SolGold secures US$750 million to advance the Cascabel Copper-Gold Project, located in Ecuador

SolGold Plc has secured a US$750 million (m) investment to advance the ?Cascabel Copper-Gold Project, located in Ecuador. The funding is part of a syndicated gold stream with Franco-Nevada (70%) and Osisko (30%).

Cascabel has a post-tax net present value (NPV8) of US$3.2 billion (bn) and an after-tax IRR of 24% based on a copper price of US$3.85/lb and a gold price of US$1,750/oz. The current copper price is around US$4.5/lbs and the gold price is US$2,405/oz, so the NPV and IRR look conservative.

SolGold will receive an initial deposit of US$100 m that will be paid in three tranches. One-third, ?expected to be received later today, is allocated towards de-risking, permitting, completion of the development funding package as well as completion of the feasibility study. This initial funding should take the project through to the final investment decision.

Once the Project is shovel-ready, the company will receive a construction deposit of US$650 m, to contribute towards funding the construction of the mine.

SolGold will also receive ongoing payments equivalent to 20% of the spot gold price at the time. The stream providers will receive in return 20% of the recovered gold in concentrate from Cascabel until 750,000 ounces of gold have been provided, after which the stream will reduce to 12% for the life of the mine.

This is a clever agreement for SolGold. Cascabel is dominantly a copper deposit with over 12.2 million tonnes of contained copper, which is worth around US$120 billion at today's copper price, but the project also contains around 30.5 million ounces (Moz) of gold, worth US$73.4 billion and 102 Moz of silver worth US$30.7 billion.

This gold stream allows SolGold to advance the Tier 1 Cascabel Project towards production in a non-dilutive way while also allowing it to receive the bulk of the revenue from all its products. The total capex for Cascabel is estimated to be US$1.55 billion and this could be funded from international development banks and off-take agreements with smelting companies.

SolGold is now planning to initiate the next phase of Project advancement immediately, focusing on geotechnical drilling of the tailings storage facility, additional metallurgical testing, reserves definition at the Tandayama-Ameríca deposit, hydroelectric power opportunities, plant location, and mine site design and layout, as well as securing necessary land access rights for infrastructure and commencing work on the FS.

Lots of work to do but the company looks in great shape to do it.

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