VANCOUVER, BRITISH COLUMBIA– (Marketwired – May 30, 2017) – Lundin Gold Inc. (“Lundin Gold” or “The Company”) (TSX:LUG) (OMX:LUG) is pleased to announce a $400 million to $450 million project financing package (the “financing”) with orion Mine Finance Group (Orion) and Blackstone Opportunities (Blackstone). Funding is the basis for the development of the Fruta del Norte project and shows the growing support for mining investment in Ecuador. The financing consists of a $150 million prepaid gold credit facility, a $150 million credit facility and a committed $100 million to $150 million in future equity financings required to finance the project. All dollar amounts are expressed in dollars (“”). The conclusion of a commodity futures contract may have significant advantages over traditional forms of equity and debt financing: under a commodity futures contract, the seller undertakes to exchange a certain quantity of a product over the duration of the total contract, this quantity being delivered in quantities equal to the expected performance of the project in question. Normally, the buyer bears the price risk associated with the commodity, while the seller bears the costs and costs associated with the production, transportation, refining and delivery of the goods. The acquisition agreement allows Newcrest to acquire 50% of Fruta del Norte`s refined gold production, up to 2.5 million ounces in cash, calculated by reference to a listing period. A prepaid futures agreement is a possibility by which a buyer agrees to purchase a certain quality and quantity of a product from a producer for prepayment. In short, the buyer acts as a lender in the sense that he provides money in advance in exchange for future productions. With a guaranteed market for future production, the mining company is more likely to obtain financing from a lender to enter the construction phase of the mining cycle. Acquisition agreements are generally a condition of a fully bankable feasibility study (FS) to obtain a syndicated credit facility from traditional banks.
Another advantage of an advance credit facility related to a buyback transaction is that the buyer is usually a trader in the commodities sector, who has great technical and financial expertise in the mining industry. This gives them the ability to circumvent certain necessary conditions in a fully bankable FS, thereby reducing the associated time and expense and speeding up production time.