Mr. Ron Hochstein reports

LUNDIN GOLD INC. REPORTS 2016 RESULTS

Lundin Gold Inc. has released its results for the year ended Dec. 31, 2016. All amounts in this release are in U.S. dollars unless otherwise indicated.

Highlights:

• An independent feasibility study for the Fruta del Norte project (FDN) was completed in June, 2016.
• In July, the La Zarza concession (host to FDN) phase change application was approved by the government of Ecuador. With this approved, the status of the La Zarza concession was converted from the exploration phase to the exploitation phase under ecuador's mining law.
• The company completed an equity financing with a syndicate of underwriters, pursuant to which the underwriters purchased, on a bought deal basis, 17.25 million common shares of the company at a price of $5.50 per common share. Gross proceeds under the offering were $94,875,000 (Canadian) ($72.6-million).
• An exploration drilling campaign was completed in early August, having tested five key targets, located 15 to 20 kilometres south of the FDN. The results of the drilling program indicated that further follow-up is required.
• In October, the company's environmental impact study (the EIS) for FDN was approved, and the environmental licence was granted by the government of Ecuador.
• The company completed negotiations and signed the exploitation agreement (the EA) for FDN with the government of Ecuador in December, 2016. The EA, combined with existing laws and regulations, establishes the fiscal, operational and commercial terms and conditions for the development of FDN.
• During 2016, the company completed negotiations and signed the investment protection agreement (the IPA) with the government of Ecuador in December. The IPA provides further legal and tax stability to Lundin Gold in conjunction with the EA.
• The company continued to progress its planned early works program to advance the engineering and initiate fieldwork to maintain the project critical path. During the fourth quarter of 2016, work commenced on site clearing and earthworks associated with the development of the area and facilities to support the commencement of construction of the mine portals and mine access declines in the second quarter of 2017. The company also closed bids for the underground mine development contract, which is expected to be awarded in first quarter of 2017.
• On Jan. 16, 2017, the company secured a $35-million credit facility from an insider of the company.
• On Feb. 21, 2017, the company awarded the mine development contract for FDN, which encompasses construction of the mine portals, soft tunnelling work and the development of the twin declines.

"Lundin Gold made significant advancements in the development of FDN during 2016 as the company completed the feasibility study, obtained the environmental licence, and signed the EA and IPA," said Lundin Gold president and chief executive officer, Ron Hochstein. "We also have embarked on our early works program. We expect 2017 to be another milestone year in the development of FDN, as we complete our project financing and commence the construction starting with the mine portals and declines in mid-2017."

                                        FINANCIAL RESULTS
                            (in thousands, except per-share amounts) 

                                                Three months ended Dec. 31,              Year ended Dec. 31,
                                                   2016               2015             2016              2015   
Results of operations                                                                             
Net (loss) for the period                      $(23,889)          $(12,761)        $(62,814)         $(45,324)
Basic and diluted (loss) per share                (0.20)             (0.13)           (0.59)            (0.45)

Note: The complete analysis of the 2016 financial results can be found in management's discussion and analysis and the financial statements dated Feb. 24, 2017, filed on SEDAR.

The current quarter's net loss is higher compared with losses in prior quarters, including the fourth quarter of 2015, primarily because of an increase in general and administrative expenditures. This increase was mainly due to the one-time mandatory contribution to the government of Ecuador for earthquake relief efforts, a settlement-of-proceeding legal dispute, an increase in project evaluation and exploration expenditures, and higher employee compensation due to incentive bonuses.

The loss during the year ended Dec. 31, 2016, is higher compared with the previous year as a result of exploration expenditures of $5.3-million in 2016 compared with $900,000 in 2015. Professional fees increased by $1.3-million due to an increase in corporate activities relating to negotiations with the government of Ecuador on the EA and IPA. The company was also required to pay $3.9-million due to a one-time mandatory contribution to the government of Ecuador for the earthquake relief efforts. A law passed by the government of Ecuador in response to an earthquake in the provinces of Manabi and Esmeraldas in Ecuador on April 16, 2016, established a mandatory one-time levy, was based on 0.9 per cent of the book value of the equity interest held in Ecuadorian companies by non-resident entities and is not deductible for income tax purposes.

