According to the World Gold Council's Central Bank Gold Reserves Survey, 89% of central bank respondents expect global official gold reserves to increase over the next year, a record share.

People's Bank of China extended its run to eighteen consecutive months of gold purchases through Q1 26, with total holdings reaching 2,322 tones.

Between FY 15 and FY 25, the USD share of global central bank reserves fell by 12% while gold's share rose by 8%. This reflects gold's growing role as a reserve asset amid geopolitical and economic uncertainty.

In this demand scenario, the Ecuadorian government is increasingly positioning mining as a strategic export industry, making sector growth and investment a key pillar of the country’s economic agenda beyond 2026.

Lundin Gold, the owner and operator of the Fruta del Norte mine in southeast Ecuador, is positioned directly in the path of this trend. The company already operates one of the world's highest-grade producing gold mines and is advancing district-scale exploration and expansion opportunities, including Fruta del Norte and multiple copper-gold targets, positioning it to benefit from Ecuador's push to grow its mining sector.

When profits shine

Q1 26 revenue jumped 59.2% y/y to USD 567.4m from USD 356.3m in Q1 25. This substantial growth was possible as average realized gold price rose 60.7% y/y from USD 3,081 per oz to USD 4,951 per oz.

What makes the result more interesting than a lucky commodity spike is the operating leverage. Income from mining operations in Q1 26 expanded 80.1% y/y to USD 420.7m from USD 233.5m, driven by record mill throughput of 5,520 tons per day (tpd), up 24% y/y.

Q1 26 net income surged 78.1% y/y to USD 273.3m from USD 153.5m in Q1 25, boosted by high gold prices, although partly offset by a higher tax bill. Its income tax expense almost doubled to USD 124m, up from USD 63m in Q1 2025.

Free cash flow of USD 348.5m nearly doubled from USD 170.8m in Q1 25. This matters because this is a debt-free company and every dollar of FCF is discretionary, with no interest payments eating away at it.

Valuation turns cautious

Lundin Gold's share price has cooled from peak levels. At CAD 80 (USD 56.5), the stock trades below its 52-week high of CAD 131 (USD 92.5), despite generating a respectable 9.4% return over the past year.

FY 25 total dividend payment of USD 2.7 per share represents a yield of 4.9%. Analysts expect this rate to remain around 5% over the coming years.

Analyst sentiment remains cautious, however: only 4 out of the 15 analysts monitoring the stock have "Buy" ratings on it, reflecting confidence in the company's fundamentals, although limited conviction on near-term upside. Despite this seemingly cautious stance, their average analyst target price of CAD 106.3 (USD 75) implies a significant 32.8% upside potential.

Single mine, multiple risks

Fruta del Norte is Lundin Gold's only producing mine, leaving the company exposed to asset concentration risk. Extreme weather and climate-related disruptions could affect operations, infrastructure and logistics, while regulatory changes, illegal mining, security conditions, permitting delays and workforce availability remain key risks to execution.

Alongside this, management expects Q2 26 to be softer; ore mined in the coming months is of a lower grade, and the plant will be partially shut down for scheduled maintenance. On top of that, extreme weather and illegal mining near the concession area are real (albeit unlikely), which are disruptions that management flags as ongoing watch items.