The Conversation (0)
Oct. 22, 2014 03:30PM PST
The company plans to change its name to Lundin Gold after the transaction is completed and hopes to move the Ecuador-based project quickly through to production.
Fortress Minerals (TSXV:FST.H) announced after market close on Tuesday that it will be acquiring Kinross Gold’s (TSX:K,NYSE:KGC) Ecuador-based Fruta del Norte gold project for US$240 million.
Subject to shareholder approval, Fortress will also change its name to Lundin Gold after the acquisition is complete. The plan is for the company to “be the principal gold vehicle of the companies controlled by the Lundin family,” according to a press release. Fruta del Norte will be its flagship asset.
Commenting further, Lukas Lundin, president, CEO and director of Fortress, said, “[o]ur team is very enthusiastic about working on FDN and we are confident in our ability to rapidly advance the project to a construction decision and obtain the required permits to build this world-class gold asset.”
Lundin’s optimism might come as a surprise to investors familiar with Fruta del Norte. After all, the project was abandoned by Kinross last year following over two years of negotiations with Ecuador’s government. The parties were “unable to agree on certain economic and legal terms which balance the interests of all stakeholders,” Kinross said at the time.
However, Fortress said Tuesday that the government “has indicated its support for the transaction,” meaning that perhaps this time the project will be able to move forward successfully.
If it does, investors should certainly stand to benefit. Fruta del Norte is “one of the largest and highest grade undeveloped gold projects in the world,” and boasts an indicated mineral resource of about 23.5 million tonnes at an average grade of 9.59 grams per tonne (g/t) gold containing 7.26 million ounces of gold. Its inferred mineral resource sits at around 14.5 million tonnes at an average grade of 5.46 g/t gold containing 2.55 million ounces of gold, “with additional significant resource upside potential.”
In terms of how long bringing the project into production will take, expect to see Fortress act fast. Its first step will be to fund the acquisition via a brokered $250-million private placement, after which it believes it can “move quickly through feasibility to a construction decision, leveraging the considerable amount of historical exploration, development, mine planning and permitting work that has already been completed to date.”
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
