Mining entrepreneur Lukas Lundin has a well-earned track record of succeeding in places where others won’t tread. Even, it appears, Ecuador.
When his company Lundin Gold Inc. bought the Ecuador-based Fruta del Norte (FDN) project in 2014, it raised a lot of eyebrows. Ecuador, in the end, was probably the most inhospitable places on the planet for mining investment in the prior six years. The country had no mining ministry, didn’t give away concessions and insisted on the punitive 70-per-cent windfall tax that destroyed the possibility upside from higher metal prices. Foreign investment by western miners was close to nil.
But as always, it seems Lundin timed his move perfectly. Since his entry, Ecuador has adopted some workable mining policy and it has grabbed the interest of the investment community.
“Mining is no longer a four-letter word in Ecuador,” Lundin Gold leader Ron Hochstein said in an interview at the Prospectors and Developers Association of Canada (PDAC) conference in Toronto.
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Ecuadorian officials, including mining minister Javier Cordova Unda, spoke to a packed conference room in the PDAC conference on Monday, stressing the country is dedicated to mining and desires foreign investment. They’d have struggled to attract a dozen people not too long ago.
The low point for Ecuador came in 2013, when Kinross Gold Corp, threw in the towel around the Fruta del Norte project and took a US$720-million writedown rather than spend another penny on it. (The project was sold to Lundin Gold the following year.) It’s understood that Ecuadorean officials were stunned by Kinross’s move and realized they have to make changes when they ever hoped to attract investment.
Ecuador finally created a mining ministry last year and put Unda in charge. Before that, mining only agreed to be contained in the gas and oil ministry and was neglected. Unda quickly set about creating a viable industry. There’s still more to do, insiders say, but there will be legitimate political will to do it.
Lundin Gold held intensive negotiations with the government over FDN. And in January, the organization announced a deal that sets happens for growth and development of the mine. The windfall tax continues to be in there, however it has been diluted to the stage that it’s not really a serious problem.
“Ideally, I’d still like to see (the tax) gone,” Hochstein said, adding that he thinks it is going to be mothballed.
FDN is one of the richest undeveloped gold deposits on the planet, with almost 10 million ounces of high-grade resources. The one big overhang continues to be political risk. Hochstein acknowledged it will require time for you to convince investors that Ecuador has finally turned a large part, but he is confident it is going to happen. He noted a vital milestone happened a week ago, when President Rafael Correa visited the FDN task for the very first time.
With the FDN deal done, other mining companies may finally begin to take Ecuador seriously. It remains probably the most under-explored countries within the Americas.
The other Canadian juniors with significant assets in Ecuador are INV Metals Inc. and Dynasty Metals & Mining Inc. INV CEO Candace MacGibbon praised the Lundin team in order to Ecuador move its mining industry forward.
“You couldn’t possess a better group leading the way,” she said.
Financial Post
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Twitter.com/peterkoven
