REG - SolGold PLC - Exploitation Agreement with Government of Ecuador

SolGoldAnnouncement

20/07/2023 07:00

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RNS Number : 5739G  SolGold PLC  20 July 2023

SolGold plc

("SolGold" or the "Company")

Announces Agreement with Government of Ecuador

 on Exploitation Agreement Terms and Conditions

 

The Board of Directors of SolGold (LSE & TSX: SOLG) is pleased to
announce that it has completed the contractual negotiations and agreed upon a
term sheet ("Term Sheet") in preparation for the execution of the Exploitation
Agreement ("Agreement") for the Cascabel Project ("Project"), its flagship
copper-gold project in Ecuador.

 

SolGold began exploration work at Cascabel in July 2011, leading to the
discovery of the Alpala and Tandayama America deposits on the Cascabel
Concession. Since January 2023, SolGold has been in discussions with the
Government of Ecuador to negotiate the terms and conditions of the
Exploitation Agreement for the Cascabel Project. The Exploitation Agreement,
coupled with existing legislations and regulations, establishes the legal and
financial terms and conditions required for the Cascabel Project's
development. The agreed Term Sheet, which has been approved by the Ecuadorian
Government, marks a pivotal step forward for the Project.

 

SolGold's CEO and President of SolGold Ecuador, Scott Caldwell, stated, "The
completion of the negotiations and execution of the Term Sheet of the
Exploitation Agreement for the Cascabel Project stands as a significant
milestone, reflecting our shared commitment to all stakeholders. SolGold
extends our sincere gratitude to the Government of Ecuador, regional
administrations and local communities for their invaluable collaboration and
support, each of whom has been instrumental in this momentous achievement.
This Agreement is a positive outcome and exemplifies our unwavering dedication
to working collaboratively with all our stakeholders."

 

Key Contract Terms

 

All monetary amounts stated below are references to United States Dollars.

 

·      SolGold plc, through its wholly owned subsidiary in Ecuador,
Exploraciones Novomining S.A. ("Mining Concessionaire"), has negotiated the
right to develop the Cascabel Project and produce copper, gold, and silver
from the contract area for 33 years, which may be renewed.

 

·      The Company and the Government of Ecuador have agreed to an
advance royalty payment totalling $75 million, with $25 million due upon the
concentrator construction start date. The remaining two payments, each of $25
million, will be made on the first and second anniversary, respectively, from
the date of the first payment. The advance royalty will be deductible against
the Government Royalty (defined below).

 

·      One of the key economic assumptions is that the Company expects
a reduced corporate income tax rate of 20% (previously 25%) during the
Project's life once the Government of Ecuador approves the amendment of the
Investment Protection Agreement. Based on this reduced corporate income tax
rate, the Mining Concessionaire, the State, and SolGold have agreed to
a variable royalty on net smelter revenues in accordance with Ecuadorian
Mining Law ("Government Royalty"). The applicable royalty rate follows the
progressivity criteria stated in the Mining Law, stipulating a variable
percentage rate from 3% to 8%. This rate is dependent on the type of mineral
and its price, as shown in Table 1: Royalty Rates. The royalty will be based
on net smelter returns received from the sales of copper, gold, silver, or
other marketable mineral products from the Project (for each mineral product,
respectively, "NSR Revenue").

 

According to the Mining Law in Ecuador, 60% of the revenue from the royalties
collected by the government will be allocated to productive and sustainable
projects through the municipal governments and parish councils of the
communities of the Cascabel Project. The Company expects these funds to make
an important contribution to local development in the area of influence.

