BHP to Boost SolGold Stake as Part of Copper Strategy

Through a subscription agreement, BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) has begun the process of bumping its stake in SolGold (TSX:SOLG,LSE:SOLG) from 6.1 percent to 11.2 percent.

The agreement entails SolGold issuing 100 million shares to BHP, with BHP paying 45 pence per share. That represents a 32-percent premium to the 20-day volume-weighted average London Stock Exchange price as of Monday (October 15). The private placement is set to be completed this Friday (October 19).

SolGold is the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador, and BHP’s move is part of the company’s plan to build its exposure to copper.

“Ecuador is a highly prospective region for the next generation of copper supply,” Danny Malchuk, BHP’s president, Minerals Americas, said in a statement.

“This additional investment in SolGold strengthens our strategic position in the Cascabel copper exploration project, and is consistent with BHP’s strategy to replenish our copper resource base and grow the business,” he added.

As an additional part of the agreement, BHP will not acquire any more shares in SolGold for two years without SolGold’s consent. Further, BHP has the right to nominate a director to the SolGold board.

BHP gained its first interest in SolGold in early September, when it acquired its 6.1-percent stake from Guyana Goldfields (TSX:GUY) for approximately US$35 million.

At the time of that acquisition, CEO Andrew Mackenzie spoke about BHP’s “positive long-term outlook” for copper, saying that copper is a key exploration focus for the company.

Cascabel, the flagship project at the center of BHP’s SolGold fever, is located in Northwest Ecuador’s Imbabura province and features a cluster of targets referred to as Alpala.

The deposit’s maiden mineral resource estimate, published in January, came in at 1.08 billion tonnes at 0.68 percent copper equivalent across both indicated and inferred classifications. This includes contained metal content of 5.2 million tonnes of copper and 12.3 million ounces of gold.

SolGold’s share price was up 14.75 percent on the TSX on close of day Tuesday (October 16) at C$0.70.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.