Sandstorm picks up royalty on Lundin’s Fruta del Norte

Sandstorm Gold (TSX: SAND; NYSE: SAND) has purchased a 0.9% net smelter returns royalty for US$32.8 million in cash on precious metals produced from Lundin Gold’s (TSX: LUG; NASDAQ: LUG) Fruta del Norte gold project in Ecuador.

The NSR royalty was purchased from a third party and covers metal production from all 644 sq. km of Lundin Gold’s mining concessions in the Suarez pull-apart basin.

“The royalty covers a large prospective land package owned by Lundin Gold with good regional prospectivity,” Andrew Kaip of BMO Capital Markets commented in a brief note.

Sandstorm notes that since January 2016, Lundin Gold has doubled the strike length of the Suarez pull-apart basin to 16 km, and identified new epithermal gold targets within the trend.

The Fruta del Norte deposit is in the basin’s northeast corner and measures 1.7 km along strike, 700 metres down dip and ranges between 150 and 300 metres in width.

Outside the Suarez pull-apart basin, Sandstorm says, Lundin has also zeroed-in on additional exploration targets, including Gata Salvaje and the Emperador area, as well as copper porphyry targets.

Current reserves at Fruta del Norte support an initial 15-year mine life, and the mine is expected to produce roughly 330,000 ounces of gold a year over the first 13 years at all-in-sustaining costs of US$583 per oz.

Lundin Gold reported in mid-January that underground development had reached the ore body.

Fruta del Norte is expected to pour first gold in the fourth quarter of 2019 and reach commercial production in the first half of 2020.

By the end of last year, Lundin Gold reported that overall engineering was 85% complete, project construction 45% complete, and that it had committed 70% of all the project capex.

Fruta del Norte is one of the highest grade gold projects in the world, with reserves of 5 million ounces of gold contained within 17.8 million tonnes with an average grade of 8.7 grams gold per tonne.

Sandstorm has a portfolio of 188 royalties, of which 20 of the underlying mines are producing.

The company sold about 57,600 attributable gold-equivalent ounces in 2018, of which about 85% were from operations run by major and mid-tier mining companies.

At press time in Toronto, Sandstorm’s shares were trading at $6.06 apiece. Over the last year the company has traded within a range of $4.60 and $6.95 per share.