The Company’s consolidated financial statements comprise:

•

the consolidated statements of financial position as at December 31, 2020 and 2019;

the consolidated statements of loss and comprehensive income (loss) for the years then ended;

the consolidated statements of changes in equity for the years then ended;

the consolidated statements of cash flows for the years then ended; and

the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.

Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2020. These matters were

PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How our audit addressed the key audit matter

Fair value of the gold prepay credit facility,
stream loan credit facility and offtake derivative
liability

Refer to note 3 – Summary of significant accounting
policies, note 9 – Long-term debt and note 20 –
Financial instruments and risk management to the
consolidated financial statements.

The Company has a gold prepay credit facility, a
stream loan credit facility and an offtake derivative
liability (together, fair value financial liabilities),
which management measured as financial liabilities
at fair value through profit or loss. As at
December 31, 2020, these fair value financial
liabilities were valued at $248.8 million,
$268.5 million and $32.3 million, respectively, and
management recorded a combined change in fair
values of these liabilities of $137.0 million and
($128.1) million during the year in net loss and
other comprehensive income (loss), respectively.
Management used Monte Carlo simulation
valuation models to determine the fair values of
these fair value financial liabilities.

The significant assumptions used in the Monte
Carlo simulation valuation models include: the gold
forward prices, gold price volatility, the risk-free rate
of return, risk-adjusted discount rates and the
projected life of mine production schedule. In
addition, in valuing the stream loan credit facility,
the silver forward prices, silver price volatility, and
the gold/silver price correlation were also used as
significant assumptions by management. The
Monte Carlo simulation valuation models were
prepared by an independent valuation specialist
and the projected life of mine production schedule
was based on information compiled and reviewed
by qualified persons (together, management’s
experts).

Our approach to addressing the matter included the
following procedures, among others:

• With the assistance of professionals with

specialized skill and knowledge in the field of
financial instrument valuation, developed an
independent point estimate of the fair values of
the gold prepay credit facility, stream loan
credit facility and offtake derivative liability,
which included:

−

Independently developing expectations
related to the gold forward prices, gold
price volatility, the risk-free rate of return,
the risk-adjusted discount rates, the silver
forward prices, silver price volatility, and the
gold/silver price correlation based on
external market and industry data.

− Comparing the independent point estimates
to management’s estimates to evaluate the
reasonableness of management’s
estimates.

• Developing the independent point estimates

also involved assessing the reasonableness of
the projected life of mine production schedule,
which involved:

− Comparing the gold and silver production

volumes deducted from the stream loan
credit liability up to December 31, 2020 to
actual production volumes.

− Comparing the future production volumes
included in the projected life of mine
production schedule on a total and annual
basis, to the available quantities of
recoverable reserves and resources.

Key audit matter

How our audit addressed the key audit matter

We considered this a key audit matter due to (i) the
significant judgments made by management,
including the use of management’s experts, when
developing the key inputs used in the valuation of
the fair value financial liabilities; (ii) a high degree of
auditor judgment, subjectivity and effort in
performing procedures related to the significant
assumptions; and (iii) the audit effort involved the
use of professionals with specialized skill and
knowledge.

− Using the work of qualified persons in

performing the procedures to evaluate the
reasonableness of the estimates
associated with the available quantity of
recoverable reserves and resources. As a
basis for using this work, the qualified
persons’ competence, capability and
objectivity were evaluated, their work
performed was understood and the
appropriateness of their work as audit
evidence was evaluated by considering the
relevance and reasonableness of the
assumptions and methods and findings.

• Tested the disclosures, including the sensitivity
analysis, made in the consolidated financial
statements with regards to the valuation of the
fair value financial liabilities.

Other information

Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the
consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting
process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.

From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Mark Platt.

/s/PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, British Columbia
February 24, 2021

LUNDIN GOLD INC.
Consolidated Statements of Financial Position
(Expressed in thousands of U.S. Dollars)

ASSETS

Current assets
Cash and cash equivalents
Trade receivables and other current assets
Inventories
Advance royalty

Non-current assets
VAT recoverable and other long-term assets
Advance royalty
Property, plant and equipment
Mineral properties

LIABILITIES

Current liabilities
Accounts payable and accrued liabilities
Current portion of long-term debt

Non-current liabilities
Long-term debt
Other non-current liabilities
Reclamation provisions

EQUITY
Share capital
Equity-settled share-based payment reserve
Accumulated other comprehensive income (loss)
Deficit

Commitments (Note 22)

December 31,

Note

2020

December 31,
2019

4
5
7

4
7
6

79,592
136,497
59,910
13,000

288,999

71,655
41,461
872,148
231,097

75,684
63,706
-
9,790

149,180

39,435
54,699
924,982
240,665

1,505,360

1,408,961

8
9

53,821
178,575

58,802
57,578

232,396

116,380

9
12
10

11
12

678,519
1,631
5,956

821,008
-
4,751

918,502

942,139

951,725
14,732
22,511
(402,110)

586,858

899,903
14,118
(92,247)
(354,952)

466,822

1,505,360

1,408,961

Approved by the Board of Directors

/s/ Ron F. Hochstein
Ron F. Hochstein

/s/ Ian W. Gibbs
Ian W. Gibbs

The accompanying notes are an integral part of these consolidated financial statements.

LUNDIN GOLD INC.
Consolidated Statements of Loss and Comprehensive Income (Loss)
(Expressed in thousands of U.S. Dollars, except share and per share amounts)

Note

Years Ended December 31,
2020

2019

Revenues

6(b)

358,156

Cost of goods sold

Operating expenses
Royalty expenses
Depletion and depreciation

Income from mining operations

Other expenses (income)
Corporate administration
Exploration
Suspension of operations
Finance expense (income)
Other expense
Derivative loss

Net loss before tax

Income tax recovery

Deferred income tax recovery

112,132
20,750
52,888

185,770

172,386

17,801
2,805
29,304
44,942
924
136,984

14
15

20(b)

-
-
-

23,013
3,733
-
(1,763)
842
93,120

232,760

118,945

(60,374)

(118,945)

13,216

Net loss for the year

(47,158)

(118,945)

OTHER COMPREHENSIVE INCOME (LOSS)

Items that may be reclassified to net loss

Currency translation adjustment

Items that will not be reclassified to net loss

Derivative gain (loss) related to the Company’s own credit risk 20(b)
Deferred income tax expense on accumulated other
comprehensive income
Other

Comprehensive income (loss) for the year

Basic and diluted loss per common share

194

4,134

128,089

(61,238)

(13,216)
(309)

-
210

67,600

(175,839)

(0.21)

(0.54)

Weighted-average number of common shares outstanding

227,500,029

221,247,101

The accompanying notes are an integral part of these consolidated financial statements.

LUNDIN GOLD INC.
Consolidated Statements of Changes in Equity
(Expressed in thousands of U.S. Dollars, except number of common shares)

Number of
common
shares

Note

Share
capital

Equity-settled
share-based
payment
reserve

Other
reserves

Deficit

Total

Balance January 1, 2019

213,163,980

857,279

12,125

(35,353)

(236,007)

598,044

Proceeds from equity financing, net
Consideration for cost overrun facility
Exercise of stock options
Exercise of anti-dilution rights
Stock-based compensation
Other comprehensive loss
Net loss for the year

Balance December 31, 2019

Proceeds from equity financing, net
Exercise of stock options
Exercise of anti-dilution rights
Stock-based compensation
Other comprehensive loss
Net loss for the year

11
9
12
11
12

11
12
11
12

8,625,000
300,000
1,121,800
420,432
-
-
-

33,940
1,221
5,340
2,123
-
-
-

-
373
(2,010)
139
3,491
-
-

-
-
-
-
-
(56,894)
-

-
-
-
-
-
-
(118,945)

33,940
1,594
3,330
2,262
3,491
(56,894)
(118,945)

223,631,212

899,903

14,118

(92,247)

(354,952)

466,822

4,772,500
1,074,650
609,975
-
-
-

41,419

5,318
5,085
-
-
-

-
(1,887)
-
2,501
-
-

-
-
-
-
114,758
-

-
-
-
-
-
(47,158)

41,419
3,431
5,085
2,501
114,758
(47,158)

Balance December 31, 2020

230,088,337

951,725

14,732

22,511

(402,110)

586,858

The accompanying notes are an integral part of these consolidated financial statements.