 

Table 1: Royalty Rates

 

 Realized Copper Price (US$/lb)  Percentages applicable to

                                 Copper NSR Revenue
 Equal to or less than $3.00     3.0%
 From $3.01 to $3.50             4.0%
 From $3.51 to $4.00             5.0%
 From $4.01 to $4.50             6.0%
 From $4.51 to $5.00             7.0%
 Equal to or more than USD 5.01  8.0%

 

 Realized Gold Price (US$/oz)     Percentages applicable to

                                  Gold NSR Revenue
 Equal to or less than $1,400.00  3.0%
 From $1,400.01 to $1,600.00      4.0%
 From $1,600.01 to $1,800.00      5.0%
 From $1,800.01 to $2,000.00      6.0%
 From $2,000.01 to $2,200.00      7.0%
 Equal to or more than $2,200.01  8.0%

 

 Realized Silver Price (US$/oz  Percentages applicable to

                                Silver NSR Revenue
 Equal to or less than $20.00   3.0%
 From $20.01 to $22.50          4.0%
 From $22.51 to $25.00          5.0%
 From $25.01 to $27.50          6.0%
 From $27.51 to $30.00          7.0%
 Equal to or more than $30.01   8.0%

 

 

·      The advance royalty will be deductible against the lesser of 50%
of the royalties payable or 10% of the total advance royalty payment made
until the advance royalty is settled in full (calculated every six months once
the Government Royalty becomes payable).

 

·      According to current legislation, the Exploitation Agreement also
provides that the Government of Ecuador's share of cumulative discounted
benefits derived from SolGold's Cascabel Project will not be less than 50%.
Each year, to the extent that the Government of Ecuador's cumulative benefit
falls below 50%, the Company will be required to pay an annual sovereign
adjustment. The Government of Ecuador's benefit will be calculated as the
present value of the cumulative sum of taxes paid, including corporate income
taxes, royalties, labour profit sharing paid to the State, non-recoverable VAT
and any previous sovereign adjustment payments. To the knowledge of the
Company, no mining company operating in Ecuador with a similar sovereign
adjustment clause in its exploitation agreement has made a payment to the
government pursuant to such clause. Based on the economic assumptions included
in the Project's financial model, it is not expected that the Company will be
required to make any such payments after the commencement of commercial
production at the Cascabel Project.

 

·      The Term Sheet also includes a mechanism for correcting any
economic imbalance for the Mining Concessionaire as a result of changes in
taxes, laws and regulations in place at the date of the signing of this
Agreement. The provision removes a significant amount of uncertainty for the
economic regime governing the Project in the future.

 

·      The Term Sheet also develops various investor protection rights,
ensuring the protection of the investment including, among other things, a
dispute resolution mechanism through international arbitration.

 

·      The Mining Concessionaire will be solely responsible for making
pertinent technical and economic decisions in the design, construction and
operation of the Cascabel Project as specified in the Term Sheet.

 

In the following months, the Company must apply to change the SolGold
Project's official status from exploration phase to exploitation phase (the
"Phase Change Application"). The Company has up to six months after the
approval of the Phase Change Application to execute the Exploitation Agreement
with the Government of Ecuador. Once executed, the Exploitation Agreement is
required to be registered with the Mines Registry and will be made publicly
available on the Company's profile on the SEDAR website maintained by the
Canadian Securities Administrators at www.sedar.com (http://www.sedar.com/) .
(http://www.sedar.com/)

 

A conference call with a live webcast presentation to provide a market update
will be held on July 20, 2023, at 8:00 a.m. (EST), 1:00 p.m. (BST), and 10:00
p.m. (AEST).

 

Investors can register for SolGold's webcast on 6ix.com for free via the
following link:

https://my.6ix.com/2kg-oijy
(https://aus01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fmy.6ix.com%2F2kg-oijy&data=05%7C01%7Ccrobinson%40solgold.com.au%7Ce6efdc59c03442cca06608db83ed767d%7C6819bffc27b74d9eaacdc2a1f597f4fc%7C0%7C0%7C638248828160537540%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=5BSv41DjbXCf%2F8p9V19dluyMHHdZpu0%2FEF41pMwGvoI%3D&reserved=0)
 

 

The presentation is open to all existing and potential shareholders. The
presentation material will also be available on the day of the presentation
at: https://www.solgold.com.au/investors-center
(https://www.solgold.com.au/investors-center) .

