SolGold scores $150m in funding from Franco Nevada

The Cascabel copper-gold project, 180 km north of the capital Quito, may become one of the largest copper-gold porphyry systems ever discovered. (Image: Alpala camp. Screenshot from SolGold corporate video 2017)

Ecuador-focused miner SolGold (LON, TSX:SOLG) has secured up to $150 million from streaming company Franco Nevada (TSX, NYSE: FNV), which it will use to develop its Alpala copper-gold project.

The company said the net smelter return (NSR) agreement includes an initial $100 million. Franco-Nevada, which provides natural resource companies with upfront cash in exchange for future production, will receive a perpetual 1% NSR.

Financing package consists of a $100m net smelter return (NSR) deal, with an option to increase the investment to $150m 

The total amount could increase by $50 million, at SolGold’s discretion. The move would also increase the NSR for Franco Nevada to 1.5%.

The company said it would spend the coming months developing a feasibility study for Alpala, the largest deposit found at its Cascabel copper-gold asset, located 180 km north of Ecuador’s capital, Quito.

SolGold, which says its Ecuador project is one of the largest copper-gold porphyry systems ever discovered, expects to start production in 2025.

Attracting top miners

Over the past two years, Ecuador has attracted a flurry of interest from big miners looking to increase their exposure to copper. The highly conductive metal is in demand for use in renewable energy and electric vehicles, but big, new deposits are rare.

Diversified majors particularly favour large-scale, long-life projects, such as the one SolGold promises. BHP upped its stake in the company last year to 15.31% from 14.7%, becoming the miner’s top shareholder.

BHP and Australia’s largest gold producer, Newcrest, are SolGold’s top shareholders

Australia’s largest gold producer, Newcrest Mining (ASX: NCM), is the second biggest investor in SolGold, with a 15.23% interest.

Ecuador aims to move from an explorer hotspot to a mining exporter. Its oil-led economy has been hit hard over the past few months.

The nation is currently reeling from both the spread of covid-19 and the collapse of global oil prices.

Prior to recent developments, the South American country expected to attract $3.7 billion in mining investments between 2019 and 2020, up significantly from the $270 million it received in 2018.

SolGold’s stock surged by over 8.5% on Monday morning following news of the funding. The gold and copper producer’s market capitalization is $661 million.