LUNDIN GOLD INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. Dollars)

OPERATING ACTIVITIES

Net loss for the year
Item not affecting cash:

Depletion and depreciation
Stock-based compensation
Derivative loss
Unrealized foreign exchange loss
Finance expense (income)
Income tax recovery
Other expense

Changes in non-cash working capital items:

Trade receivables and other current assets
Inventories
Advance royalty
Accounts payable and accrued liabilities

Interest received

Note

Years Ended December 31,
2020

2019

(47,158) $

(118,945)

12
20(b)

55,411
4,061
136,984
2,333
42,733
(13,216)
-

130
3,491
93,120
2,637
(1,763)
-
398

181,148

(20,932)

(110,141)
(11,158)
8,762
44,631
402

(2,726)
-
-
589
1,763

Net cash provided by (used for) operating activities

113,644

(21,306)

FINANCING ACTIVITIES

Net proceeds from equity financing
Proceeds from long-term debt
Repayments of long-term debt
Interest paid
Transaction costs paid
Proceeds from exercise of stock options
Proceeds from exercise of anti-dilution rights

11
9
9
9
9

41,419

-
(35,412)
(42,294)
-
3,431
5,085

33,940
350,000
-
(12,982)
(5,541)
3,330
2,262

Net cash provided by (used for) financing activities

(27,771)

371,009

INVESTING ACTIVITIES

Acquisition and development of property, plant and equipment, net of
sales
Change in VAT receivable and other long-term assets

Net cash used for investing activities

(58,766)
(20,878)

(404,093)
(38,797)

(79,644)

(442,890)

Effect of foreign exchange rate differences on cash

(2,321)

1,358

Net increase (decrease) in cash and cash equivalents

3,908

(91,829)

Cash and cash equivalents, beginning of year

75,684

167,513

Cash and cash equivalents, end of year

79,592

75,684

Supplemental cash flow information (Note 18)

The accompanying notes are an integral part of these consolidated financial statements.

LUNDIN GOLD INC.
Notes to the consolidated financial statements as at December 31, 2020
(All dollar amounts are stated in U.S. dollars unless otherwise indicated. Tables are expressed in thousands of U.S.
dollars, except share and per share amounts)

1. Nature of operations

Lundin Gold Inc. together with its subsidiaries (collectively referred to as “Lundin Gold” or the “Company”) is
focused on its Fruta del Norte gold operation and developing its portfolio of mineral concessions in Ecuador.

The common shares of the Company are listed for trading on the Toronto Stock Exchange (the “TSX”) and Nasdaq
Stockholm under the symbol “LUG”. The Company was originally incorporated in British Columbia and continued
under the Canada Business Corporations Act in 2002. The Company’s head office is located at Suite 2000, 885
W. Georgia Street, Vancouver, BC, and it has a corporate office in Quito, Ecuador.

The Company substantially completed the development of Fruta del Norte and achieved commercial production in
February 2020. The continued operations at Fruta del Norte are dependent on the extent to which the COVID-19
pandemic is being controlled, consequential actions by local, provincial, and national governments, and the
effectiveness of the international supply chain and personnel travel. Therefore, the Company cannot be certain
that an escalation of the COVID-19 pandemic would not have an impact on operations or on the Company’s
financial position in the future. The Company’s continuing operations and the underlying value and recoverability
of the amount shown for the mineral interests and property, plant and equipment are ultimately dependent upon
the ability of the Company to operate the mine without extended interruptions and on future profitable production.

2. Basis of preparation

These consolidated financial statements, including comparatives, have been prepared using accounting policies
consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”). The principal accounting policies applied in the preparation of these consolidated
financial statements are set out below and have been consistently applied to all the periods presented.

These consolidated financial statements were approved for issue by the Board of Directors on February 24, 2021.

The following entities are included in these consolidated financial statements:

Aurelian Resources Inc.
Aurelian Resources Corporation Ltd.
Aurelian Exploration Inc.
Aurelian Menor Inc.
Condor Finance Corp.
Aurelian Ecuador S.A.
AurelianEcuador Holding S.A.
Ecoaurelian Agricola S.A.
Aurelianmenor S.A.
SurNorte Ventures Pte. Ltd.
SurNorte Holdings I Pte. Ltd.
SurNorte Holdings II Pte. Ltd.
SurNorte S.A.

Country of
incorporation

Canada
Canada
Canada
Canada
Canada
Ecuador
Ecuador
Ecuador
Ecuador
Singapore
Singapore
Singapore
Ecuador

Ordinary shares held
December 31, December 31,

2020

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

2019

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

The proportion of the voting rights held directly by the parent company does not differ from the proportion of
ordinary shares held.

3. Summary of significant accounting policies

The Company’s principal accounting policies are outlined below:

(a) Basis of consolidation

These consolidated financial statements incorporate the financial statements of the Company and the entities
controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern
the financial and operating policies of an entity so as to obtain benefits from its activities. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases. All significant intercompany transactions and balances have
been eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Company.

(b) Foreign currency translation

Transactions and balances

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the
transactions. At each statement of financial position date, monetary assets and liabilities are translated using
the period end foreign exchange rate. Non-monetary assets and liabilities are translated using the historical
rate on the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are
translated using the historical rate on the date that the fair value was determined. All gains and losses on
translation of these foreign currency transactions are included in the statement of loss.

Group companies

The functional currency of the significant subsidiary of the Company, Aurelian Ecuador S.A., and certain other
entities is U.S. dollars. Other entities which have a functional currency different from the presentation
currency, including Lundin Gold Inc. whose functional currency is CAD, are translated into the presentation
currency as follows:

ii.

iii.

Assets and liabilities for each statement of financial position presented are translated at the closing
rate at the date of that statement of financial position.
Income and expenses for each statement of loss are translated at average exchange rates (unless
this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the rate on the dates of the
transactions).
All resulting exchange differences are recognized in other comprehensive loss as cumulative
translation adjustments.

The preparation of consolidated financial statements requires management to make judgments, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, and
expenses. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and further periods if the review affects both current and future periods.

Significant assumptions about the future and other sources of estimation uncertainty that management has
made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of
assets and liabilities in the event that the actual results differ from assumptions made, relate to, but are not
limited to, the following:

3. Summary of significant accounting policies (continued)

Mineral reserves and resources – The Company estimates its mineral reserves and resources based on
information compiled and reviewed by qualified persons as defined in accordance with NI 43-101
requirements. The estimation of mineral reserves and resources requires judgment to interpret geological
data and metallurgical testing, design of appropriate mining methods, recovery methods and establishment of
a life of mine production schedule. The estimation of recoverable reserves is also based on assumptions
such as capital costs, operating costs and metal pricing. New geological data or changes in the above
assumptions may change the economic viability of reserves and may, ultimately, result in the reserves being
revised. Changes in the reserve or resource estimates may impact the fair value of financial instruments, the
valuation of property, plant and equipment and mineral properties, the depletion and depreciation of property,
plant and equipment and mineral properties, utilization of tax losses and decommissioning and site restoration
provisions.

Fair value of financial instruments – The fair value of financial instruments that are not traded in an active
market are determined using valuation techniques. The Company uses its judgment to select a variety of
methods and makes significant assumptions that are mainly based on market conditions existing at initial
recognition and at the end of each reporting period. Refer to Note 20 for further details on the methods and
significant assumptions used.

Commercial production – The determination of when a mine is operating in the manner intended by
management (referred to as “commercial production”) is a matter of significant judgement. In making this
determination, management considered specific facts and circumstances. These factors included, but were
not limited to, whether substantially all construction development activities had been completed in accordance
with design and a period of commissioning which achieved consistent operating results for a period of time in
relation to design capacity.

Valuation of mineral properties, property, plant, and equipment – The Company carries the acquisition costs
of its mineral properties, property, plant, and equipment at cost less depletion and depreciation and any
impairment losses. The Company undertakes a periodic review of the carrying values of these assets and
whenever events or changes in circumstances indicate that their carrying values may exceed their recoverable
amount. In undertaking this review, management of the Company is required to make significant judgments,
including estimates of mineral reserves and resources. These judgments are subject to various risks and
uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values of
these assets.

Utilization of tax losses – The Company is subject to income taxes in a number of jurisdictions and has had a
history of tax losses. These tax losses are only recognized to the extent that expected future taxable profits
are available. Judgment is required in assessing whether deferred tax assets and certain deferred tax
liabilities are recognized on the balance sheet and what tax rate is expected to be applied in the year when
the related temporary differences reverse. Deferred tax liabilities arising from temporary differences are
recognized unless the reversal of the temporary differences is not expected to occur in the foreseeable future
and can be controlled. As the Company has not yet had a history of taxable profits as at December 31, 2020,
the Company has not recognized any tax losses on its financial statements except those expected to be
utilized as a result of cumulative derivative gains within other comprehensive income.

Stock-based compensation – The fair value of stock options is determined using the Black-Scholes option
pricing model and are expensed over their vesting periods. In estimating fair value, management of the
Company is required to make certain assumptions and estimates regarding the life of the options, volatility
and forfeiture rates. Changes in the assumptions used could result in materially different results.

3. Summary of significant accounting policies (continued)

Decommissioning and site restoration provisions – The Company has obligations for site restoration and
decommissioning related to Fruta del Norte. The future obligations for decommissioning and site restoration
activities are estimated by the Company using mine closure plans or other similar studies which outline the
requirements that will be carried out to meet the obligations. Because the obligations are dependent on the
laws and regulations of the country in which the project is located, the requirements could change as a result
of amendments in the laws and regulations relating to environmental protection and other legislation affecting
resource companies. As the estimate of obligations is based on future expectations, a number of assumptions
and judgments are made by management in the determination of closure provisions. The decommissioning
and site restoration provisions are more uncertain the further into the future the mine closure activities are to
be carried out.

