Canada’s Lundin Gold (TSX:LUG), the company that plans to kick off production at its Fruta del Norte gold project in Ecuador later this year, will boost exploration in the country thanks to a C$40.5 million (about $30.8m) financing secured this week.
A syndicate of underwriters, co-led by GMP Securities and BMO Capital Markets, had agreed on a bought deal basis to buy 7.5 million shares at $5.40 each, the company said.
In exchange, the Vancouver-based miner has agreed to grant its backers an over-allotment option, exercisable in whole or in part, to buy up to an additional 1,125,000 shares, or 15% of those sold under the offering.
Lundin Gold will use the funds to expand exploration in Ecuador and general corporate purposes.
Lundin expects that Newcrest Mining (ASX:NCM), which already holds about 27% of the miner’s issued and outstanding, will exercise their pre-emptive participation rights.
It also anticipates that Lundin Family Trusts, composed by Zebra Holdings and Investments S.à.r.l, Lorito Holdings S.à.r.l and/or Nemesia S.à.r.l, which collectively have a 23% interest in Lundin, will participate to their collective pro-rata shareholdings in the financing.
Lundin said it intended to use the net proceeds of the offering for exploration on its portfolio of mineral concessions in Ecuador, including the Suarez pull-apart basin, the structure that hosts the Fruta del Norte Gold deposit, and for general corporate purposes.
Lundin’s Fruta del Norte, discovered in 2006, is expected to produce to 4.6 million ounces of gold over a 15 year mine life.
Lundin has been developing the asset for almost two years, following an agreement with Ecuador’s government that allowed it to move ahead with the project.
The company acquired it in 2015 for $240 million from fellow Canadian miner Kinross Gold (TSX:K) (NYSE:KGC), which had to halt the project after being unable to reach an agreement with authorities regarding the terms for developing the asset.
The underground gold and silver mine, which will be Ecuador’s largest, encompassing six of Lundin’s 29 mining concessions, which cover 70,000 hectares of land.
Ecuador has gained ground as a mining investment destination over the past two years, with top miners entering into joint ventures or investing in juniors to gain exposure to projects in that country.
Anglo American (LON:AAL) also landed in the South American nation through a deal with Canada’s Luminex Resources (TSX-V: LR). The company plans to develop two copper and gold concessions there.
Currently, Ecuador’s emerging mining sector employs 5,000 people, but estimates the figure will rise to about 16,000 by 2020.
The post Lundin Gold to step up exploration in Ecuador thanks to $38m financing appeared first on MINING.com.