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Kinross has been trying to exit Ecuador and divest the Fruta del Norte deposit after clashing with the local government on the economic terms of the project

Kinross Gold Corp. has agreed to sell its mothballed gold project in Ecuador for $240-million (U.S.) to Fortress Minerals Corp., a company controlled by the Lundin family.

The sale of Fruta del Norte is a relief for the beleaguered Kinross, which was forced to write down the asset after clashing with the Ecuadorean government on its economic terms.

Toronto-based Kinross once saw Fruta del Norte as key to its growth. But after two years of negotiations with the South American government, the gold miner said it was not going to waste any more capital. It recorded a $720-million charge and slashed its reserves by 10 per cent to reflect the loss.

The $240-million in cash and stock from the Lundin family is a fraction of the $1.2-billion Kinross paid for Aurelian Resources, the owner of the gold deposit. But analysts have said any sale was positive for Kinross.

The Globe and Mail first reported the planned sale in September.

For the Lundin family, Fruta del Norte will give it a foothold in the gold industry.

"This acquisition is the first step in the building of our gold company," said Lukas Lundin, who with his brother Ian runs the Lundin Group of Cos., a group of mining and energy companies that includes Fortress.

Ecuador, considered a risky place for foreign investment, had imposed a hefty tax on mining projects. Mr. Lundin will face the same challenges as Kinross, though the mining executive has a history of investing in politically risky areas.

After the deal closes, Fortress will change its name to Lundin Gold Inc. and will become the Lundin family's primary gold vehicle, the company said.

Fortress said it will raise funds through a private placement for the acquisition. Kinross could receive as much as $190-million in cash, depending on the net proceeds from the equity financing.

The deal is expected to close in December and needs the approval of Fortress shareholders as well as Ecuador's attorney-general.

The companies said the Ecuadorean government "has indicated its support for the transaction."