(d) Segment reporting

The Company’s primary reporting segments are based on the nature of its operations, being the operation of
Fruta del Norte, exploration activities in Ecuador, and corporate activities in Canada. The office in Canada
provides support to the operations in Ecuador with respect to treasury and finance, regulatory reporting and
corporate administration.

(e) Financial instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument.

Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets
or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities measured at fair value through profit or loss are recognized
immediately in the statement of loss.

Financial assets

The Company classifies its financial assets according to the following measurement categories:

Amortized cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortized cost.

ii.

Fair value through other comprehensive loss (“FVOCI”)

Assets that are held for both collection of contractual cash flows and future potential sale, where the
assets’ cash flows represent solely payments of principal and interest, are measured at fair value
through other comprehensive loss.

iii.

Fair value through profit or loss (“FVPL”)

Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through
profit or loss.

Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Company has transferred substantially all the risks and rewards of
ownership.

3. Summary of significant accounting policies (continued)

Impairment of financial assets

The Company assesses the expected credit losses associated with its financial assets carried at amortized
cost and FVOCI. The impairment methodology applied depends on whether there has been a significant
increase in credit risk.

Financial liabilities

The Company classifies its financial liabilities according to the following measurement categories:

FVPL

Liabilities that are (i) held for trading or (ii) so designated, are measured at FVPL.

A financial liability is classified as held for trading if:

•
It has been incurred principally for the purpose of repurchasing it in the near term; or
• On initial recognition it is part of a portfolio of identified financial instruments that the
Company may manage together and has a recent actual pattern of short-term profit-taking;
or
It is a derivative, except for a derivative that is a financial guarantee contract or a designated
and effective hedging instrument.

•

A financial liability that is not a financial liability held for trading may be designated as FVPL upon
initial recognition if:

• Such designation eliminates or significantly reduces a measurement or recognition

•

inconsistency that would otherwise arise; or
The financial liability forms part of a group of financial assets or liabilities or both, which is
managed and its performance is evaluated on a fair value basis; or
It forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits
the entire combined contract to be designated as FVPL.

The amount of change in the fair value of the financial liability that is attributable to changes in the
credit risk of that liability is recognised in other comprehensive income. The remaining amount of
change in the fair value of liability is recognised in the statement of loss. Changes in fair value
attributable to a financial liability’s credit risk that are recognised in other comprehensive income are
not subsequently reclassified to the statement of loss; instead, they are transferred to retained
earnings upon derecognition of the financial liability.

ii.

Amortized cost

Liabilities not measured at FVPL are measured subsequently at amortized cost using the effective
interest method.

Financial liabilities are derecognized when, and only when, the Company’s obligations are discharged,
cancelled or have expired.

(f) Cash

Cash includes cash on hand and deposits held with banks.

3. Summary of significant accounting policies (continued)

(g)

Inventories

Ore stockpiles, in-circuit and finished metal inventory are valued at the lower of weighted average production
cost and net realizable value. Production costs include the cost of raw materials, direct labour, mine-site
overhead expenses and applicable depreciation and depletion of mineral properties, plant and equipment.
Net realizable value is calculated as the estimated price at the time of sale based on prevailing and long-term
metal prices less estimated future production costs to convert the inventories into saleable form and estimated
costs to sell.

Ore stockpile inventory represents ore on the surface or underground that has been extracted from the mine
and is available for further processing. In-circuit inventory represents material in the mill circuit that is in the
process of being converted into a saleable form. Finished metal inventory represents doré and concentrate
located at the mine, in transit to and at port and doré at refineries.

Materials and supplies inventories are valued at the lower of weighted average cost and net realizable value.
Replacement costs of materials and spare parts are generally used as the best estimate of net realizable
value.

Any write-downs of inventory to net realizable value are recorded within cost of sales in the statement of
earnings. If there is a subsequent increase in the value of inventory, the previous write-downs to net realizable
value are reversed up to cost to the extent that the related inventory has not been sold.

(h) Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses. The
cost of an asset consists of its purchase price, any directly attributable costs of bringing the asset to its present
working condition and location for its intended use and an initial estimate of the costs of dismantling and
removing the item and restoring the site on which it is located.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably.

Depreciation of a majority of asset classes is calculated using the straight-line method to allocate its cost less
its residual value over its estimated useful life. Mine and plant facilities are depleted using a unit of production
method over the total recoverable ounces. The estimated useful lives of property, plant and equipment are
as follows:

Buildings
Machinery and equipment
Vehicles
Furniture and office equipment
Mine and plant facilities

15 to 20 years
10 years
5 years
3 to 10 years
based on total recoverable reserves on a unit of production basis

Depreciation methods and estimated useful lives and residual values are reviewed annually and when facts
and circumstances require a re-estimate.

The Company reviews the estimated total recoverable reserves annually and when events and circumstances
indicate that such a review should be made. Changes to estimated total recoverable reserves are accounted
for prospectively.

Expenditures on major maintenance or repairs, including the cost of the replacement of parts of assets and
overhaul costs or where an asset or part of an asset is replaced, the expenditure is capitalized and the
remaining carrying amount of the item repaired, overhauled or replaced is derecognized when it is probable
that future economic benefits associated with the item will be available to the Company. All other costs are
expensed as incurred.

3. Summary of significant accounting policies (continued)

An item of plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any related gain or loss is determined as the difference
between the net disposal proceeds or residual value, as applicable, and the carrying amount of the asset, and
is recognized in the statement of earnings.

(i) Exploration and evaluation (“E&E”) expenditures and mineral properties

Exploration and evaluation costs are those costs required to find a mineral property and determine commercial
viability. E&E costs include costs to establish an initial mineral resource and determine whether Inferred
mineral resources can be upgraded to Measured and Indicated mineral resources and whether Measured and
Indicated mineral resources can be converted to Proven and Probable reserves.

E&E costs consist of, but are not limited to:

•
•
•
•
•

gathering exploration data through topographical and geological studies;
exploratory drilling, trenching and sampling;
determining the volume and grade of the resource;
test work on geology, metallurgy, mining, geotechnical and environmental; and
conducting engineering, marketing and financial studies.

Project costs in relation to these activities are expensed as incurred until such time that the project
demonstrates technical feasibility and commercial viability. Technical feasibility and commercial viability
generally coincides with the establishment of proven and probable mineral reserves. Upon demonstrating
technical feasibility and commercial viability, and subject to an impairment analysis, any such future costs,
including costs incurred to increase proven and probable reserves, are capitalized as development costs
within mineral properties.

After initial recognition, mineral properties are valued at cost less accumulated depletion and any impairment
losses. Costs associated with acquiring a mineral property are capitalized as incurred. Upon commencement
of commercial production, mineral properties are depleted based on total recoverable reserves on a unit of
production basis.

(j)

Impairment of non-financial assets

Assets that are subject to amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recorded
immediately if the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating
units).

Value in use is determined as the present value of the future cash flows expected to be derived from continuing
use of an asset or cash generating unit in its present form. These estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset or cash generating unit for which estimates of future cash flows
have not been adjusted.

Fair value is the price that would be received from selling an asset or cash generating unit in an orderly
transaction between market participants at the measurement date. Costs of disposal are incremental costs
directly attributable to the disposal of an asset or cash generating unit. Estimated future after tax cash flows
are calculated using estimated future prices, mineral reserves and resources and operating and capital costs.
All inputs used are those that an independent market participant would consider appropriate.

3. Summary of significant accounting policies (continued)

Non-financial assets that have been impaired in prior periods are reviewed for possible reversal of the
impairment at each reporting date. When identified, a reversal of an impairment loss is recognized in earnings
immediately.

(k) Provisions

Asset retirement obligations

The Company recognizes a liability for an asset retirement obligation on long-lived assets when a present
legal or constructive obligation exists, as a result of past events and the amount of the liability is reasonably
determinable. Asset retirement obligations are initially recognized and recorded as a liability based on
estimated future cash flows discounted at a risk-free rate. This is adjusted at each reporting period for changes
to factors including the expected amount of cash flows required to discharge the liability, the timing of such
cash flows and the risk-free discount rate. Corresponding amounts and adjustments are added to the carrying
value of the related long-lived asset and amortized or depleted to operations over the life of the related asset.

(l) Current and deferred income tax

Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other
comprehensive income or directly in equity. In this case the tax is also recognized in other comprehensive
income or directly in equity, respectively.

Current tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the statement of financial position date in the countries where the Company’s subsidiaries
operate and generate taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.

ii.

