Lundin Gold seals $450m finance package for Fruta del Norte; moves first gold forward

VANCOUVER (miningweekly.com) – Canadian project developer Lundin Gold has unveiled a $400-million to $450-million financing package with the Orion Mine Finance Group (Orion) and Blackstone Tactical Opportunities to fund construction of its flagship Fruta del Norte project, in Ecuador.

According to the Vancouver-based company, the financing provides the foundation for the development of Fruta del Norte and shows the growing support for mining investment in Ecuador.

The financing comprises a gold prepay credit facility for $150-million, a stream loan credit facility of $150-million and committed participation of $100-million to $150-million to future equity financings required to fund the project.

"We are very pleased with the financial commitments that Orion and Blackstone have made towards the development of the Fruta del Norte project and Ecuador. It confirms the strength of this project and gives us the ability to move full speed ahead with construction," stated president and CEO Ron Hochstein.

The gold prepayment agreement comprises a senior secured loan of $150-million to subsidiary Aurelian Ecuador, which holds the Fruta del Norte project. Half of the loan amount will be advanced at closing, with the second half available at Lundin’s discretion up to the end of June, 2018. The loan is repayable in 19 fixed quarterly principal and interest instalments equivalent to the value of 11 500 oz of delivered gold, starting in December 2020. Lundin could defer the quarterly instalments for up to four years, but this arrangement will attract increased gold deliveries of 1 000 oz of gold for each deferred quarter.

The stream credit agreement comprises a senior secured loan of $150-million extended to Aurelian, with half of the amount to also be advanced on closing, and the other half available for drawdown until end of June, 2018. The loan is repayable in variable monthly principal and interest instalments, equal to Lundin delivering 7.75% of gold output and 100% of the silver output starting in December 2020, up to a maximum of 350 000 oz of gold and six-million ounces of silver.

Lundin can choose to repay half of the remaining stream loan on June 30, 2024 for $150-million and/or the other 50% of the remaining stream loan on June 30, 2026, for $225-million.

Orion and Blackstone have also been granted the right to buy 50% of Fruta del Norte gold production, up to a maximum of 2.5-million ounces, at a price based on monthly delivery dates and a defined quotation period.

PROJECT UPDATE
Lundin Gold also late on Monday released the results of an updated feasibility study (FS) on Fruta del Norte, outlining a revised mine plan, updated capital and operating costs and a new execution plan based on a self-perform approach.

The project is expected to cost $684-million, net of taxes, compared with $669-million in the FS, including contingency and preproduction costs and revenues. This revised estimate includes the cost of mining equipment and the paste plant, estimated at $58-million, previously included in sustaining capital.

Project economics show an improvement over the FS, at the same $1 250/oz of gold and $20/oz of silver metal price assumptions, calculating an after-tax net present value, using a 5% discount rate, of $717-million, and an internal rate of return of 16.3%.

Based on field investigations and improved mine design, first gold production has been moved forward several months, from the first quarter of 2020, to fourth quarter 2019.

The mining rate is expected to ramp up quicker, over a twelve-month period, to an extraction rate of 3 500 t/d until 2022, when the rate of 3 600 t/d is planned.

The updated study envisions average gold output to top 300 000 oz over 15 years, compared with 13 years in the June 2016 FS, at an average life-of-mine (LOM) total cash cost of $561/oz and a LOM all-in sustaining cash cost of $609/oz.

LOM output is expected to be about 4.5-million ounces of gold and 5.5-million ounces of silver.

As at April 30, 2016, Fruta del Norte held 15.49-million tonnes grading 9.67 g/t gold in the probable mineral reserve category, for 4.82-million ounces of gold, and 6.34-million ounces of silver at a grade of 12.7 g/t silver.

The project also has 7.35-million contained ounces of gold at a grade of 9.61 g/t gold in the indicated category, and 9.89-million ounces of silver at a grade of 12.9 g/t. Inferred resources held 2.23-million ounces of gold at a grade of 2.13 g/t gold, and 4.05-million ounces of silver at a grade of 10.8 g/t silver.