Lundin Gold has signed the exploitation agreement (EA) for Fruta del Norte (FDN) gold mine, its flagship project in Ecuador.

Lundin Gold chairman Lukas Lundin said: "I'm very happy to be in Ecuador for the execution of this important agreement.  

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"In just under two years, working cooperatively with the Government of Ecuador, we have negotiated this key agreement and completed the feasibility study for FDN, paving the way for the development of this world-class asset."

The EA establishes the fiscal, operational and commercial terms for the mine development. It was signed after the company received the environmental impact study approval and subsequent issuance of environmental licence last October. 

"The signing of the EA brings opportunity for jobs and economic development at both the local and national levels and shows the country's commitment to mining."

Lundin Gold president and CEO Ron Hochstein said: “The signing of the EA is a significant milestone for the company and for the country of Ecuador. For Lundin Gold, this event signals the company's commitment to growing the company in Ecuador by moving towards the development of and achieving commercial production at FDN. 

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“For Ecuador, the signing of the EA brings opportunity for jobs and economic development at both the local and national levels and shows the country's commitment to mining.”

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Under the signed agreement, Lundin Gold receives the right to produce and develop gold from Fruta del Norte mine for 25 years, which can be extended through contract renewal.

The company will pay $65m to the Government of Equador as advance royalty payments. The first instalment of $25m will be paid in the next few days, while the remaining amount will be paid in two equal tranches at the first and second anniversary.

The EA also includes a royalty equal to 5% of net smelter revenues from production.

Lundin Gold and the Government of Ecuador finalised the key terms and conditions of the EA in January.

The company claimed that along with the government, it will continue to promote sustainable development of the area by employing local people, economic and infrastructure development.