BHP acquires stake in SolGold

BHP Billiton (LON: BLT) is acquiring a 6.1% stake in SolGold's (TSX: SOLG; LON: SOLG) Cascabel porphyry copper-gold project in Ecuador.

BHP is purchasing the stake from Guyana Goldfields (TSX: GUY) for 26.59 pence per share, a 20% premium to its 20-day volume-weighted average price of 22.16 pence per share on the London Stock Exchange.

BHP Chief Executive Officer, Andrew Mackenzie, said the investment not only gives it exposure to a high-quality copper exploration project but that Cascabel is also in a "highly prospective location" for the company.

"Consistent with our positive long-term outlook, copper is a key exploration focus for BHP as we seek to replenish our resource base and grow this important business," Mackenzie said in a press release on September 5.

The Alpala deposit is the main target in the Cascabel concession, located on the northern section of the Andean Copper Belt.

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 in northern Ecuador, about a three-hour drive north of Quito, and is close to water, power supply and ports on the Pacific.

Alpala has produced some of the greatest drill hole intercepts in porphyry copper-gold exploration history, the company says, with hole 12 (CSD-16-012) returning 1560 metres grading 0.59% copper and 0.54 gram gold per tonne, including 1044 metres grading 0.74% copper and 0.54 gram gold.

SolGold has completed about 123,500 metres of diamond drilling on the project so far and produces about 10,000 metres of core each month. Twelve rigs are currently operating at Cascabel, ten on the Alpala cluster, and two on a prospect called, Aguinaga.

The program is focussed primarily on extending and upgrading the Alpala resource.

A maiden resource published in January 2018 estimated 430 million tonnes grading 0.8% copper equivalent (at a 0.3% copper-equivalent cut off) in the indicated category and 650 million inferred tonnes averaging 0.6% copper-equivalent.

Workers in the core shack at SolGold's Cascabel gold property in Ecuador. Credit: SolGold.

Those numbers add up to 2.3 million tonnes of contained copper and 6.0 million ounces of gold in the indicated category and 2.9 million tonnes of copper and 6.3 million ounces of gold in the inferred category.

Since the mineral estimate was completed earlier this year, the company has completed over 100 km of additional drilling at Alpala.

In mid-August, the company provided an exploration update on Cascabel.

Hole 41 was the highlight. It cut 582 metres grading 1.18% copper equivalent (0.64% copper and 0.85 gram gold), including 340 metres of 1.54% copper-equivalent (0.78% copper and 1.21 grams gold).

In addition to testing Alpala, there are several targets the company is testing or plans to test in the future, including the Aguinaga and Trivinio prospects.

Guyana Goldfields will receive about US$35 million for its 6.1% stake in SolGold. It notes that its initial purchase price for 103.13 million SolGold shares cost it about US$10 million - yielding a 3.5 times return on its initial investment.

Guyana Goldfields said it doesn't expect to pay any capital gains on the share sale due to accumulated tax pools it has available. It plans to use the proceeds from the sale to reduce debt and for general corporate purposes.