Major Lundin Gold shareholders increase stake

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Lundin Gold Inc. [LUG-TSX, Nasdaq Stockholm] on Thursday December 5 said its two largest shareholders have each increased their interest in the company via the acquisition of Lundin common shares held by Kinross Gold Corp. [K-TSX; KGC-NYSE].

A subsidiary of Newcrest Mining Ltd. [NCM-ASX] has agreed to acquire 10.9 million shares of Lundin Gold, resulting in an aggregate holding of 71.4 million common shares. The acquisition will increase Newcrest’s interest in Lundin Gold to approximately 32% from 27% of the outstanding shares.

Lorito Holdings S.a.r.l. and Zebra Holdings and Investments S.a.r.l., two companies owned by a trust whose settlor was the late Adolf H. Lundin (the Lundin Family trust) have agreed to acquire 8.4 million common shares of Lundin Gold which, when combined with holdings of Nemesia S.a.r.l., results in an aggregate holding by companies controlled by the Lundin Family Trust of 60.1 million common shares.

The acquisition will increase the Lundin Family Trust’s interest in Lundin Gold from approximately 23% to approximately 27% of the Lundin Gold shares outstanding.

The acquisitions by Newcrest and the Lundin Family Trust are in accordance with the shareholder limits set out in a subscription agreement between Lundin Gold and Newcrest in February, 2018.

Lundin Gold shares advanced on the news, rising 2.9% or 22 cents to $7.79. The shares are trading in a 52-week range of $4.59 and $9.04.

Lundin Gold recently produced the first doré bar at its flagship Fruta del Norte gold project in Ecuador. Commissioning of the carbon in leach circuit is ongoing and nearing completion, the company said in a press release on November 18, 2019.

“We will continue to focus on commissioning and ramping up production on the path to commercial production in the second quarter of 2020,” said Lundin Gold President and CEO Ron Hochstein.

Fruta del Norte is a rich Ecuadorian gold discovery that Lundin group company Fortress Minerals acquired in October 2014 from Kinross Gold for $240 million. It is one of the world’s largest high-grade gold projects that are currently in the final stages of construction.

The goal was to make Fruta del Norte the cornerstone asset of newly formed 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,” Lundin told Resource World Magazine during a recent interview.

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.

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