SolGold PLC Announces BHP to Invest a Further US$22m in SolGold

SolGold PLC


SolGold PLC Announces BHP to Invest a Further US$22m in SolGold

Monday, November 25, 2019 5:10 AM

BHP to Invest a Further US$22m in SolGold

Highlights:

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BHP agrees to invest US$22m in SolGold as 77m shares at 22.15p per share.

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BHP to be issued 1:4 options (19.25m) exercisable at 37p within 5 years.

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SolGold has invited, and BHP may provide, secondees for the technical effort for the completion of Feasibility Studies at SolGold's 85% owned Cascabel project in Northern Ecuador and regional exploration effort.

BISHOPSGATE, LONDON / ACCESSWIRE / November 25, 2019 / Commenting on the agreement, SolGold CEO Nicholas Mather said:

"SolGold is pleased to welcome BHP into a further position in the Company. SolGold's view is that the agreement endorses its view of SolGold's commanding Ecuadorean copper and gold exploration footprint, and in particular the robust Alpala deposit."

BHP will become the largest shareholder by a small margin with 282,721,826 shares or approximately 14.7% of SolGold's diluted share capital. SolGold views the BHP support as an endorsement or the SolGold strategy to become a copper gold producing major.

The deal, at a significant premium to the market closing price of 22 November 2019 (approximately 13%) and without the burden of market risk and capital raising fees, presents a strong opportunity for SolGold and its shareholders.

SolGold released its PEA on the Alpala project in May 2019 and recently updated the PEA report to include wider metal price capex and opex ranges. The revision indicated ranges in NPV from approximately $2.5 to approximately $6.1 Billion. Further, metallurgical data released by SolGold to the market on 28 November 2019 indicated significant improvements in both copper and gold recoveries of 3.8% and 21.6% respectively, which data has not yet been modelled financially.

SolGold is working on a Prefeasibility Study on Alpala for completion by end Q1 in 2020.

BHP is party to a Share Subscription Agreement (SSA) with SolGold, executed on 15 October 2018 which provides for:

(i) Nominee Director

Under the BHP SSA, BHP has, subject to holding at least 10% of the share capital of SolGold, a right (but not an obligation) to appoint a Director to the Board of Directors of SolGold.

(ii) Anti Dilution at 10%

For a period of two years (to 15 October 2020), provided BHP continues to hold at least 10% of the shares in SolGold, if BHP's holding falls below 10% as a result of the issue of new shares by SolGold, BHP has anti-dilution rights to subscribe for further shares to maintain its holding to 10% of the undiluted share capital of SolGold.

(iii) Board Recommendations

BHP agreed for a period of two years (to 15 October 2020) to follow the recommendations of the Board of Directors of SolGold which are supported by an independent expert appointed by the SolGold Board of Directors to opine in respect of any proposed change of control transactions in respect of the SolGold share capital or its assets, and in circumstances where it is demonstrable that holders of 60% of SolGold shares (disregarding BHP) voting at a meeting or lodging acceptances are supportive of the particular formal proposal. BHP also agreed, for a period of two years (to 15 October 2020), to support capital change resolutions put to SolGold shareholders at SolGold's AGM affecting authorised capital limits and pre-emption waivers under the LSE rules, in the event that 60% of the votes validly cast at a meeting of SolGold shareholders approve the same and the pre-emption waivers are within certain limits.

(iv) Anti Collusion

BHP agreed, for a period of two years (to 15 October 2020, and subject to certain exemptions), not to discuss or collude with other shareholders in relation to a change of control transaction of SolGold or an acquisition of additional shares in SolGold above the minimum permitted threshold, without SolGold consent.

(v) Standstill

Subject to permitted exclusions, BHP has agreed not to acquire further shares in, or make an offer for, SolGold for a period of two years (to 15 October 2020). Permitted exclusions to this provision include:

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a right for BHP to acquire up to 246,634,271 shares in SolGold (not counting shares acquired by way of certain permitted acquisitions). SolGold has waived this provision in respect of the issue contemplated by the agreement which is the subject of this announcement;

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a right to make an offer to acquire SolGold provided such offer has been first approved and recommended to shareholders by the Board of SolGold.

