Okay. Thanks, everybody, for those that are attending today and those that have joined us on the webcast for our inaugural Analyst and Investor Day here for Lending Gold. Appreciate everyone's attendance. First of all, we want to make this more of an open forum versus a high school class where we present and then ask questions after. So, if you have any questions during the presentation, please, sync up your hand because we're on webcast.
So, Sonia will come to you with a microphone so that those on the web cast can hear the question as well. But please don't hold your questions. We really want to make this as much as an open forum as we can. For those that are on the webcast, you can file your question online and we'll make sure that it gets queued up and answered as well. We will be making some forward looking statements.
So we encourage everyone to take a look at our standard disclaimer language as we move forward through this. So the structure today, I'll make a few brief comments about Ecuador and Fruity Del Norte, Then Alessandro is going to talk briefly about our financing. And then we'll get into more into a lot more detail. First of all, Dave de Carre is going to speak about where we're at with the project in terms of construction and overall project progress. We have Steve Leary here, who will talk to us about our exploration activities.
And then we'll wrap it up with Nathan, which is, as we all know, a very important aspect in any mining operation today, which is corporate sustainability and responsible mining. This is very critical for Ecuador. As I mentioned, it's critical for anywhere in the world today. But we'll wrap up with that and then I'll have a few closing comments. So, let's first of all, let's talk a little bit about Ecuador.
We've been there now. First visit was 4 years ago almost to the day, actually when we went down to meet with the government. And what a change in 4 years has made. When you look at it, at that time, there was essentially INB and SolGold and Cornerstone, a few of the very small guys that were not doing much in the country. And if you look at it today, the Canadian Embassy quotes numbers of over 30 companies that are now active.
And as you see on this list here, we're joined now by quite an auspicious group of very major companies. Obviously, our partner Newcrest and Alessandro will talk a little bit about their financing is very much involved because they're invested not only in lending gold, but also in SolGold and have exploration projects on their own. And all these companies are involved in some degree other whether it's farm ins, current just opening offices and evaluation or active in the country. So, quite a change in 4 years in Ecuador. So, what has Ecuador done to make this happen?
Well, if we look back from the Kinross to our involvement, there were several changes that were made. They changed their depreciation schedule to allow for accelerated depreciation. That previously was not allowed to be refunded for mining and oil and gas. Now mining as of January 1 this year, we can now require a request to refund for our vet once we start export. So we'll build up a credit or a liability sorry, an asset, recoverable asset and then we'll recover that once we start exporting.
Capital outflow tax recovery. This is a tax on capital that leaves the country. We get that reimbursed if it's for on goods. One of the big issues when Kinross was there, some of you may remember was this sovereign adjustment. The way it was structured previously, this was really a 50% tax.
Now, it's been structured to look much like as any investor looks at it, it's the economic benefit. So, it's done on a discounted cash flow basis. It's based on from the time the concessions were formed. And it just doesn't include taxes to the government, includes any payments to the government. So, it includes the royalties that we pay, VAT that we pay.
There is a tax on to the pension funds. Any payments we make to the government flows into this. And if you look at most jurisdictions around the world, governments do on a discounted cash flow basis typically receive much greater than 50% of the economic benefits. If you look at some analysis we've done on projects in Canada, Canadian government on this type of analysis has benefits in the neighborhood of 55% to 58%. So, this isn't something that it's now on a basis that is much more, I think, realistic and understandable.
They've eliminated protective tariffs and we're seeing that now with as we start bringing imports and the fiscal stability contracts, which we have signed 1, an IPA as has Mirador. Other changes that are currently being considered and have been talked about recently is the elimination of the windfall profit tax and elimination amendment even further the capital outflow tax. So these are things the government I think what we want to leave with you is the government is continuing to look. They're not happy with where things are today. They're continuing to look for opportunities to improve the fiscal regime.
Other factors that are being looked at or that we have in place, sorry, there's no restrictions on export. So, what we did, what our concentrates, our dore and that we have no restrictions on that at all. The government is also considering some other issues. One of the big concerns in Ecuador right now with the passing of the referendum was there is this thing about protected areas. Well, what does that mean?
So, the new ministries are working with the Ministry of Environment to really define what those areas are. This will give much greater visibility for you as investors into what areas are open for exploration. The reopening of the catastrophe system, so they had closed that, Moreno had closed that because really it did need to be cleaned up. So, they're working on that and they're looking at reopening that in the very near future. And one of the other big things this will impact more a lot of the exploration companies and even our own exploration activities is improving the permitting process for exploration.
Right now in Ecuador, if you're going to go out and just do some drilling, you need a full EIA, essentially the same EIA as you would need for a mine. Now obviously, your impacted areas now are much smaller, but it's the same process. What they're looking at doing now is going with a very simplified process for drilling and exploration activities, which will really help to open up that aspect for the country. These I think are all some very positive changes. The other change that happened very recently was announced was a creation of a new ministry.
When in February 2015, mining was set up as its own ministry. Javier Cordova did a very good job of championing that for the last few years. However, with the changes now and with the activities that are happening in the country, the decision is made now to combine mining, oil and gas and electricity into 1 ministry. Each of these will operate as sort of individual ministries, but have one boss in terms of Carlos Perez. Carlos Perez is a businessman.
He worked for Halliburton for 20 plus years and is involved is very much we've had several meetings with them very much pro business and understands the issues. We see this as a very positive move and this will be a very powerful ministry when you look at overall the impact on the economy that this ministry will have. Other changes, they formed as Pro Investment Council. This is a group of ministers within the cabinet that is specifically tasked with looking at improving the business climate within Ecuador. Even though mining is technically sort of a smaller ministry underneath Carlos Perez, they've asked the mining Henri Troyer to be there at the table on this council.
We've also seen other changes in the ministries, some new faces and these are within the past month. Ministry of Finance, they replaced the previous minister with a person who is essentially very little political, mostly business, but a strong economist. This is very positive. Ministry of Foreign Affairs, this used to be sort of a what's the word I'm looking for, patronage appointment. This now they've put in a career diplomat.
So someone who really understands the ins and outs of foreign affairs. And the Minister of Foreign Trade, again, is a businessman with very little political. So, they've really started to work with trying to get the appropriate ministers in here versus them being traditionally patriots appointments. And just again, this is very positive for Ecuador overall. Now, I want to talk a little bit about sorry, yes, Chris.
Chris Spear, RBC. Just on the government section, what is the feeling on the ground with the locals? And is this news then having a top down is it top down driven? Or how do the local provinces or regions react with or interact with the federal government?
Actually, Mason, you deal a lot with locals. Do you want to respond to that question? You can do it from there. Your mic is live.
For the question, I think it's important to note that in Ecuador, politics is driven much more by personality than by political platforms. And so, notionally, the Alliance of Paris party is still they transition from Rafael Correa to Lenin Moreno, very different style. What we've seen over the past year is that at each level of government at the national level, provincial level and even at the very local level, Most of the Alliance at Pais party members are now coming into line with Elena Moreno and a new vision for the future of the country. The Koreista, the followers of Koreya who are firmly behind him even now are a very small minority.
So we are seeing sort of this sort of new thought, Chris, I think coming up from the lowest levels all the way up.
Ron, Steve Butler, GMP. The Mining Minister Henry Troyer. Yes.
Can you give a bit
of background on him maybe?
Sorry, that's a good point, Steve. I missed that on that slide. Henry has been formally appointed as sort of the head of mining. So there will be vice ministers that we will report to Carlos Perez. But Carlos Perez has said that each of these will act as sort of their standalone.
Henry actually, we've known Henry for quite a while. He was a sub secretary under Javier Cordova and was almost in the ministry almost from the start when Javier stepped in. So he's been in the mining industry now for since 2015 in the ministry. When Javier stepped aside and Rebecca came in as acting minister, Henry was promoted up to Vice Minister. So, again continuity, Henry certainly understands the industry and has been very active in working with all the companies with regards to not only issues within the National Cabinet, but working with industry in terms of any local issues, whether at the province, the Canton or even down to the parish level.