Deferred tax

Deferred income tax is recognized on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, the
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantively enacted by the statement of financial position date and are
expected to apply when the related deferred income tax asset is realized or the deferred income tax
liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries,
except where the timing of the reversal of the temporary difference is controlled by the Company and
it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.

3. Summary of significant accounting policies (continued)

(m) Share capital

Common shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.

(n) Stock-based compensation

The Company has a stock-based compensation plan, under which the entity receives services from
employees and non-employees as consideration for equity instruments (options and share units) of the
Company.

Stock options and share units granted to employees are measured on the grant date. Stock options granted
to non-employees are measured on the date that the goods or services are received.

The fair value of the employee and non-employee services received in exchange for the grant of the options
and share units are recognized as an expense. The total amount to be expensed is determined by reference
to the fair value of the stock options and share units granted and the vesting periods. The total expense is
recognized over the vesting period, which is the period over which all of the specified vesting conditions are
to be satisfied.

The cash subscribed for the shares issued when the options are exercised is credited to share capital, net of
any directly attributable transaction costs.

(o) Loss per share

Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted
average number of shares outstanding during the reporting period. Diluted loss per share is computed similar
to basic loss per share except that the weighted average shares outstanding are increased to include
additional shares for the assumed exercise of stock options, if dilutive. The number of additional shares is
calculated by assuming that outstanding stock options were exercised and that the proceeds from such
exercises were used to acquire common stock at the average market price during the reporting periods. For
the years presented, this calculation proved to be anti-dilutive.

(p) Comprehensive income (loss)

Comprehensive income (loss) is the change in the Company’s net assets that results from transactions, events
and circumstances from sources other than the Company’s shareholders and includes items that would not
normally be included in net profit such as derivative gains (losses) related to the Company’s own credit risk
on financial liabilities measured at fair value through profit or loss. The Company’s comprehensive income
(loss), components of other comprehensive income (loss) and cumulative translation adjustments are
presented in the consolidated statements of loss and comprehensive income (loss) and the statements of
changes in equity.

(q) Revenue recognition

Revenues are recognized when all of the following criteria are met:

• Control has been transferred to the customer;
• Neither continuing managerial involvement to the degree usually associated with ownership, nor

effective control over the goods sold, has been retained;
The amount of revenue can be reliably measured;
It is probable that the economic benefits associated with the sale will flow to the Company; and
The costs incurred or to be incurred in respect of the sale can be reliably measured.

•
•
•

These conditions are generally satisfied when title passes to the customer.

3. Summary of significant accounting policies (continued)

Doré sales

Revenues are recorded at the time of physical delivery, which is also the date that title of the gold and silver
passes to the customer. For gold, the sales price is determined in accordance with the terms of the offtake
commitment (Note 9). For silver, the sales price is fixed on the date of sale based on the silver spot price.

Concentrate sales

Based on the terms of concentrate sales contracts with independent smelting companies, revenues are
recorded when the concentrate is loaded on vessels for shipment to the customers, which is also the date that
title passes to the customer. Sales prices are provisionally set at that time based on the then market prices
and adjusted for variations between the provisional price and the actual final price determined approximately
30 to 60 days after concentrates are unloaded at the port of discharge in accordance with the smelting
contracts.

4. Trade receivables and other current assets

Trade receivables (a)
VAT recoverable (b)
Prepaid expenses and deposits
Deferred transaction costs (c)
Other current assets

December 31,
2020

December 31,
2019

93,023
16,711
23,059
3,704
-

136,497

20,936
26,804
12,056
3,750
160

63,706

(a) Trade receivables represent the value of concentrate sold as at period end for which the funds are not yet
received. Consistent with industry standards, these sales generally have relatively long payment terms and
are not settled until two to four months after export. There is no recorded allowance for credit losses. In
determining the recoverability of trade receivables, the Company considers any change in the credit quality
of the counterparty, with the concentration of the credit risk limited due to the nature of the counterparties
involved and a history of no credit losses.

(b) VAT paid in Ecuador by the Company after January 1, 2018 will be refunded or applied as a credit against
other taxes payable based on export sales. As the Company is generating sales, a portion of the VAT
recoverable has been classified as current assets.

(c) Deferred transaction costs include upfront and advisory fees incurred to secure the cost overrun facility (the
“COF”). These costs will be reclassified to long-term debt on a pro-rata basis should the Company utilize
the COF. Should the COF expire without being utilized, these costs will be expensed directly to the
Company’s statement of loss.

Inventories

Ore stockpile
Gold in circuit
Doré and concentrate
Materials and supplies

December 31,
2020

December 31,
2019

1,979
3,320
13,786
40,825

59,910

-
-

6. Property, plant and equipment

Cost

Balance, January 1,
2019
Additions
Cumulative translation

adjustment

Balance, December
31, 2019

Additions (a)
Reclassifications (b)
Cumulative translation

adjustment

Balance, December
31, 2020

Construction-
in-progress

Mine and
plant
facilities

Machinery
and
equipment

Furniture
and office
equipment

Vehicles

Total

451,123

4,458

18,192

11,903

1,734

487,410

415,735

369

257

26,478

7,994

763

451,227

373

867,227

4,715

44,670

19,897

2,501

939,010

29,360
(890,488)

-
841,073

10,211
-

230

2,121
-

138
-

41,830
(49,415)

232

6,099

846,018

54,881

22,018

2,641

931,657

6. Property, plant and equipment (continued)

Accumulated
depletion and
depreciation

Construction-
in-progress

Mine and
plant
facilities

Machinery
and
equipment

Furniture
and office
equipment

Vehicles

Total

Balance, January 1,
2019

Depletion and
depreciation

Cumulative translation

adjustment

Balance, December
31, 2019

Depletion and
depreciation

Cumulative translation

adjustment

Balance, December
31, 2020

411

3,330

2,159

589

6,489

102

3,639

3,306

488

7,535

513

6,969

5,465

1,081

14,028

36,200

4,806

3,884

589

45,479

36,713

11,775

9,349

1,672

59,509

Net book value

As at December 31,
2019

As at December 31,
2020

867,227

4,202

37,701

14,432

1,420

924,982

6,099

809,305

43,106

12,669

969

872,148

(a)

Included in the additions to Construction-in-Progress are the following:

Depletion and depreciation
Capitalized interest and accretion of
transaction and derivative costs (Note 9)

December 31,
2020

December 31,
2019

1,507

10,556

12,063

7,405

35,257

42,662

Sales in January and February 2020 totaling $52.4 million (2019 – $20.9 million) have been recognized as a
reduction of capitalized Construction-in-Progress costs.

(b) The Company achieved commercial production at Fruta del Norte in February 2020. In making this
determination, management considered a number of factors, including completion of substantially all
construction development activities in accordance with design and a production ramp up period where mill
feed, in terms of tonnes of ore, equalled an average of 70% of mill capacity over a 90 day period. With this
achievement and continued handover of assets to operations, substantially all of Construction-in-Progress
has either been reclassified to Mine and Plant Facilities ($841 million) or recognized as Opening Inventory as
at February 29, 2020 ($49.4 million), as applicable, and depletion commenced on mine and plant facilities.
Effective March 1, 2020, revenues, cost of goods sold, and debt service costs (Note 9 and 15) are recognized
in the consolidated statements of loss and comprehensive income (loss). Costs of remaining areas of
construction, not essential to operations, will continue to be captured as Construction-in-progress until ready
for their intended use.

7. Advance royalty

Advance royalties are deductible against royalties on sales payable to the Government of Ecuador at a rate equal
to the lesser of 50% of the actual future royalties payable in a six-month period or 10% of the total advance royalty
payment. As the Company is generating sales, a portion of the advance royalty payment has been classified as
current assets.

8. Accounts payable and accrued liabilities

Accounts payable
Accrued liabilities

9. Long-term debt

Gold prepay credit facility (a)
Stream loan credit facility (b)
Offtake derivative liability (c)
Senior debt facility (d)

Less: current portion

Gold prepay credit facility
Stream loan credit facility
Offtake derivative liability
Senior debt facility

December 31,
2020

December 31,
2019

14,229
39,592

53,821

25,306
33,496

58,802

December 31,
2020

December 31,
2019

248,828
268,471
32,308
307,487

234,917
290,124
26,856
326,689

857,094

878,586

68,174
50,041
4,488
55,872

14,784
21,894
1,753
19,147

Long-term portion

678,519

821,008

The gold prepay credit facility (the “Prepay Loan”), stream loan credit facility (the “Stream Loan”), and the offtake
derivative liability are accounted for as financial liabilities at fair value through profit or loss and are comprised of
the following as at December 31, 2020.

