TIDMSOLG
RNS Number : 3758M
SolGold PLC
11 May 2020
11 May 2020
SolGold plc
("SolGold" or the "Company")
SolGold Agrees a Royalty Financing Package of US$100m with
Upscale to US$150m from Franco-Nevada for the Alpala Project
The Board of Directors of SolGold (LSE & TSX: SOLG) is
pleased to announce that SolGold has entered into a US$100 million
Net Smelter Returns Financing ("NSR Financing") Agreement with
Franco-Nevada Corporation ("Franco-Nevada"), with an option to
upsize the financing to US$150 million at the Company's election,
with reference to the Company's flagship Alpala copper-gold project
and the remainder of the Cascabel license in northern Ecuador.
Concurrently with the entering into of the NSR Financing
Agreement, SolGold and Franco-Nevada have also entered into a US$15
million secured Bridge Loan Agreement ("BLA") of immediately
available funds as an initial advance (the "Advance") prior to
closing the NSR Financing Agreement. The full amount of the Advance
will be disbursed by Franco-Nevada to SolGold today.
The Advance provides SolGold with short term funding at an
interest rate of 12% per annum for a four-month period, with an
option to extend the maturity for another four months. The Advance
is in any event repayable with interest upon closing of the NSR
Financing.
Franco-Nevada and SolGold have each received all required
corporate approvals for entering into the transactions.
Highlights of the NSR Financing Agreement:
-- SolGold and Franco-Nevada have entered into a binding NSR
Financing Agreement for up to US$150 million.
-- For the first US$100 million, Franco-Nevada will receive a
perpetual 1% NSR interest from SolGold calculated with reference to
Net Smelter Returns from the Cascabel licence area.
-- The NSR Financing Agreement can be upsized at SolGold's
election by US$50 million to a 1.5% NSR interest within eight
months from the date of the Agreement.
-- For clarity, neither Exploraciones Novomining S.A. ("ENSA")
nor the minority shareholder in ENSA will be liable for the
royalty.
-- Key features of the NSR Financing Agreement include:
o A 50% buy-back option exercisable at SolGold's election for
six years from closing at a price delivering Franco-Nevada a 12%
internal rate of return;
o A NPV neutral option in favour of Franco-Nevada to convert the
NSR interest into a gold-only NSR interest, available for six years
from two years after operation start;
o Franco-Nevada is entitled to receive certain minimum royalty
payments of US$10 million from 2028;
o The inclusion of a NSR interest top-up mechanism in the event
that actual mine production (measured on a copper equivalent basis)
is less than 85% of planned production, as stated in SolGold's most
recent publicly filed technical report.
-- Conditions precedent to the NSR Financing are expected to be
satisfied soon after COVID-19 related travel restrictions are
lifted.
-- Franco-Nevada has indicated its interest, subject to further
studies, to participate in the financing of SolGold's share of the
mine development at Alpala via a gold stream. SolGold expects that,
due to the gold-rich nature of the Alpala porphyry, the project can
support up to US$1 billion of precious metals stream financing.
Commenting on the funding, Nicholas Mather, SolGold's Chief
Executive Officer said: "SolGold is immensely excited to further
progress Alpala in the run up to final feasibility and a
development decision, and for Franco-Nevada's endorsement of the
Alpala Project. The US$100 million of funding generated, plus the
option to upscale the royalty by US$50 million for an additional
0.5% NSR at SolGold's option, will see the rapid advancement of the
Alpala Project".
Paul Brink, President and CEO of Franco-Nevada commented:
"Alpala is an exceptional orebody and one of the most attractive
block cave development projects globally. We would welcome the
opportunity to provide a gold stream financing as part of the
construction financing of the project".
Executive General Manager of Corporate Finance, Mr Ingo Hofmaier
commented: "SolGold received and considered a broad range of
funding options and the decision to proceed with Franco-Nevada is
based on various factors, including the size of investment, the
permanent nature of this financing, Franco-Nevada's experience and
understanding of Latin America and the competitive cost of capital.
In SolGold's opinion, a 1-1.5% NSR will not constrain the debt
capacity of the project; on the contrary, we believe this financing
increases the confidence in SolGold's ability to fund the
development, further affirming the overall quality of the Alpala
deposit."
"With BHP, Newcrest and now Franco-Nevada having exposure to the
project, there should be no doubt as to the quality of Alpala or
Ecuador as a sovereign mining destination for project development
capital. Franco-Nevada is the largest royalty and streaming company
by market capitalisation, has a history of investing into
world-class assets and has invested US$3.1 billion in Latin America
since 2015, with SolGold being Franco-Nevada's first financing in
Ecuador".
