Cornerstone Capital Resources (TSXV: CGP) plans to call a meeting of SolGold’s (TSX: SOLG; LSE: SOLG) shareholders to replace the company’s entire board, the investor said today.
The move by the Ontario-based junior, which has an 8% interest in SolGold, comes after it rejected the Ecuador-focused mining company’s second takeover approach on July 14.
“The current SolGold board is incapable of managing the affairs of SolGold for the benefit of all shareholders in a prudent and transparent manner,” Greg Chamandy, chairman of Cornerstone, said in a news release.
SolGold, the owner of the massive Cascabel copper-gold project in Ecuador that has attracted big miners, made an all-stock offer for Cornerstone late in June.
That bid, which valued Cornerstone at about $140 million (US$102 million), would have seen the Solgold pay $3.90 for each of the company’s shares. That was a 22% premium to its closing price on June 29, the day before SolGold presented the offer.
This is not the first time SolGold has made an effort to take over Cornerstone. It tried in both 2017 and 2018, following up last year with the first disclosed attempt.
The Canadian company also rejected that offer, representing a premium of around 20%, saying it undervalued the company.
Cornerstone, with a market capitalization of $120.5 million (US$89 million), owns 15% of the Alpala copper-gold project, part of SolGold’s Cascabel asset.
It also has other gold, silver and copper projects in Ecuador and Chile.
A recent report showed Alpala is even bigger than expected, with 2.66 billion tonnes of copper at 0.53% copper-equivalent in the measured and indicated categories, and 544 million tonnes at 0.31% copper-equivalent in the inferred category.
Once developed, Alpala is expected to produce an average of 150,000 tonnes of copper, 245,000 oz. gold and 913,000 ounces of silver in concentrate per year during its 55-year life-of-mine.
Over the first 25 years of mining, average annual production is expected to be 207,000 tonnes copper, 438,000 oz. gold and 1.4 million oz. silver.
Despite setbacks due to disruptions related to the coronavirus pandemic, SolGold aims to begin production in 2025.
In May, SolGold secured up to US$150 million from streaming company Franco-Nevada (TSX: FNV; NYSE: FNV) to develop Alpala. The move defied the wishes of Newcrest Mining (ASX: NCM), one of the company’s top investors, which had urged SolGold to raise funds via equity.
Cornerstone didn’t like the decision either. “The proposed Franco-Nevada royalty financing will significantly destroy shareholder value for all SolGold shareholders,” Chamandy said in his July 15 statement.
SolGold CEO Nick Mather has repeatedly said his team is building a company “as important to the development of Ecuador as BHP was to Australia.”
Over the past two years, Ecuador has attracted a flurry of interest from big miners looking to increase their exposure to copper. The highly conductive metal is in demand for use in renewable energy and electric vehicles, but big, new deposits are rare.
Diversified majors particularly favour large-scale, long-life projects, such as the one SolGold promises. BHP (NYSE: BHP; LSE: BHP) upped its stake in the company last year to 15.31% from 14.7%, becoming SolGold’s top shareholder.
The interest in SolGold by top global miners have triggered speculations of a potential takeover in the making.
Other than its flagship Alpala project in Ecuador, the company is exploring and assessing 75 regional concessions across 14 provinces in the South American country.
Ecuador aims to move from an explorer hotspot to a mining exporter. Its oil-led economy has been hit hard over the past few months.
The nation is reeling from both the spread of Covid-19 and the collapse of global oil prices.
Prior to recent developments, Ecuador expected to attract US$3.7 billion in mining investments between 2019 and 2020, up significantly from $270 million in 2018.