JOHANNESBURG (miningweekly.com) – TSX- and OMX-listed Lundin Gold is preparing to advance its Fruta del Norte (FDN) gold/silver project, in Ecuador, into the next phase, moving the flagship operation a step closer to construction.

During the quarter to June 30, the company completed a positive feasibility study and closed the first tranche of a C$82.5-million equity financing and, post-period, secured the nod of approval from the Ecuador government to take its FDN project into the exploitation phase, said Lundin president and CEO Ron Hochstein.

Lundin expected to complete an early works programme, which started in June, by the end of the second quarter of 2017.

This programme aims to provide the access, infrastructure, services and facilities to support the start of construction of the mine's twin declines, while the data collection undertaken in specific technical disciplines will support basic engineering and refine the capital cost estimates.

Now, over the next 12 months, Lundin will focus on evaluating and putting in place the financing for the construction of FDN, which is expected to start July 1, 2017.

“The company intends to have its financing in place coincident with its production decision,” Hochstein noted.

The initial capital cost is estimated to be $669-million, while the sustaining capital is estimated to be $263-million, with closure costs projected at $29-million.

Lundin had $4-million in cash and a working capital deficit of $8.5-million by the end of June, compared with $21.4-million in cash and a $16.3-million working capital surplus reported as at December 31, 2015.

“The decrease in cash of $17.4-million was primarily owing to $18.7-million of project evaluation expenditures relating to the feasibility study, offset by drawdowns from the debenture,” he said.

Meanwhile, the exploration drilling campaign will continue to test high-priority concessions near the project, after 15 drill holes were completed on the Emperador, Robles, Chanchito and El Arco targets during the quarter under review, and a total of 5 672 m were drilled as at June 30.

“After completing the first pass of drilling, up to an additional 3 000 m may be drilled as follow-up where results justify,” Hochstein explained.

Meanwhile, Lundin also plans to undertake a geophysical programme in the fourth quarter to target new areas of interest identified from the recently completed geochemical survey.