BHP Billiton (NYSE: BBL; LON: BLT) is raising its stake in SolGold (TSX: SOLG; LON: SOLG) from 6.1% to 11.18% and the US$50.2 million in proceeds will help the junior explorer advance studies of the Alpala deposit, the main target on the Cascabel porphyry copper-gold project in Ecuador.
Under the placement agreement, BHP is subscribing for 100 million shares at 45 pence — a 30% premium to the last 20 days volume-weighted average price (VWAP) and a 27.8% premium to SolGold’s closing price on the London Stock Exchange on October 15.
The investment follows BHP’s acquisition in early September of its initial stake in the company from Guyana Goldfields (TSX: GUY) for 26.59 pence per share, which at the time was a 20% premium to SolGold’s 20-day volume-weighted average price of 22.16 pence per share on the LSE.
The funds will be used to further expand the Alpala deposit, complete a preliminary economic analysis, and conduct pre-feasibility studies before the end of next year.
If BHP’s holding falls below 10% as a result of the issue of new shares by SolGold, BHP will have anti-dilution rights to subscribe for further shares to maintain its holding to 10% of the company’s undiluted share capital.
SolGold’s CEO, Nick Mather, describes the Alpala project as “one of the five best undeveloped copper projects in the world.”
On Oct. 5, SolGold issued an exploration update, with drill highlights of 869 metres grading 0.72% copper equivalent, including 378 metres of 1.17% copper equivalent in hole 55R-D1; 983 metres of 1.08% copper equivalent, including 456 metres of 1.71% copper equivalent in hole 58-D1; and 634 metres of 1.25% copper equivalent, including 301 metres of 1.88% copper equivalent and 174 metres of 2.46% copper equivalent in hole 66.
SolGold expects to update its current resource in December, based on about 105,000 metres of additional drilling the company will complete this year.
A maiden resource published in January 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. 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.
Cascabel is on the northern section of the prolific Andean Copper belt, and hosts mineralization of Eocene age, the same age as numerous Tier 1 deposits along the copper belt in Chile and Peru to the south.
The project is in northern Ecuador, about a three-hour drive north of the capital, Quito.