Henry has been very involved and realizes that his role is to help to be that bridge between the local and the national governments. Okay? So, a couple of slides on Fruta. I think we all know Fruta is pretty unique. And Steve will talk a little bit more about the geology in that a little later.
But here is an updated slide showing where Fruta sits in terms of the current undeveloped or in some cases such as Brucejack developed now in production. How it sits relative to the projects around the world. It is a large high grade deposit, one of the largest in the world today. And based on our current projections, if you look at the cost curve for the primary gold industry overall, we will be in the lower quartile and possibly we continue to keep pushing on our operating costs getting us down into the lower decile. But this will be a large low cost mining operation.
I'm going to turn it over to Alessandro now to talk a bit more about our financing and answer any questions on that front. Thank
you, Ron. Briefly on the financing, we really hit the ground running 18 months ago. We wanted to make sure that the project was able to start the construction and development of the project soon as we received the key contracts with the government and the license, environmental license. And so we structured the financing on in with 3 elements. Initially with our gold prepay and stream loan that was announced in May of 2017, dollars 300,000,000 under that those two loans and they were drawn over a period of approximately 10 months.
And we followed that up with a significant private placement of March of this year, dollars 400,000,000 with 3 key supporters of Fullerton Northern and Lending Gold. We welcome Newcrest, 1st of all, as our new largest strategic shareholder and investor. They own 27% of the company at this point in time. And of course, we saw the continued support of the Lundin Family Trust, subscribing to $50,000,000 in the private placement. And then the commitment from Orion and Blackstone as a follow on from the gold prepay and stream loan financing with $100,000,000 of equity.
That puts us in a situation where we now have the time to complete the documentation on a $350,000,000 commercial senior debt facility that has been negotiated with 7 banks. Initially, 5 banks were in the process and we've been joined they've been joined by 2 other banks. All banks are very familiar with project finance for mining operations. And this debt, we expect it to be finalizing, obviously, in the coming weeks. It has 2 critical elements.
1 is a commercial facility of $250,000,000 and then $100,000,000 facility that is guaranteed by an export credit agency. So in a very short period of time, we have been able to put together the foundation of the project finance elements. We refer to substantially complete mainly because under the senior debt financing, we are required to secure our cost overrun facility and that cost overrun facility will be in place over the coming months to satisfy that requirement in case there are overruns. But of course, there won't be overruns. I would like now to turn it to David Decher, who will take you through the project on an update and description.
Thanks, Alessandro. Okay. I've joined Lundin just over 2 years ago. And basically, I've been tasked to build the organization, the team and put together the execution of the project and lead the team for that. Mostly you guys know project execution, good project execution, putting together a good team is critical.
If you look at a lot of the projects that fail, a lot of it goes back to not having a strong team. We've put together a great team, a lot of experience, a combination of South American experience, gold mining expertise and working in saprolite and jungle conditions. So we've got the team in place. In behind this, we've also started to put together our operations team. We have a GM.
We have a mill manager. We have a training director. And our mining team, the guys are going to run the mine are actually already in place running the development and Doug Moore will lead that team across to operations. So any project construction, strong safety is critical. We do have very strong safety performance as you can see there.
We've had this is our recordable incident rate. We've had 6 recordables to date on the project, 2 LTIs and we really have not had any serious incidents. The LTIs were actually knee injuries, guys working in the jungle twisting a knee in that. So, we have improved and we continue to strive on our safety record. And we have significantly derisked.
We've come through the very difficult working conditions in jungle clearing, earthworks and that portion of the project. And we also have a great visible leadership program in place that drives interactions between the workers and 1,000 interactions a day. These are recorded interactions. So it's a 1,000 interactions a day. These are recorded interactions.
So it's a very good program that we've seen in the past that will drive keep safety at the forefront in everything they do on-site. I'm going to take you through a bit of the progress and we'll go through some background on the project. Where we're at on the project right now is we've really significantly de risked the project. The first one, the mine development is going well. We didn't have exploration at it, so there was a lot of uncertainty on advanced rates, ground conditions and that.
And we're now about 1.8 kilometers underground and we've proven that we've derisked that portion of the project. We can continually beat the advance rates, the target rates. We're happy with the rock conditions. We've had the geotechnical experts come down repeatedly and have a look. The rock is very good for development and we've kind of derisked the project in that area.
The other thing is the site capture. We're almost through the earthworks other than the tailings dam construction, but we've got 3 kilometers of road left to build. We've done most of the site earthworks. We've got our water management in place. So we've derisked significantly in the site capture.
That's a lot of times where you have high cost overruns as in your civil and earthworks. And then most of the equipment has been purchased. So we have certainty on the cost of all equipment. The mining fleets have been purchased. We got some very good terms.
We kind of caught the underground mining industry before it started to pick up. So we've got some very good pricing in terms on our mining process plant equipment has been purchased. We got some minor pumps and cranes and a few things like that, but all the major equipment has been purchased. Once again, we caught the vendors. They didn't have a lot of stuff to bid on.
They were very hungry. And they're also they're very interested in setting up in Ecuador. They can see the future. So they're all setting offices up for us there to support us. We kind of went with the big guys to set up, so make sure we've got support since it is a new jurisdiction.
And we set up some big packages, grinding packages, CIL packages in that. We'll go through that a little bit later on where they're at. So we're ramped up in concrete. The critical concrete work, the SAG and Ball Mills is on schedule. And then now we're getting into some of the infrastructure construction, which is pretty normal at this stage, tailings, power line contractor.
And in behind this, we've also got our training program for operations for the underground mine development ready to go. Those guys will start early next year. It's about a 4 to 6 month training program for them. The simulators are in country. The program is set up and we'll get ready to go.
We've got a contractor doing the development now, but we also have to get our own workforce there and ramped up early next year.
Yes.
It's Carey from Howard. For the major pieces of equipment, how much of that equipment is actually in country? And how much has to make it through sort of the customs guys?
Some of the we bought a surface fleet to build the tailings dam and for the ongoing raising of the tailings dam. Most of that's in country. The mining equipment is not in country yet, but we have imported equipment for the contractor. We bought the contractor equipment to do the underground development. So we've been through that process.
And then the process plant equipment is not in country. Some of it's getting ready to ship. I think flotation cells will be in country probably in July. But we're not seeing too many issues with customs. We can usually get stuff cleared through customs in 2 to 5 days.
So we're not seeing an issue. And then we're just going through that process with them. But we were expecting more difficulties than we're having.
So was it 2 to 5 days to get the mining gear in for the contractor? That's kind of what it took?
Yes. We get the customs cleared. The mining equipment was a little bit early. There's a process. It takes about 2 to 5 days to clear customs.
And then if it's mobile equipment, it takes about another 2 to 5 days to get the Ministry of Transport Certification and get it all licensed in that to go through. So it's probably 2 weeks for mobile equipment.
Okay. Thanks.
This year, we're going to play it's kind of a time lapse video. We've got some drone footage and it will give you guys a good feeling for where we started from and where we're going or where we're at today. So, kind of the start here is where we started with the exploration camp. We did expand that camp to about 600, 700 people. It was at about 400 people.
And there you can see on the right where the expansion went in. Now we're going to go into the new camp. So what we did was we put the new very close to the existing camp to get a lot of common facilities and it was an area that had previously been deforested. So that helped us in our environmental impact. We weren't taking out new area for the camp.
And that's the kitchen in the foreground there, the kitchen dining hall and that's about 1 1,000 units of accommodation. Very good camp. It was built in country. We're very happy with the facilities we've got there. This is kind of the mine portal right in the middle where the white is, is kind of where you'll see where the portals went in.
See that one, the temporary ventilation is gone and we've now moved the vent fans underground. I'll just put a couple of shots in here to show the scale of the mining like Ecuador has no large scale underground mining. Most of their underground mines are a couple of 100 tons a day. So it's new for them. This is all new for the people there.
So as you can see there, it's a very temperate climate there. So a lot of our facilities are just tent type structures, very fit for purpose, economical. They were fast to build to get everything up and running. And there you can see just in December, we didn't we just started excavating in the process plan area. And we're probably 95% complete all the process plant excavations now.
