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BHP ups SolGold stake to almost 15 per cent

Major miner injects $22m into developer as Ecuador worries and copper weakness drag on share price
November 25, 2019

BHP (BHP) has upped its stake in copper-gold developer SolGold (SOLG) as the Ecuador-focused company’s share price wallows around the 20p level. The $22m (£17m) will take BHP’s shareholding from 11.1 per cent to 14.7 per cent, with 282m shares. 

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SolGold’s valuation has fallen by half in recent months because of the shaky political situation in Ecuador, where Lenin Moreno’s government is at risk of falling, and a weak copper price. 

There has been a recent mining win in the country, however, with Lundin Mining (CA:LUN) announcing production had started at its massive Fruta del Norte project this month. 

Earlier this month, the company said it “adjusted" its monthly cash burn as it was in late-stage negotiations on financing options for the Alpala project, which will cost between $2.4bn and $2.8bn. Its losses narrowed for the September quarter, falling from $3.9m in the same period a year ago to $2.7m this year. The weaker share price has made equity fund raising a less attractive option for SolGold – BHP paid 45p per share in October last year when it took its stake from 6 per cent to over 11 per cent, compared with the 22p in this new purchase. 

Under the new agreement, BHP has also taken 19.25m share options at 37p expiring in five years. The 14.7 per cent stake makes the major miner SolGold’s largest shareholder, the company said. Australian gold miner Newcrest Mining (AU:NEW) previously had the largest stake, and now sits just below BHP with 14.2 per cent when the new shares are taken into account. 

SolGold expects to release a new mineral resource estimate for the Alpala deposit by the end of the year, and complete the prefeasibility study for a mine by March 2020.