SolGold (TSX: SOLG) is a leading exploration company focussed on the discovery and definition of world-class copper-gold deposits. The company has a first mover advantage in Ecuador, a highly prospective yet under-explored section of the Andean Copper Belt, home of multiple Tier 1 copper and gold projects and half of the world’s copper resources. CEO Nick Mather gives us more information on SolGold's team, track record and resources.
Hello Mr Mather, SolGold is listed on several stock exchanges. Can you tell us something about the history?
SolGold was born in the Solomon Islands (originally called Solomon Gold), exploring for copper gold porphyries. At the time, government relationships were tricky and the rainfall made it a difficult environment to work in so our geologists conducted a top down search for where to go. We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. This meant heading to the most obvious location – the Andean Copper Belt. Ecuador proved to be highly prospective and did not have a huge mineral mining industry as they had relied on oil revenue in the past.
SolGold entered Ecuador in 2012 and has to date defined a world class copper-gold deposit with 21.7Moz gold, 9,9Mt copper and 92.2Moz silver at the Alpala Project. In addition to this, SolGold utilised its first mover advantage and has secure an additional 75 concessions throughout the country and is the largest explorer on the ground. 13 priority projects have been identified which SolGold aims to use the exploration blueprint created at Alpala to rapidly advance the regional projects.
SolGold has always been listed on the London Stock Exchange, initially on AIM but moved to the London Main Market in 2017 and dual-listed on the TSX due to the strong shareholder demand out of Toronto. Our shares are also listed on various exchanges and platforms in Germany.
Who are the biggest shareholders of the company?
We have issued 2,072,213,495 shares and 13.64% are hold by BHP, 13.57% by Newcrest Mining, 9.85% by DGR Global. SolGold also counts some of the largest institutional investors like Franklin Templeton, Blackrock, Ninety One, JP Morgan Asset Management and Pictet & Cie among its shareholders.
What is the focus of SolGold?
SolGold is focussed on the discovery and development of world class copper gold projects in Ecuador. SolGold is concentrating on the Ecuadorean section of the world’s richest copper gold belt, the Andean Copper Belt. It’s 700km long, with 3 parallel metallgenic belts, which in northern Chile, contains 25% of the world’s copper resources and production. The geology is very similar and up until SolGold’s initial drilling efforts in late 2013, there had been no serious porphyry exploration there at all.
SolGold knew there should be, and after the discovery of Alpala in the first drill hole, and particularly in holes 5 & 9, SolGold identified numerous other locations throughout Ecuador. These locations have the same growth, and geological features and opportunity for world class deposits, similar to or even better than Alpala.
SolGold is the only company in the world to have a pipeline of opportunities with the same geology, same regulatory environment, same fiscal environment and the same social environment. So, SolGold has an advantage over other companies who have to reset every time they go to another project in another country.
SolGold’s focus on tier 1 projects gives us global relevance to capital markets and development funding opportunities and the opportunity to help transform Ecuador’s economy, currently based on tourism devices and agriculture.
SolGold is focussed on being best in class in the areas of mining technology development using block caving, which is particularly suited to the vertical elongated shape of the Alpala deposit as well as social and regulatory and environmental endorsement in Ecuador.
The vast amount of money printed since the Global Financial Crisis in the US and other major economic powers, when dominated against gold, means that gold has a long way to go on the upside. This also means that the cost of capital will remain lower for longer. The development of the high-grade core in the initial years of Alpala’s development provides the basis for excessive discoveries and developments at other projects to be financed internally for decades to come.
This is the macro plan for SolGold to become a major and an inter-generational contributor to global copper and gold production.
Can you please give us details about the characteristics and status of your projects?
SolGold’s first project is the 85% owned Alpala project on the Cascabel license in northern Ecuador. So far, it holds a resource of 21.7Moz gold, 9.9Mt copper and 92.2Moz silver. Alpala added 10% of all gold discovered in new projects in the last decade. As copper and gold prices increase, there is the opportunity for this to increase in value. Alpala is currently in Pre-Feasibility Stage, with the aim of completing the full Feasibility Study by mid 2021.
On the basis of published studies to date, Alpala’s median NPV is USD 4.4 billion, after capital development costs of USD 2.7 billion, an IRR of 25.9% and a payback period of 4 years. The mine life is forecast to be 55 years. The PFS at Alpala aims to identify refinements in the proposed block cave mining strategy, metallurgical recoveries and reduction in operating costs and details on tailings storage strategies.
