Canada’s Lundin Gold (TSX:LUG) on Friday provided an update on its flagship Fruta del Norte project in Ecuador, reporting overall construction was 59% complete.
“This is a pivotal year for Lundin Gold as we move from construction to production at Fruta del Norte. During this quarter we accomplished two major milestones with the underground development reaching the orebody and introduction of the first owner mining crews,” Ron Hochstein, president and CEO of the Vancouver-based miner said. “In the next quarter we will reach peak staffing and reach several other project milestones. We remain on schedule and on budget to commence commissioning in the third quarter and achieve first gold as expected in the fourth quarter of this year.”
The company said on Friday cash on hand at the end of the first quarter was $83 million, down from $167 million at the end of last year while working capital has been reduced to $60 million from $153 million. The change in cash was due to net proceeds from a bought deal in March this year of $33.9 million offset by development costs of $113.3 million, general and administration costs of $6.6 million and exploration expenditures of $1.4 million.
In April Lundin Gold completed the first draw down of $159 million from a debt facility, which will be used to fund the construction of the mine. The company has $191 million remaining under the facility and also entered an agreement with an insider for a $75 million cost overrun facility in exchange for 300,000 common shares and 300,000 warrants at an exercise price of C$5.98.
Fruta del Norte, discovered in 2006, is expected to produce 4.6 million ounces of gold over a 15 year mine life.
Lundin Gold, worth $1.2 billion in Toronto, acquired the project in 2015 for $240 million from fellow Canadian miner Kinross Gold (TSX:K) (NYSE:KGC), which had to halt operations 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, covers 70,000 hectares of land.