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Lukas Lundin: ‘I hope I am buying at the bottom of the cycle.’

Matthew Sherwood for the Globe and Mail/Matthew Sherwood

Lukas Lundin has no tricks for how to play the market, but somehow he has timed his deals impeccably.

The mining tycoon managed to sell a big gold mine for billions at the top of cycle. Then after bullion slumped 30 per cent he bought another gold project for a fraction of the original cost.

"It was some luck and some skill," the executive said in an interview at this week's Prospectors & Developers Association of Canada conference.

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Mr. Lundin said he learned his deal-making skills from his father, Adolf Lundin, who founded the $11.8-billion Vancouver- based Lundin Group, a conglomerate of mining and energy companies.

"He had a big appetite for risk," said Mr. Lundin. One of the family's 11 companies is called NGEx Resources Inc. It stands for "No Guts, No Glory Exploration," a play on patriarch Lundin's "no guts, no glory" motto.

"He was a big speculator, took big risks, sometimes maybe not calculated. Hopefully I take more risks that are calculated," said Mr. Lundin.

Calculated or not, Mr. Lundin is an enviable position. He did not buy during the frenetic commodity boom and is now gobbling up mines and projects at seemingly bargain prices.

Over the past two years, Mr. Lundin bought Freeport McMoRan Inc.'s Candelaria copper mine in Chile for $1.8-billion (U.S.), Rio Tinto's Eagle nickel and copper mine in Michigan for $325-million and Kinross Gold Corp.'s Fruta Del Norte gold project in Ecuador for $240-million.

"I hope I am buying at the bottom of the cycle. If I'm not, I'm in trouble," Mr. Lundin said.

The nickel and copper acquisitions will boost production at one of his base-metal companies. The Ecuadorean project will be the cornerstone asset for a new gold company under the Lundin name.

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The downturn in commodity prices has forced companies to put their mines up for sale in order to raise cash. Today, the market is awash with mines on the auction block, including some of Anglo American PLC's Chilean mines. Mr. Lundin said his plate is full digesting the three acquisitions and he does not plan to buy anything else this year. When asked about all the cheap assets on the market, Mr. Lundin said just because they are for sale doesn't mean they are any good.

"All the assets we bought were assets people didn't want to sell but had to sell. It was quite unique. That happens about once every 10 years," said Mr. Lundin.

"Freeport had to sell because it took on this debt buying oil and gas. Rio didn't really want to sell Eagle mine, but the board decided it was too small of an asset. Kinross didn't really want to sell Fruta Del Norte, but decided to refocus," he said.

At the PDAC conference, Ecuador sought to reassure crowds that it was open for mining business. The Ecuadorean government recently made it easier to invest in the country after lifting conditions that made it untenable for Kinross to develop its Fruta Del Norte project.

Before buying it, Mr. Lundin said he went to Ecuador to make sure the government would be supportive. "There are not many barriers left. They really want to see this happen."

Mr. Lundin's biggest deal was selling his gold company, Red Back Mining, to Kinross for $7.1-billion in 2010. One year later, bullion started to plummet and decimated much of the gold industry. Red Back's flagship mine – Tasiast in Mauritania – suffered multiple writedowns and cost former Kinross CEO Tye Burt his job.

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Nevertheless, Mr. Lundin said he loved Red Back and that it was a good deal for everybody. He said Kinross had a hard time executing Tasiast mine and then had to deal with the fallout from the weaker gold prices.

Mr. Lundin, who brokered the deal with Mr. Burt on a ski trip in British Columbia, said Mr. Burt is still friends with him.

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