Canada’s Lundin Gold has reached a deal with Newmont to buy out the remaining stream credit facility and offtake agreement for its Fruta del Norte gold mine in Ecuador for $330m (C$452.22m).
With the deal, Lundin Gold will become a debt-free business by completely repaying the project finance debt.
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Located in south-east Ecuador, the Fruta del Norte gold mine has been operational since late 2019 and is reputed to be among the highest-grade operating gold mines in the world.
The negotiated purchase price of $330m is payable in cash, with the first tranche of $180m due on closing of the transaction, which is targeted for 28 June 2024.
The final tranche of the purchase price of $150m is due on or before the end of the third quarter of 2024.
Established in 2017, the stream facility and offtake were part of a project financing package to fund the development and construction of Fruta del Norte.
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By GlobalDataThe stream facility was repayable in variable monthly instalments equivalent to the value of 7.75% of gold production less $408 per ounce (oz) and 100% of the silver production less $4.08/oz, up to a maximum of 350,000oz of gold and six million ounces (moz) of silver.
On the other hand, the offtake provided Newmont with the option to purchase 50% of Fruta del Norte’s gold production up to a maximum of 2.5moz at a price based on a defined quotational period.
Under the terms of the stream facility agreement, Lundin Gold will have the option to purchase the remaining 50% stake in the stream facility by 30 June 2024 for $150m and/or buy back the other 50% of the Stream Facility on 30 June 2026 for $225m.
Lundin Gold president and CEO Ron Hochstein said: “I am very pleased to announce the buy out of the stream facility and offtake. With this milestone complete, Lundin Gold will have repaid in full all of its project finance debt only four years after achieving commercial production at Fruta del Norte.
“Upon closing, the company will be debt free and have increased exposure to rising gold prices, resulting in increased amounts of free cash flow to support capital allocation initiatives, including further growth and shareholder returns.”
