The expansion is set to take throughput from 3,500 to 4,200 tonnes per day and would be funded by cash flow from operations.

Lundin planned to start construction in the first quarter.

"With this added gold production coming online in the last quarter of 2021, we will increase the average annual gold production from 325,000oz per year to 340,000oz per year over the life of mine," president and CEO Ron Hochstein said.

The company estimated 2021 production at 380,000-420,000 ounces of gold at an average head grade of 10.4g/t, a recovery rate of 90% and all-in sustaining costs of $770-830/oz.

Fruta del Norte was expected to produce 200,000-220,000oz in 2020, Lundin has said, in a year impacted by COVID-19 and a recent 15-day blockade following frustration over a bridge collapse.

Reserve boost

The company also increased Fruta del Norte's reserves by 8% to 5.41 million ounces, due to changes in the planned mining method.

"The increase in the 2020 reserve is primarily due to the conversion of a significant portion of the sections of the ore body originally mined by drift and fill to long hole stoping, based on the good ground conditions experienced in the mine to date, which resulted in a slight increase in dilution and decrease in average grade," it said.

Based on the new reserve and throughput expansion, the new life of mine plan anticipated 4.8Moz of production over 14 years to 2034.

"Our increase in probable reserves demonstrates the further upside potential we see in the ore body, and we anticipate adding even more to these estimates upon completion of an underground drilling program which began last month," Hochstein said.

Lundin also planned to spend to spend $11 million in 2021 drilling two high priority exploration targets at its Barbasco and Puente-Princesa concessions, about 7km from the mine.

It put 2021 sustaining capex at $32.6 million and said it would spend a further $9.5 million to complete the Zamora River bridge and complete the South Ventilation Raise, which was critical to achieving expansion mining rates.

It also assumed COVID-19 protocols would remain in place in 2021, which represented a cost of $27/oz.

Lundin shares (TSX: LUG) closed down 0.8% yesterday to C$11.95, remaining near a one-year high, valuing it at $2.7 billion (US$2.1 billion).