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Lundin Gold eyes 60:40 debt-equity financing for Fruta del Norte


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Lundin Gold eyes 60:40 debt-equity financing for Fruta del Norte

Lundin Gold Inc. is looking for a 60:40 debt-equity structure to finance the development of its Fruta del Norte gold project in Ecuador, CEO Ron Hochstein told S&P Global Market Intelligence on the sidelines of the European Gold Forum in Zurich.

"We hope to be able to have a significant proportion of the [60%] debt component of the financing in place by the end of Q3 this year," Hochstein said.

The company recently commenced an early works program to prepare the site for development.

Capital costs for the development will amount to about US$670 million, excluding taxes and other costs, meaning project financing will total between US$850 million and US$900 million, Hochstein said. A project update on CapEx, execution plan and financing for Fruta del Norte will be released in the "very short term."

Fruta del Norte is considered to be a "world-class" discovery and one of the largest in the world. Lundin acquired the project in 2014, after the previous owner, Kinross Gold Corp., walked away following years of unsuccessful negotiations with the government.

More recently, Ecuador has sought to simplify the permitting of large-scale projects to reassure investors. Last year, Lundin succeeded in agreeing on an investment protection plan with the government, enabling the company to push ahead with developing Fruta del Norte.

Hochstein permanently moved to Ecuador in 2015, which he said made a "huge difference" in pushing ahead with the project.

"We have to remember, this is Ecuador's gold, this is their wealth. By [mining] it responsibly, we can show that Ecuadorians can benefit from it as well as our shareholders."

This week's elections in Ecuador are unlikely to bring a change. Even though a new leader has taken the helm, Hochstein said the fact that he belonged to the party that had been in power for the past nine years was "encouraging."

"We don't anticipate a lot of significant change in terms of the mining policy going forward; we are quite encouraged," he said.