So see those, that's a grinding area. We've already started to topsoil slope to get the re vegetation going in there. So basically in 6 months, we've got most of that process plant cleared and concrete started. This is our underground development. If you look at the picture, the blue is our contractor underground development.
Development contract about 8,000 meters of development in the blue. The green is the ultimate mine development, which accesses the very levels and then going to the ore body. The ore body basically sits between the green and where you see that South Bent Shaft label in there. And then on the bottom right there, you can see where we're at today or at the end of May. You can see as we're heading down the spirals, that's the key now is spiral down and then we'll go across under the river and then access the ore body through there.
This is the status of where we're at. We have 2 tunnels, Curry and Kissa. So we're about 1.8 kilometers of total development. And then you can see we have depends on the ground type, the target rates we have good, fair and poor ground. We've mostly been in good ground.
We've had very little poor ground and a bit of fair. So the target as you can see in Kisseu there, the target in May, they were all in good ground. Their target is 5.16 meters a day and they were achieving about a meter above that. So, May had a very good month. They are basically 10% to 20% above their targeted advance rate.
Just got a few photos in here to show a little bit. You can get the feel with the rock type on the face there. There's a scoop mocking. This is scaling and truing up the face. The rock is very competent.
We're not getting a lot of breakage and that. So we're very happy with the rock conditions that we've encountered. This is shock creep. In our declines, we are using bolt and shock creep all the way down. And it's a pretty standard process.
They're very good. If you look at the shotcrete from where they started to now, they're actually very quick, very good. It's going really smoothly. And then as we're going down, we're getting our contractor to put in the permanent infrastructure and services, all the water lines, airlines. So we're putting in the permanent ones, use them for construction, then we won't get held up having to go back into those declines when the haulage rates are up to put in services.
So permanent substations, refuge chambers, things like that, van installations. Now we'll take you through what the Fruta del Norte is. If you look at that, the grid lines are a kilometer on that. So when we went back to optimize this after feasibility study, we wanted a very compact site. It's very similar like there's a lot of conditions in the jungle with a 3.5 meters of rain a year that impact facilities and construction.
And it's almost like being in Northern Canada. You want everything very compact inside buildings protected. So down below you can see the Las Pangas camp down in the bottom right and that's where we built the camp. And then there's what we call the mountain pass road that goes over the top that goes through where we're going to put our quarry. That will supply rock to the tailings dam for the rock fill and it also supply rock for the backfill for the mine.
It's a very steep road, so we did build what we call the river road around the base of the mountain. That's about a 4 kilometer road and that is how we go back and forth to the camp, takes about 15 minutes, whereas before it was taken about 45 minutes to an hour going up a very a road with very steep slopes, also derisks traffic accidents. PACE plant there you can see sits right over top of the ore body. Portal platform is there. The portals are kind of right under the P there.
So we've got all the mine facilities there and the process plants right beside it, very close, very short haul for the surface run on the trucks. You can really walk it. It's about a kilometer apart. The mine waste is built kind of just beyond the process plant. So that total haul from the portals is only about 2 kilometers.
Eventually, all the mine waste goes back underground. So we won't have any ongoing acid rock drainage issues that will go back underground as back fill. We have a couple dumps and then you can see the tailings dam. The tailings dam is only, I think, 3, 4 kilometers away. So we don't have any big long 30, 40 kilometer pipelines that you traditionally see on many projects.
And then the North access road is where we're working now and that will be the new access road to Los Encuentros, which basically we have a 44 kilometer road now and that will go down to about under 20 kilometers for that road. So that will cut the travel time probably from an hour and a half down to about 30 to 45 minutes. This is the mine area. As you can see, the portals are there and then we have the portal platform there. Process plant right beside it, there's a bit of a gully which is mostly filled in.
There's a drainage down the middle and then the mine waste storage. So it's very compact that sits on the toe of the slope. Good ground conditions. We are building on saprolite, which is a little different. It's not hard rock.
There's probably 20 to 50 meters of saprolite that we everything sits on top of, but it's very compact. These are the portal facilities and what we've done here is we've separated the heavy vehicles from the light vehicles. The dry and mine offices are down on the bottom and then the other facilities are up top. We're just starting construction of the permanent truck shop. We have fuel station wash bay, tire chain, everything is right there.
The batch plant, which provides concrete and shotcrete is very close also. So everything is very compact in one platform, one area.
Dave, coming
back to the advance rates in May, just a question before it's too many slides forward or backward. Is it mostly productivity? You don't have to
go back. Okay. Up to you.
Is it mostly productivity for the crews, the advance rates being 10%, 20% better? Rock conditions, I think you said earlier, pretty much as expected or maybe a
bit better than expected or is
a combination of productivity and rock?
Rock is a
bit better than expected. They're also getting
a little bit longer pull rounds. The brakes are very clean. They're getting almost 3 meters on a round and some and productivity also. Some days they can pull 3 rounds, some days they pull 2, just kind of depends where they're at on their cycles. We worked through.
It was a little bit slow at the start. They had to optimize explosives drill patterns in that. So it's a combination of both. But the contractors also incentivized based on his productivity. Here you can see the portal platform.
The portals are in the background there and that's the batch plant in the foreground and the temporary truck shop we built to get everything up and running and started. So very close to the portal, good flat area. And then this is just adjacent to that. This is where we set up a lot of the construction and mine temporary facilities. A very fit for purpose tent style structures, metal frames.
We got a warehouse there. A lot of that area to the right was is going to be the lay down area. We built a temporary mine dry, so we can get the permanent one built. Our construction office and also a fab shop, we're pretty remote. There's not a lot of local fabrication capabilities in the local communities.
So we've got our fab shop there to build a lot of the small steel structures and things like that ourselves. This is the process plant, kind of the 3 d model. There you can see the crusher is very close. It's just a traditional jaw crusher feeding onto a stockpile and then into the grinding building a SAG ball mill circuit. That's covered.
And then the backside there we have flotation and concentrate. The bottom side is mainly the CIL Gold Refinery. There you can see all the facilities along the bottom are very close to the process plant. That's a laboratory. The building that's chopped off there is all the reagent storage.
And then we have kind of on the other side, the guardhouse, the change house and lunchroom. So everything will be very compact. Guys will be able to walk. It's a very temperate climate, very compact little plant site. It's a very traditional gravity float leach plant, 3,500 tonnes a day.
Nothing really out of the ordinary here. You go through your flotation circuit side and that produces your gold concentrate and then you go through the CIL electro winning into the refinery side and that produces the dore. So we're about a seventy-thirty split, 30% dore of the total gold, 70% concentrate that will be loaded due to the high value in 20 foot containers. It's probably 6 to 10 containers a day. It's not high volume and that will be hauled the Guaya Kill loaded on ships there and then shipped off to the smelters.
The other big facility on-site is a tailing storage facility. We're just getting into the construction of that. First thing we got to do is complete the polishing pond, which is really the sediment control pond. The water will run through there and get the sediments out before we release it. Aggregate from that will come from our Mountain Pass Quarry.
We're in the final permitting stages of that quarry. Quarries in Ecuador are permitted separately from mine. So we had to go back through and permit that separately. You basically split out that area from the concession into a separate quarry concession and then permit it that way. So we're almost through that.
The other critical thing is we've got a detailed construction wet weather plan, building a tailings dam and 3.5 meters of rain a year, has some issues with we've got to build copper dams. We've got to make sure if we get an event, we don't get flooded out building the dam. So we've got a series of copper dams, diversion ditches, pumping stations and that develops that we'll start on now. This is the tailings dam area. Up at the top of the photo there, you can see that cut.
That's a road that it's about 1.2 kilometers long up to the tailings dam. The tailings dam will come across that valley and go up. In the bottom and there where the road goes up that's into the polishing pond or the sediment control structure that will go across that valley. It's a pretty significant structure. It's about 15 meters high, but we've got to build it, so it can take a storm event if we do get a storm while we're under construction.
And then the off-site infrastructure, we've got 2 major areas in this. Our north access road will basically cut our travel time in half and make it a lot safer and avoid some of the communities. We basically got 3.2 kilometers to go. I think they're actually down under 3 kilometers or about 2.9 kilometers as of today. And we've got the difficult section.
