REG - SolGold PLC - US$750M Financing Package for the Cascabel Project

SolGoldAnnouncement

15/07/2024 07:00

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RNS Number : 3798W  SolGold PLC  15 July 2024

15 July 2024

 

SolGold plc

("SolGold" or the "Company")

US$750 Million Financing Package for the Cascabel Project

 

SolGold (LSE & TSX: SOLG) is pleased to announce that it has entered into
a syndicated gold stream agreement ("Agreement") with Franco-Nevada (Barbados)
Corporation ("Franco-Nevada") and Osisko Bermuda Limited ("Osisko") (together,
the "Syndicate") for the provision of US$750 million in project advancement
funding and a proportion of development funding ("Deposit") in exchange for a
percentage of the gold produced from the Cascabel Project ("Cascabel" or the
"Project").

The Deposit comprises two funding segments, of which Franco-Nevada and Osisko
will contribute 70% and 30%, respectively:

i)             the initial deposit ("Initial Deposit"): US$100
million paid over three tranches, a third of which is expected to be received
later today, allocated towards de-risking, permitting, completion of the
development funding package and completion of the feasibility study ("FS") on
the Project to take it to a Final Development Investment Decision, and

ii)            the construction deposit ("Construction Deposit") of
US$650 million to be contributed to funding the construction of the Project.

In exchange for the Deposit and ongoing payments to SolGold equivalent to 20%
of the spot gold price at the time, the Syndicate will receive an amount in
reference to 20% of the recovered gold in concentrate from Cascabel until
750,000 ounces of gold have been provided after which the percentage will
reduce to 12% for the life of the mine. At a time when global demand for
copper is expected to surge, the Agreement, which involves gold only,
preserves the revenue streams from the significant copper, silver, and a large
portion of the gold resources at Cascabel for SolGold and its shareholders
while also fulfilling SolGold's commitment to royalty holders, the Ecuadorian
Government, and stakeholders to advance the Project.

The Agreement includes a buyback option for five years following the closing
of the stream transaction, exercisable upon a change of control transaction of
SolGold, to reduce the stream by 50% within three years of the closing date of
the Agreement or by 33.33% thereafter until the fifth anniversary of the
closing date of the Agreement. This buyback option provides SolGold with
exceptional strategic flexibility.

Key Highlights

·    Validates Cascabel's position as a world-class copper-gold project

·    Represents a substantial contribution towards the estimated US$1.55
billion funding required for the construction of Cascabel, per the 2024 NI
43-101 Pre-Feasibility Study ("PFS") (See News Release of 16 February 2024:
Link (https://polaris.brighterir.com/public/solgold/news/rns/story/xze09lx) ),
while maintaining the first-quartile cost profile

·    Validates the 2024 PFS that demonstrates an after-tax NPV(8) of
US$3.2bn and an after-tax IRR of 24% based on a 4-year development period for
an initial 12 Mtpa operation ramping up to 24 Mtpa at conservative prices
(US$3.85/lb Cu and US$1,750/oz Au)

·    Competitive cost of capital at ~9% based on the 2024 PFS

·    Provides sufficient funds to advance the Project to a Final
Development Investment Decision, including completion of feasibility studies,
any required engineering studies, and financing completion

·    Enables the completion of the Project's environmental permitting
subject to process and government approval

·    Flexibility to reduce gold deliveries into the stream upon a change
of control via a buyback option

·    Significant due diligence and financial commitment from Franco-Nevada
and Osisko further confirm the extensive work completed by SolGold

·    Commitment by Franco-Nevada and Osisko to significantly support
environmental and community projects, reflecting their dedication to
sustainable development and social responsibility

Scott Caldwell, President and CEO of SolGold, remarked: "We are thrilled to
finalize this transformative US$750 million gold stream with Franco-Nevada and
Osisko. This Agreement not only secures a significant portion of the capital
required to fund the construction of Cascabel but also validates the vast
potential of the Cascabel Project. The US$100 million dedicated to de-risking
and technical work is crucial for the next steps in our project development.
We are committed to advancing our operations responsibly and efficiently, and
this partnership is a testament to our progress to date and the promising
future ahead. Finally, this major investment in Ecuador reflects the strong
support from the Ecuadorian government for the mining industry."

Paul Brink, President and CEO of Franco-Nevada, commented: "We are excited to
support SolGold in the development of their world-class Cascabel project. This
gold stream agreement aligns with our strategy to invest in high-quality
assets with significant growth potential. We believe SolGold's flagship
project will be amongst the next generation of large copper development
projects and will contribute meaningfully to our longer-term growth. We are
pleased to provide pre-construction funding to derisk project development and
project financing that provides a balance of funding certainty and financial
flexibility."

