Lumina Gold: The Gran Bestia Zone Could Change Everything

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Summary

  • Lumina Gold’s Cangrejos project currently holds 8.5 million ounces of gold, making it one of the largest undeveloped gold projects in the world.
  • However, it has an IRR of just 15% and this is based on inferred resources.
  • I think that the Gran Bestia zone has the potential to become a satellite deposit that can be used as an initial starter pit.
  • This could significantly boost the economics of Cangrejos which is very welcome for Lumina Gold as the company is looking to sell the project.

Introduction

Over the past several months, Lumina Gold (OTCQX:LMGDF) has been releasing some pretty good drill results for the Gran Bestia zone at its Cangrejos gold-copper project in Ecuador which I think proves that the zone has a good potential to become a satellite deposit which is used as initial starter pit.

Some of the highlights include 262m @ 0.44g/t Au and 0.12% Cu from surface and 198m @ 0.87g/t Au and 0.09% Cu from 82m.

I think this is crucial as the company is trying to monetize the project in the medium term and its main weakness seems to be the low internal rate of return, which stands at just 15%. Gran Bestia could improve this number.

How it all started

Lumina Gold is an early mover in Ecuador as it acquired a lot of properties in 2014 at the bottom of the gold cycle with the idea to develop them and monetize them when the price of gold recovers. The management team of the company was behind Lumina Copper, which successfully followed a similar strategy for copper and was sold for C$470 million in 2014.

The largest shareholder of Lumina Gold is mining legend Ross Beaty, who has a 17.2% stake. His gold company Equinox (OTCPK:EQXFF) currently owns the Warintza copper-molybdenum project in southeastern Ecuador through Solaris Copper, which I’ve already covered here.

Ecuador has quickly become one of the most dynamic jurisdictions in Latin America, with the Fruta del Norte and Rio Blanco gold mines due to enter production later this year. Investment in the country’s mining sector is expected to top $3.8 billion between 2018 and 2021 and the government is supportive of the sector. It recently scrapped a controversial windfall tax and allowed mining companies to carry out prospective drilling without applying for a full environmental license.

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Source: Gold Panda | Seeking Alpha

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