Lumina Gold Corp (TSX-V:LUM, OTCQX:LMGDF) has announced a significant precious metals purchase agreement with a subsidiary of Wheaton Precious Metals Corp (LSE:WPM, TSX:WPM, NYSE:WPM) from its Cangrejos gold-copper project in El Oro Province, Ecuador.
Under the terms of the Gold Stream agreement, signed on May 16, 2023, Wheaton Precious Metals International Ltd will provide funding for the project for an initial 6.6% share of the payable gold produced from Cangrejos.
The agreement will provide Lumina Gold with pre-construction funding of US$48 million and construction funding of US$252 million.
In a statement, Ross Beaty, Lumina's founder and largest shareholder, emphasized the significance of the transaction, stating: "This transaction validates the extensive technical work that the Lumina Group has completed on Cangrejos since 2014."
Beaty highlighted the project's potential to become one of the world's largest gold producers and expressed his excitement about working with Wheaton's experienced team.
Randy Smallwood, president and CEO of Wheaton, also expressed his enthusiasm for the partnership, commenting: "The Cangrejos Project is an excellent addition to Wheaton's existing portfolio of high-quality, low-cost assets as it should provide impactful, long-term growth as well as significant exploration potential."
The funding will be divided into two segments - an early deposit paid during the feasibility study and permitting period, and an upfront payment paid during the project's construction. The early deposit of US$48 million will be used for definition drilling, feasibility studies, and permitting work; the upfront payment of US$252 million will provide approximately 25% of the total construction funding required.
In return for the funding, Lumina Gold will sell a portion of the payable gold production from the Cangrejos Project. Initially, Wheaton will purchase 6.6% of the gold production until 700,000 ounces have been delivered. After reaching this milestone, the Gold Stream will be reduced to 4.4% of the production. Wheaton will pay a production payment based on the spot price of gold.
The agreement also includes a provision allowing Lumina Gold to repurchase one-third of the Gold Stream in the event of a change of control. This option is available until January 1, 2030, or 12 months after the start of production.
Lumina Gold is focused on the 100%-owned Cangrejos Gold-Copper Project, the largest primary gold deposit in Ecuador. The company has a successful track record in advancing and monetizing exploration projects, and its experienced management team has played a crucial role in the development of Cangrejos.
Contact the author at jon.hopkins@proactiveinvestors.com