SolGold, listed on both the London and Toronto Stock Exchanges as SOLG, announced on Monday that it has secured a substantial $750 million funding deal. This investment comes from Canadian giants Franco-Nevada and Osisko Gold Royalties, aimed at advancing the Cascabel copper-gold project in Ecuador.
This funding arrangement, structured as a gold stream, will be disbursed in two phases. The initial $100 million will enable SolGold to complete essential feasibility studies and obtain the necessary permits to greenlight the project. Following these preliminary steps, the additional $650 million will be directed towards the actual construction of the mine, located in the northern province of Imbabura, Ecuador.
The two investing firms, Franco-Nevada and Osisko Gold Royalties, will contribute 70% and 30% of the funds, respectively. In return, they will receive a share of the gold produced from the mine. Initially, they are entitled to 20% of the gold until SolGold extracts the first 750,000 ounces. Post this milestone, their share will reduce to 12% for the remaining operational period of the mine.
Paul Brink, President and CEO of Franco-Nevada, expressed enthusiasm about deepening their partnership with SolGold. He highlighted that Cascabel is among the top copper-gold development projects globally and is poised to substantially augment their growth pipeline with significant gold equivalent ounces (GEOs).
Jason Attew, President and CEO of Osisko, also welcomed the new stream investment, noting it as a strategic enhancement to their growth profile, secured at an attractive return rate. This deal complements their existing royalty stakes in Cascabel, solidifying their investment portfolio.
This financial endorsement comes as part of SolGold’s broader strategy to invest a whopping $3.2 billion into the Cascabel project, marking it as the largest mining investment in Ecuador’s history. This plan follows a $10 million loan secured by the company in May and a pivotal contract signed with the Ecuadorian government in June to develop Cascabel.
Projected to operate for 28 years, the Cascabel project is expected to attract over $4.2 billion in investments, as per the Ecuadorian Energy Ministry. This venture is set to bolster Ecuador’s position in the global mining sector significantly. SolGold initiated exploration activities at Cascabel in 2012, leading to the notable discovery at Alpala by early 2014 and later identifying the Tandayama-AmerÃca deposit. A recent pre-feasibility study released in February highlighted a reduction in upfront costs for initial development, setting pre-production capital at $1.55 billion, a considerable decrease from the previous $2.75 billion estimate.
The sheer scale of the resource at Cascabel positions it as a potential multi-generational asset, ranking among the top 20 largest copper-gold mines in South America. Despite past skepticism regarding SolGold’s management capabilities, this funding deal reflects a robust vote of confidence in their operational potential.
The news of this financial backing significantly impacted SolGold’s market performance. Following the announcement, shares surged by over 23% in Toronto, with a substantial increase in London as well, reflecting a positive market response to this strategic development. Major mining entities like BHP, Newmont through the acquisition of Newcrest, and China’s Jiangxi Copper have also invested in SolGold, further endorsing its potential within the industry.
