Australian gold company Newcrest Mining is investing $US250 million ($318.9 million) in Toronto-listed Lundin Gold, which is developing the Fruta del Norte mine in Ecuador, South America.
Newcrest will acquire a 27.1 per cent interest in Lundin as part of a $US400 million private placement being undertaken by the smaller company to fund Fruta del Norte, which is expected to reach production by the end of 2019.
The two companies have also signed an exploration agreement, with Newcrest to earn up to a 50 per cent interest in eight exploration properties in Ecuador by investing $US20 million in the assets over five years.
Newcrest managing director Sandeep Biswas said the company viewed the equity investment and exploration farm-in as a strategic partnership with Lundin that was consistent with its strategy of securing exposure to high-potential orebodies.
“The Fruta del Norte epithermal orebody has many similarities with our Gosowong operation and we look forward to sharing our experience with Lundin Gold to further develop this high-quality deposit,” Biswas said.
“This equity investment aligns with our aspiration of being exposed to five tier one orebodies by 2020.”
Newcrest will have the right to appoint two directors to the Lundin board by making the investment. The Australian miner will also manage the exploration activities and the joint venture company once it has been formed.
Under the exploration earn-in, Newcrest is committed to spend a minimum $US4 million over the next two years and has the option to invest a further $US6 million over the following 18-month period to earn an initial 25 per cent share.
If Newcrest spends a further $US10 million within five years in can earn an additional 25 per cent interest.
Biswas said the JV formed part of its strategy of building a high-quality exploration portfolio.
“We are pleased to partner with Lundin Group to explore in this prospective part of Ecuador and we see potential for new discoveries to be made through the combined experience of both companies in exploring for epithermal gold and deep gold-copper porphyry deposits,” Biswas said.