The standstill in respect of SolGold ceases in the event that a third party makes an offer to acquire SolGold.

(vi) Right of First Refusal

BHP also agreed for a period of two years (to 15 October 2020) to provide SolGold with a right of first offer in the event that BHP wishes to dispose of its acquired shares in SolGold to certain parties.

By order of the Board

Karl Schlobohm

Company Secretary

CONTACTS

Nicholas Mather

SolGold Plc (Chief Executive Officer) [email protected]

Tel: +61 (0) 7 3303 0665

+61 (0) 417 880 448

Karl Schlobohm

SolGold Plc (Company Secretary)

[email protected]

Tel: +61 (0) 7 3303 0661

Ingo Hofmaier

SolGold Plc (GM - Project & Corporate Finance) [email protected]

Tel: +44 (0) 20 3823 2132

Gordon Poole / Nick Hennis

Camarco (Financial PR / IR)

[email protected]

Tel: +44 (0) 20 3757 4997

Andrew Chubb

Hannam & Partners (Joint Broker and Financial Advisor)

[email protected]

Tel: +44 (0) 20 7907 8500

Ross Allister / David McKeown

Peel Hunt (Joint Broker and Financial Advisor)

[email protected]

Tel: +44 (0)20 7418 8900

James Kofman / Darren Wallace

Cormark Securities Inc. (Financial Advisor)

[email protected]

Tel: +1 416 943 6411

Follow us on twitter @SolGold_plc

ABOUT SOLGOLD

SolGold is a leading exploration company focussed on the discovery and definition of world-class copper and gold deposits. In 2018 SolGold's management team was recognised by the "Mines and Money" Forum as an example of excellence in the industry, and continues to strive to deliver objectives efficiently and in the interests of shareholders. SolGold is the largest and most active concession holder in Ecuador and is aggressively exploring the length and breadth of this highly prospective and gold-rich section of the Andean Copper Belt.

The Company operates with transparency and in accordance with international best practices. SolGold is committed to delivering value to its shareholders, while simultaneously providing economic and social benefits to impacted communities, fostering a healthy and safe workplace and minimizing the environmental impact.

Dedicated stakeholders

SolGold employs a staff of over 560 and at least 98% are Ecuadorean. This is expected to grow as the operations at Alpala, and in Ecuador generally, expand. SolGold focusses its operations to be safe, reliable and environmentally responsible and maintains close relationships with its local communities. SolGold has engaged an increasingly skilled and experienced team of geoscientists using state of the art geophysical and geochemical modelling applied to an extensive data base to enable the delivery of ore grade intersections from nearly every drill hole at Alpala. SolGold has 86 geologists, of which 11% are female, on the ground in Ecuador looking for copper and gold.

About Cascabel and Alpala

The Alpala deposit is the main target in the Cascabel concession, located on the northern section of the heavily endowed Andean Copper Belt, the entirety of which is renowned as the base for nearly half of the world's copper production. The project area hosts mineralisation of Eocene age, the same age as numerous Tier 1 deposits along the Andean Copper Belt in Chile and Peru to the south. The project base is located at Rocafuerte within the Cascabel concession in northern Ecuador, an approximately three hour drive on sealed highway north of Quito, close to water, power supply and Pacific ports (Figure 1).

Having fulfilled its earn-in requirements, SolGold is a registered shareholder with an unencumbered legal and beneficial 85% interest in ENSA (Exploraciones Novomining S.A.) which holds 100% of the Cascabel concession covering approximately 50km2. The junior equity owner in ENSA is required to repay 15% of costs since SolGold's earn in was completed, from 90% of its share of distribution of earnings or dividends from ENSA or the Cascabel concession. It is also required to contribute to development or be diluted, and if its interest falls below 10%, it shall reduce to a 0.5% NSR royalty which SolGold may acquire for US$3.5m.

