TORONTO (miningweekly.com) – Canadian project developer Lundin Gold, a member of the Lundin Group of Companies, has received a nod of approval from the Ecuador government to take its Fruta del Norte project into the exploitation phase.

The TSX- and OMX-listed miner said the Ecuador government had approved a ‘phase change application’ for the La Zarza concession under the country’s mining law, allowing subsidiary Aurelian Ecuador to enter into the ‘exploitation agreement’ with government and to proceed with its plans to develop the project.

"The approval of the phase change application for the La Zarza concession is another defining moment in the history of the Fruta del Norte project. With the completion of the feasibility study and the forthcoming closing of the equity financing announced on June 27, 2016, Lundin continues to make great strides towards the goal of building a high-grade gold mine in Ecuador,” Lundin president and CEO Ron Hochstein stated.

Lundin advised that the phase-change application now had to be registered in the Mining Registry within 30 days, and Lundin had up to six months from registration to conclude the exploitation agreement for the project. The company continued to work with the government on obtaining key environmental permits, including formal approval of the environmental impact assessment and the related environmental licence, which were also required to develop the project.

Fruta del Norte is one of the highest-grade undeveloped precious metals projects anywhere in the world. According to the feasibility treatment that was prepared by Amec Foster Wheeler, with the support of four other globally recognised engineering firms, the project had an after-tax net present value, at a 5% discount rate, of $676-million, providing an after-tax rate of return of 15.7%.

The study assumed a gold price of $1 250/oz and a silver price of $20/oz.

According to Lundin, the initial capital cost was estimated to be $669-million, excluding any expenditures by the company before starting construction on July 1, 2017. The sustaining capital was estimated to be $263-million and closure costs were projected to total $29-million.

Starting in 2020, the mine would produce about 340 000 oz at an average life-of-mine (LoM) total cash cost of $553/oz and an LoM all-in sustaining cash cost of $623/oz, placing it in the lowest cash-cost quartile globally.