Lundin on track for first Ecuador gold pour

The crusher and process plant at the Fruta del Norte gold project in Ecuador. Source: Lundin Gold Inc.

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Lundin Gold Inc. [LUG-TSX, NASDAQ Stockholm] on Wednesday June 26 released a construction update for its Fruta del Norte gold project in Ecuador.

The company said it has begun mining of its first production stope. It also said construction of the process plant and tailings facility is continuing on schedule. Commissioning of the process plant is set to begin in the third quarter of 2019.

The update was released after the close of trading on North American markets, June 25, 2019.

On Wednesday, Lundin shares advanced on the news, rising 1.06% or $0.07 to $6.67. Earlier in the session the shares spiked up to $6.73 after previously trading in a 52-week range of $4.33 and $6.72.

Fruta del Norte is a rich Honduran gold discovery that Lundin group company Fortress Minerals acquired in October 2014 from Kinross Gold Corp. [K-TSX; KGC-NYSE] for $240 million.

The goal was to make Fruta del Norte the cornerstone asset of newly formed company Lundin Gold.

Lundin was able to acquire Fruta Del Norte for a fraction of the $1.2 billion that Kinross paid for the asset after Kinross was hit with a 70% revenue-based windfall profits tax and halted development after spending US$225 million on drilling.

Confident that he could secure more favourable terms, Lundin Gold Chairman Lukas Lundin won the right to produce gold at Fruta del Norte for 25 years under an (potentially renewable) exploitation agreement that allows Ecuador to tax the difference between net smelter revenue and what the revenue would be using a base price at a 70% rate. The base price, to be determined on a monthly basis, will equal the trailing 10-year average of the daily price of gold and silver.

The agreement gives Lundin Gold the right to recoup its cumulative costs before the tax kicks in.

“It’s a great orebody. It is going to be a very low cost producer, sub US$500 an ounce. It will go in any kind of gold environment,” said Lundin, during an interview with Resource World Magazine.

Lundin previously said he expects the mine to cost around $700 million to develop and produce between 300,000 ounces and 350,000 ounces of gold annually.

“Fruta del Norte reached another important milestone on schedule,” said Lundin Gold President and CEO Ron Hochstein in a press release on June 25, 2019. “At the end of May, overall construction progress was 73% complete and 88% of the project’s capital expenditure was committed,” he said. “The team continues to make great progress as we head towards our first gold pour later this year.”

Fruta del Norte is one of the world’s largest high-grade gold projects currently under construction.


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