Newcrest eyes Ecuador gold project with $250m stake in Lundin

26th February 2018 By: Mariaan Webb - Creamer Media Deputy Editor Online

Newcrest eyes Ecuador gold project with $250m stake in Lundin

Newcrest CEO Sandeep Biswas says the equity investment is part of a strategy to be exposed to tier-one orebodies.

JOHANNESBURG (miningweekly.com) – Australia’s largest gold miner Newcrest Mining is buying a 27.1% interest for $250-million in Canada-listed Lundin Gold, which is building the Fruta del Norte gold mine, in Ecuador.

The investment, announced on Monday, is part of a $400-million equity private placement by Lundin for the development of the Fruta del Norte mine, which will start production by the end of next year.

Newcrest MD and CEO Sandeep Biswas said the transaction aligned with the Melbourne-headquartered group’s aspiration to be exposed to five tier-one orebodies by 2020.

“Fruta de Norte epithermal orebody has many similarities with our Gosowong operation and we look forward to sharing our experience with Lundin Gold to further develop this high-quality deposit,” he commented in a news statement.

As part of the strategic partnership, up to three Newcrest employees would be seconded to Fruta del Norte.

“Newcrest has extensive experience building gold mines and bringing them into production. As our strategic partner, their knowledge and expertise will be valuable as we develop Fruta del Norte into a large, high-grade gold mine,” commented Lundin president and CEO Ron Hochstein.

The other subscribers of the $400-million equity raising of Lundin include Orion Mine Finance Group, Zebra Holdings and Investments and Lorito Holdings (Lundin family trust). The weighted average subscription price is at C$5.44 a share, which is equivalent to a 13% premium to Friday’s closing price of C$4.81 a share.

Orion will invest $100-million at a price of C$5.25 a share, increasing its stake in the gold miner to 22.3%, and the Lundin family trust will invest $50-million at C$5.50 a share to increase its interest to 27.1%.

Newcrest will have the right to appoint two members to the Lundin board and Orion the right to appoint one member.

The Fruta del Norte project, located in a 150-km-long copper/gold metallogenic sub province in the Cordillera del Condor region, has probable mineral reserves of 4.82-million ounces of gold and 6.34-million ounces of silver.

Lundin is targeting gold production of 340 000 oz/y at an average life-of-mine (LoM) cost of $553/oz and an average LoM all-in sustaining cost of $623/oz from the Fruta del Norte project. Over its 13-year life, the mine is forecast to produce about 4.4-million ounces of gold and 5.2-million ounces of silver.

EXPLORATION TEAM-UP
Meanwhile, Newcrest and Lundin also signed a binding heads of agreement to form a joint venture (JV) to explore eight early stage concessions to the north and south of Fruta del Norte, but excluding the large block of concessions surrounding the project.

In terms of the exploration earn-in, Newcrest could earn up to a 50% interest in the JV company by spending $20-million over a five-year period. It has committed to spend $4-million over the next two years and has an option to spend $10-billion over the following 18 months for its initial 25% interest.