Dundee Precious Metals Inc. (TSX: DPM) has entered into an investment protection agreement (IPA) with the Government of Ecuador for its Loma Larga gold project in the country’s Azuay province, a deal that will provide the company with tax incentives and other benefits.
The company announced completion of the deal on Friday, which requires Dundee to invest over US$400 million in the developing project’s construction and production phases to utilize the benefits of the agreement.
These include a 5 per cent discount on the country’s income tax rate, fixed at 20 per cent; exemption from import duties on equipment needed for the operation; tax stability on value-added tax; and the right to international arbitration in New York regarding any disputes related to Loma Larga.
Additionally, the company says it will receive “protections related to the prohibition of all forms of confiscation, non-discriminatory treatment and equal playing field, legal and tax stability.”
The Loma Larga gold-copper project is an underground operation in the Western Cordillera mountains acquired by Dundee in 2021 that is currently in the permitting phase. It is estimated to have a 12-year lifespan and is expected to produce 200,000 gold equivalent ounces in its first five years of production.
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Loma Larga contains 2.2 million ounces of gold and 88 million pounds of copper
The initial capital cost for the mine will be around US$315.5 million and the total project capital cost for Loma Larga is estimated to be approximately US$408.5 million.
“This agreement provides further legal protections and tax stability for DPM and our investors,” said Dundee’s President and CEO David Rae.
“We will continue to take a disciplined approach to future investment and advancement of the project based on the receipt of other key milestones and overall operating environment in country,” he added.
Ecuador passed referendums on Monday banning oil development in part of the Yasuni Amazon reserve and mining in the Choco Andino forest near the country’s capital Quito.
Dundee shares rose by 2.2 per cent Monday to $8.28 on the Toronto Stock Exchange and have risen by 22.85 per cent since January 1 this year.
