The government of Ecuador is looking to boost the country’s appeal as a mining exploration destination by implementing new measures and clarifying certain tax aspects that have limited its potential […]
The government of Ecuador is looking to boost the country’s appeal as a mining exploration destination by implementing new measures and clarifying certain tax aspects that have limited its potential in the past. The Ministry of Mining is focused on five strategic projects: Mirador, Fruta del Norte, Río Blanco, Loma Larga, and Carlos-Panantza. However, Fruta del Norte (FDN) is among the largest and highest grade undeveloped gold projects in the world.
On October 21st, the Canadian company Lundin Gold acquired FDN from Kinross for $240 million. The sale was subject to various conditions, including the granting of certain approvals by the government of Ecuador, which have all been provided. Up to the date on which Lundin Gold acquired the project, around $279 million had been spent on exploration and development, including over 150km of drilling, with exploration accounting for approximately 30% spending, mine and project infrastructure 32%, and general operating costs, studies, and other expenditures accounting for approximately 38%
FDN was discovered in 2006 and it has an indicated mineral resource of approximately 23.5 million tonnes at an average grade of 9.59g/t Au containing 7.26 million ounces of gold and 9.73 million ounces of silver. It also has an inferred mineral resource of approximately 14.5 million tonnes at an average grade of 5.46 g/t Au containing 2.55 million ounces of gold. The project consists of 36 mining concessions in the Cóndor mountain range in the south-eastern part of Ecuador. Most of them are located in the province of Zamora-Chinchipe with the remaining ones extending into the province of Morona-Santiago, covering an area of approximately 86,000 ha. Ecuador is a largely underexplored mining country with mining laws that are currently in early stages. In February 2015 the Ministry of Mining was established. It is for these reasons that Lundin Gold views the country to have significant opportunity. The Minister of Mining, Javier Córdova, said, “One of our priorities is to increase the presence and role of foreign companies like Lundin Gold. Their presence boosts know-how transfer, which helps us attain our true potential, as they have the requisite experience.“
In June 2015 negotiations began between Lundin Gold and the Government of Ecuador on the Exploitation and Investment Protection Agreements with the common goal of settling the key terms and conditions by the end of 2015. By the same time, field programs, including 10,000 meters of diamond drilling, were substantially complete as well as the environmental baseline work in support of Environmental Impact Assessment (EIA) submissions.
Up to the end of 2015, Lundin Gold plans to conduct engineering and technical studies and environmental permitting at the FDN project with the goal to complete a feasibility study and reach a production decision by mid-2016. In addition, the company may carry out regional exploration on its extensive land position in Ecuador. Ron Hochstein, President and CEO of Lundin Gold said, “We find ourselves to be in solid position, in that we can hopefully set the standards for the way that responsible mining can be done in this country.“ The Minister Córdova, estimates that the country has a $200,000 million in mining potential, however this number could be higher since the country is believed to be underexplored. He added, “Ecuador’s mining industry could receive over $8 billion in FDI by 2025. This would generate some $4 billion in exports and between $800 and $900 million in direct taxes.“ In the meantime, Lundin Gold has spent over $280 million in the country and in the first five months of 2015 it hired 170 people for the project.