SolGold seeks US$20M to prevent takeover attempts

Ecuador-focused miner SolGold (TSX: SOLG; LSE: SOLG) is bolstering its defences against a takeover by fundraising to raise a minimum of £16 million (US$20 million) as top miners try to take advantage of the global economic downturn caused by the coronavirus pandemic.

The move follows a royalty financing agreement with streaming company Franco Nevada (TSX: FNV; NYSE: FNV), inked in May. The deal guaranteed SolGold US$100 million and gives it an option to upscale to $150 million.

That is how much the miner needs for a preliminary feasibility study for its Alpala copper-gold project, part of the Cascabel asset, located 180 km north of the capital Quito.

The company, a prime takeover target due to the potential of its undeveloped project in the South American country, said it expects to deliver the report in fall 2020.

SolGold will also use the funds to produce a definitive feasibility study on the asset, to be released in the second quarter of 2021.

SolGold’s Cascabel copper-gold project in northern Ecuador. Credit: SolGold.

The Australian miner has been in talks with multiple investors since March, hoping to secure US$2.85 billion to develop Alpala. According to the latest resource update, the asset contains 2.66 billion tonnes of copper at 0.53% copper-equivalent in the measured and indicated categories, and 544 million tonnes at 0.31% copper-equivalent in the inferred category

Despite small setbacks due to disruptions related to the coronavirus pandemic, SolGold aims to begin production in 2025.

Chief executive Nick Mather has repeatedly said his team is building a company “as important to the development of Ecuador as BHP was to Australia.”

“The proposed $20 million capital raising will see, with completion of the FNV royalty, SolGold fully funded through its PFS and to the delivery of a definitive feasibility study and all related permits,” Mather said.

“This funding will also cover the costs of SolGold’s important regional exploration programmes and the ancillary costs of generating the US$2.7 billion capital development funding package for the Alpala project,” he added.

Over the past two years, Ecuador has attracted a flurry of interest from big miners looking to increase their exposure to copper. The highly conductive metal is used in renewable energy and electric vehicles, but big, new deposits are rare.

Workers at SolGold’s Cascabel copper-gold property in Ecuador. Credit: SolGold.

Copper entered a bull market on June 4, boosted by strong demand from post-lockdown China and hedge funds closing bearish bets.

It was trading just over 20% from its March low of US$4,371 per tonne on Thursday afternoon, at US$5,530 per tonne.

Diversified majors favour large-scale, long-life projects, such as the one SolGold promises. BHP (NYSE: BHP; LSE: BHP) upped its stake in the company last year to 15.31% from 14.7%, becoming the miner’s top shareholder.

Australia’s largest gold producer, Newcrest Mining (ASX: NCM), is the second-biggest investor in SolGold, with a 15.23% interest.

Ecuador aims to move from an explorer hotspot to a mining exporter. Its oil-led economy has been hit hard over the past few months.

The nation is currently reeling from both the spread of COVID-19 and the collapse of global oil prices.

Prior to recent developments, the South American country expected to attract US$3.7 billion in mining investments between 2019 and 2020, up significantly from the US$270 million it received in 2018.

— This article first appeared in our sister publication, MINING.com.