SolGold’s regional exploration team continues to conduct surface exploration studies and prioritise targets on 13 other projects along the length of Ecuador at the same spatial frequency as major development projects in northern Chile. All of the project areas host significant mineralised systems, and several demonstrate high grade outcrops and mineralisation systems in excess of 6km2. In many cases, surface mineralisation is more extensive and richer than what our geologists found at Alpala, and these projects are all 100% owned by SolGold.
SolGold is planning significant drilling programmes on the five best targets as soon as possible, including Rio Amarillo, Porvenir and La Hueca Target 6. These targets are supported by promising surface exploration and geological surveys.
You emphasize on your website that you are an explorer. Aren't you on the way to being a producer?
The greatest value addition for shareholders comes from the discovery of a new virgin orebody. That was certainly the case for Alpala, which saw SolGold’s market capitalisation reach USD 1 billion. SolGold is working on Alpala’s transition into a developer, but we are ever mindful that there is nothing more effective than a new discovery. SolGold’s unique pipeline of projects, gives us an incomparable position to be an explorer, a developer and miner on several projects.
In the light of the increase in the money supply by the central banks, gold seems to be the right commodity now. Copper is equally important for the global introduction of electric mobility. Are you already noticing any of these trends?
The world is awash with money. Likewise, the world is awash with expertise and these pools are available freely to junior explorers as much as major miners. SolGold can move faster and more efficiently than a major company and with considerable sensitivity to Ecuador’s fiscal requirements of Ecuadoreans. SolGold’s development as a company, rather than just Alpala as a project, has been endorsed time and time again by the explosion of the money supply over the past 10 years, resulting in a paradigm shift in the US dollar price.
The global gentrification and electrification and the increasing electric demand by a rapidly urbanising global environment, means that copper is going to be heavily demanded. At the same time, copper resource grades, access to water and concentrate qualities have all been declining in a number of major mining projects globally, and this bodes well for the outlook for copper prices. In the period after WW2, abundant capital and low interest rates similarly saw strong programmes of industrial and infrastructure expenditure as global economies rebuilt.
We expect the same macro-economic drivers to underwrite increasing demand for the price of copper. SolGold is well places to benefit from the increase in both copper and gold prices against the US dollar in the decades to come.
What impact would a gold price above USD 2,000 an ounce have on you?
The PEA for Alpala was done at USD 1,300 per ounce. It is now already USD 1,800 per ounce and we confidently expect it to go higher. The application of higher gold and copper prices to the Alpala financial model and the application of lower discount rates and a lower cost of capital will have a profound effect on the ultimately bankable NPV of Alpala. This can be expected to be replicated many times over on SolGold’s other projects as its resources are discovered, appraised and found to present feasible developments.
Is it to be expected that SolGold will be a takeover target or maybe already is?
The market capitalisation of SolGold is well underneath the value of Alpala alone without considering the value of the 13 other projects. There is of course continual speculation that the company may receive takeover offers. It would need to be very hefty to receive my recommendation.
From today's point of view, where do you see the largest sales market or strategic interest for your projects?
It’s academic to consider that, because selling the project or part of it for the company at anything like the current market capitalisation is not at all favoured. Clearly the world’s major mining houses are interested in SolGold because Alpala, because it is large, low cost, long-life and expandable, and because they have publicly stated, that they are expanding their copper mining businesses. When it comes to our concentrate, met-testing results have shown that our concentrate is high in copper, gold and silver, especially in the first decade, and very low in deleterious elements. We expect high demand for our high value concentrate from Chinese, German, Japanese, Korean and Scandinavian smelters.
What significance does ESG have for your company?
We take the view that the foundation for ESG is a real focus on a social license to operate. For most companies, a social license to operate is something that rolls off executive’s tongues, in SolGold we actually practice it. ESG is a key feature of our activities and we involve the Ecuadorean people at all levels, as much as possible. We have a 98% workforce and we look after the communities; we endorse the requirements of local governments and we liaise with national governments to ensure we’re addressing industry requirements.
We are actively involved with the communities surrounding Alpala and constantly work on evolving ESG programmes including plants in our on-site nursery, the bakery and chicken farms within the villages, fish farms on site and improvements to facilities at local schools and community areas. SolGold also places huge importance on education and we have a number of sponsorships and partnerships with local universities.
Where do you see SolGold in five and in ten years?
In 5 years’ time, SolGold is aiming to be in production at Alpala and working on Feasibility studies and exploration programmes on its 13 other projects. It’s too early to speculate on what we may be valued at or capitalised at, but the upside is massive. We’re building a major gold and copper mining company and it’s going to produce nearly as much value in copper as it does gold - that is exciting.
Thank you very much for talking to us.
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