Lundin plans to start construction in the first quarter 2021, ramping production in the third quarter and increasing mill operations in the fourth quarter.
Lundin, worth almost C$2.8 billion ($2.2bn), worked on developing the asset for almost two years, following a 2016 agreement with Ecuador’s government. That deal allowed it to move ahead with the project, located in the southeastern Amazon province of Zamora Chinchipe.
The company acquired Fruta del Norte in 2014 for $240 million from fellow Canadian miner Kinross Gold (TSX:K) (NYSE:KGC), which had to halt operations after being unable to reach an agreement with authorities regarding the terms for developing the asset.
The underground gold and silver mine, discovered in 2006, contains six of Lundin’s 29 mining concessions and covers 70,000 hectares of land.
Lundin has set its 2021 production goal at between 380,000 and 420,000 ounces of gold at an average head grade of 10.4g/t, a recovery rate of 90% and all-in sustaining costs (AISC) of $770-830 per ounce.
The company also increased Fruta del Norte’s reserves by 8% to 5.41 million ounces, thanks to changes in the planned mining method.
“The increase in the 2020 reserve is primarily due to the conversion of a significant portion of the sections of the ore body originally mined by drift and fill to long-hole stoping, based on the good ground conditions experienced in the mine to date, which resulted in a slight increase in dilution and decrease in average grade,” it said.
Based on the new figures, Lundin now expects to produce almost 4.8 million ounces of gold at Fruta del Norte over a 14-year mine life.
The company still expects to produce 200,000-220,000 gold ounces at the operation this year, despite the impact of covid-19 restrictions and a recent 15-day blockade following frustration over a bridge collapse caused by one of Lundin’s mining trucks.
President and CEO Ron Hochstein said Fruta del Norte has proven to be a low-cost producer, with upside potential in its ore body.
“We anticipate adding even more to these estimates upon completion of an underground drilling program which began last month,” Hochstein said.
The company is planning to spend $11 million in 2021 drilling two high priority exploration targets at its Barbasco and Puente-Princesa concessions, about 7km from the mine.