SolGold gets $100m injection from Franco-Nevada

Ecuador-focused miner SolGold (LON, TSX:SOLG) said on Monday it had received $100 million from streaming company Franco-Nevada (TSX, NYSE: FNV), which it will use to progress its Alpala copper-gold project through to final feasibility and a development decision.

The funding is part of a net-smelter royalty finance agreement (NSR) between the parties agreed in May, which guarantees Franco-Nevada a perpetual 1% NSR.

Franco-Nevada, which provides natural resource companies with upfront cash in exchange for future production, advanced to SolGold $100 million under the agreement, less the amount of outstanding principal and interest under a $15m secured bridge loan.

The aggregate amount owing under the bridge loan was therefore repaid out of the proceeds of the royalty financing. The financing could increase by $50 million, at SolGold’s discretion. The move would also increase the NSR for Franco Nevada to 1.5%.

Alpala is the largest deposit found at SolGold’s Cascabel copper-gold asset, located 180 km north of Ecuador’s capital, Quito.

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

Hot spot

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.

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 almost 4% in London on Monday morning following news of the funding. The gold and copper producer’s market capitalization is £555 million.