Proceeds of the NSR Financing will be used by SolGold to fund
the costs to complete the Feasibility Study and any surplus will be
used for SolGold's share of the development of Alpala pursuant to
agreements with the minority shareholder of ENSA, Cornerstone
Capital Resources Inc. ("Cornerstone").
Cornerstone's share to completion of the Feasibility Study of
Alpala is debt funded by SolGold and post Feasibility Study,
Cornerstone must contribute to all expenses and capital costs. If
Cornerstone's equity stake in ENSA is diluted below 10%, its equity
stake will be converted to a 0.5% NSR which SolGold can then
acquire for US$3.5 million at any time. SolGold's debt funding to
Cornerstone accrues interest at LIBOR plus 2% per annum and is to
be repaid from 90% of Cornerstone's distributions of earnings or
dividends from ENSA or the Cascabel concession. Currently
Cornerstone's indebtedness to SolGold is US$30.5 million. The
latest budget indicates that this liability is expected to reach
US$52.0 million in the period to completion of the Feasibility
Study.
Under the NSR Financing Agreement, following closing,
Franco-Nevada will have the right to appoint an observer to the
Alpala Project Advisory Committee. Although this committee will not
have formal decision-making power, it can nonetheless advise
SolGold's Board of Directors on strategic, financial and technical
matters regarding the project.
SolGold places utmost importance on its social and environmental
initiatives and is delighted that Franco-Nevada has agreed to
contribute US$150,000 for three years towards environmental and
social initiatives in Ecuador in the direct zone of influence of
the Alpala Project via joint projects.
With regard to certain conditions to closing of the NSR
Financing:
-- Franco-Nevada commenced due diligence on SolGold and Alpala
in late 2019. Franco-Nevada's studies of the project have been
completed satisfactorily, except for a site visit. Temporary
COVID-19 travel restrictions have delayed completion of
Franco-Nevada's on-site due diligence, which is a key condition
precedent to closing the NSR Financing.
-- The site visit is expected to take place as soon as travel
restrictions are lifted. Both parties will adhere to appropriate
health and safety measures in order to mitigate potential risks of
COVID-19 infection to the personnel of Franco-Nevada, SolGold
employees as well as the communities in and around the Alpala
project area.
-- As a backup measure, both parties are also investigating
alternatives to a conventional site visit.
-- In the event that the conditions precedent are not fulfilled
or waived by a long stop date, the NSR Financing Agreement will
terminate.
SolGold's field operations are currently on care and maintenance
due to COVID-19 social isolation rules and respect for communities
in the area in an effort to reduce the potential transmission of
the virus. The Ecuadorian mining authorities have requested the
Company's plans for re-activation of operations, pending the full
agreement from local county authorities. SolGold continues to
actively monitor all its employees as health and safety are top
priorities for the Company. SolGold will continue supporting its
employees and local communities where possible in their efforts to
curtail the spread of the virus.
By order of the Board,
Karl Schlobohm
Company Secretary
CONTACTS
Nicholas Mather Tel: +61 (0) 7 3303 0665
SolGold Plc (Chief Executive Officer) +61 (0) 417 880 448
nmather@solgold.com.au
Karl Schlobohm
SolGold Plc (Company Secretary) Tel: +61 (0) 7 3303 0661
kschlobohm@solgold.com.au
Ingo Hofmaier
SolGold Plc (Executive GM - Project & Tel: +44 (0) 20 3823 2131
Corporate Finance) ihofmaier@solgold.com.au
Gordon Poole / Nick Hennis
Camarco (Financial PR / IR) Tel: +44 (0) 20 3757 4997
solgold@camarco.co.uk
Ross Allister / David McKeown Tel: +44 (0)20 7418 8900
Peel Hunt (Joint Broker and Financial
Advisor)
solgold@peelhunt.com
James Kofman / Darren Wallace Tel: +1 416 943 6411
Cormark Securities Inc. (Financial Advisor)
dwallace@cormark.com
Qualified Person:
Scientific and technical information in this report relating to
the Alpala project and Cascabel concession is based on data
reviewed by Mr Jason Ward ((CP) B.Sc. Geol.), the Chief Geologist
of the Company. Mr Ward is a Fellow of the Australasian Institute
of Mining and Metallurgy, holds the designation FAusIMM (CP), and
has in excess of 20 years' experience in mineral exploration and is
a Qualified Person for the purposes of the relevant LSE and TSX
Rules. Mr Ward approves the information in the form and context in
which it appears.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of the
Regulation (EU) No 596/2014 until the release of this
announcement.
