Canadian miner Lumina Gold has signed a binding term sheet with the Government of Ecuador to finalise the exploitation contract for its wholly owned Cangrejos gold-copper project.

Located in El Oro Province, the project is reputed to be Ecuador's largest primary gold deposit.

The terms of the agreement include a total advanced royalty payment of $25m over four instalments, beginning with a $2.5m payment upon signing the exploitation contract in 2025.

The subsequent payments are aligned with construction milestones over the next two years. The royalty rates for gold, copper and silver production will vary between 3% and 8%, depending on the respective metal prices.

The advance royalty payments will be credited against royalties due each semester, with a mechanism in place to ensure the Government of Ecuador receives no less than 50% of the cumulative discounted benefits from the project.

Marshall Koval, Lumina CEO and director, said: “This is a major step for the project and Ecuador on the path to the development of the largest primary gold deposit in the country. Lumina Gold would like to thank all the government representatives that worked on the negotiations and all our local stakeholders that have supported the project to date.

“The royalty terms we have agreed upon are in line with Lumina’s 2023 pre-feasibility study and position the project well for the upcoming feasibility study expected in Q2 2025.”

The term sheet also includes provisions to address potential economic imbalances caused by changes in legislation, offering Lumina Gold a degree of certainty regarding the project's future economic regime.

The next step for the company is to apply for a change in the project's status from exploration to exploitation, with a six-month window to execute the exploitation contract post-approval.

An environmental licence will be required to commence the exploitation phase. Lumina Gold anticipates completing applications for the required environmental licence in 2025.

The agreement with the Government of Ecuador also fulfils a condition of the precious metals purchase agreement (PMPA) signed with Wheaton Precious Metals International, ensuring that company funds the remaining $6m early deposit under the PMPA by 2 December.

In May 2023, Wheaton signed a $300m streaming deal with Lumina Gold to purchase product from the Cangrejos project.