To boost its presence in the last mining frontier, Ecuador, Newcrest Mining Ltd., the largest gold producer of Australia, announced on Monday that it will invest in Canadian miner Lundin Gold Inc. which is building the Fruta del Norte gold mine in Ecuador.
Newcrest agreed to acquire common shares for investment purposes. Australia’s largest gold producer invested $250 million dollars to receive 27.1% of Lundin’s share which is approximately 57.7 million common shares.
Since last year, Ecuador has been attracting a number of mining giants who are seeking enormous deposits of untapped metals. The investment is part of a $400-million equity raising by Lundin Gold which will raise funds for the development of Fruta del Norte gold mine in southeastern Ecuador. The said mine is scheduled to start production by the end of 2019.
According to Sandeep Biswas, Managing Director and Chief Executive Officer of Newcrest, they see their investment as a strategic partnership with Lundin Gold and it is aligned with their strategy of assuring exposure to high-quality orebodies. He added that their transaction with Lundin Gold is in accordance with their ambition of being present to five tier-1 orebodies by 2020.
Newcrest will have the right to designate two directors to Lundin Gold’s board. One of it’s nominated directors will also be assigned to the Project Advisory Committee that will oversee the development of the Fruta del Norte gold mine.
Newcrest and Lundin have also signed a binding head of agreement to form a joint venture company that will explore eight early-stage concessions to the north and south of Fruta del Norte which is held by Lundin Gold. Under the deal by spending $20 million over a five year period, Newcrest can earn up to a 50% interest. Once the joint venture company is formed, Newcrest will be the one to manage all the activities of the exploration. The exploration excludes the large block of concessions which surrounds the Fruta del Norte deposit.
The Fruta del Norte project is located in Ecuador’s Cordillera del Condor region. The project is a 150-kilometer long copper/gold metallogenic sub-province and is estimated to possess millions of possible mineral reserves.