After four attempts, Brisbane-based but UK-listed SolGold has finally been able to consolidate control of the huge Cascabel copper-gold prospect in Ecuador.
But in doing so, could this mean control of SolGold and the huge potential mine could finally be grabbed by an Australian major?
The question arises after news on Friday that SolGold had finally got Canada’s Cornerstone Capital Resources – which owns 15% of Cascabel to SolGold’s 85% – to agree to an all-paper takeover offer.
BHP has a 13.6% stake in SolGold and Newcrest has 13.5% – that’s before the all-scrip offer which will dilute those holdings.
But with ownership of the huge project about to be sorted out once and for all, the two Australian companies are poised to grab control if they want – BHP more so than Newcrest, which is still digesting its Pretium Resources takeover in Canada earlier this year at a cost of $2.8 billion.
Pretium and its key asset, the rich Brucejack gold mine, is key to Newcrest maintaining its annual production at or above 2 million ounces at as low a mining cost as possible. Brucejack is a higher-grade gold mine that others Newcrest owns and that makes it a low-cost operation.
BHP has made no secret of its ambitions for more copper – launching a rejected $8 billion or so bid for OZ Minerals in Australia and looking elsewhere – Cascabel would not be a contender until the next decade.
The friendly deal is SolGold’s 5th attempt since 2017 to take over the Ontario-based explorer and consolidate ownership of the highly prospective Cascabel prospect. The offer values Cornerstone at $US108 million (or around $A160 million).
SolGold is buying Cornerstone by offering 15 SolGold shares for every Cornerstone share. SolGold has the option to pay up to 20% (around $A32 million) of the consideration in cash.
Cornerstone’s shares skyrocketed on the news, climbing as much as 35% in Toronto to C$3.69 before easing to end Friday up 23.5%.
SolGold’s shares closed down 1.37% in London on Friday at 17.22p, but were 8% higher in Toronto on the news.
SolGold said the merger will consolidate ownership of the massive project along with a strong portfolio of other projects.
The miner also said it is undertaking a strategic review, which may include evaluating financing alternatives and a spinout of assets other than Cascabel.
“This merger transaction makes sense for both sets of shareholders. The merger allows our shareholders to maintain exposure to the world class Cascabel project and is a step towards maximising value,” Cornerstone CEO Brooke Macdonald said in the statement.
In June, 2021 the various parties ended a standoff over the direction of the project that saw SolGold’s then-CEO leave but an agreement reached to jointly advance the project.
In August of this year, the miner announced a round of management changes, which included newly appointed chief financial officer Ayten Saridas stepping down after only six weeks in the job, after an unsuccessful fund raising.
Alpala, the largest of deposits so far found at Cascabel has measured and indicated resources of 2.7 billion tonnes grading 0.53% copper-equivalent (0.37% copper, 0.25 grams gold per tonne, and 1.08 parts per million silver) for 9.9 million tonnes of contained copper, 21.7 million oz. gold and 92.2 million oz. of silver.
During the first 25 years of mining, Cascabel is expected to have an average annual production of 207,000 tonnes of copper, 438,000 ounces of gold and 1.4 million ounces of silver.
All up annual production is expected to be 132,000 tonnes of copper, 358,000 ounces of gold and 1 million ounces of silver over Cascabel’s 55-year life-of-mine. That’s before any contributions from several other interesting areas around the main deposit.
