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Lundin lowers costs, ups reserves for Ecuador’s largest underground mine

Fruta del Norte, discovered in 2006, is one of the world’s biggest recent gold findings. (Image courtesy of Lundin Gold.)

Canada’s Lundin Gold (TSX:LUG) has updated the project estimate for its flagship Fruta del Norte gold project in Ecuador, on track to kick off production in Spring next year.

The asset, discovered in 2006, is expected to produce to 4.6 million ounces of gold over a 15 year mine life. That’s 73,000 ounces more than what was indicated in the previous estimate.

Lundin acquired the halted Fruta del Norte project in 2015 for $240 million from fellow Canadian miner Kinross Gold. 

The company also increased its estimates for Probable Mineral Reserves slightly by 80,000 ounces in relation to the update announced last May, and by 204,000 ounces when compared to the estimates contained in the Technical Report.

Its operating cost per tonne are now predicted to be 7.3% lower, from $111.84 to $103.65, while all-in sustaining cost (“AISC”) went down to $583 per ounce of gold from $609.

Lundin has been developing Fruta del Norte for a year and a half, following an agreement with Ecuador’s government allowing the miner 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 mine, which will be Ecuador’s largest, encompassing six of Lundin’s 29 mining concessions, which cover 70,000 hectares of land.

“Highly prospective” location

Ecuador has gained ground as a mining investment destination in the past two years thanks to a revised regulatory framework and a major investor engagement campaign

Earlier this month, world’s largest miner BHP (ASX, NYSE:BHP) (LON:BLT) bought a 6.1% stake in SolGold (LON:SOLG) (TSX:SOLG) to gain access to the explorer’s Cascabel copper-gold project in in northern Ecuador,

In March, another big miner, Anglo American (LON:AAL), landed in the South American country. Through a deal with Canadian explorer Luminex Resources, the company plans to develop two copper and gold concessions there.

Currently, the nation’s emerging mining sector employs 3,700 people, but the government estimates the figure will rise to about 16,000 in the 2017-2020 period.