Principal
Interest accrued and capitalized at
stated rate of 7.5%
Transaction costs
Derivative fair value adjustments

Gold prepay
credit
facility

Stream loan
credit
facility

Offtake
derivative
liability

Total

142,105

145,233

287,338

27,114
(2,764)
82,373

23,867
(2,473)
101,844

-
-
32,308

50,981
(5,237)
216,525

Total

248,828

268,471

32,308

549,607

9. Long-term debt (continued)

Derivative fair value adjustments reflect the revaluation of the financial instruments at fair value as at December
31, 2020, including a portion of the cost of derivatives which are part of the long-term debt. The derivative gain or
loss related to the Company’s own credit risk recorded in other comprehensive income (loss) includes the impact
of the difference between the Company’s own credit risk at the time of entering into the long-term debt and the
balance sheet date (see also Note 20).

(a) Gold prepay credit facility

The Prepay Loan is a secured loan facility with a stated interest rate of 7.5% per annum with interest accruing
based upon the outstanding balance.

The Prepay Loan is amortized and repayable over 19 quarters starting December 31, 2020. Quarterly
payments are equivalent to the value of 9,775 oz. of gold based on the gold spot price at the time of the
payment date. The excess of the quarterly repayments over the principal due quarterly and the balance of
interest accrued to that date, if any, is a variable additional charge (the “Finance Charge”). If the average gold
price in the fiscal quarter prior to repayment date is less than $1,436 per oz. or less than $1,062 per oz.,
repayments will be based on 11,500 oz. or 13,225 oz. of gold, respectively.

The Company made the first principal and interest payments under the Prepay Loan totaling $7.9 million and
$10.4 million, respectively, on December 31, 2020 (see Note 20).

The Company has elected to measure the Prepay Loan as a financial liability measured at fair value through
profit or loss.

(b) Stream loan credit facility

The Stream Loan is a secured loan facility with a stated interest rate of 7.5% per annum with interest accruing
based upon the outstanding balance.

The Stream Loan is repayable in variable monthly instalments equivalent to the value of 7.75% of gold
production less $400 per oz. (the “Gold Base Price”) and 100% of the silver production less $4 per oz. (the
“Silver Base Price”) upon the start of commercial production at the Fruta del Norte Project, up to a maximum
of 350,000 oz. of gold and six million oz. of silver. The Gold Base Price and Silver Base Price will increase
by 1% per annum starting on the third anniversary of the commercial production date. The excess of the
monthly repayments over the principal due monthly and the balance of interest accrued to that date, if any,
will be a Finance Charge.

With the start of commercial production in February 2020, the Company made principal and interest payments
under the Stream Loan totaling $4.8 million and $13.2 million, respectively, to the end of December 31, 2020
(see Note 20). As at December 31, 2020, based on the projected life of mine production and other significant
assumptions (see Note 20), the estimated fair value equivalent to 338,876 oz. of gold and 5,899,553 oz. of
silver remains outstanding under the Stream Loan.

The Company has the option to repay (i) 50% of the remaining Stream Loan on June 30, 2024 for $150 million
and / or (ii) the other 50% of the remaining Stream Loan on June 30, 2026 for $225 million.

The Company has elected to measure the Stream Loan as a financial liability measured at fair value through
profit or loss.

The lender of the Prepay Loan and Stream Loan has been granted the right to purchase 50% of Fruta del
Norte gold production, up to a maximum of 2.5 million oz., at a price determined based on monthly delivery
dates and a defined quotational period. This obligation is satisfied first through the sale of doré and then, if
required, financial settlement.

9. Long-term debt (continued)

The Company has determined that the Offtake represents a derivative financial liability. Accordingly, the
Offtake, which is primarily a function of the gold price option feature, is measured at fair value at each
statement of financial position date, with changes in the derivative fair value being recorded in profit or loss.

(d) Senior debt facility

Tr anche A

Tranche B

Total

Principal
Accrued interest
Transaction costs

233,750
36
(14,753)

93,500

8
(5,054)

327,250
44
(19,807)

Total

219,033

88,454

307,487

The Facility is a senior secured loan comprised of two tranches: a senior commercial facility (“Tranche A”) and
a senior covered facility under a raw material guarantee (“Tranche B”) both of which were fully drawn as at
December 31, 2020. The annual interest rate is the three or six-month LIBOR plus an average margin of
approximately 5.05% for Tranche A and 2.50% for Tranche B. Tranche A and Tranche B are subject to risk
mitigation and guarantee fees of 2.00% and 3.15%, respectively. The Facility is repayable in variable quarterly
instalments starting December 31, 2020 and maturing in June 2026. In addition, accelerated quarterly
principal repayments based on 30% of Fruta del Norte’s free cash flow apply after completion date as defined
under the Facility (“Completion”), which is forecast to occur in 2021.

During the year ended December 31, 2020, the Company paid $22.8 million of principal and $14.7 million
(2019 – $5.3 million) of interest relating to the Facility.

(e) Cost overrun facility (the “COF”)

On March 29, 2019, the Company entered into a $75 million COF with a related party of the Company by
virtue of its shareholding in the Company in excess of 20%. The COF can only be used to fund a potential
cost overrun related to Fruta del Norte until Completion and is currently undrawn.

In accordance with the terms of the COF, the Company issued the related party 300,000 common shares and
300,000 warrants ("Warrants") in lieu of fees. Each Warrant has a term of three years from the date of issue
and is exercisable for a common share upon payment of the exercise price of CAD$5.98. The Company is
required to issue an additional 300,000 common shares to the related party as a condition precedent to the
first utilization of the COF.

Under the long-term debt, the Company, together with its subsidiaries related to Fruta del Norte (collectively, the
“FDN Subsidiaries”), are subject to a number of covenants while amounts remain outstanding. The long-term debt
is secured by a charge over the FDN Subsidiaries’ assets, pledges of the shares of the FDN Subsidiaries and
guarantees of the Company and the FDN Subsidiaries.

10. Reclamation provision

The Company’s reclamation provision relates to the rehabilitation of Fruta del Norte. The reclamation provision
has been calculated based on total estimated rehabilitation costs and discounted back to its present value. The
pre-tax discount rate and inflation rate are adjusted annually and reflect current market assessments. At December
31, 2020, the Company applied a pre-tax discount rate of 9.4% (2019 – 9.1%) and an inflation rate of 1.8% (2019
– 2.5%). The estimated total future liability for reclamation and remediation costs on an undiscounted basis and
adjusted for an estimate of future inflation is approximately $22.8 million (2019 – $22.5 million).

December 31,

2020

2019

Balance, beginning of year

4,751

4,353

Change in discount rate, amount, and timing of cash flows
Accretion of liability component of obligations

1,166
39

-
398

5,956

4,751

11. Share capital

Authorized:

• Unlimited number of common shares without par value
• Unlimited number of preference shares without par value

A continuity summary of the issued and outstanding common shares and the associated dollar amounts is
presented below:

Balance at January 1, 2019

213,163,980

857,279

Number of
common shares

Share capital

Proceeds from equity financing, net
Consideration for cost overrun facility
Exercise of stock options
Exercise of anti-dilution rights

Balance at December 31, 2019

Proceeds from equity financing, net
Exercise of stock options
Exercise of anti-dilution rights

8,625,000
300,000
1,121,800
420,432

223,631,212
4,772,500
1,074,650
609,975

33,940
1,221
5,340
2,123

899,903

41,419
5,318
5,085

Balance at December 31, 2020

230,088,337

951,725

(a) On March 1, 2019, the Company closed a CAD$46.6 million bought deal equity financing (the “2019 Bought
Deal”) by issuing 8,625,000 shares, which included the exercise in full of the over-allotment option of an
additional 1,125,000 shares, at a price of CAD$5.40 per share. Share issue costs of $1.2 million were paid
resulting in net proceeds of $33.9 million received by the Company in relation to the 2019 Bought Deal.

(b) On June 11, 2020, the Company closed a bought deal equity financing (the “2020 Bought Deal”) by issuing
4,772,500 shares of the Company at a price of CAD$12.05 per share for gross proceeds of CAD$57.5 million
($42.4 million), which included the exercise in full of the over-allotment option of an additional 622,500 shares.
Share issue costs of $1.0 million were paid resulting in net proceeds of $41.4 million received by the Company
in relation to the 2020 Bought Deal.

11. Share capital (continued)

(c) During the year ended December 31, 2020, the Company issued 609,975 common shares to Newcrest Mining
Limited (“Newcrest”) at a weighted average price of CAD$11.55 per share for total proceeds of $5.1 million.
During the year ended December 31, 2019, 420,432 common shares were issued at a weighted average price
of CAD$6.72 per share for total proceeds of $2.1 million. All issuances were completed in accordance with
Newcrest’s anti-dilution rights granted as part of its initial investment in the Company.

12. Stock-based compensation and share purchase warrants

(a) Stock-based compensation

The Company has adopted an omnibus incentive plan (the “Omnibus Plan”) approved at the June 3, 2019
annual general and special meeting of shareholders which replaces its rolling stock-based compensation plan.
The Omnibus Plan allows for the reservation of a maximum 8.5% of the common shares issued and
outstanding at any given time for issuance under the Omnibus Plan. Under the Omnibus Plan, the Company
may grant stock options, restricted share units and deferred share units (collectively, the “Awards”). Subject
to specific provisions under the Omnibus Plan, the eligibility, vesting period, term, and number of Awards are
granted at the discretion of the Company’s board of directors.

