Lundin Gold achieves debt-free status by repaying $330 million to Newmon

Lundin Gold, has recently reached a significant milestone by fully repaying a debt of $330 million to Newmont Corporation. This strategic move positions Lundin Gold in a strong financial position and underscores its commitment to financial stability and growth in the sector.

Lundin Gold,  has successfully reached an agreement with Newmont to fully acquire the remaining stream credit facility and offtake agreement associated with its Fruta del Norte mine in Ecuador. This strategic move liberates Lundin Gold from its debt obligations to the world’s largest gold miner.

As part of the buyout arrangement, Newmont is set to receive $330 million in cash. This sum will be disbursed in two installments: an initial payment of $180 million scheduled for completion by the closing date on June 28, 2024, followed by a final payment of $150 million before the conclusion of Q3 2024.

The Newmont stream facility required variable monthly repayments, calculated at 7.75% of Fruta del Norte's gold production, subtracting $408 per ounce, and 100% of silver production, subtracting $4.08 per ounce. These payments were capped at 350,000 ounces of gold and 6 million ounces of silver.

As per the original agreement, Lundin had the option to repurchase 50% of the outstanding balance by June 30, 2024, for $150 million, and/or the remaining 50% by June 30, 2026, for $225 million.

Simultaneously, the initial offtake agreement allowed Newmont to purchase 50% of Fruta del Norte's gold output, up to a maximum of 2.5 million ounces, at a price determined during a specified quotational period.

In light of this negotiated deal, Lundin's CEO and shareholder, Ron Hochstein, emphasized that the company would achieve a debt-free status and enhance its exposure to increasing gold prices, consequently bolstering free cash flow to support further growth initiatives.

The stream facility and offtake agreements were established in 2017 as part of a financing arrangement with Newmont, totaling up to $450 million to facilitate Fruta del Norte's development. With this financial backing, Lundin commenced mine construction that same year, culminating in the inaugural gold pour two years later.

Located in southeastern Ecuador, the underground mine at Fruta del Norte is celebrated for its exceptional grade and low operational costs, positioning it among the world's premier gold mines. Over an anticipated lifespan of approximately 13 years, annual gold production is forecasted at 340,000 ounces on average, with estimated capital expenditures amounting to $692 million.

After over four years of active mining, current gold reserves stand at approximately 4.5 million ounces, with a grade of 7.89 grams per tonne. Recent expansion drilling endeavors may potentially augment these reserves further, as indicated by mining analysts.