I'll show you on the next slide in the middle. That's where we're at now. We also will build a new bridge over the Zamora River. Right now, there's a single lane bridge that serves the community and we'll build a new double lane bridge. It's really not critical to anything for construction or operations.
It's just a commitment we have made to the community. So we should be through the road by the end of Q3 and that will greatly improve site logistics. It will make it easier to bring equipment to site, though we can bring all the equipment up the existing road also that we have right now. It's just a longer haul, couple more difficult bridges to cross than that. This is the North access road on the image at the top there, the plant sites at the right and the communities down at the left.
So we've made pretty good progress. And we're in that blue section in the middle where you can see there the arrows show where we're at. Some pretty difficult conditions, pretty steep, but we are taking it. We pulled the guys we want you to be safe. We're not in a rush for it.
Let's be safe and get through this rather than try and push it and add some risk due to the steepness of the slopes. You can see here some of the conditions that the guys are working in. Basically, it's steep side hill and you basically cut and bench, build drainage on each of the benches to make sure it doesn't get saturated and keep the water off. That's right about kilometer 14. They're actually down around the switchback now.
And then one of the keys in building in saprolite is you don't want to get the saprolite saturated. So you immediately got to cap it as soon as you open it up. There you can see the saprolite on the right and then capping the road immediately with granular materials. On the left there are some of the slopes. We do cover them till we can get them re vegetated and seeded.
Once the construction guys are through, then we come back and vegetate hydro seed some of the slopes, hand plant some of them. We try and keep the water off of them as much as possible till we can get there. The other thing we've got to do is connect up to the national power grid. There is a substation that was a power line into Bomboisa that will service Fruta del Norte and it also services the Mirador Exa mine that's up to the north of us. So from there, we have to build the power line 42 kilometer, 230 kv Line 2 site.
We have our environmental license. We're just getting our final construction permit from the utilities. And then we'll start construction on that. It's about 107 towers in that 42 kilometers. Contractors on-site, he's actually starting to clear from site and working down towards the other areas.
Once we get our off-site construction permit, we'll start on multiple fronts with that line. There you can see, Bomboyes at the top, Fruta del Norte is at the bottom. The line largely runs along a highway or significant roadways. And then when it gets to El Pindell or Los Encuentros crosses the river and then we'll follow the same valley as the access road up to site. This is kind of our high level schedule where we're at.
As you can see, we're getting through a lot of the earthworks activities, which is de risking the project and de risking the schedule. North Access Road, we're almost through that. That was a very difficult road to build and high risk in some areas. Once we get our permit, we'll develop our quarry and have that ready to go for the tailings dam. We completed the River Road and then you can see farther down we're pretty well through the site earthworks.
So that gives us a lot more comfort on schedule and cost certainty. And then in the middle there is the mine development, which is the critical path of the project. So we get to 1st stope in 20 19 and the contractor continues on developing some of the dewatering galleries in that. Down on the bottom there, you can see where we've got some of the power line construction, tailings construction. We're just getting into those.
And then we'll go into the commissioning in the middle of 2019. First Gold is in 2019 there and you can see the commercial production is in early 2020.
Just a couple of things. Just maybe on there, maybe you could point out your critical path items. And then secondly, how's the government been in terms of releasing equipment to you that you're importing? Or have you gone much through that phase?
Okay. Critical path is basically the mine development. And the next slide will say where the critical paths are. So and then equipment is we haven't had any trouble releasing equipment. It's usually within a week.
Just got to have your work in order and your harmonized codes. We have a bonding system, advanced payments. So it's all pretty smooth and processed. So usually it's within a week we can get equipment out of the customs. These are the top critical paths, the mine development, the power line is in there and then closely followed by the tailings dam.
On the tailings dam on the schedule you showed on the slide before, is there a point in time where you can't work because it's too wet? Or are you able to construct that tailings throughout the wet season and it doesn't really matter when the permit comes? Because it obviously isn't really a critical path, assuming you could work anytime.
Yes. We can work through the wet season. We've developed the plan. The critical path for the tailings dam is really the hall of the rock fill. There's 500,000 meters cubed of rock fill.
We got a quarry and hull. The trucks are arriving. We bought the trucks to do that. And there's opportunity there or if we have issues, we can add trucks and go to an extended night shift also. It's not desirable to work on dams at night, but we can do the hauling at night.
So
So that you show us here on the slide before, when does that assume that you actually get the permit for the quarry?
The permit for the quarry is imminent. We've got a lot of excavation to develop in the bottom of the tailings dam foundation in that. So we really have several months before we need that permit. We will some of the special filter materials will come from off-site. We're already stockpiling those on-site right now.
So we're ready to go.
Okay. Thanks.
Yes.
And then just to sum up where we're at at the end of May, we are on schedule for 1st gold and 1st ore. Our mine development, we got 1.8 kilometers. We got 4.6 kilometers to go to 1st stope and 8.1 kilometers overall. That 1st stope is kind of an important date because that's when our own crews need to be ready to go. Engineering is we are a bit behind on engineering.
We did do some more optimization and started engineering a bit late. We looked at some of the paste and some of the tailings schemes and did some more optimization there. We have added resources to make sure we can meet all the construction dates for the drawings. So we are now ahead of construction, but it is tight only being 47% or 37% complete engineering and only about 20% ahead of construction. Procurement, as you can see there, we've got through all that.
Scoops and trucks are cat. You can see the companies there. And then we went with some fairly large packages, so we have good vendor support on the process plant. The front end is basically Auto Tech and the back end is FL SPIT and the electrical is with ABB. Construction, we're 17% complete versus a plan of 22%.
The critical path is being maintained. Our behind progress can be mainly attributable to the slow progress on the North Access Road and some of the non critical concrete truck shops and things like that, that we have not started yet, but it's getting going now. So just a couple of photos here. So the equipment, the float cells are ready, the concentrate filter is just about ready to leave. So I think the mills are leaving the first sections in August.
They're coming out of Europe. And then just to sum up, the $684,000,000 total CapEx, we spent $140,000,000 dollars up to the end of May. We've committed $332,000,000 and we still got 73% of the contingency remaining, which and we've been through a significant amount of derisking of the project. We've got through a lot of the earthworks, which is where you usually on projects, if you're going to have a cost overrun, that's where it's going to happen. And we've got certainty on the underground mine development that we can meet the advance rates, which is the other area.
So we're in pretty good shape regarding capital costs right now.
Committed includes incurred?
Yes.
Okay.
Dave, you pointed that your engineering is a little behind and you're 37% complete. So usually, when we see situations like this with a relatively complicated build, then we start worrying about what happens with field change orders and the changing scope for contractors, but you have a different relationship with G Mining in there. Could you talk a bit about your ability to respond to changes in the scope or if you have to reengineer something once you actually get to it?
Yes. Our execution methodology is we're basically self performing the process plant. So we do have the flexibility there with running the construction crews that if something's late, we really don't get impacted because we can move the crews around and we can also drive the engineering to match the construction. So the same leads that started in Montreal with Asenco doing the engineering, they're overseeing the engineering, they're responsible for making sure all the bulks are bought and taken off and will meet the construction schedule. And then that lead moves to the field once his engineering has progressed to certain state and builds it.
So he's very familiar with that. I would say we've already bought 75% of the bulks on theirs. So we have bought those and a lot of them are on route. And then a greenfield site, that's very traditional is to buy a bunch of bulks. The owner buys the bulks and then the leftovers are left for operation.
So they've got an inventory of pipe and steel and things like that to work from also. Whereas a traditional, if you have a contractor there, he leaves with all his materials, you've got nothing left. So it is a direct hire. We're very happy with the quality of the tradesmen we're getting in Ecuador. Supervision basically comes from off shore.
We took the team that built the Marion mine for Newmont, the core team that built that. And as that project ended, we've moved them over to Fruta del Norte. So they've all worked together before.
Chris Speer, RBC. Just on the water, I think you mentioned 3 meters a year or whatever. We have a 100 year event, but underground, I know it's a wet mine. Like can you just speak to some of the experiences so far and water handling and under your events?