Restricted share units entitle the recipient, upon settlement, to receive common shares or, subject to
provisions under the Plan, the cash equivalent or a combination thereof. The Company’s board of directors
may also grant restricted share units that include performance criteria which vests based on a multiplier
(“PSUs”).

Deferred share units may only be granted to non-employee directors and are payable after termination of the
recipient’s service with the Company. Upon settlement, the recipient may receive common shares or, subject
to provisions under the Plan, the cash equivalent or a combination thereof.

i. Stock options

Stock options granted and outstanding under a pre-existing stock option plan (the “Option Plan”) have an
expiry date of five years and vest over a period of two years from date of grant. No additional stock options
can be granted under the Option Plan.

During the year ended December 31, 2020, 821,800 stock options were granted under the Omnibus Plan
which have an expiry date of five years and vest over a period of three years from date of grant.

Stock options are exercisable into one common share of the Company at the price specified in the terms of
the option agreement.

12. Stock-based compensation and share purchase warrants (continued)

A continuity summary of the stock options granted and outstanding under the Omnibus Plan and Option Plan
is presented below:

Year Ended
December 31, 2020

Year Ended
December 31, 2019

Number of
Common Shares

Weighted
exercise price
(CAD)

Number of
Common Shares

Weighted
exercise price
(CAD)

Balance, beginning of year

6,508,200

4.91

5,902,900

Granted
Cancelled / Expired
Exercised(1)

821,800
(28,900)
(1,074,650)

12.60
12.60
4.23

1,861,800

(134,700)
(1,121,800)

Balance outstanding, end of year

6,226,450

6.00

6,508,200

4.59

5.35
5.18
3.95

4.91

Balance exercisable, end of year

4.74
(1) The weighted average share price on the exercise date for the stock options exercised during the year ended December
31, 2020 was CAD$10.19 (2019 – CAD$6.81).

4,573,650

4,634,800

4.99

The following table summarizes information concerning outstanding and exercisable options at December 31,
2020:

Outstanding options

Exercisable options

Range of
exercise
prices (CAD)

Number of
options
outstanding

Weighted
average
remaining
contractual
life (years)

Weighted
average
exercise
price
(CAD)

Number of
options
outstanding

Weighted
average
remaining
contractual
life (life)

Weighted
average
exercise
price (CAD)

$
3.75 to 5.21
$ 5.22 to 12.60

3,319,850
2,906,600

1.15
3.05

4.79
7.39

3,319,850
1,314,950

1.15
2.32

6,226,450

2.04

6.00

4,634,800

1.48

4.79
5.49

4.99

The fair value based method of accounting was applied to stock options granted to employees, including
directors, and non-employees on the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions:

Risk-free interest rate
Expected stock price volatility
Expected life
Expected dividend yield

2020

2019

1.38%
28.28%
5 years
-

1.81%
57.18%
5 years
-

Weighted-average fair value per option granted (CAD)

$3.46

$2.69

The equity-settled share-based payment reserve comprises the fair value of employee options measured at
grant date and amortized over the period during which the employees become unconditionally entitled to the
options.

During the year ended December 31, 2020, the Company recorded stock-based compensation expense of
$2.2 million (2019 – $3.5 million) relating to stock options.

12. Stock-based compensation and share purchase warrants (continued)

ii. Restricted share units with performance criteria (“PSUs”)

During the year ended December 31, 2020, the Company granted 148,000 PSUs to eligible employees which
vest three years from date of grant subject to continued employment and certain performance conditions being
met. The number of PSUs that vest will be adjusted using a multiplier that is based on total shareholder return
by the Company’s shares over the three-year period relative to a peer group as defined by the Company’s
board of directors. Each vested PSU entitles the recipient to a payment of one common share or cash with
an equivalent market value, at the recipient’s option. If the recipient elects a cash payout, the market value is
determined as the volume weighted average trading price of the Company’s shares on the TSX for the five
trading days immediately preceding the vesting date.

The fair value of PSUs was measured based on Monte Carlo simulation with the following weighted-average
assumptions:

Risk-free interest rate
Average expected volatility of the Company and its peer group
Expected life
Expected dividend yield

Weighted-average fair value per PSU outstanding

December
31, 2020

December
31, 2019

0.53%
55.03%
3 years
-

$8.12

-
-
-
-

The Company recorded a liability of $1.2 million to recognize the estimated fair value as at December 31,
2020 of the PSUs.

iii. Restricted share units settled in cash (“Cash RSUs”)

During the year ended December 31, 2020, the Company granted 29,500 Cash RSUs to eligible employees
which vest three years from date of grant subject to continued employment of which 26,700 remain outstanding
as at December 31, 2020. Each vested Cash RSU entitles the recipient to a payment in cash based on the
market value of one common share at the end of the three-year period. The market value is determined as
the volume weighted average trading price of the Company’s shares on the TSX for the five trading days
immediately preceding the vesting date.

The fair value of the Cash RSUs was measured based on the Black-Scholes option pricing model with the
following weighted-average assumptions:

Risk-free interest rate
Expected stock price volatility
Expected life
Expected dividend yield

Weighted-average fair value per Cash RSU outstanding

December
31, 2020

December
31, 2019

0.26%
52.58%
2.15 years
-

$11.25

-
-
-
-

The Company recorded a liability of $0.3 million to recognize the estimated fair value as at December 31,
2020 of the cash settled RSUs.

12. Stock-based compensation and share purchase warrants (continued)

iv. Restricted share units settled in shares (“Share RSUs”)

During the year ended December 31, 2020, the Company granted 34,600 Share RSUs to eligible employees.
Of these, 31,500 Share RSUs vested on December 31, 2020. The remaining 3,100 Share RSUs vest three
years from date of grant subject to continued employment. Each vested Share RSU entitles the recipient to
a payment in shares shortly after vesting.

The fair value of the Share RSUs was measured on the date of grant based on the Black-Scholes option
pricing model with the following weighted-average assumptions:

Risk-free interest rate
Expected stock price volatility
Expected life
Expected dividend yield

Weighted-average fair value per Share RSU outstanding

December
31, 2020

December
31, 2019

0.29%
66.62%
0.49 years
-

$10.24

-
-
-
-

The fair value of Share RSUs measured at grant date are being amortized over the period during which the
employees become unconditionally entitled to the Share RSUs.

During the year ended December 31, 2020, the Company recorded stock-based compensation expense of
$0.3 million (2019 – nil).

(b) Share Purchase Warrants

A continuity summary of the warrants granted and outstanding is presented below:

Year ended
December 31, 2020

Year ended
December 31, 2019

Number of
warrants

Weighted
average
exercise price
(CAD)

Number of
warrants

Weighted
average
exercise price
(CAD)

Balance, beginning of year

411,441

5.98

Consideration for cost overrun
facility (Note 9)
Anti-dilution rights exercised by
Newcrest

300,000

111,441

Balance outstanding, end of year

411,441

5.98

411,441

5.98

The Company issued 111,441 warrants to Newcrest at a price of CAD$1.66 per warrant for total proceeds of
CAD$0.2 million under its anti-dilution rights following the issuance of Warrants to the COF provider (see Note
9). Each warrant has a term of three years from the date of issue and is exercisable for a common share
upon payment of the exercise price of CAD$5.98.

12. Stock-based compensation and share purchase warrants (continued)

The following table summarizes information concerning outstanding warrants at December 31, 2020:

Exercise
price (CAD)

Number of
warrants
outstanding

Remaining
contractual life
(years)

5.98

411,441

1.25

The fair value based method of accounting was applied to the warrants on date of grant using the Black-
Scholes option pricing model with the following weighted-average assumptions:

Risk-free interest rate
Expected stock price volatility
Expected life
Expected dividend yield

Weighted-average fair value per warrant granted (CAD)

December
31, 2020

December
31, 2019

-
-
-
-

1.78%
50.63%
3 years
-

$1.66

The equity-settled share-based payment reserve includes the fair value of warrants as measured at grant
date.

13. Administration

Corporate social responsibility
Depreciation
Investor relations
Municipal taxes
Office and general
Professional fees
Regulatory and transfer agent
Salaries and benefits
Stock-based compensation
Training
Travel

December 31,
2020

December 31,
2019

814
-
219
48
2,021
2,280
321
7,654
4,061
216
167

1,140
96
281
1,225
2,578
4,510
338
5,269
3,491
3,359
726

17,801

23,013

14. Suspension of operations

Salaries and benefits
Maintenance
Fixed administrative costs
Site services
COVID-19 expenditures
Other costs
Depletion and depreciation

December 31,
2020

December 31,
2019

13,003
4,364
4,062
2,197
1,455
1,734
2,489

29,304

-
-
-
-
-
-
-

Due to growing concerns regarding the spread of COVID-19 in Ecuador and the impacts of increasing efforts by
the governments at all levels to slow the spread of COVID-19, the Company temporarily suspended operations at
Fruta del Norte on March 22, 2020. Following three months of suspension of operations in response to the COVID-
19 pandemic, the Company re-started operations in early July. Costs during this suspension period have been
presented separately and are comprised principally of salaries and benefits, maintenance, COVID-19 related costs,
and ongoing indirect fixed costs such as insurance and property taxes.

