Newcrest Mining has signed an agreement to acquire a 27.1% interest in Canadian firm Lundin Gold in a deal worth $250m.

The move is part of Lundin’s $400m equity private placement financing to fund the development of the Fruta del Norte (FDN) gold mine in Ecuador.

In addition, the companies have entered an exploration agreement that allows Newcrest to earn up to 50% direct interest in eight separate exploration concessions located north and south of FDN by investing up to $20m over a period of five years.

Newcrest Mining CEO Sandeep Biswas said: “This new joint venture forms part of our strategy of building a high-quality exploration portfolio.

“This new joint venture forms part of our strategy of building a high-quality exploration portfolio.”

“We are pleased to partner with Lundin Gold to explore in this prospective part of Ecuador and we see potential for new discoveries to be made through the combined experience of both companies in exploring for epithermal gold and deep gold/copper porphyry deposits.”

The acquisition of 27.1% interest amounts to ownership of a total of 57.7 million common shares of Lundin.

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Situated about 139km east-north-east of Loja, the FDN project is estimated to have probable mineral reserves totalling 4.82 million ounces of gold and 6.34 million ounces of silver.

Lundin expects to achieve first production from the project by the end of next year.

Once a joint venture (JV) is formed over the eight concessions, Newcrest is expected to manage the exploration activities and be the manager of the JV.