BHP has made another attempt to put its foot on one of the most prospective underground copper/gold deposits in the world.
It will be the second time in just over two years that BHP has tried to grab an interest in the project in South America.
The mining giant yesterday revealed a $US35.6 million deal that will see it acquire a 6.1% stake in a copper-gold project in Ecuador.
In an announcement to the ASX BHP said it had entered into an agreement with Guyana Goldfields to buy that company’s 6.1% interest in the Brisbane-based but Canadian and UK listed company SolGold.
SoldGold (formerly Solomon Gold) owns an 85% stake in the emerging Cascabel copper-gold project in Ecuador which has an estimated half a billion tonnes of copper-gold, with more reserves expected to be firmed up by a drilling campaign that has been underway now for months.
In announcing its grab BHP CEO Andrew Mackenzie, said in a statement the investment in SolGold would give BHP exposure to a high-quality copper exploration project in Ecuador, which is a highly prospective location for BHP.
“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.”
Under the terms of the agreement with Guyana, BHP will acquire 103.1 million shares in SolGold. SolGold is listed on the London Stock Exchange (LSE) and the Toronto Stock Exchange.
The purchase price payable by BHP is 26.592 pence a SolGold share, representing a 20% premium to the 20 day volume-weighted average LSE price of 22.16 pence a share as determined on 4 September 2018.
The BHP price values SolGold at around $750 million, against $625 million on Monday night’s close in London before BHP’s announcement to the ASX yesterday.
Just on two years ago SolGold revealed that it received an investment proposal from BHP including an offer to acquire 10%of SolGold for $US30 million and an offer to spend a further $US275 million to buy up to 70% of the Cascabel prospect in northern Ecuador.
SolGold said the offer was less attractive and had more conditions attached than a rival offer from Newcrest Mining and Maxit, a financial investor. SolGold went with Newcrest.
Earlier this year SolGold said “A maiden Mineral Resource Estimate (MRE) for the Alpala deposit, estimated from the initial 53,616m of drilling and released in December 2017, comprised: 430 Mt @ 0.8% CuEq (at 0.3% CuEq cut off) in the Indicated category, and 650 Mt @ 0.6% CuEq (at 0.3% CuEq cut off) in the Inferred category; contained metal content of 2.3 Mt Cu in the Indicated category and 2.9 Mt Cu in the Inferred category (both at 0.3% CuEq cut off); and contained metal content of 6.0Moz Au in the Indicated category, and 6.3Moz Au in the Inferred category (both at 0.3% CuEq cut off).
“A further 83km (83,000m) of drilling has been completed (of which assays are outstanding for approximately 7,800m) since calculation of the maiden MRE, and significant resource growth is expected in a revised MRE. The Company believes that assay results from infill and extension drilling at Alpala Central substantiate the existence of a larger and more robust high-grade core than estimated in the December 2017 MRE.
“Recent drilling shows that early stage diorite and quartz diorite intrusions, relatively richer in copper and gold, are far more continuous than previously modeled.
“Current 3D geological and grade models on site confirm the core of the deposit to have uninterrupted true dimensions of up to 750m vertically, 700m long, and 300m wide, at a cut-off grade of 1.5% CuEq. The actual grade of the gold-rich internal core (to the larger deposit) is expected to be significantly higher grade than the cut-off grade.
“An updated Mineral Resource Estimate is expected to provide a significantly greater resource base for the project upon completion of approximately 17,000m of planned drilling.
“SolGold is encouraged by mineralisation, high grade being encountered in drilling across the western lobe of Alpala, lying in an elevated position, adjacent to the high-grade core, whilst extension drilling along the northwest and east margins of the Alpala deposit continue to add growth to the overall extent of mineralisation.”
Newcrest’s June quarter exploration report did not mention the SolGold project.
BHP shares fell 2.6% yesterday to end at $32.20.
