Lundin Gold Inc. announced that it has successfully completed the negotiation of the definitive form of the Exploitation Agreement for the Fruta del Norte Project, its gold project in Ecuador. Lundin Gold has been negotiating the terms and conditions of the Exploitation Agreement for the Fruta del Norte Project with the Government of Ecuador over the past six months. The Exploitation Agreement, combined with existing laws and regulations, establishes the fiscal terms and conditions for the development of the Fruta del Norte Project and its completion marks a key milestone in the Project plan.

The definitive form of the Exploitation Agreement has received the approval of the Government of Ecuador. Through its wholly owned subsidiary in Ecuador, Lundin Gold has negotiated the right to develop and produce gold from the Fruta del Norte Project for 25 years, which may be renewed. The Company and the Government of Ecuador have agreed to an advance royalty payment of $65 million, with $25 million being due upon execution of the Exploitation Agreement.

The balance of the payment will be due in two equal disbursements on the first and second anniversaries of the execution of the Exploitation Agreement. Lundin Gold has agreed to pay the Government of Ecuador a royalty equal to 5% of net smelter revenues from production. The advance royalty payment is deductible against future royalties payable.

It will be deductible against the lesser of 50% of the royalties payable in a six-month period or 20% of the total advance royalty payment. According to the Exploitation Agreement, extraordinary revenue tax will be calculated in the event that market prices exceed a stipulated base price for gold and for silver. The Government of Ecuador will tax the difference between net smelter revenue and what revenue would be using the base price at a rate of 70%.

The base price, which will be determined on a monthly basis, will be equal to the trailing 10-year average of the daily price of gold or silver, escalated by the U.S. Consumer Price Index, plus one standard deviation. The Windfall Tax will not apply until the Company has recouped all of the cumulative investment n the development of the Fruta del Norte Project since its inception plus the present value of the actual cumulative investment incurred from signing of the Exploitation Agreement until the start of production. The Exploitation Agreement also provides that the Government of Ecuador's share of cumulative benefits derived from the Fruta del Norte Project will not be less than 50%.

To the extent that the Government of Ecuador's cumulative benefit falls below 50%, the Company will be required to pay an annual sovereign adjustment. Each year, the benefits to the Company will be calculated as the net present value of the actual cumulative free cash flows of the Fruta del Norte Project subsequent to the signing of the Exploitation Agreement, net of the cumulative investment incurred in the development of the Project from its inception until the date of the Agreement. The Government of Ecuador's benefit will be calculated as the present value of cumulative sum of taxes paid including corporate income taxes, royalties, Windfall Tax, labour profit sharing paid to the State, non-recoverable VAT, and any previous sovereign adjustment payments.

The Exploitation Agreement also includes a mechanism for correcting any economic imbalance to these key terms which are the result of changes in taxes, laws and regulations as provided under this Agreement.