BHP buys SolGold stake for US$35M

BHP Billiton (NYSE: BHP; LON: BLT) is acquiring a 6.1% stake in SolGold (TSX: SOLG; LON: SOLG), which is developing its Cascabel porphyry copper-gold project in Ecuador.

BHP is buying the stake for US$35 million from Guyana Goldfields (TSX: GUY) for 26.59 pence per share — a 20% premium to its 20-day, volume-weighted average price of 22.16 pence per share on the London Stock Exchange.

BHP CEO Andrew Mackenzie, said the investment not only gives it exposure to a high-quality copper exploration project, but that Cascabel is also in a “highly prospective location” for the company.

“Consistent with our positive long-term outlook, copper is a key exploration focus for BHP, as we seek to replenish our resource base and grow this important business,” Mackenzie said in a press release on Sept. 5.

The Alpala deposit is the main target in the Cascabel concession, located on the northern section of the Andean Copper Belt.

The project area hosts Eocene-aged mineralization — much like numerous tier-one deposits along the Andean Copper Belt in Chile and Peru.

The project’s base of operations is located at Rocafuerte in northern Ecuador, about a three-hour drive north of Quito, and is close to water, power supply and ports on the Pacific.

Alpala has produced some of the greatest drill-hole intercepts in porphyry copper-gold exploration history, the company says, with hole 12 (CSD-16-12) returning 1,560 metres grading 0.59% copper and 0.54 gram gold per tonne, including 1,044 metres grading 0.74% copper and 0.54 gram gold.

Workers in the core shack at SolGold’s Cascabel gold property in Ecuador. Credit: SolGold.

SolGold has completed 123,500 metres of diamond drilling on the project so far and produces 10,000 metres of core each month. Twelve rigs are operating at Cascabel: 10 on the Alpala cluster, and two on a prospect called “Aguinaga.”

The program is designed to extend and upgrade the Alpala resource.

A maiden resource for Alpala published in January 2018 estimated 430 million indicated tonnes grading 0.52% copper and 0.43 gram gold per tonne (at a 0.3% copper-equivalent cut off) plus 650 million inferred tonnes at 0.45% copper and 0.30 gram gold.

Those numbers add up to 2.3 million tonnes of contained copper and 6 million oz. gold in the indicated category and 2.9 million tonnes copper and 6.3 million oz. gold in the inferred category.

Since the mineral estimate earlier this year, the company has drilled over 100,000 additional metres at Alpala.

In August, the company provided an exploration update on Cascabel.

Hole 41 was the highlight. It cut 582 metres grading 0.64% copper and 0.85 gram gold, including 340 metres of 0.78% copper and 1.21 grams gold.

In addition to testing Alpala, there are several targets the company is testing or plans to test in the future, including the Aguinaga and Trivinio prospects.

Guyana Goldfields will get US$35 million for its 6.1% stake in SolGold. It notes that its early purchase price for 103.1 million SolGold shares cost it US$10 million — yielding a healthy return on its investment.

Guyana Goldfields, which operates the Aurora gold mine in Guyana, said it doesn’t expect to pay any capital gains on the share sale due to accumulated tax pools it has available. It plans to use the proceeds from the sale to lower debt and for general corporate purposes.