The National Post is Canada’s second largest national paper.
If anyone was going to tackle the Fruta del Norte project, it would naturally be Lukas Lundin.
The Vancouver-based mining entrepreneur has never shied away from investing in the most politically challenging parts of the world. And by getting into countries including Argentina and the Democratic Republic of Congo ahead of the pack, the Lundin Group has taken hold of many world-class projects at low cost and made a fortune for its shareholders.
Fruta del Norte (FDN) fits the bill for Mr. Lundin perfectly. It is arguably the world’s best undeveloped gold deposit, with 6.8 million ounces of very high-grade reserves. It is also in Ecuador, a country that has been inhospitable for mining investment and has scared away the rest of the gold sector. As a result, the asset was available at a bargain-basement price.
“One of those things the Lundin family has done so well over so many years is [obtaining] great assets,” Ron Hochstein, chairman of Lundin shell company Fortress Minerals Corp., said in an interview. “And also having the ability to work with governments and with the population to see them through.”
Fortress announced late Tuesday it will buy FDN from Kinross Gold Corp. for US$240-million in cash and stock. Fortress will be renamed Lundin Gold Inc. and plans to use FDN as the foundation to build a significant gold producer.
To do so, it will have to manage Ecuadorian politics a lot better than Kinross did.
Kinross paid $1.2-billion for FDN in 2008, even though Ecuador did not have a firm mining code in place. The company made a wrong-way bet that the outlook for mining investment in the country would improve. Kinross gave up on the project last year — and took a US$720-million writedown — as the government refused to back down on a punitive 70% windfall tax.
For the rest of this article, click here: http://business.financialpost.com/2014/10/22/how-the-fruta-del-norte-project-is-another-high-risk-high-reward-gamble-for-lundin-group/