Yes. We've got most of the water management infrastructure in place now, all the diversion ditches in that. And we have had some various serious events, 100 millimeter events. And it's really only shuts us down for transportation. It hasn't shut us down for more than a day in various severe events.
We do get 3.5 meters of rain a day, but it tends to come in a couple hours and then it will dry up. So we have been able to continue to construct in the rain. As long as you keep your drainage in place and keep your diversion in place and as soon as you open up your areas get them capped up, you can Not yet. No, we're not down there. We'll be down there next year.
But
the
Not yet. No, we're not down there. We'll be down there next year, but the mine is actually dry. There's not a lot of water in the declines right now. They're actually saying there's a lot less water than they were expecting in the declines.
But we are building the permanent pumping systems to deal with that. Okay. Thank you.
And Dave, Steve Butler again, GMP. The construction completion 2017 versus 2022, you talked about the North Access Road being the main reason for that. So was that expected to be completed by now or substantially further along the way versus 2.8 kilometers to go as of this date?
Originally, it was expected. I think we had planned to complete it by now, but we really had no geotechnical data on that road. We couldn't get down there to drill it. The only way to drill it was to apply for permits and helicopter drill it, which really wasn't feasible. So it was a bit of an unknown, but it's really not critical to the schedule.
We brought in pieces as big as the mill shells already on the existing road. So it would have been a nice to have, mainly for logistics and people transport, but it's not critical. Okay. So Steve Leary, our consulting geologist is up and I'll let him take you through it.
Thanks, Dave. So I'll start off by talking about the discovery, the geology and the resource of FTN. Now I'll move on to the Suarez Pulp Heart Basin, which is our highest priority exploration target. The discovery was made at the start of 2006, but the story really begins in 2,005. This is back with Aurelian Resources.
So myself and the team, we had most of the Ecuadorian guys that were working there still with us. This is what the geology looked like in 2,005 and 2,006. We had a number of gold epithermal prospects, and they were surrounding this feature in brown, which is the Suarez pull apart basin. This is a pull apart structure that formed on the regional scale of Las Penas fault zone and runs through the project. It's a sediment filled basin.
And to an exploration geologist that's looking for epithermal gold deposits, a pull apart structure is pretty much as good an environment as you can ask for. The problem with this one was that at the time, the interpretation was that it predated the mineralization. So you can see there's no prospects within the basin. It was considered that it was pre mineralization and it was a bad host to mineralization. Well, this didn't make a lot of sense.
And in 2,005, we did a lot of mapping. We did some trenching, and we reinterpreted the basin. The result of that was an exploration model that basically said that we shouldn't be looking around the basin, but we should be looking within the basin, and we should be looking for buried epithermal systems. Well, the next piece to the discovery, the next factor was one of our geologists was in the Effian area, and he recorded some solidification of the basin sediment. But with further mapping and sampling, we were identifying epithermal textures, epithermal alteration with markicide, etcetera.
We had a high level epithermal geochemistry with a lot of arsenic and antimony, sometimes with mercury. Not a lot of gold, but we knew in epithermal systems, the gold can be deeper. Well, the discovery of alteration at FTN fitted our exploration model, but we were looking for, of course, our buried system. So what we're seeing on the surface, we interpret it as the potential surface expression of buried system. We mobilized a drill rig to the area at the start of 2006.
We had, of course, an outcrop of epithermal mineralization, and of course, we were looking for a buried system. Problem was we didn't actually know how deep the basin sediment was. So the first hole went through the alteration, kept going and intersected the underlying andesites too
far to the east.
But at the contact, we intersected Sinter, which is the surface expression of epithermal systems. So it confirmed our model, and it also told us that we were close to an epithermal system. So second hole, we pretty much just reorientated the rig and aimed at the intersection point of the alteration we were seeing in the sediment with the bottom of the basin because we now knew, of course, how deep that sediment was. Hole 51 drilled right into the top of the system, assayed 2 37 meters over 4 grams. Since then, we've drilled over 300 holes and 130,000 meters, and we've delineated a zone of intense stock work, bridge here.
As you can see along the margin of
the basin, the brown is
the sediment basin sediment. So it's a buried system at the northern end. It gets within about 100, 130 meters of the surface, but there's not a lot to indicate its presence apart from that alteration we saw in the sentiment that led us to the target. There's some exceptional high grade at FDN. Hole 100 is the best hole we've drilled to date at 2 48 meters over an ounce.
So we do get assays into the 1,000 grams per tonne. We had classic epithermal textures at FDN, beautiful crust from cold formed banding. This is a pulsing epithermal system. We get bands of silica, carbonate, sulfide, and when conditions are just right, we get bands of gold, and that's the high grade. So some spectacular visible gold in the system.
It's an epithermal systems. The fluids are boiling. We get lots of hydrothermal appreciation, bladed calsoate, part of the boiling process. The resource and reserves, you can see to the north, it's closer to surface. This is the reserve area, I think, pretty much completely drilled out.
As we head south, the system does splay, broaden out, but it's open to the south. We haven't drilled that off yet. You can see it becomes deeper below surface. So we will drill the southern part of the ore body from underground. So the current resource, we have over 7,000,000 ounces at 9,600,000 and indicated, over 2,000,000 ounces at 5,690,000 and onethree, and that converts to almost 5,000,000 ounces at 9,000,000 in reserves.
First target I'll talk about is actually in close proximity to FDM. This is a section through the block model. You'll see the ore body is dipping to the west, and it runs into this feature here, the west fault. The west fault is a post mineral structure, but we get a lot of epithermal clasts in the gouge. We know that this fault cuts the mineralization, and you can see the mineralization dips into it.
But if we look at that in plan view and see the ore body trends north northwest, Pretty much the central right through to
the northern part of the
ore body is truncated along strike by the west fault. So the West Fault cuts mineralization both downdip and along strike. Well, we know the West Fault has moved down to the West. We also think the West Fault has moved synastry along strike. So mineralization should have occurred on the other side of the fault.
It's probably gone down into the south. We've been doing some reinterpretation of the structure at FTN and realize that south of this point here, we have not intersected the west block, west of the west fault. So obviously, that's a high priority target for us to test and try to find the missing piece of FDN. Back to the Suarez Pulapar Basin, and that, of course, that FDN is buried at the northern end of it.
Chris here again. Just I think Silataux had highlighted that years ago. And so you've drilled the down vaulted Western Block, but not to the south?
No. We drilled it pretty much. I think the deep hole was off here. The theory was we've gone deeper than we thought, But yes, we didn't get any joy from that drilling.
So the untested area, is that easy to test from, I don't know, from a surface perspective?
Yes. We could drill some deep holes from surface or the other option, of course, as we go underground and draw from there when we're going to be drilling the southern part of the ore body anyway. So that's a discussion we're having right now, how how we go about testing that area.
Is the old Kinross portal usable for that purpose?
No.
Okay.
And do you have any sense, Steve, of displacement on this fault? I mean, it's hard to measure any marker horizons or anything you can measure?
No, nothing. We're just looking at the overall structure of the basin and how the whole thing has behaved over the larger scale. But when we cross the Westfall in the decline, we want to be there to see if we can pick up kinematics. So back to the Suarez Pulpah Basin with EFD and, of course, buried at the northern end, and this is what it looks like now. This, of course, is our highest priority exploration area.
And the reason for that is going back to an old exploration saying that the best place to explore is in the shadow of the headframe. Well, the geological reason behind that saying is that once you get conditions that form 1 ore body, they tend to repeat. Ore body is normally clustered because of that very reason. The geological conditions formed mineralization in one area are going to form other mineralized zones in close proximity. The conditions that formed FDM is first, very dilational structure, I.
E, pull apart based on marginal faults but dilated, circulating the giving permeability for the circulating fluids. We believe there's volcanism below the basin, and this is the heat engine for the epithermal system. To form a large epithermal gold system, you also need those structures and that volcanism to be active over a long period of time. You want your system to be bubbling away for a significant time period. We know that happened at SDN.
