SolGold (SOLG), koper en goud in Ecuador
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SolGold’s Alpala: getting bigger, with higher grade
Another year, another doubling of resources: since launching a drill campaign on the Cascabel project in northern Ecuador in 2013, SolGold (TSX: SOLG; LON: SOLG) has steadily converted hints of copper-gold mineralization at surface into 2.1 billion indicated tonnes grading 0.41% copper and 0.29 gram gold per tonne, or 0.60% copper equivalent (at a 0.2% copper-equivalent cut-off), plus 900 million inferred tonnes grading 0.27% copper and 0.13 gram gold, or 0.35% copper equivalent, at the same cut-off.
In other words, the explorer has outlined an eye-popping resource of 10.9 million tonnes copper and 23.2 million oz. gold, and nearly half of that is in the relatively high-grade core (over 0.9% copper equivalent) of the flagship Alpala deposit.
These latest numbers were released in January and are based on 133,600 metres of drilling.
The feverish drilling pace continues. The company has 10 rigs operating on-site, nine focused on expanding Alpala, and one engaged in geotechnical drilling for decline development. Two more portable rigs are scheduled to join the Cascabel fleet imminently to expedite geotechnical and hydrogeological testing and ongoing monitoring programs.
Adding to the excitement are new higher-grade intercepts outside the resource envelope that could enhance the current high-grade core of 400 million indicated tonnes grading 0.90% copper and 0.93 gram gold per tonne (1.49% copper equivalent) at a 0.9% copper-equivalent cut-off grade. At Alpala Northwest, for instance, recent drilling returned 318 metres grading 0.67% copper equivalent in hole 86, including 100 metres grading 1.34% copper equivalent.
“There’s an emerging north–south trend in the orebody,” says SolGold’s country manager Jason Ward in an interview. “It opens up huge upside potential and is open to the north, so we are following that.”
According to SolGold, Alpala has produced some of the best drill-hole intercepts in porphyry copper-gold exploration history, including one intersection of more than 1,000 metres grading 0.74% copper and 0.54 gram gold per tonne. Drilling to date exceeds 190,000 metres.
In recognition of his role spearheading this emerging exploration success story, The Northern Miner named SolGold president and CEO Nicholas Mather — a geologist with years of experience in large exploration projects — Mining Person of the Year for 2018.
SolGold is awaiting a preliminary economic assessment (PEA) for Alpala that will better define the terms of development and mining. The PEA will be followed by a pre-feasibility study, with a bankable feasibility study expected by the end of 2020 — in time for construction to begin in 2021.
“The real driver [for share price appreciation] will be ongoing resource growth and regional exploration that confirms Cascabel as a multi-decade mining camp that could form the backbone for a new diversified South American miner,” said Cormark analyst Tyron Breytenbach in a November 2018 research report.
Meanwhile, ownership structures are in flux. Australia’s largest gold producer, Newcrest Mining (ASX: NCM; US-OTC: NCMGY), increased its stake in SolGold to 15.3% from 13.8% late last year, while BHP Group (NYSE: BBL; LON: BHP) bought a 6.1% stake in the explorer in September 2018 and boosted it to 11.2% a month later. Craig Jones, general manager of the Wafi-Golpu copper-gold porphyry project in Papua New Guinea, represents Newcrest on SolGold’s board of directors, while BHP has the right — as yet unexercised — to appoint its own director.
With ambitions to control 100% of the project, SolGold is revising a hostile bid for Cornerstone Capital Resources (TSXV: CGP; US-OTC: CTNXF), 15% owner of Cascabel, after Cornerstone rejected an earlier bid that would have given its investors 0.55 of a SolGold share for each share held for a 20% premium.
“Cornerstone is going to face some serious obstacles and risks when it comes to contributing [to financing the project] after feasibility,” Ward argues. “The takeover enables Cornerstone shareholders to share in the upside of SolGold’s 100% owned projects, which have the potential to yield more discoveries.”
Ecuador covers the least explored section of the Andean copper belt that stretches from Chile to Panama, and hosts some of the world’s biggest copper-porphyry deposits, including Escondida in Chile, and Cobre Panama in Panama.
With a $15-million annual regional exploration budget that Ward says will double once drilling begins, SolGold has identified 11 top copper-gold porphyry targets on 3,200 sq. km of concessions along the Ecuadorian share of the belt.
A team of 42 Ecuadorian geologists uses Alpala’s geological setting as a blueprint for regional targeting, mapping similar alteration and structure within SolGold’s 72 concessions, and applying trace element geochemistry to narrow the target areas and estimate the depth of any underlying porphyries.
“There will soon be increased news flow about what we have discovered through our mapping and sampling programs,” Ward says. “But we’re not drilling at the moment, because we are awaiting permits.”
In 2017, the Ecuadorian government said it intended to attract $4 billion in mining investments by 2021, and wants mining to significantly contribute to the country’s gross domestic product.
But there has been backlash against mineral exploration in the country. Last year, Ecuadorian courts ruled that the government had awarded mining concessions in the country without proper consultation with local communities.
And in April, Ecuador’s comptroller identified “irregularities” that may threaten plans by Chilean state-owned Codelco and Ecuador’s equivalent, Enami, to develop the 982-million-tonne Llurimagua copper project, 60 km south of Cascabel.
Political risk continues to be an obstacle to investment. Ecuador ranks at No. 114 out of 180 countries in Transparency International’s 2018 Corruption Perceptions Index, and No. 123 out of 190 countries in the World Bank’s Doing Business Index for 2019, similar to last year’s scores.
Undeterred, Lundin Gold (TSX: LUG) is pushing ahead with its Fruta del Norte underground gold mine in southeastern Ecuador, and expects to produce by year-end. Lundin recently drew down US$159 million for development and construction activities from a US$350-million secured debt facility arranged last year with a syndicate of lenders.
In other positive news for miners in the country, BHP has signed a letter of intent for a joint-venture agreement with Luminex Resources (TSXV: LR; US-OTC: LUMIF) on the junior’s Tarqui copper project in Ecuador.
Ward says that SolGold has a number of options to finance development at Alpala, because “there are more funds in the world than Tier 1 copper projects.”
Cormark’s Breytenbach says Newcrest or BHP are the best candidates to develop a mine at Alpala, starting with the high-grade mineralization. Newcrest already uses block caving — the mining method SolGold has proposed for Alpala — at its Cadia Valley gold mine in Australia, and plans to use the same method at Wafi-Golpu in Papua New Guinea.
“[We] assume mining of the high-grade core at the front of the mine plan,” Breytenbach said. “This is the key component of the project, as its cash flow more than supports the large upfront capital, and it effectively makes the broader (lower-grade) resource economic. The high-grade core alone ranks well against other block-cave projects globally.”
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