- New Cascabel pre-feasibility study cuts over $1bn from upfront bill
- Company will have to raise cash this year
Mining exploration company SolGold (SOLG) has knocked just over $1bn (£790mn) off the upfront cost of its Cascabel copper and gold project in Ecuador as it continues to face an uphill funding struggle.
The company’s share price has dropped by half in the past year as investors remain sceptical of its ability to build the mine, made tougher by political volatility in Ecuador.
Hopes of a buyout remain, although given the share price weakness and blocking stakes of heavyweight shareholders, this will also prove difficult to pull off and would leave most shareholders sitting on a loss given the shares are sitting around 6p. As recently as two years ago, the company was trading at 40p.
The new pre-feasibility study sees production of 123,000 tonnes of copper and 277,000 ounces of gold a year, over a 28-year mine life. The cost is forecast at $1.55bn, down from $2.7bn in the previous study two years ago. The net present value of the project is up 10 per cent to $3.2bn, helped by increased copper and gold price estimates.
The cheaper mine build has largely come from shifting more development post-startup. Post-production capex has gone from $2.1bn in the previous study to $2.6bn, while this slower ramp up comes alongside a higher forecast for the copper grade in the first 10 years, going from 1.35 per cent copper equivalent to 1.45 per cent.
The company is also running a strategic review, looking at sale or partnership options to develop the mine. In the meantime, SolGold has slashed spending in a bid to stay afloat, cutting administrative costs in the second half from $14mn in 2022 to $5.9mn in the six months to 31 December.
It had $12.8mn in cash on 31 December, so more financing will be needed in the current year. SolGold has burned through cash at a breakneck speed in recent years, after selling off royalties for Cascabel to raise just over $150mn between 2020 and 2022.
Equity investments have also been used to raise cash, the most substnantial being a $36mn sale of shares to Jiangxi Copper in late 2022, giving the company a 6.3 per cent take at the time. The other major shareholders, with around 10 per cent each, are BHP (BHP) and Newmont (US:NEM), through its buyout of Newcrest Mining.
Investor unhappiness is clear beyond just looking at the share price. The December AGM saw another significant vote against former chief executive and shareholder Nick Mather, and 33 per cent of shareholders voted against giving the company approval to allot shares.
Solgold's shares were up 10 per cent on the release of the new study.
