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The diversified mining company will own the majority stake in multiple copper projects once this deal goes through.
Global miner BHP (ASX:BHP,NYSE:BHP,LSE:BLT) will purchase 77 million shares of SolGold (TSX:SOLG,LSE:SOLG) for US$21.9 million, making BHP the company’s largest shareholder.
This transaction would render BHP the majority stake in the Brisbane-based miner, and by extension the Cascabel copper-gold project in Ecuador. The Cascabel project has been the jewel of SolGold’s assets, with the company boasting it has the potential to become one of the largest sources of copper in the world.
According to previous feasibility studies, Cascabel will produce 207,000 metric tons of copper per year in its first 25 years of operation, a number which lands it squarely among the top 20 copper mines globally. The mine is also expected to produce 438,000 ounces of gold and 1.4 million ounces of silver.
The deal would see BHP raise its interest in SolGold to 14.7 percent from 11.1 percent by buying 77 million new shares in SolGold for 22.15 pence each. This represents a 13.1 percent premium to SolGold’s last close of 19.58 pence on Friday (November 22). The giant miner will also have options to buy more than 19.25 million SolGold shares in the next five years at a price of 37 pence per share.
BHP owns and operates four copper mines in Chile and Southern Australia. In Chile, BHP operates the Cerro Colorado mine, the Spence mine and the Escondida mine, the world’s largest copper mine. In Southern Australia, BHP operates the Olympic Dam mine.
In recent months, BHP has made news for its focus on renewable energy at its Chilean copper projects; the company expects to reach its goal by the mid 2020s. The company also hopes to become water secure within that same time frame.
This additional focus on copper comes as analysts forecast an incoming boom for the red metal as electrification and electric vehicles take off. According to analysts at Wood Mackenzie, electric vehicle copper consumption will grow by 250 percent by 2030.
SolGold’s share price has struggled this year, with the company’s stock decreasing by 38.46 percent since January. From March 22 to 25, SolGold traded at a high of C$0.72. BHP’s share price has increased by 5.4 percent since the beginning of 2019, although it did lose some of the heat it picked up during the summer.
On Monday (November 25), BHP’s share price closed up 1.09 percent at US$51.40 in New York. Meanwhile, SolGold’s share price closed up 10.57 percent in London at GBX 21.65. Copper on the London Metal Exchange traded for US$5,833.50 per metric ton on November 22.
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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.
