BHP becomes Ecuador-focused SolGold’s largest shareholder

BHP becomes Ecuador-focused SolGold’s largest shareholder

The mining giant said on Monday it had paid 17.1 million pounds ($22 million) to raise its interest in SolGold, a move that makes it the Ecuador-focused company’s top shareholder. Such position was held until today by Australia’s largest gold producer, Newcrest Mining (ASX: NCM).

The deal, which also gives BHP options to purchase another 19.25 million shares by 2024, stipulates that it won’t acquire further shares for two years without SolGold’s consent.

SOLGOLD’S FLAGSHIP PROJECT MAY BECOME ONE OF THE LARGEST COPPER-GOLD PORPHYRY SYSTEMS EVER DISCOVERED.

The rising mine developer has attracted a flurry of interest from big industry actors eager to increase their exposure to copper. The highly conductive metal is in demand for its use in renewable energy and electric vehicles, but big, new deposits are rare.

SolGold’s Cascabel copper-gold project is one of those exceptional finds as it has the potential to become one of the largest copper-gold assets ever discovered with an estimated productive mine-life of 55 years.

Recent recoveries at the project, located in in northern Ecuador, could add $8.7 billion of revenue over the life of Cascabel, the company said in October.

SolGold is also studying 13 other priority targets in the Andean nation, according to a presentation delivered this month.

From Hotspot to Producer

Ecuador, the new darling of copper prospectors, expects to attract $3.7 billion in mining investments over the next two years, up significantly from the $270 million it received in 2018.

The country is moving forward with plans to move from an explorers’ hotspot to mining exporter as its only large-scale copper mine readies to ship its first large cargo this month. The $1.4 billion Mirador open-pit mine, which opened in July, is owned by a joint venture of Tongling Nonferrous Metals Group and China Railway Construction (EcuaCorriente).

Canada’s Lundin Gold (TSX:LUG), which has been developing its Fruta del Norte gold-silver project for almost two years, has produced its first doré and gold concentrate, and is on track to beginning commercial activities in the second quarter of 2020.

Other than Cascabel, another three major copper projects are due to be in production by 2024: Lumina Gold’s (TSX-V:LUM) (OTC:LUMAF) Cangrejos and Codelco-Enami Ecuador’s Llurimagua mine.

Lundin kicks off production at Fruta del Norte mine in Ecuador

Lundin kicks off production at Fruta del Norte mine in Ecuador

The opening ceremony, held on Nov. 14, was attended by Ecuador’s vice president, Otto Sonnenholzner, and energy minister, Carlos Perez, as well as provincial and local authorities and key stakeholders, the company said.

The first doré bar was produced on Nov. 16 from the gravity circuit at the mine, following the reception of the last two permits required to move it into production.

The Vancouver-based miner said production of gold concentrate, as part of the commissioning activities, was well advanced, with the first containers being loaded with marketable concentrate. Commissioning of the carbon in leach circuit, in turn, is ongoing and nearing completion, Lundin noted.

LUNDIN HAS BEEN DEVELOPING THE ASSET FOR ALMOST TWO YEARS, FOLLOWING A 2016 AGREEMENT WITH ECUADOR’S GOVERNMENT

Based on the current projections, the first export of concentrate and doré is projected to happen by mid-December. This means the company is on track to beginning commercial production at Fruta del Norte in the second quarter of 2020.

Lundin, worth almost C$1.7 billion, has been developing the asset for almost two years, following a 2016 agreement with Ecuador’s government. The deal allowed it to move ahead with the project, located in the southeastern Amazon province of Zamora Chinchipe.

The company acquired Fruta del Norte in 2014 for $240 million from fellow Canadian miner Kinross Gold (TSX:K) (NYSE:KGC), which had to halt operations after being unable to reach an agreement with authorities regarding the terms for developing the asset.

The underground gold and silver mine contains six of Lundin’s 29 mining concessions and covers 70,000 hectares of land. Discovered in 2006, Fruta del Norte is expected to produce almost 4.7 million ounces of gold over a 15 year mine life.

“The opening of Fruta del Norte is a turning point for the mining industry in Ecuador,” Keith Barron, who discovered the deposit and is now Aurania Resources’ chairman and chief executive said in a separate statement.

“For the first time in Ecuador’s history, gold mining will be carried out in a responsible, technically safe and sustainable way,” he added.

Courtesy of Lundin Gold.

Ecuador has gained ground as a mining investment destination over the past two years, with top miners entering into joint ventures or investing in juniors to gain exposure to projects in the country.

Anglo American (LON: AAL) also landed in the South American nation through a deal with Canada’s Luminex Resources (TSX-V: LR). The company plans to develop two copper and gold concessions there.

Currently, Ecuador’s emerging mining sector employs 5,000 people, but estimates the figure will rise to about 16,000 next year if the country’s finances don’t take a turn for the worse.

The outlook is dubious, however, as Ecuador dollar sovereign bonds were the worst performing in emerging markets on Monday. The tumble came after Congress rejected a reform bill presented by President Lenin Moreno as part of a $4.2 billion financing agreement with the International Monetary Fund (IMF).

“The inconvenient reality is that if Ecuador loses IMF support, then they lose market access,” Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont Securities, wrote in a note.

Moreno’s measures to comply with the IMF program have been criticized by the wide range of topics included — from student debt to mining policy and central bank autonomy.