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Kinross Gold Corp. is in talks to sell its mothballed gold project in Ecuador in a move that could see the Lundin family develop the deposit, according to people familiar with the matter.
For about a year, Kinross has been trying to exit Ecuador and divest the Fruta del Norte after clashing with the local government on the economic terms of the project. The Ecuadorean government gave Kinross approval to sell Fruta del Norte last week, one person familiar with the matter said.
Fruta del Norte, also known as FDN, was at one time seen as critical to Kinross’s growth. The company acquired the precious metal deposit when it bought Aurelian Resources for $1.2-billion in 2008.
But after more than two years of negotiations with the Ecuadorean government, Kinross threw in the towel and said it was not going to waste any more capital developing the mine. It recorded a $720-million charge on the asset in 2013 and slashed its gold reserves by a third to reflect the loss of Fruta del Norte.
“We continue to work co-operatively with the Ecuadorean government on our exit from the country and the FDN project,” Kinross spokeswoman Andrea Mandel-Campbell said. “We do not comment on speculation,” she said.
It is unlikely Kinross will recoup much of the $1.2-billion it paid for Aurelian. But analysts said any sale was positive.
“Anything is better than nothing. If they can surface any value that is a positive,” said Pawel Rajszel, analyst with Veritas Investment Research.
It isn’t clear which Lundin entity would acquire Fruta del Norte if a deal is completed, or whether other potential buyers are in the mix. Lukas Lundin and his brother, Ian, run the Lundin Group of Companies, a conglomerate of mining and energy companies that was founded by their father.
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