Lundin Gold gets serious about M&A
With its Fruta del Norte mine in Ecuador firing on all cylinders, and exploration looking like it will lead to mine life extension, Lundin Gold is increasingly looking to add a second asset to diversify geographically and remove potential vulnerability in being a single asset product, chief executive Ron Hochstein told Mining Journal at the at the 2023 Gold Forum Americas in Colorado Springs, Colorado.
Evidence of this can be seen in the company hiring Chris Kololian as chief financial officer in April. Kololian spent the last five years with RBC Capital Markets where he was managing director and co-head of metals & mining for Europe, the Middle East and Africa.
"He brings a skill set we didn't have, and our activities in [M&A] area picked up significantly since he joined us. Chris likes to say we have to kiss a lot of frogs, and that's what we're doing," said Hochstein.
Few assets can compare with the grade and scale of Fruta del Norte, so the company is taking a broad search to find an asset that is a good fit.
"Sometimes companies are just getting by and don't want to do anything because they're waiting for a permit. Whereas if we were to acquire them, we've got cash, we can start derisking, maybe doing early work before permits are issued to derisk and create value," said Hochstein.
Lundin is also looking out for potential inbound interest from bigger companies that may be interested in adding the low-cost and large production scale of Fruta del Norte to their portfolios, although the company does not feel vulnerable to a hostile bid.
"We know there's probably some eyes on us, so we need to look forward and back. For everything in the Lundin Group, the for sale signs is always in the front yard. We are in a unique position because a strong Lundin family owns 27% of the company. That group has shown historically that they're always looking out for the minority shareholder, with share structures protecting us and ensuring we get as much value as we can for all shareholders," said Hochstein.
Fruta growth
Fruta del Norte produced 129,731oz in the June quarter, and the company increased its 2023 production guidance to 450,000 to 485,000oz. Much more may come as the company ramps up its exploration efforts, which could result in an increased mine life and the possibility of expansion.
"Fruta del Norte is pretty unique because of how concentrated the epithermal veins are. We are seeing more of a traditional epithermal system but with much stronger veins, higher grade and bigger veins. Maybe it's the tip of the iceberg as to what potentially is there," said Hochstein.
The company is already moving into detailed engineering to increase throughput from 4400tpd to 5000tpd. It is also looking at changing the flow sheet to improve gold recoveries.
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