The Cascabel project, in Ecuador.
High copper and gold grades of the Alpala deposit are providing dual-listed SolGold with a level of independence in the development of the larger Cascabel project, in Ecuador, CEO Nicholas Mather said on Friday.
Responding to critics saying that Brisbane-based SolGold is too small to fund a project the size of Cascabal, he said in the company’s annual report, that the “extraordinary” high grades in the core of Alpala and the expected high grades in the nearby Blanca gold project would enable a “low capital, quick, highly profitable development”, which would provide “much of the capital required” for the Cascabel development.
“We are working on a conditional total funding package, which involves agreement of the funding parameters with financiers and offtakers now, at prearranged prices related to the net present value (NPV), rather than the share price and conditional only on the delivery of firstly, a feasibility study, secondly, appropriate permits, and thirdly, the necessary fiscal arrangements with the Ecuadorian government. That way the market and the industry will be able to see that the project is substantially derisked from an early stage,” Mather said.
SolGold is looking at starting in very high grades and gradually ramping up into a 40-million-tonne-a-year block cave at the high grade core grades of 1.5% copper equivalent.
The February 2018 mineral resource estimate for the Alpala deposit comprised 430-million tonnes at 0.8% copper equivalent in the indicated category and 650-million tonnes at 0.6% copper equivalent in the inferred category.
However, the size of the deposit continued to expand with the completion of “nearly every drill hole”. Recent drilling confirmed the core of the deposit to have uninterrupted true dimension of up to 750 m vertically, 700 m long and 300 m wide, at a cutoff grade of 1.5% copper equivalent.
SolGold has a target of 10-million tonnes of copper and 25-million ounces of gold in the next mineral resource estimate, scheduled for December this year. This could deliver an NPV of more than $4-billion and an internal rate of return of more than 25% for a 40-million-tonne-a-year block cave mine.
SolGold will follow up the second mineral resource update with a maiden preliminary economic assessment in January, followed by detailed feasibility studies in the resource evaluation, mine planning, process design and plant design, capital and operating cost estimates, environmental and community engagement in 2019.
“We expected to spend 2020 on permitting, final feasibility, financing and fiscal negotiations with a plan to get to a development decision by calendar-end 2020,” Mather stated.
Commenting on BHP Billiton’s $35-million acquisition of a 6.1% stake in SolGold, he said the junior was “obviously happy” to have its project, the copper market and management team endorsed by the global miner. “I’m assuming that is just for starters,” the junior firm’s CEO said.
Since BHP’s investment in SolGold, the junior’s share price has advanced about 80% on both the London and Toronto exchanges.
Australian gold miner Newcrest is the top shareholder in SolGold with a 14.54% stake.