Over 228,000m of diamond drilling has been completed on the project. With numerous rigs currently active on the project, SolGold produces up to approximately 10,000m of core every month. The Cascabel drill program is currently focussed on extending and upgrading the status of the Alpala Resource, as well as further drill testing of the rapidly evolving Aguinaga prospect. Drill testing of the Trivinio target has commenced, whilst the numerous other untested targets, namely at Moran, Cristal, Tandayama-America and Chinambicito, are flagged for drill testing as overall program demands allow.

The November 2018 Alpala MRE update, dated 15 November 2018, was estimated from 68,173 assays. Drill core samples were obtained from total of 133,576m of drilling comprising 128 diamond drill holes, including 75 drill holes comprising, 34 daughter holes, 8 redrills, and 11 over-runs, and represents full assay data from holes 1-67 and partial assay data received from holes 68 to 75. In contrast, the Dec 2017 Maiden MRE was estimated from 26,814 assays obtained from 53,616m of drilling comprising 45 drill holes, including 10 daughter holes and 5 redrills.

The November 2018 Alpala updated Mineral Resource Estimate (MRE) totals a current:

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2,050 Mt @ 0.60% CuEq (at 0.2% CuEq cut-off) in the Indicated category, and 900 Mt @ 0.35% CuEq (at 0.2% CuEq cut-off) in the Inferred category.

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Contained metal content of 8.4 Mt Cu and 19.4 Moz Au in the Indicated category.

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Contained metal content of 2.5 Mt Cu and 3.8 Moz Au in the Inferred category.

Investors should consult the technical report dated 3 January 2019 for a detailed account of the assumptions on which the estimates were based as well as any known legal, political, environmental and other risks that could materially affect the development of the resources.

Getting Alpala advanced towards development

The resource at the Alpala deposit boasts a high grade core which, in the event of the construction of a mine, is targeted to facilitate early cashflows and an accelerated payback of initial capital. SolGold is currently investigating development and financing options available to the company for the development of Cascabel on reaching feasibility.

The results of the PEA were published on 20 May 2019, highlighting the following key aspects:

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Net Present Value ("NPV") estimates range from US$4.1Bn to US$4.5Bn (Real, post-tax, @ 8% discount rate, US$3.3/lb copper price, US$1,300/oz gold price and US$16/oz silver price) depending on production rate scenario.

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Internal Rate of Return ("IRR") estimates range from 24.8% to 26.5% (Real, post-tax, US$3.3/lb copper price, US$1,300/oz gold price and US$16/oz silver price) depending on production rate scenario.

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Pre-production Capex estimated at approx. US$2.4B to US$2.8B, and total Capex including life of mine sustaining Capex of US$10.1B to US$10.5B depending on production rate scenario.

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Payback Period on initial start-up capital - Range from 3.5 to 3.8 years after commencement of production depending on production rate scenario.

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Preferred Mining Method - Underground low-cost mass mining using Block Cave methods applied over several caves designed on two vertically extensive Lifts.

Full results and all details of the PEA are available in the Company's market release of 20 May 2019.

SolGold's regional push

SolGold is using its successful and cost efficient blueprint established at Alpala, and Cascabel generally, to explore for additional world class copper and gold projects across Ecuador. SolGold is the largest and most active concessionaire in Ecuador.

The Company wholly owns four other subsidiaries active throughout the country that are now focussed on thirteen high priority gold and copper resource targets, several of which the Company believes have the potential, subject to resource definition and feasibility, to be developed in close succession or even on a more accelerated basis from Alpala.

See www.solgold.com.au for more information. Follow us on twitter @SolGold_plc

CAUTIONARY NOTICE

News releases, presentations and public commentary made by SolGold plc (the "Company") and its Officers may contain certain statements and expressions of belief, expectation or opinion which are forward looking statements, and which relate, inter alia, to interpretations of exploration results to date and the Company's proposed strategy, plans and objectives or to the expectations or intentions of the Company's Directors. Such forward-looking and interpretative statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from such interpretations and forward-looking statements.

