UPDATE 2-Australia's Newcrest buys stake in Canada's Lundin Gold for $250 mln

By Kitco News / February 25, 2018 / www.kitco.com / Article Link

* Newcrest raises exposure in Ecuador

* Miner to buy 27.1 pct stake in Lundin for $250 million

* Deal includes JV to tap Ecuador explorers


(Adds analyst comment, detail)

MELBOURNE, Feb 26 (Reuters) - Newcrest Mining Ltd said on Monday it had invested $250 million to buy a 27.1 percent stake in Canadian miner Lundin Gold Inc as the gold major ramps up its exposure to Ecuador to secure growth.

The stake is part of a $400 million equity raising by Lundin Gold to fund development of its Fruta del Norte gold mine in Ecuador, Newcrest said in a statement. The mine is expected to start production by end-2019.

"We see this equity investment ... as consistent with our strategy of securing exposure to high potential orebodies," Newcrest CEO Sandeep Biswas said.

The deal marks Newcrest's second foray into Ecuador after it spent $40 million to buy a 14.54 stake in London AIM-lsited miner SolGold Plc in June last year.

Newcrest said it would pay C$5.50 ($4.35) per Lundin Gold share and would be entitled to appoint two directors to Lundin's board.

Newcrest, which has reported flat production in recent years, needs new projects to grow, especially as its Indonesian Gosowong project winds down and before its Papua New Guinean Golpu project ramps up, RBC mining equity analyst Paul Hissey said in a report.

"This investment could potentially plug the gap between Gosowong ceasing in (2021) and before any production from Golpu, given ongoing delays in approvals," Hissey said.

Newcrest also said it signed a joint venture with Lundin to earn up to 50 percent direct interest in eight Ecuadorean exploration concessions by spending up to $20 million over five years.

Newcrest would manage the joint venture company and has committed to spend at least $4 million over the next two years.

"We haven't seen this sort of activity from the majors for some time probably because they have been repairing their balance sheets," said mining analyst David Lennox of Fat Prophets in Sydney.

"It's probably a sign of confidence in where the gold market is going."

($1 = 1.2643 Canadian dollars)



(Reporting by Aaron Saldanha in Bengaluru; Editing by Daniel Wallis and Richard Pullin)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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