15. Finance expense (income)

Interest expense
Other finance costs
Accretion of transaction costs
Interest income

December 31,
2020

December 31,
2019

33,940
7,714
3,690
(402)

-
-
-
(1,763)

44,942

(1,763)

With the achievement of commercial production, effective March 1, 2020, debt service costs are recognized in the
consolidated statements of loss and comprehensive income (loss) (Note 6(b)).

16. Related party transactions

(a) Related party expenses

During the years ended December 31, 2020 and December 31, 2019, the Company incurred the following:

Payee

Nature

Note

December 31,
2020

December 31,
2019

Namdo

Management fees

353

298

i. Namdo Management Services Ltd. (“Namdo”), a company associated with an officer of the Company in

2020, provides services and office facilities to the Company pursuant to an agreement.

16. Related party transactions (continued)

(b) Key management compensation

Key management includes executive officers and directors of the Company. The compensation paid or
payable to key management for employee services and directors is shown below.

Salaries, bonuses and benefits
Stock-based compensation

December 31,
2020

December 31,
2019

6,576
3,283

9,859

3,950
2,508

6,458

17. Income taxes

(a)

Income tax expense

Income tax expense differs from the amount that would result from applying the Canadian federal and
provincial income tax rates to net loss before tax. These differences result from the following items:

December 31,

2020

2019

Net loss before tax

(60,374)

(118,945)

Canadian federal and provincial income tax rates

27.00%

Expected income tax expense based on the above
rates

Increase (decrease) due to:

(16,301)

(32,115)

Differences in foreign tax rates
Non-deductible costs
Losses and temporary differences for which an income tax asset has
not been recognized
Non-taxable portion of capital gains
Benefits of previously unrecognized deferred income tax assets

2,270
7,308

1,233
35
(7,761)

5,220
2,180

24,743
(28)
-

Income tax recovery

(13,216)

The Company recognized a deferred income tax recovery relating to deferred tax assets that are expected to
be utilized as a result of cumulative derivative gains within other comprehensive income.

17. Income taxes (continued)

(b) Deferred income taxes

Deferred tax assets and liabilities have been recognized on the statement of financial position as follows:

December 31,

2020

2019

Long-term debt
Mineral properties and property, plant and equipment
Net-capital losses – Canada
Unrealized foreign exchange gains

13,762
(13,762)

-
-

-
-
146
(146)

Deductible temporary differences for which no deferred taxes assets have been recognized are as follows:

Non-capital losses - Canada
Net-capital losses - Canada
Non-capital losses - Ecuador
Long-term debt
Mineral properties and property, plant and equipment
Share issuance costs
Other

December 31,

2020

2019

28,921
14,604
8,210
153,972
24,536
3,049
18,437

23,360
8,924
-
224,094
111,506
3,766
2,383

251,729

374,033

As at December 31, 2020, the Company has the following tax losses which may be used to reduce future taxable
income:

Year of expiry

Canada

Ecuador

2021
2022
2023
2024
2025 and onwards

-
-
-
-

28,921

Total

28,921

-
-
-
-
8,210

8,210

18. Supplemental cash flow information

Change in trade receivables and other current
assets related to:

Sales recognized as a reduction of property,
plant and equipment

Change in accounts payable and accrued
liabilities related to:

Acquisition of property, plant and equipment

December 31,

2020

2019

20,936

(20,936)

(49,935)

25,408

The following table sets forth the changes in liabilities arising from financing activities for the year ended December
31, 2020.

Gold
prepay
credit
facility

Stream
loan credit
facility

Offtake
derivative
liability

Senior
debt
facility

Total

Balance, January 1, 2019

167,524

178,838

17,890

364,252

Cash inflows
Cash outflows
Change in derivative fair values
Other changes (1)

-
-
55,372
12,021

-
-
99,702
11,584

Balance, December 31, 2019

Cash inflows
Cash outflows
Change in derivative fair values
Other changes (1)

234,917
-
(18,328)
20,238
12,001

290,124
-
(17,952)
(15,194)
11,493

-
-
8,966
-

26,856
-
-
5,452
-

350,000
-
-
(23,311)

326,689
-
(22,750)
-
3,548

350,000
-
164,040
294

878,586

-
(59,030)
10,496
27,042

Balance, December 31, 2020
(1) Other changes include non-cash movements and interest accruals which are presented as investing activities
in the statement of cash flows.

268,471

248,828

307,487

32,308

857,094

19. Segmented information

Operating segments are components of an entity that engage in business activities from which they incur expenses
and whose operating results are regularly reviewed by a chief operating decision maker to make resource
allocation decisions and to assess performance. The Chief Executive Officer is responsible for allocating
resources and reviewing operating results of each operating segment on a periodic basis.

The Company’s primary business activity is the Fruta del Norte operating mine in Ecuador. Materially all of the
Company’s non-current assets and non-current liabilities relate to Fruta del Norte. In addition, the Company
conducts exploration activities and maintains a number of concessions in Ecuador outside of Fruta del Norte.

19. Segmented information (continued)

The following are summaries of the Company’s current and non-current assets, current and non-current liabilities,
and net losses by segment:

Fruta del
Norte

Other
concessions

Corporate
and other

Total

As at December 31, 2020

Current assets
Non-current assets

Total assets

Current liabilities
Non-current liabilities

Total liabilities

For the year ended December 31, 2020

Capital expenditures

Revenues

Income from mining operations
Corporate administration
Exploration expenditures
Suspension of operations
Finance income (expense)
Other expense
Derivative loss
Deferred income tax recovery

Net loss for the year

As at December 31, 2019

Current assets
Non-current assets

Total assets

Current liabilities
Non-current liabilities

Total liabilities

For the year ended December 31, 2019

Capital expenditures

Corporate administration
Exploration expenditures
Finance income
Other income (expense)
Derivative loss

Net loss for the year

240,991 $

1,216,361

1,457,352

231,570
684,475

916,045

41,830

358,156

172,386
(4,231)
-
(29,304)
(45,313)
(7)
(136,984)
13,216

(30,237)

968
-

968

170
-

170

-
(46)
(2,805)
-
-
-
-
-

(2,851)

47,040 $
-

288,999
1,216,361

47,040

1,505,360

656
1,631

2,287

232,396
686,106

918,502

-
(13,524)
-
-
371
(917)
-
-

41,830

358,156

172,386
(17,801)
(2,805)
(29,304)
(44,942)
(924)
(136,984)
13,216

(14,070)

(47,158)

Fruta del
Norte

Other
concessions

Corporate
and other

Total

96,653 $

1,259,781

1,356,434

115,168
825,759

940,927

451,227

(11,870)
-
401
2,202
(93,120)

(102,387)

137
-

137

624
-

624

52,390 $
-

149,180
1,259,781

52,390

1,408,961

588
-

588

116,380
825,759

942,139

451,227

(39)
(3,733)
8
-
-

(3,764)

(11,104)
-
1,354
(3,044)
-

(23,013)
(3,733)
1,763
(842)
(93,120)

(12,794)

(118,945)

20. Financial instruments and risk management

The Company’s financial instruments include cash, cash equivalents and receivables, which are categorized as
financial assets at amortized cost, and accounts payable and accrued liabilities, which are categorized as financial
liabilities at amortized cost. The fair value of these financial instruments approximates their carrying values due to
the short-term nature of these instruments. In addition, the Gold Prepay Loan; Stream Loan; and offtake
commitment have been classified as financial liabilities measured at fair value and the senior debt facility as a
financial liability at amortized cost.

(a) Fair value measurements and hierarchy

IFRS establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities and the lower priority to unobservable inputs. The three levels of the fair value hierarchy
are as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities that the reporting entity has

the ability to access at the measurement date.

Level 2: Inputs that are observable, either directly or indirectly, for substantially the full term of the

asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value

measurement and unobservable.

20. Financial instruments and risk management (continued)

(b) Fair value measurements using significant unobservable inputs (Level 3)

The following table sets forth the Company’s financial liabilities measured at fair value on a recurring basis by
level within the fair value hierarchy for the year ended December 31, 2020. Each of these financial instruments
are classified as Level 3 as their valuation includes significant unobservable inputs.