Accordingly, the reader should not rely on any interpretations or forward-looking statements; and save as required by the exchange rules of the TSX and LSE or by applicable laws, the Company does not accept any obligation to disseminate any updates or revisions to such interpretations or forward-looking statements. The Company may reinterpret results to date as the status of its assets and projects changes with time expenditure, metals prices and other affecting circumstances.

This release may contain "forward‑looking information" within the meaning of applicable Canadian securities legislation. Forward‑looking information includes, but is not limited to, statements regarding the Company's plans for developing its properties. Generally, forward‑looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved".

Forward‑looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward‑looking information, including but not limited to: transaction risks; general business, economic, competitive, political and social uncertainties; future prices of mineral prices; accidents, labour disputes and shortages and other risks of the mining industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward‑looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

The Company and its officers do not endorse, or reject or otherwise comment on the conclusions, interpretations or views expressed in press articles or third-party analysis, and where possible aims to circulate all available material on its website.

The Company recognises that the term "World Class" is subjective and for the purpose of the Company's projects the Company considers the drilling results at the growing Alpala Porphyry Copper Gold Deposit at its Cascabel Project to represent intersections of a "World Class" deposit. The Company considers that "World Class" deposits are rare, very large, long life, low cost, and are responsible for approximately half of total global metals production.

"World Class" deposits are generally accepted as deposits of a size and quality that create multiple expansion opportunities, and have or are likely to demonstrate robust economics that ensure development irrespective of position within the global commodity cycles, or whether or not the deposit has been fully drilled out, or a feasibility study completed.

Standards drawn from industry experts (1) Singer and Menzie, 2010; (2) Schodde, 2006; (3) Schodde and Hronsky, 2006; (4) Singer, 1995; (5) Laznicka, 2010) have characterised "World Class" deposits at prevailing commodity prices. The relevant criteria for "World Class" deposits, adjusted to current long run commodity prices, are considered to be those holding or likely to hold more than 5 million tonnes of copper and/or more than 6 million ounces of gold with a modelled net present value of greater than USD 1 Billion.

The Company and its external consultants prepared an updated mineral resource estimate at the Cascabel Project in November 2018. Results are summarised in Table B attached.

Any development or mining potential for the project remains speculative.

Drill hole intercepts have been updated to reflect current commodity prices, using a data aggregation method, defined by copper equivalent cut-off grades and reported with up to 10m internal dilution, excluding bridging to a single sample. Copper equivalent grades are calculated using a gold conversion factor of 0.63, determined using an updated copper price of USD3.00/pound and an updated gold price of USD1300/ounce. True widths of down hole intersections are estimated to be approximately 25-70%.

On the basis of the drilling results to date and the results of the Alpala Maiden Mineral Resource Estimate, the reference to the Cascabel Project as "World Class" (or "Tier 1") is considered to be appropriate. Examples of global copper and gold discoveries since 2006 that are generally considered to be "World Class" are summarised in Table A.

References cited in the text:

1.

Singer, D.A. and Menzie, W.D., 2010. Quantitative Mineral Resource Assessments: An Integrated Approach. Oxford University Press Inc.

2.

Schodde, R., 2006. What do we mean by a world class deposit? And why are they special. Presentation. AMEC Conference, Perth.

3.

Schodde, R and Hronsky, J.M.A, 2006. The Role of World-Class Mines in Wealth Creation. Special Publications of the Society of Economic Geologists Volume 12.

4.

Singer, D.A., 1995, World-class base and precious metal deposits-a quantitative analysis: Economic Geology, v. 90, no.1, p. 88-104.

5.

Laznicka, P., 2010. Giant Metallic Deposits: Future Sources of Industrial Metal, Second Edition. Springer-Verlag Heidelberg.