A 4th factor for the basin is the fact that mineralization forming within the basin has tended to become buried and therefore preserved. A lot of epithermal systems become heavily eroded because they're in a volcanic arc and mountainous setting. So to explore for Jurassic age epithermal systems, this is a huge advantage. In 2006, we realized after drilling a couple of holes in the south and mapping this area here, the basin was twice as big as we originally thought. Can see there's extensive Lejanda sites erupted into the basin, and we have extensive colluvium.
So our prospective exploration area doubled in size in 2016. Well, how do we find another FBN? Well, the exploration model we developed in 2,005 is still relevant. We've developed it over the years, but essentially, it's the same. We have dilation or basin faults, which focus the fluids.
As the basin subsides, it starts to fill with sediment, but fluids in that epithermal system keep flowing. They discharge into the permeable sediment of the basin, and we get high level epithermal alteration, narco site, clays, sometimes some silica, and we get high level epithermal pathfinders, arsenic, antimony, sometimes some mercury. Not a lot of gold usually, that's usually deeper than the system. These are the targets around the Suarez Basin. I'll only really be talking about El Puma, Barbasco briefly on Puente Princesa.
We've talked about Efthian Southwest already, and I'll touch on Alejandra. We've covered most of the basin in soil sampling. This is arsenic, so one of our pathfinders. You can see Alejandro. We believe this is actually the tail end of the FDN system.
At El Puma, you can see a large area of anomalous soil samples. We have a nice anomaly at Babasco. If we look at Antimony, our other main pathfinder, same trends. Alejandro, the tail of the FTN system, Barbasco and El Puma are 2 of the larger anomalies. El Puma, we have a lot of cover in the area.
So the late Andes sites, Hoye and Calluvium. But when we do get windows into the basin sediment, we see a lot of Marcusite, we see a lot of arsenic, we see a lot of antimony, just the same signature we were seeing at FDN. We have drilled some scout holes across the basin, basically drilling a section through here. Other surface indications, we have some float at Elpuma. We have our cropping epithermal mineralization at Pointe Princesa.
Fortune between is pretty much heavily covered, both with beta andesites and some colluvium, but that's pretty much the strike of the basin marginal structure. So we're currently doing more work in the Pointe au Princeis area to try
to pull that trend together.
Barbasco, you can see it sits on the eastern margin of the basin, very similar position to FTN, has very similar orientation to FTN. So it's a north northwest trending anomaly, defined by Antimony and arsenic, our 2 main pathfinders. The ratios of these two elements is very similar to FTN, which is encouraging. It tells us that maybe the fluid geochemistry in the area was similar. And again, north northwest trend and is a very distinctive ridge feature, which this follows.
We've recently flown a ZTM survey, and this is an airborne resistivity survey, which uses the natural electromagnetic properties in rocks to look at the resistivity, I. E, the conductivity of the rocks. Well, at the southern end of the Barbasco soil anomaly, we're finding some strong mark site in the conglomerate, but then it goes undercover. We believe that this anomaly here, this high conductivity anomaly, is probably the continuation of that system. So now we're at about 3.8 kilometers length for that target zone.
We don't have a lot of exposure through the Leit Andes sites, the Coluvian and the Suarez. But where we do have windows into the underlying San Diego formation Andes sites, I. E, the host rock for FTN and the rock that's below the basin, we're seeing some epithermal veining and mineralization. The best sample was from here, 8 grams per tonne gold trends north northwest along the
trend of the anomaly.
One other unusual aspect of Barbasco is that pretty much every stream that drains the anomaly contains alluvial gold. We believe this is probably eroding from the conglomerate itself. And in the conglomerate, we see a lot of epithermal clasts coming from well, the interpretation is that these epithermal clasts and the gold has probably eroded from an exposed epithermal system somewhere along the basin margin in the Jurassic. We're talking about as a palaeoplacer deposit forming as the basin developed, and now that's remobilizing into the streams. Just a little bit on the setting of epithermal systems.
Epithermal systems tend to form in volcanic acts. Below those volcanic acts, of course, we have magmatism. When a magma stalls on its ascent, you get porphyry systems form. So you get the volatiles coming off, fluids coming off and forming a porphyry alteration. The porphyries, of course, drive circulating fluids for low and intermediate sulfidation, and the fluids coming off them form high sulfidation systems.
So the point I'm trying to make here is that to get a significant epithermal system, you must have a porphyry at depth. Back to the ZTEM survey. So what we're looking at here is the conductivity of the rocks, and ZTEM is a very good technique for looking for porphyries. It penetrates to great depth, and it picks up the broad zones of sulfide you get with the porphyry alteration. So east of FDN, we have outcropping porphyry mineralization helping us with the intert.
You can see that lights up as a high conductivity area. We believe at depth below FTN, we also have porphyry alteration. In the southern basin, we picked up another anomaly. This is about 5 kilometers long strike and a couple of kilometers wide. And of course, it sits right in the middle of the southern basin.
Our interpretation is this is another porphyry system below the basin, and it's probably the heat engine that drove fluids at our Puma, Barbasco and Pointe A Princesa. So it's another piece of the bigger picture, so to speak, that we have the plumbing that developed.
How deep do these ZTIM surveys reach?
Well, they say 2 kilometers, but after about 1500 meters, it's thus yet less accurate. But this is 1200 meters below surface. So exploration next steps. We're doing some work on the El Puma Pointe Princesa trends. We're permitting Barbasco because that's one of our higher priority targets just because we have all the right ingredients and it looks similar to FTN.
Of course, the southern part of FDN will be drilled from underground, so we'll be planning that soon as well.
Craig Stanley with A Capital. Is there a budget for actually drilling these 100 percent owned exploration properties? And are they would drilling be all helicopter supported?
So if
you could repeat that one.
So do you have a budget and a time? When would you actually start drilling? And is it helicopter supported?
Yes. It's most of the targets are helicopter supported like Barbasco will be completely helicopter supported. We'll even have to put in a little fly camp to support the drillers in the program. Yes, we're told that we should have permitting for Barbasco start of next year. So we'll be putting together a budget to hopefully come sub with that.
So yes, but it's up for discussion right now. Hopefully, next year, we'll be hitting some of these targets. Okay. The exploration package, so to speak, the concessions, see, we're focused on
Sorry, Steve. Could I just ask a question if you go back to that plan that you had before? Where are the concessions that you actually own? Like, do you own concessions around
Gwen, Steve.
Yes. The Barbasco, El Puma and Pointe de Princesa, Keraunos concession here in Perador. Of course, the basin then trends up through the La Zaza concession. So yes, it's all ours. You can see there's a cutout here to the west, which is the refugio.
So a little piece of the basin is contained within that.
I'm sorry, where is that on the map? Can you just show me?
This cutout here to the west.
Okay. And do you have to drop this ground over time? Or how does it work here?
You do have to relinquish. You can see some little slices taken off some of the concessions. So yes, you do have to reduce the area over time. But we've converted obviously, La Zaza concession is now a mining concession, so there's no problem there. And Perador has been actually converted to small scale mining.
So I don't think there's any concerns there about reducing the area of that one at this point. So you can see on this map, we're focused on the central concession area. We've recently joint ventured the northern and southern concession blocks to Newcrest, so they can earn up to 50% on those. We are in a porphyry copper belt. The pink unit on this map is the Zamora batholith, and that is a batholith that underlay our endocytic volcanic arc.
You can see remnants of that arc in green, obviously, the Saguaro Basin and surrounding andesites and some other remnants elsewhere. But most of that volcanic arc has been eroded down to porphyry levels. So we've lost a kilometer or 2 off the top because that's down to porphyry level. The most significant porphyries are the Mirador and Mirador Norte copper gold systems north of us. The Mirador Norte system, we believe, trends onto the Belle De Kimi concessions to the north, which, of course, are now joint ventured to Newcrest.
This porphyry belt is 120 kilometers in length. It extends right up to Penance and San Carlos to the north. There's porphyries as we go south. We have confirmed porphyry mineralization at Las Nubes and Sandia. So yes, just to summarize, FTN is obviously an exceptional epithermal system with some exceptional grades.