Gold prepay
credit
facility

Stream loan
credit
facility

Offtake
derivative
liability

Total

Balance, January 1, 2019

167,524

178,838

17,890

364,252

Interest accrued and capitalized at
stated rate of 7.5%
Accretion of transaction costs

Derivative fair value adjustments recognized in:

Property, plant and equipment
Derivative loss
Other comprehensive loss
Change in derivative fair values

11,406

615

4,460
31,806
19,106
55,372

11,406

178

5,222
52,348
42,132
99,702

-
-

22,812
793

-
8,966
-
8,966

9,682
93,120
61,238
164,040

Balance, December 31, 2019

234,917

290,124

26,856

551,897

Principal paid
Interest paid
Interest accrued and capitalized at
stated rate of 7.5%
Accretion of transaction costs

Derivative fair value adjustments recognized in:

Property, plant and equipment
Derivative loss
Other comprehensive income
Change in derivative fair values

(7,895)
(10,433)

11,387

614

735
59,961
(40,458)
20,238

(4,767)
(13,185)

11,302

191

866
71,571
(87,631)
(15,194)

-
-

(12,662)
(23,618)

22,689
805

-
5,452
-
5,452

1,601
136,984
(128,089)
10,496

Balance, December 31, 2020

248,828

268,471

32,308

549,607

The financial liabilities above were valued using Monte Carlo simulation valuation models. The significant
assumptions used in the Monte Carlo valuation models include: the gold forward prices, gold price volatility,
the risk-free rate of return, risk-adjusted discount rates, and the projected life of mine production schedule. In
addition, in valuing the Stream Loan, the silver forward prices, silver price volatility, and the gold/silver price
correlation were also used.

20. Financial instruments and risk management (continued)

As the gold price and silver price volatilities and risk-adjusted discount rates are unobservable inputs, the
financial liabilities above are classified within Level 3 of the fair value hierarchy. The following table
summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value
measurements.

Fair value at
December
31, 2020

549,607

Financial
liabilities
measured at
fair value

Unobservable
inputs

Range of
inputs

Relationship of unobservable
inputs to fair value

Gold price and
silver price
volatilities

16% to 43%

Risk-adjusted
discount rates

13% to 15%

An increase or decrease in the
expected volatilities of 5% would
increase or decrease the fair value
of long-term debt and derivative loss
by $5.4 million or $6.2 million,
respectively
An increase or decrease in risk-
adjusted discount rates of 1% would
decrease or increase the fair value of
long-term debt and comprehensive
income by $15.6 million or $16.6
million, respectively

(d) Valuation processes

The valuation of financial instruments classified as Level 3 of the fair value hierarchy were prepared by an
independent valuation specialist under the direct oversight of the Vice President, Finance (“VP Finance”) of
the Company. Discussions of valuation processes and results are held between the VP Finance, the Chief
Financial Officer, and reported to the audit committee at least once every three months, in line with the
Company’s quarterly reporting periods.

(e) Financial risk management

The Company’s financial instruments are exposed to a variety of financial risks by virtue of its activities.

Currency risk

Lundin Gold is a Canadian company, with foreign operations in Ecuador. Revenues generated and
expenditures incurred in Ecuador are primarily denominated in U.S. dollars, as are its loan facilities. However,
equity capital, if needed, is typically raised in Canadian dollars. As such, the Company is subject to risk due
to fluctuations in the exchange rates of foreign currencies. Although the Company does not enter into
derivative financial instruments to manage its exposure, the Company tries to manage this risk by maintaining
most of its cash in U.S. dollars. Based on this exposure, a 2% change in the U.S. dollar exchange rate would
give rise to an increase or decrease of approximately $0.8 million in net loss for the year.

Credit risk

Credit risk is the risk of a financial loss to the Company if a counterparty to a financial instrument fails to meet
its contractual obligations. The majority of the Company’s cash is held in large financial institutions with a
high investment grade rating. The Company is also subject to credit risk associated with its trade receivables.
The Company manages this risk by only selling to a small group of reputable customers with strong financial
statements.

20. Financial instruments and risk management (continued)

Interest rate risk

The Company is subject to interest rate risk with respect to the fair value of long-term debt which are accounted
for at fair value through profit or loss and on the senior debt facilities for which interest payments are affected
by movements to the LIBOR rate. Refer to Note 20(c) for the impact of changes in interest rates on the fair
value of the Company’s long-term debt.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. Cash
flow forecasting is performed regularly to monitor the Company’s liquidity requirements to ensure it has
sufficient cash to meet its operational needs at all times. In addition, management is actively involved in the
review, planning and approval of significant expenditures and commitments.

The Company’s accounts payable and accrued liabilities are due within twelve months. For the Company’s
long-term debt, terms of repayment are described in Note 9.

Commodity price risk

The Company is subject to commodity price risk from fluctuations in the market prices of gold and silver.
Commodity price risks are affected by many factors that are outside the Company’s control including global
or regional consumption patterns, the supply of and demand for metals, speculative activities, the availability
and costs of metal substitutes, inflation and political and economic conditions. The Company has not hedged
the price of any commodity at this time.

The fair value of long-term debt accounted for at fair value through profit or loss is impacted by fluctuations of
commodity prices. Based on this exposure, an increase or decrease of 5% in gold and silver prices would
increase or decrease the fair value of long-term debt and the derivative loss by $28.8 million or $28.7 million,
respectively.

21. Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going
concern and operate Fruta del Norte and to maintain a flexible capital structure which optimizes the cost of capital
at an acceptable risk.

In the management of capital, the Company considers items included in shareholders’ equity and long-term debt.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions
and the risk characteristics of the Company’s assets. In order to maintain or adjust the capital structure, the
Company may attempt to issue new shares or debt instruments, acquire or dispose of assets, or to bring in joint
venture partners.

In order to facilitate the management of its capital requirements, the Company prepares annual expenditures
budgets that are updated as necessary depending on various factors, including successful capital deployment and
general industry conditions. The annual and updated budgets are approved by the Board of Directors.

22. Commitments

Significant capital expenditures contracted as at December 31, 2020 but not recognized as liabilities are as follows:

Development
costs

11,009
-

11,009

2021
2022
2023

Total

The Company’s sales are subject to a 5% net smelter royalty payable to the Government of Ecuador and a 1% net
revenue royalty payable to third parties.

Corporate Information

OFFICES
CORPORATE HEAD OFFICE
Lundin Gold Inc.
885 West Georgia Street, Suite 2000
Vancouver, British Columbia V6C 3E8
Telephone: 604-689-7842
Toll Free: 1-888-689-7842
Facsimile: 604-689-4250

REGIONAL HEAD OFFICE
Aurelian Ecuador S.A.,
a subsidiary of Lundin Gold Inc.
Av. Amazonas N37-29 y UNP Edificio
Eurocenter, Piso 5
Quito, Pichincha
Ecuador
Telephone: 593-2-299-6400

COMMUNITY OFFICE
Calle 01 de Mayo
SN y de Febiero
Los Encuentros, Zamora-Chinchipe,
Ecuador

STOCK EXCHANGE
LISTINGS
The Toronto Stock Exchange
Trading Symbol: LUG
Nasdaq Stockholm
Trading Symbol: LUG

SHARE REGISTRAR AND
TRANSFER AGENT
Computershare Investor Services Inc.
510 Burrard Street, 3rd Floor
Vancouver, B.C. V6C 3B9
Telephone: 1-800-564-6253

AUDITOR
PricewaterhouseCoopers LLP
250 Howe St #700 Vancouver,
BC V6C 3S7
Telephone: 604-806-7000

ADDITIONAL INFORMATION
Further information about Lundin
Gold is available by contacting:
Finlay Heppenstall
Director, Investor Relations
Telephone: 604-689-7842
Toll Free: 1-888-689-7842
info@lundingold.com

BOARD OF DIRECTORS
Lukas H. Lundin, Chairman
Geneva, Switzerland
Carmel Daniele
London, United Kingdom
Ian Gibbs
Vancouver, Canada
Chantal Gosselin
Vancouver, Canada
Ashley Heppenstall
London, United Kingdom
Ron F. Hochstein
Vancouver, Canada
Craig Jones
Brisbane, Australia
Paul McRae
Algarve, Portugal
Bob Thiele
Balmoral, Australia
Istvan Zollei
New York City, United States

OFFICERS
Ron F. Hochstein
President & Chief Executive Officer
Alessandro Bitelli
Executive Vice President &
Chief Financial Officer
Sheila Colman
Vice President, Legal
& Corporate Secretary
David Dicaire
Vice President, Projects and
General Manager
Nathan Monash
Vice President, Business
Sustainability
Iliana Rodriguez
Vice President, Human Resources
Chester See
Vice President, Finance

885 West Georgia Street, Suite 2000
Vancouver, British Columbia, V6C 3E8
Canada

Av. Amazonas N37-29 y UNP Edificio
Eurocenter, Piso 5
Quito, Pichincha, Ecuador

Telephone: 604-689-7842
Toll Free: 1-888-689-7842

Telephone: 593-2-299-6400

info@lundingold.com

www.lundingold.com

@LundinGold

@LundinGoldEC

Lundin Gold

Lundin Gold Ecuador