This announcement was approved for release by Ryan Wilson - Company Secretary.

 

CONTACTS

 Scott Caldwell              Tel: +44 (0) 20 3807 6996

 Chief Executive Officer

 Tavistock (Media)           Tel: +44 (0) 20 7920 3150

 Jos Simson/Gareth Tredway

 

ABOUT SOLGOLD

SolGold is a leading resources company focused on the discovery, definition
and development of world-class copper and gold deposits and continues to
strive to deliver objectives efficiently and in the interests of shareholders.

The Company operates with transparency and in accordance with international
best practices. SolGold is committed to delivering value to its shareholders
while simultaneously providing economic and social benefits to impacted
communities, fostering a healthy and safe workplace, and minimizing the
environmental impact.

SolGold is listed on the London Stock Exchange and Toronto Stock Exchange
(LSE/TSX: SOLG).

See www.solgold.com.au (http://www.solgold.com.au) for more information.

 

CAUTIONARY NOTICE

News releases, presentations and public commentary made by SolGold plc (the
"Company") and its Officers may contain certain statements and expressions of
belief, expectation or opinion which are forward looking statements, and which
relate, inter alia, to interpretations of exploration results to date and the
Company's proposed strategy, plans and objectives or to the expectations or
intentions of the Company's Directors, including the plan for developing the
Project currently being studied as well as the expectations of the Company as
to the forward price of copper. Such forward-looking and interpretative
statements involve known and unknown risks, uncertainties and other important
factors beyond the control of the Company that could cause the actual
performance or achievements of the Company to be materially different from
such interpretations and forward-looking statements.

Accordingly, the reader should not rely on any interpretations or
forward-looking statements; and save as required by the exchange rules of the
TSX and LSE or by applicable laws, the Company does not accept any obligation
to disseminate any updates or revisions to such interpretations or
forward-looking statements. The Company may reinterpret results to date as the
status of its assets and projects changes with time expenditure, metals prices
and other affecting circumstances.

This release may contain "forward‑looking information". Forward‑looking
information includes, but is not limited to, statements regarding the
Company's plans for developing its properties. Generally, forward‑looking
information can be identified by the use of forward-looking terminology such
as "plans", "expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases or state
that certain actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved".

Forward‑looking information is subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of
activity, performance or achievements of the Company to be materially
different from those expressed or implied by such forward‑looking
information, including but not limited to: transaction risks; general
business, economic, competitive, political and social uncertainties; future
prices of mineral prices; accidents, labour disputes and shortages and other
risks of the mining industry. Although the Company has attempted to identify
important factors that could cause actual results to differ materially from
those contained in forward-looking information, there may be other factors
that cause results not to be as anticipated, estimated or intended.  There
can be no assurance that such information will prove to be accurate, as actual
results and future events could differ materially from those anticipated in
such statements. Factors that could cause actual results to differ materially
from such forward-looking information include, but are not limited to, risks
relating to the ability of exploration activities (including assay results) to
accurately predict mineralization; errors in management's geological modelling
and/or mine development plan; capital and operating costs varying
significantly from estimates; the preliminary nature of visual assessments;
delays in obtaining or failures to obtain required governmental, environmental
or other required approvals; uncertainties relating to the availability and
costs of financing needed in the future; changes in equity markets; inflation;
the global economic climate; fluctuations in commodity prices; the ability of
the Company to complete further exploration activities, including drilling;
delays in the development of projects; environmental risks; community and
non-governmental actions; other risks involved in the mineral exploration and
development industry; the ability of the Company to retain its key management
employees and skilled and experienced personnel; and those risks set out in
the Company's public documents filed on SEDAR at www.sedar.com
(http://www.sedar.com) . Accordingly, readers should not place undue reliance
on forward‑looking information. The Company does not undertake to update any
forward-looking information, except in accordance with applicable securities
laws.

The Company and its officers do not endorse, or reject or otherwise comment on
the conclusions, interpretations or views expressed in press articles or
third-party analysis.

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