The conditions which are formed in are pretty much ideal. And because of that, the Suarez Basin is our highest priority target. We want to find another FDM, and we believe that those conditions that form the FDM should be repeated within our Spires Basin, and we're seeing similar geochemistry and similar indicators within that basin. The challenge, of course, is finding a buried system below cover. We're also in a porphyry copper belt, and so there's opportunities there to find extra copper gold mineralization.
I'll now hand over to Nathan, who's going to talk about responsible mining.
Morning, everyone. Thanks, Steve, for the introduction. It falls to me to change gears a little bit now up until this point we've been focusing on things going on within the project exploration portfolio. What I'd like to walk you through now is what's happening outside the gates and how we are working with local communities and local governments as we take forward the Fruta Norte project. So a couple of quick points before I get into the presentation.
Ron mentioned the role that mining is playing within the Ecuadorian economy. It's important to note that mining is a key part of the economic diversification strategy that the Ecuadorian government has identified. But that being said and has also been mentioned this morning, there is no large scale responsible mining industry in Ecuador right now that is active, it is in operations. And so when we work with local communities and we work with local governments, there's a real lack of understanding of what we're talking about. And so when we start, we often start with maybe
more of
a philosophical slide or discussion than anything else. But as we've seen, there's natural capital in the ground, it's inaccessible to the Ecuadorian people. And there exists an opportunity to convert that into human capital, through training, through employment, dual use infrastructure, of course, financial capital for our investors, for the Ecuadorian government. And if we can do that, while protecting ecosystem services, mining represents an opportunity to create a broad based sustainable platform for economic development for the Ecuadorian people. So a little bit of social context for the Fruta Norte project.
Sumoritanchipa is among the least developed provinces of Ecuador. There's really no large scale industry of any kind in the province. Existing economic activities is focused on different aspects of agriculture. So growing of coffee, plantains, cocoa, there's dairy and some low levels of artisanal mining. This is generally a secondary economic activity for people on their own land.
People often ask given the history we've just seen of Fruta Norte, what was our experience as Lending Gold when we arrived? And we found this very high levels of support for this project. That's confirmed through our day to day interactions and also through formal surveys that we undertake on an annual basis in local communities. So why is that? Well, it's because of what I've just mentioned.
It's an economically undeveloped area. And when the project began, even in those early stages, it had a very significant positive economic impact in Sumorcin Chipe. When Kinross made his decision to pull back from Fruta and Norte, the economic impacts were severe in Sumoroch and Chipe. And so when the project restarted, people were eager for that to happen. They welcomed the restarting of the project because of the economic benefits that it would bring.
But there are very significant expectations. And so that's our challenge. There are expectations around local employment, local procurement, community investment. And because of the lack of understanding of how mining development takes place, those expectations are not necessarily aligned in timing with the development of the Fruta Norte project. So a lot of our efforts over the past years have been focused on addressing those expectations.
Before I get into that, just a couple of quick additional points. There are no communities in the area of direct influence of Route 8 Norte. There are no people in the area of indirect influence. So when we speak about communities, we're talking exclusively about our area of indirect influence. And that's defined as the parish of Los Encuentros and a couple of other small little communities.
But we're talking about approximately 4,000 people in the area of indirect influence. And the town of Los Encuentros, the Paris seat is about 1200 people, it's the nearest community of any significant size to the project and it's about 42 kilometers away on the existing road, 21 kilometers away on the north access road once that is open. So when we talk about mining, we talk about responsible mining. And those are just two words unless there's something that sits behind it. We always start discussing our fundamental principles, working safely, environmental stewardship and respect.
And in terms of our engagement with local communities, it's really that this respect element that I'd like to discuss further with you this morning. Given the history of FDN, people often ask what were our priorities when we arrived. And for us, the number one priority was to build a basis of trust with local communities. No matter how many times we discuss the construction of Fruta Norte, as it is happening, it is still new for a number of people. And unless there's that basis of trust, we won't be able to address the inevitable questions and issues that arise.
So how do you build trust? So for us, it begins with a process of listening. On arrival in 2015 and for 6 months, we went through a structured process of listening to local communities. We heard a huge range of issue, hundreds of issues. What are their expectations?
What are their concerns? What are their dreams for the development of this project near to their communities? And through that, we established a process to address what we heard to be the priorities. This is what we call our roundtable process. I mentioned it began with this listening process in 8 different communities that identified 8 priority issues.
Out of those hundreds of issues that were originally raised, that was boiled down to 8. You can see them here. Community values, there is a concern that the arrival of the large scale mining industry and the inevitable in migration that will take place will cause local communities to lose their values. Environmental responsibility, employability, which I will talk about in a moment, that's surely the top issue that is raised by local communities. We use the existing rural road network quite significantly with our construction activities.
So that's a key issue, how to maintain that. Local procurement, local business opportunities. Agricultural development, which is recognizing the existing economic activity in the area Inter institutional coordination, we recognize we are certainly not the government. There are existing development plans and what we do needs to align with those plans. And finally, tourism, which is an industry that really does not exist in Sumoroch and Chikin currently, but one that local communities would like to see developed.
These roundtables meet every 6 weeks. I was just coming here from the last round, which was the 15th round of roundtables since 2016. In that time, about 2,200 people have participated. It's important to note that these roundtables are not owned or run by Lundin Gold. We participate in them together with, at this point, more than 20 different government institutions from ministries at the national level to local governments to different portfolios and their representatives that seek to engage on specific issues.
We also have a range of local, national and international NGOs that participate on issues that are relevant for them. And of course, local community leaders and local indigenous leaders are involved in the roundtable process. As I mentioned, of those 8 topics, certainly the most important from a community perspective is job creation. And to address that issue pragmatically, we had to address very low levels of education and a high degree of informality in the labor market around us. From our arrival in 2015, we've been very clear that large scale responsible mining is a skilled industry.
And therefore, to enter into our training programs, local community members must be high school graduates. Had we simply stopped there in 2015, we surely would have created a significant problem because there are very few high school graduates in that area. But we had time. At that point, we were still 5 years away from operations. And so we created a program, the first stage of our training for operations, which was high school equivalency.
It was undertaken in collaboration with the Ministry of Education, Ministry of Mining and run through an NGO called Fei Alegria, which is a NGO affiliated with the Catholic Church that focuses on education. At the time of his commencement, it was the only program of its kind in Ecuador, providing high school education to adults. We, in March, attended the graduation ceremony. There are now 230 additional high school graduates in Los Cinqueros. Those high school graduates together with the few that existed prior to the program are all now eligible to enter into the structured training program that Dave mentioned in his presentation.
Again, it's a 4 to 6 month on average about a 5 month program depending upon whether they will be underground operators or plant operators, quite intensive and a quite significant commitment both from the company and from local community members. That's a very significant aspect of our training. We do though have a number of other shorter training activities that are focused more on the construction phase. These tend to be 3 to 6 week intensive programs that take people who have no experience in construction and it doesn't make them skilled workers. They're still unskilled, but it allows them to enter into the project as helpers to electricians, to welders and things along those lines.
We've also looked to license truck operators that are already in the area. So we look at where we are today. These efforts have borne fruit. We have established a local employment strategy through the employment roundtable focused on geography. You can see that geography here 4 concentric rings moving out from the project area.
And these represent our priorities. We always start with ring 1 and then move out regardless of the position we're looking for. And you can see that of the almost 2,700 people currently working at site either directly with us or with our contractors, a very significant portion is local. We have approximately 45% from the province. And again, in the province with almost no economic activity from industry, these impacts are very significant.
Local procurement is likely the 2nd most important issue that's raised to us from by local communities. I don't intend to walk you through every element on this slide. But this again is a strategy that has been developed through the local procurement roundtable and seeks to address the key impediments to local procurement that have been identified. 1 is a lack of skills and a lack of simply technical aptitude within local businesses. So with a local university, we are providing training to local businesses.
They tend to be very small companies and they tend to be completely unaffiliated with larger companies in Ecuador. So we sought to bridge that divide by bringing in a number of larger Ecuadorian companies that can partner and mentor local companies. We seek to ensure they're not fully dependent upon us and to bring broader access to other markets beyond the Fruta Norte project. And then we do seek to address access to finance, which is a key challenge for local businesses. That is one that we have not yet fully been able to address.
