October 21, 2014 / 10:46 PM / 4 years ago

UPDATE 1-Kinross to sell halted Ecuador gold project to Lundin company

(Recasts with more acquisition details, context, background)

Oct 21 (Reuters) - Kinross Gold Corp has agreed to sell its halted Fruta del Norte gold project in Ecuador to a company belonging to the Swedish-Canadian Lundin family for $240 million, Kinross and the company, Fortress Minerals Corp , said on Tuesday.

Toronto-based Kinross acquired the project in 2008 with its $1.2 billion friendly takeover of Aurelian Resources, and once called it “one of the most exciting gold discoveries of the past 15 years.”

But last year it suspended work on the gold project, Ecuador’s largest, saying the government had refused to compromise over a 70 percent windfall tax. Last June Kinross took a $720 million charge on the project and has been looking to sell it.

The government of Ecuador has indicated its support for the transaction, Kinross said.

Ecuador plans to change its mining law and offer tax incentives to attract foreign investors and spur investment in the stalled sector, a cabinet minister said in June.

Kinross will receive between $100 million and $190 million in cash, depending on proceeds from a C$250 million ($222.68 million) equity financing announced by Fortress. The rest of the purchase price will be paid in Fortress equity.

The transaction is subject to certain conditions, including approval by Fortress shareholders and an 18-month extension by the Ecuadorian government to provide time for Fortress to carry out feasibility work on the project and development negotiations.

Once the acquisition closes, Fortress will change its name to Lundin Gold Inc. The company will become the principal gold vehicle of the companies controlled by the Lundin family, with Fruta del Norte the flagship asset.

The family is well known in mining and oil circles globally, and has stakes in around a dozen companies, including Toronto-listed Lundin Mining Corp and Stockholm-based Lundin Petroleum. (U.S. $1 = 1.1227 Canadian dollar) (Reporting by Nicole Mordant in Vancouver; editing by Chris Reese and Leslie Adler)

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