Home / Business / Lundin Gold Inc completes development agreement for Ecuador Fruta del Norte project
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Lundin Gold Inc completes development agreement for Ecuador Fruta del Norte project

The Fruta del Norte gold mine in Ecuador.

TORONTO — Canadian mining company Lundin Gold Inc said on Thursday it will pay the government of Ecuador an advance royalty of $65 million under an agreement setting out the financial terms for development of its Fruta del Norte project.

A windfall tax will not apply until Lundin has recouped its development investment, said the company, which has negotiated the right to develop and produce gold from the project for 25 years, with renewal rights.

Lundin Gold said the terms are “significantly better” than those previously considered and it will now finalize its feasibility study and project financing. Its shares were 10 per cent higher, at $4.16, on the Toronto Stock Exchange.

“We believe a legislation change to allow for VAT (Value-Added Tax) recovery and a modestly smaller upfront royalty payment help to improve the economics of the project,” said RBC Capital Markets analyst Stephen Walker in a note to clients.

Ecuador passed legislation in December allowing recovery of a 12 per cent Value-Added Tax, Walker wrote. He added that Lundin Gold’s upfront royalty payment was reduced to US$25 million from US$40 million previously, while the total remains at US$65 million.

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