Canadian Mining Journal


GOLD: BHP increases stake in SolGold

ECUADOR – BHP Billiton is spending US$22 million to boost its stake in Australian junior SolGold to 14.7% from 11.1%, making it one of the two largest shareholders in the Ecuador-focused company. Newcrest Mining owns about 14.8%.

BHP is acquiring 77 million shares at 22.15 pence per share, a 13% premium to SolGold’s closing share price on Nov. 22.

Under the deal, BHP agreed not to acquire more shares in the company over the next two years without SolGold’s consent. But the investment does give it options for 19.25 million shares at a price of 37 pence through Nov. 25, 2024.

The transaction underscores the attractiveness of copper assets, as existing copper mines age and the appetite for the metal grows with rising demand for renewable energy and the electrification of the transportation sector.

SolGold’s Alpala deposit in northern Ecuador contains 8.4 million tonnes of copper and 19.4 million oz. gold in the indicated category (2.1 billion tonnes grading 0.41% copper and 0.29 g/t gold) and another 2.5 million tonnes of copper and 3.8 million oz. gold in the inferred category (900 million tonnes grading 0.27% copper and 0.13 g/t gold).

The company has completed more than 228,000 metres of drilling on the project and expects to complete a prefeasibility study in the first quarter of 2020.

A preliminary economic assessment in May 2019 outlined pre-production capex of between US$2.4 billion and US$2.8 billion, and total capex including life of mine sustaining capex of US$10.1 billion to US$10.5 billion, depending on the production rate scenario.

The study envisioned a 50 million t/y operation producing 456 million lb. copper and 438,000 oz. gold a year over 25 years.

The study stated the preferred mining method would involve underground bulk mining using block cave methods applied over several caves designed on two vertically extensive lifts.

According to SolGold, Alpala has produced some of the best drill hole intercepts in porphyry copper-gold exploration history, including one intersection of more than 1,000 metres grading 0.74% copper and 0.54 g/t gram gold.

The deposit is the main target on SolGold’s Cascabel concession, on the northern section of the Andean Copper Belt.

Matthew O’Keefe of Cantor Fitzgerald says the investment puts BHP “on par with SolGold’s other major shareholder, Newcrest Mining, “supporting competitive tension.”

He also points to SolGold’s enormous land position in the country.

“With a first mover advantage in Ecuador, SolGold has amassed 3,200 sq. km of concessions and is well positioned for additional large scale discoveries,” he writes in a research note.

“SolGold has significantly greater leverage to copper than gold and with copper at multi-year lows we see this as a good time to buy SolGold, particularly for the investment horizons over the medium term,” he adds. “As copper prices improve and as the project advances through permitting and feasibility, we expect the stock to move up towards our target price.”

The analyst has a one-year target price on the stock of A$1.00 or 60 pence per share.

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