Exploration potential, low costs attractions of Fruta del Norte

Exploration potential and low costs are key attractions of Lundin Gold's Fruta del Norte project in Ecuador, according to Newcrest Mining CEO Sandeep Biswas.

Australia-based Newcrest acquired a 27.1% stake in Lundin in March, stumping up US$250mn in a US$400mn private placement.

Lundin is currently constructing the US$669mn gold-copper asset, Ecuador's biggest gold project, with first production earmarked for 4Q19.

The decision to invest in part hinged on the project's 15-year mine life, industry leading all-in sustaining costs and annual production above 300,000oz/y gold, Biswas told the Bank of America Merrill Lynch Annual Global Metals, Mining & Steel Conference in Miami.

"The project ticks all those boxes," the CEO told the event.

"We know the mining, we are comfortable with the country, and believe the project has exploration potential, not just on the existing leases but two leases to the north and south."

Under the strategic agreement with Lundin, Newcrest can earn up to a 50% interest in eight separate exploration concessions in Ecuador by spending US$20mn over five years.

Newcrest will manage exploration on the concessions.

ATTRACTIVE JURISDICTION

Ecuador's mineral potential makes the country an attractive jurisdiction, despite some political risk, according to Biswas.

In addition to the Lundin investment, Newcrest holds a stake in SolGold, which has an 85% interest in the Cascabel project in the country.

Newcrest also plans to begin exploration on its own concessions in Ecuador, the CEO said, without giving further details.

The decision to invest in Ecuador was based on a collective judgment that the country is turning a corner and moving away from mining-unfriendly politics.

"One of the things is that you have to make sure what you invest in has the potential for very high returns to factor in the risk you are taking," Biswas told the event.

Newcrest has mines in Australia, Papua New Guinea and Indonesia.