It's just a reality of business in Southern Ecuador that these kind of companies do not have good access to finance. This jointly defined strategy with local companies has a number of components. It does formally define what the term local means. When we say we will prioritize local business that has a formal definition for any item that forms part of what we call the reserve list. This is a list of goods and services that communities themselves believe that they can supply to us.
It doesn't mean that they will or they actually can. But if it's on that list, then we go through a formal process as identified in the strategy. Certification is a first step. Local companies must be formally constituted as companies. They must be paying their taxes.
They must abide by all regulations. There are a number of red lines, child labor, for example, we ensure are not part of their supply chain. And you can see in the graphic here that we are having significant impacts. This is our monthly spend into local communities through procurement. You can see on some months, we're essentially at $3,000,000 a month.
This is into a local economy. At the local level, we estimated about $60,000,000 per year. So these impacts are very significant. Briefly, I'd like to take you through a couple of case studies on what this looks like as we work with local communities. The first one is Catering Las Penas.
So it's a group of employees. They worked for Wounding Gold and had a dream to create their own company. There were 30 people in 2015. We assisted them together with the Lundin Foundation to create catering las Penas, which today employs 233 people. The vast majority of these people come from the province and many from the parish itself.
Quirinos Penas has now developed its own local procurement program with the assistance of Lundin Gold and the Lundin Foundation. And again, to put these numbers around that concept, Querigos Penas is now purchasing about $100,000 worth of produce in the parish of Los Encuentros each month. Again, very significant impacts. As we look to the future, our challenge is how do we work with it, catering off Penas to broaden their client base, broaden their supplier base as we transition from construction to operations. Apiosai is a local cooperative of organic coffee, plantain and cocoa growers.
Upon arrival, in 2015, we found APYOSAI to be in a critical state. They were barely solvent. And so we've worked with them and all of the 425 members of the cooperative to improve their productivity and to allow them to access a broader market. We've seen results here in 2017, their sales reached $300,000 which is a very significant increase over 2016 and they were cash flow positive for the first time in years. And so this is a cooperative that now does have access to international markets.
And finally, Ecodac. Ecodac is the largest dairy in Southern Ecuador. Prior to our arrival, they were purchasing in Simorochincipe, but not in Los Encuentros. We worked with them to establish a collection point in Los Encuentros and they went then from 0 to almost 15,000 liters per month of milk collected by local families. Right now, there are 13 farms, 13 families that are part of this program.
And for those families, the economic impact has been very significant. They see an 81% increase in family income from milk production in this timeframe from $2.99 a month in 2015, which is below the individual minimum wage in Ecuador to now $5.42 per month from their milk production. Again, our challenge is how do we ramp this up? Echolac as a dairy is seeking more milk. So how do we work with local producers to allow them to enter into that value chain?
We talk about indigenous peoples around the Fruta Norte project, it's important to first note 3 key points. As I mentioned, there are no people in the area of direct influence. Therefore, there are no indigenous people or indigenous communities in that area. Fruta Norte does not cover any ancestral land. When I say that, I mean 2 things.
1, no ancestral land as recognized by the government of Ecuador and perhaps more importantly, no land claimed unilaterally by the Shuar people who are the local indigenous community. And Frutte Norte does not impact upon any cultural heritage of the Shuar people. All that said, we do recognize the importance of the Shuar culture in Southern Ecuador and we work very closely with them, with the Shuar Federation of Samora Chinchipe. I started with a framework agreement that laid out how we would engage with the Shuar communities and how we would strengthen their culture and their language, which was a key concern that they brought to us with the arrival of Frutane Norte. And so just last Friday, I was in Sumo Archincipe with the head of the Shuar Federation to inaugurate an ethnocultural center.
It's the culmination of 6 years of work starting in the Kinross time that we have continued on as Wu Ming Gold. This is essentially a meeting center, it's a museum, it is close to the city of Samora and is meant to reach local and international tourists who are coming through and even local residents to help them to understand the Shuar culture. Beyond projects such as this one, we also work very closely with the Shuar Federation in our training efforts, our employment efforts to integrate them into all of the other programs that we have with local communities. And finally, as we look to the future, one of our big challenges is going to be moving from construction to operations. And this is often a very sensitive moment for local communities because of the decrease in economic activity, the decrease in employment and procurement that they've seen in the construction phase as we go into operations.
So we are developing our transition plan for 2018 2019. This will be working directly with the Lundin Foundation and leveraging their expertise on these issues. But already we can see the outline of what this program will entail. Given that many of our employees have agricultural activities at home, we're going to be looking to further improve the efficiency and productivity of the local agricultural industry. We want to improve the quality of goods and services so that local businesses can access other markets.
We want to help local people in certifying their existing skills and in obtaining new skills and then helping them to look for employment outside of Frutai North. So with that, I'll conclude. Unless there are any questions, I'll hand it back over to
Ron. Thanks, Nathan. Thanks, guys. And just in closing, I think Ecuador is certainly, I think surpassing what we expected. The lending group realized this was a good jurisdiction to be in.
But now the industry is really truly building a critical mass of number of players in there, number of activity. And as Nathan mentioned, the government recently we've seen a change in government and this government now is stating that mining is a key part of the national policy and a national part of the economic of the economy of the country. It's a great deposit. We will be the 1st large scale underground mine. With the work done over the last 18 months, we now have the funding in place so that Dave and his team continue to keep moving this project forward.
Our project, as Dave has walked through, is on track. We are maintaining our critical path. We're really watching the underground mine development and a lot of the service facilities is moving along in what can be a very difficult environment. We think the I think the aspect to self perform is certainly something that helps us in this construction and in this difficult environment. As Steve has walked through, there's a lot of upside, not only with Fruta del Norte, but in the area in general.
And as always, we are showing the Ecuadorians that mining can be done responsibly and that it will have an overall economic impact on the country in terms of not only just mining, but sustainable development in terms of other industries. We're on track again, can't stress this enough, we're on track for First Gold in Q4 of next year. What's the longer term vision for lending gold? Well, we do see this as our foundational asset. This is not something we're just going to sit back and build this.
We want to become we stress we want to become a 1,000,000 ounce a year producer and we see 2 ways of doing that. As Steve has laid out, we have a long runway in front of us to do this organically. But also we will be looking at accretive M and A transactions opportunities with a focus on staying in North and South America. And with that, I want to again thank everyone that was online and everyone that's here. I think we have a few minutes for questions.
Yes. We actually have a question from the webcast. It's from Jack Garman at Pareto Securities. And he would like to know at what stage in the development timeline will the underground development intersect the vent raise? Is this a critical milestone prior to commercial production?
Dave, do you want to answer that?
So the South Bend raise is on the critical path. So what we have our contractor doing as soon as he gets to the bottom of the declines is he heads straight for that south vent raise. We can ramp up without that South Bend race, but obviously to get to the commercial production in 2020, we will need that air source from the South Bend race. So but we do have the opportunity with the twin declines. One of the reason we went that way is we can get enough air to get ramped up and mine until we get to that South Bend race.
Anything else, Fin? Okay. I think sorry, Steve?
Ron, one more.
Yes.
Newcrest, can you maybe comment a bit about their involvement to date with respect to project advice or lack thereof? I mean, I think they said to me at the site visit that they're fairly hands off so far, but has that ramped up at all in terms of their involvement?
No, it's now they do have formally as of the AGM, the 2 board members now are on the board and Craig Jones is actively involved in our project advisory committee. So that's his role. We have started discussions on potential Chagondes in the organization. Actually, because of their experience, we see some real good opportunities there to have some other people join our team. And we continue to try to move forward to get the exploration joint venture structure and get that going.
But I think it's a good relationship and we're continuing to work together. There are things that we have seen that and we've reached out with regards to issues they may have seen at Gosawong and things like that. And that's they've been very open about that. So I think it's a good working relationship. Thank you.
Anything else? Anything else to be online? Again, thank you very much for taking the time out today. Really