The Lundin Family’s Next Major Move Revealed
Globe and Mail mining scoop queen Rachel Younglai is reporting that the Lundin family are in talks to buy Ecuador’s Fruta del Norte gold deposit from Kinross Gold, one of the richest undeveloped gold mines in the world, albeit in a challenging mining jurisdiction.
Kinross acquired the project for $1.2 billion in 2008 and have regretted the decision in recent years, citing an inability to move forward on reasonable economic terms with the Ecuadorian government. It recorded a $720 million write down last year after throwing in the towel.
Deal terms were not mentioned in the Globe article, but we heard rumours that Kinross had received offers of $100 million for the deposit, but wanted $300 million. That was last year.
It is also unclear which vehicle the Lundin’s would use to develop the Ecuadorian asset. We would suspect Fortress Minerals (V.FST.H), a $90 million market cap shell led by Lukas Lundin, has been set aside by the family for just such a situation. Fortress had $21.2 million on hand as of June 30, 2014 and just 14.3 million shares outstanding, according to quarterly financials (link).
No word yet from Fortress, but the company’s stock has climbed nearly 60% in the last three months.
In October 2007, the year before Fruta del Norte was taken over by Kinross, the deposit had at least 13.7 million ounces of gold at 7.23 g/t, and was by all accounts open for expansion.
FDN was known as the Condor Project when Aurelian Resources was promoting it. The one time penny stock hit a high of $43 before it was sold to Kinross Gold for $1.2 billion in 2008 (roughy $8.20 per share)
The Lundin family have a knack for developing massive assets in out of favor jurisdictions. In the 1990’s they acquired the Tenke copper deposit in D.R. Congo before bringing in Phelps Dodge (now Freeport McMoran) as a partner. The asset is now a cornerstone for both companies.
If the reports are true the Lundin Group obviously see an improving mining regime in Ecuador.
Lukas Lundin’s good friend Ross Beaty beat Lukas to the punch investing in Ecuador, plunking $5 million into Odin Exploration earlier this year at $0.055 per share. We were the first media to cover Ross’s investment in Odin and the company is now trading at over $0.60, just three months later. Beaty and Lundin recently co-invested in Eira Thomas and Rob Carpenter’s Kaminak Gold, and it would not surprise us if Beaty also participates in Fruta del Norte, but that’s pure speculation on my part.
Two days ago we had dinner with a Panama based investment advisor who said the outlook for Ecuadorian mining is improving.
Looks like it.
Read: Kinross Gold in talks to sell Ecuador project to Lundin family
Related: Lukas on Lundin: The resource tycoon talks risk, reward and success in mining and energy
http://ceo.ca/2014/09/10/the-lundin-familys-next-major-move-revealed/#
Link above to article webpage with small video on the original Kinross/Aurelian Gold Deposit
(just immediately north of the EGX-Ecuador Gold and Copper discovery/property locations)