ABOUT SOLGOLD
SolGold is a leading resources company focussed on the
discovery, definition and development 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
concession holder by land mass, and most active explorer 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 737 employees of whom 98% are
Ecuadorian. This is expected to grow as the operations expand at
Alpala, and in Ecuador generally. 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, refined and experienced team of
geoscientists using state of the art geophysical and geochemical
modelling applied to an extensive database to enable the delivery
of ore grade intersections from nearly every drill hole at Alpala.
SolGold has 86 geologists, of whom 30% are female, on the ground in
Ecuador exploring for economic copper and gold deposits.
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 the capital Quito,
close to water, power supply and Pacific ports.
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 50km(2) .
The minority equity owner in ENSA is required to repay 15% of costs
since SolGold's earn in was completed, from 90% of its share of the
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 convert to a
0.5% NSR royalty which SolGold may acquire for US$3.5m.
Advancing Alpala towards development
The resource at the Alpala deposit boasts a high-grade core
which is targeted to facilitate early cashflows and an accelerated
payback of initial capital. SolGold is currently assessing
financing options available to the Company for the development of
the Alpala mine following completion of the Definitive Feasibility
Study.
Mineral Resource Estimate #3:
-- Mineral Resource of 2,663 Mt @ 0.53% CuEq for 9.9 Mt Cu, 21.7
Moz Au and 92.2 Moz Ag in the Measured plus Indicated
categories.
-- Mineral Resource of 544 Mt @ 0.31% CuEq for 1.3 Mt Cu, 1.9
Moz Au and 10.6 Moz Ag in the Inferred category
SolGold's Regional Exploration Drive
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 compared to Alpala.
SolGold is listed on the London Stock Exchange and Toronto Stock
Exchange (LSE/TSX: SOLG). The Company has on issue a total of
1,923,321,033 fully-paid ordinary shares and 185,162,000 unlisted
options exercisable at various prices ranging from 25p to 60p and
expiring between July 2020 and November 2024.
Quality Assurance / Quality Control on Sample Collection,
Security and Assaying
SolGold operates according to its rigorous Quality Assurance and
Quality Control (QA/QC) protocol, which is consistent with industry
best practices.
Primary sample collection involves secure transport from
SolGold's concessions in Ecuador, to the ALS certified sample
preparation facility in Quito, Ecuador. Samples are then air
freighted from Quito to the ALS certified laboratory in Lima, Peru
where the assaying of drill core, channel samples, rock chips and
soil samples is undertaken. SolGold utilises ALS certified
laboratories in Canada and Australia for the analysis of
metallurgical samples.
Samples are prepared and analysed using 100g 4-Acid digest ICP
with MS finish for 48 elements on a 0.25g aliquot (ME-MS61).
Laboratory performance is routinely monitored using umpire assays,
check batches and inter-laboratory comparisons between ALS
certified laboratory in Lima and the ACME certified laboratory in
Cuenca, Ecuador.
In order to monitor the ongoing quality of its analytical
database, SolGold's QA/QC protocol encompasses standard sampling
methodologies, including the insertion of certified powder blanks,
coarse chip blanks, standards, pulp duplicates and field
duplicates. The blanks and standards are Certified Reference
Materials supplied by Ore Research and Exploration, Australia.
SolGold's QA/QC protocol also monitors the ongoing quality of
its analytical database. The Company's protocol involves
Independent data validation of the digital analytical database
including search for sample overlaps, duplicate or absent samples
as well as anomalous assay and survey results. These are routinely
performed ahead of Mineral Resource Estimates and Feasibility
Studies. No material QA/QC issues have been identified with respect
to sample collection, security and assaying.
Reviews of the sample preparation, chain of custody, data
security procedures and assaying methods used by SolGold confirm
that they are consistent with industry best practices and all
results stated in this announcement have passed SolGold's QA/QC
protocol.
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, successful completion of the NSR Financing, future gold
stream financing, resource estimates, the lifting of travel-related
COVID-19 restrictions, results of exploration activities,
development of the Alpala project, future funding participation by
Cornerstone, future budgets to complete a feasibility study and
re-activation of operations . 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:
timing of the lifting of COVID-19 related-related restrictions,
satisfactory completion of site visit due diligence by
Franco-Nevada, the ability to complete future financings on terms
acceptable to SolGold, 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.
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 rns@lseg.com or visit www.rns.com.
END
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