Lundin Gold sells silver stream to LunR in $670M deal

Lundin Gold (TSX: LUG) said it will sell a silver stream on its Fruta del Norte mine in Ecuador in return for newly issued shares of LunR Royalties (TSX-V: LUNR) valued at about $670 million (US$489 million). Shares of both companies jumped.

Lundin Gold shareholders will receive about 50.5 million LunR shares as a dividend-in-kind, the company said Sunday night in a statement. Lundin Gold will not directly hold any LunR shares following the distribution. Pricing will be based on the stock’s 20-day volume-weighted average price as of Friday.

LunR was created last year as a spin-out of NGEx Minerals (TSX: NGEX) to hold its net smelter royalty interests in Latin America. Part of the Lundin group of companies, NGEx is developing the Lunahuasi project in Argentina and operates the Los Helados joint venture with Japan’s JX Advanced Metals in Chile.

Shares of the royalty company have have nearly doubled since trading began on Dec. 19 as copper prices surged to record highs. They soared 14% to $21.29 Monday afternoon in Toronto trading, giving LunR a market capitalization of about $1.5 billion. Lundin Gold jumped 5.6% to $114.24.

Adam Lundin, Lundin Mining’s current chair, is LunR Royalties’ CEO.

‘Small byproduct’

The stream-for-equity deal with LunR will unlock value from a minor byproduct produced at Fruta del Norte, Lundin Gold says. The company estimates that silver currently represents only 1% to 2% of its total revenue, with forecast production of 500,000 to 600,000 oz. of payable silver in 2026.

Under the terms of the transaction, LunR will buy all of Fruta del Norte’s payable silver production until 12.2 million oz. have been delivered. After that, it will buy half of the mine’s payable silver until another 7.8 million oz. have been delivered. Thereafter, the company will purchase 7.5% of the payable silver for the remaining life of mine, currently estimated at 12 years. The silver stream is expected to be effective on March 1.

“By converting a small byproduct into an equity interest in a rapidly emerging royalty company, we are crystallizing value now and creating a new avenue of long-term value for our shareholders,” Brendan Creaney, VP of corporate development and investor relations at Lundin Gold, said in the statement. “LunR’s participation in this transaction underscores their confidence in FDN’s exceptional quality and its exploration potential to continue delivering silver for many years to come.”

Located in southeast Ecuador, Fruta del Norte represents one of the highest-grade, lowest-cost operating gold mines in the world. Lundin Gold acquired the asset in late 2014 and brought it into commercial production in February 2020, ahead of schedule.

The company is now implementing a major near-mine expansion program, including a US$100 million investment this year, to build on its existing reserve base, which is estimated at 5.8 million oz. of gold and 8.9 million oz. of silver.

Surfacing value

The streaming agreement would transform LunR into a precious metals weighted company, with added scale and cash flow that will increase its competitiveness, the company said in a separate release.

“Life-of-mine, uncapped streams on premier operations are rare, and this transaction establishes LunR as a leading competitor in the space. FDN has significant exploration upside, and the stream structure will allow LunR to surface value from Lundin Gold’s continued success for years to come,” Adam Lundin said.

Based on today’s prices, LunR would be “the sixth-largest precious metals royalty and streaming company globally” upon closing, which is expected to occur in the second quarter of 2026, he added.