Deposit Name

Discovery Year

Major Metals

Country

Current Status

Mining Style

Inventory

LA COLOSA

2006

Au, Cu

Colombia

Feasibility - New Project

Open Pit

1 469Mt @ 0.95g/t Au; 14.3Moz Au

LOS SULFATOS

2007

Cu, Mo

Chile

Advanced Exploration

Underground

2 1.2Bt @1.46% Cu & 0.02% Mo; 17.5Mt Cu

BRUCEJACK

2008

Au

Canada

Development/Construction

Open Pit

3 15.6Mt @ 16.1 g/t Au; 8.1Moz Au

KAMOA-KAKULA

2008

Cu, Co, Zn

Congo (DRC)

Feasibility - New Project

Open Pit & Underground

4 1.3Bt @ 2.72% Cu; 36.5 Mt Cu

GOLPU

2009

Cu, Au

PNG

Feasibility - New Project

Underground

5 820Mt @ 1.0% Cu, 0.70g/t Au; 8.2Mt Cu, 18.5Moz Au

COTE

2010

Au, Cu

Canada

Feasibility Study

Open Pit

6 289Mt @ 0.90 g/t Au; 8.4Moz Au

HAIYU

2011

Au

China

Development/Construction

Underground

7 15Moz Au

RED HILL-GOLD RUSH

2011

Au

United States

Feasibility Study

Open Pit & Underground

8 47.6Mt @ 4.56 g/t Au; 7.0Moz Au

XILING

2016

Au

China

Advanced Exploration

Underground

9 383Mt @ 4.52g/t Au; 55.7Moz Au

Source: after MinEx Consulting, May 2017

1 Source: http://www.mining‐technology.com/projects/la‐colosa

2 Source: http://www.angloamerican.com/media/press‐releases/2009

3 Source: http://www.pretivm.com/projects/brucejack/overview/

4 Source: https://www.ivanhoemines.com/projects/kamoa‐kakula‐project/

5 Source: http://www.newcrest.com.au/media/resource_reserves/2016/December_2016_Resources_and_Reserves_Statement.pdf

6 Source: http://www.canadianminingjournal.com/news/gold‐iamgold‐files‐cote‐project‐pea/

7 Source: http://www.zhaojin.com.cn/upload/2015‐05‐31/580601981.pdf

8 Source: https://mrdata.usgs.gov/sedau/show‐sedau.php?rec_id=103

9 Source: http://www.chinadaily.com.cn/business/2017‐03/29/content_28719822.htm

Table A: Tier 1 global copper and gold discoveries since 2006. This table does not purport to be exhaustive exclusive or definitive.

Grade

Category

Resource

Category

Tonnage

(Mt)

Grade

Contained Metal

Cu (%)

Au (g/t)

CuEq (%)

Cu (Mt)

Au (Moz)

CuEq (Mt)

Total >0.2% CuEq

Indicated

2,050

0.41

0.29

0.60

8.4

19.4

12.2

Inferred

900

0.27

0.13

0.35

2.5

3.8

3.2

Table B: Alpala Mineral Resource Estimate updated effective 16 November 2018.

Notes:

  •  

Mr. Martin Pittuck, MSc, CEng, MIMMM, is responsible for this Mineral Resource estimate and is an "independent qualified person" as such term is defined in NI 43-101.

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The Mineral Resource is reported using a cut-off grade of 0.3% copper equivalent calculated using [copper grade (%)] + [gold grade (g/t) x 0.6] based on a copper price of US$2.8/lb and gold price of US$1,160/oz.

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The Mineral Resource is considered to have reasonable potential for eventual economic extraction by underground mass mining such as block caving.

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Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

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The statement uses the terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral Reserves (May 2014).

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The MRE is reported on 100 percent basis.

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Values given in the table have been rounded, apparent calculation errors resulting from this are not considered to be material.

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The effective date for the Mineral Resource statement is 16 November 2018.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

SOURCE: SolGold PLC


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