In addition, the company incurred $2.8-million to settle a legal dispute against the company relating to a net smelter royalty on a Russian gold project previously held by the company. Lastly, in 2016, the company generated a gain on account of foreign exchange of $5.2-million. This gain was generated by the substantial holdings of U.S. dollars at the parent company level. As the functional currency of the parent company is the Canadian dollar, a strengthening of the U.S. dollar against the Canadian dollar during the year ended Dec. 31, 2015, generated a gain in terms of Canadian dollars. The foreign exchange gain was less in 2016.

Liquidity and capital resources

As at Dec. 31, 2016, the company had cash of $8.5-million and a working capital balance of $1.0-million compared with cash of $21.4-million and a working capital balance of $16.3-million at Dec. 31, 2015. The $12.9-million decrease in cash was due primarily to $57.4-million used in operating activities relating to project evaluation expenses on FDN. The company also paid its first advance royalty payment of $25-million upon signing of the EA. The balance of the payments will be due in two equal disbursements of $20-million on the first and second anniversary of signing. This decrease was offset by cash provided by financing activities of $69.7-million mainly from an equity financing.

Equity financing

The company completed an equity financing pursuant to which the underwriters purchased, on a bought deal basis, 17.25 million common shares of the company at a price of $5.50 (Canadian) per common share. The total gross proceeds raised under the offering was $94,875,000 (Canadian) ($72.6-million). Share issue costs of $3.3-million (Canadian) were paid resulting in net proceeds of $69.3-million (Canadian) received by the company in relation to the offering.

Short-term credit facilities

On June 8, 2016, the company secured an $18-million credit facility from an insider of the company. A total of $8-million was drawn down under the facility and repaid in full on July 22, 2016, from the proceeds of the offering. A total of 39,267 common shares of the company were issued in lieu of interest and fees.

Subsequently, on Jan. 16, 2017, the company secured a second short-term $35-million credit facility from the same party.

The 2017 facility is evidenced by a debenture, which is unsecured and is due on the earlier of the closing of a financing by the company or May 31, 2017. No interest is payable in cash during the term of the 2017 debenture. Any amount of the 2017 facility remaining unpaid and outstanding on or after the maturity date shall bear interest at a rate of 5 per cent per annum until repaid in full.

The company issued an aggregate of 60,000 common shares on Jan. 16, 2017, as consideration for the 2017 facility in lieu of fees. The company will also issue an additional 1,700 common shares per month for each $1-million of the 2017 facility drawn down and outstanding until the maturity date. All securities issued in conjunction with the 2017 facility will be subject to a four-month hold period under applicable securities law.

Outlook

The company remains on track with the early works program, which is expected to be completed by mid-2017. In addition, the mine development contract for FDN was awarded on Feb. 21, 2017, which encompasses construction of the mine portals, soft tunnelling work and the development of the twin declines. These activities support the commencement of construction of the mine portals and twin declines in the second quarter of 2017.

Upon completion of basic engineering, near the end of the first quarter of 2017, the company anticipates preparing a production plan based on the new mine plan, updated capital and operating cost estimates, and a revised execution plan taking into account a self-perform approach versus the conventional EPCM approach.

During the next 12 months, the company will continue to work with its financial advisers to put in place the financing for the construction of FDN. Financing for the construction and development of FDN is expected to be done by various financing transactions or arrangements, including equity financing, debt financing, stream financing, joint venturing or other means with the objective of securing a first stage of financing by mid-2017.

Qualified person

The technical information relating to the FDN contained in this press release has been reviewed and approved by Ron Hochstein, PEng, Lundin Gold's president and chief executive officer, and Nicholas Teasdale, MAusIMM CP (geo), Lundin Gold's vice-president of exploration, both of whom are qualified persons under NI 43-101.

Full details of the feasibility study can be found in a technical report entitled "Fruta del Norte -- NI 43-101 technical report on feasibility study," which has an effective date of April 30, 2016. The technical report is available for review under the company's profile on SEDAR and on the company's website.

Additional information

The company's consolidated financial statements for the year ended Dec. 31, 2016, and related management's discussion and analysis are available on the company's website or under its profile on SEDAR.

About Lundin Gold Inc.

Lundin Gold owns the Fruta del Norte gold project, located in southeast Ecuador. FDN is one of the largest and highest-grade undeveloped gold projects in the world. The company is advancing FDN to realize the significant potential of this asset.

Lundin Gold is committed to addressing the challenge of sustainability -- delivering value to its shareholders, while simultaneously providing economic and social benefits to impacted communities and minimizing its environmental footprint.

We seek Safe Harbor.