Solaris lands $200M from Royal Gold

Canadian mining developer Solaris Resources (TSX: SLS; NYSE: SLSR) has secured a $200-million financing deal from streaming and royalty company Royal Gold (Nasdaq: RGLD) to advance its Warintza copper-gold project in Ecuador.

The agreement includes a gold stream and a net smelter return (NSR) royalty. It will be structured in three instalments: $100 million upon closing, $50 million after achieving key milestones such as a pre-feasibility study and environmental approval, and a final $50 million one year later.

“This transaction is a clear endorsement of the potential scale, geological qualities and the near-surface nature, economics and stage of development of Warintza,” Solaris president and CEO Matthew Rowlinson said in the statement. He called the project one of the few near-term, globally significant copper opportunities not held by a major producer.

BMO Capital Markets analysts Matthew Murphy and Rene Cartier, in separate notes on Wednesday, said they saw the stream and royalty as “a decent deal” for Royal Gold. It helps fund Warintza to a final investment decision by late next year. “We estimate an about 7% internal rate of return at BMO gold prices and about 10% at spot,” Murphy said in a Wednesday note. “We add the stream to our RGLD model, which increases our target price by $1 (C$72¢) to $197.”

Under the deal, Royal Gold is to receive 20 oz. of gold for every million lb. of copper produced from a defined area of interest. Solaris is to receive 20% of the spot gold price for the first 90,000 oz. delivered, rising to 60% thereafter. The NSR royalty begins at 0.3% and increases annually by 0.0375% to a maximum of 0.6%, unless gold deliveries begin or eight years pass.

BMO’s Cartier sees the financing as allowing Solaris to repay its debt while continuing to de-risk the project ahead of the final investment decision. “Albeit an updated resource and economic studies still to come, based on our conceptual estimates, we see the stream as comprising a relatively modest amount of the gold, and the announcement as net-asset value accretive,” Cartier said in a note.

Eliminates debt

Solaris said the funding will eliminate its debt to Orion Mine Finance while preserving capital for development through to a final investment decision.

The Vancouver-based firm plans to release a pre-feasibility study and updated mineral resource estimate for Warintza in this year’s third quarter. A bankable feasibility study will follow, with environmental approvals targeted by mid-2025 and exploitation permits by mid-2026.

Solaris last year re-domiciled to Switzerland from Canada after the company accused Ottawa of scuttling a C$130-million investment deal from China over national security concerns even though its main project is in South America. 

The incident marked the dilemma Western countries and developers face: they need Chinese capital when stock market investing in juniors is sluggish, while governments want to wean off dependence on China’s control of critical minerals. 

Solaris is still listed on the TSX where its shares gained 4.2% on Wednesday morning to C$5.65 apiece, valuing the company at C$917 million.