Jason Attew, President and CEO of Osisko Gold Royalties, commented: "Cascabel
represents one of the most significant copper-gold discoveries in recent
history. The project has the potential to become a world-class
multi-generational mine, demonstrated by the recent PFS estimating at least a
28-year mine life with numerous avenues for additional mine life extensions.
This new stream investment, which complements Osisko's existing royalty on the
project, will help to support the development of this exceptional asset and
enhance Osisko's long-term growth profile."

Summary of Agreement Terms

·    Initial Deposit: US$100 million, paid in three tranches, aimed at
further de-risking, defining and enhancing value-adding opportunities at
Cascabel, and completing financing activities and the feasibility study.
SolGold expects the three tranches of the Initial Deposit to provide
sufficient funds to advance the Project to a Final Development Investment
Decision. The required de-risking, engineering, financing, and permitting
activities are anticipated to take approximately 24 months to complete.

o  First Tranche: $33.4 million will be available to SolGold upon the
finalization of customary closing documents and is expected to be received
later today

o  Second Tranche: $33.3 million (expected in 2025) will be available upon
certain conditions precedent being met, including, but not limited to, the
execution of the amended investment protection agreement, completion of the
geotechnical drilling, and finalization of the tailings storage facility
("TSF") design sufficient for a minimum of 10 years of operation and prepared
in accordance with applicable requirements.

o  Third Tranche: $33.3 million (expected at the end of Q4 2025) to be
disbursed upon certain conditions precedent being met, including, but not
limited to, submission of all final permit applications for the construction
and operation of the Project and the TSF, and other necessary documentation.

·    Construction Deposit: US$650 million for Project development upon
certain conditions precedent having been met, including, but not limited to, a
board-approved Final Development Investment Decision and evidence of the
availability of all equity and other sources of funds for full funding to
completion. The deposit is payable in instalments upon achieving specific
milestones, permits, and approvals related to Project advancement and
construction.

·    Gold Deliveries: The Syndicate will receive an amount in reference to
20% of the recovered gold in concentrate from Cascabel until 750,000 ounces of
gold have been provided, after which the percentage will reduce to 12% for the
life of the mine. The Agreement only applies to the gold produced from the
Cascabel concession. Any production from other properties owned by SolGold
that is not processed through the Project mill or infrastructure is not
subject to the Agreement.

·    Production Payments: The Syndicate will make ongoing production
payments to SolGold equivalent to 20% of the spot gold price at the time for
each ounce of gold delivered to the Syndicate under the Agreement.

·    Change of Control Provisions: The Agreement includes a staged buyback
option upon a change of control transaction, which provides the option to
reduce the gold stream by 50% within three years of the closing date of the
Agreement and 33.33% thereafter until the fifth anniversary of the closing
date of the Agreement.

·    Loan Repayment: The previously disclosed US$10 million loan with
Franco-Nevada Corporation, maturing on 19 July 2024, will be repaid from
proceeds from the first tranche of the Initial Deposit.

Next Steps

SolGold plans to initiate the next phase of Project advancement immediately,
focusing on geotechnical drilling of the tailings storage facility, additional
metallurgical testing, reserves definition at the Tandayama-Ameríca deposit,
hydroelectric power opportunities, plant location, and mine site design and
layout, as well as securing necessary land access rights for infrastructure
and commencing work on the FS. Throughout this period, SolGold will work
closely with Franco-Nevada and Osisko to meet all agreed milestones and ensure
timely disbursements of funds to SolGold.

Additional Financing Sources

SolGold management continues to review additional funding options for Project
development to fully fund the US$1.55 billion required for the Cascabel
Project. These options may include, but are not limited to, funding from
international development banks and off-take agreements with smelting
companies.

Economic Impact, Community Engagement, and Government Support

The Cascabel Project represents the most significant investment in Ecuador's
mining history. It is expected to generate substantial economic benefits,
employment, and economic opportunities both on the Project and downstream. The
Ecuadorian government has shown strong support for the Cascabel Project,
recognising its potential to significantly boost the Ecuadorian economy. The
government's commitment to creating a favorable investment environment has
been crucial in advancing this historic investment.

SolGold is committed to sustainable development and will continue to engage
with local communities to ensure the Project delivers long-term positive
impacts. The support from the Ecuadorian government and the ongoing engagement
with local communities are essential components of the Project's success and
its positive contribution to the region.

Certain information contained in this announcement would have been deemed
inside information.

CONTACTS

 Scott Caldwell

 SolGold Plc (CEO)             Tel: +44 (0) 20 3807 6996

 Tavistock (Media)

 Jos Simson/Gareth Tredway     Tel: +44 (0) 20 7920 3150

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
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.
Follow us on "X" @SolGold plc

 

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.sedarplus.ca
(http://www.sedarplus.ca) . 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.

The Company recognises that the term World Class is subjective and for the
purpose of the Company's projects the Company considers the drilling results
at the Alpala porphyry copper-gold deposit at its Cascabel project to
represent intersections of a World Class deposit on the basis of comparisons
with other drilling intersections from World Class deposits, some of which
have become, or are becoming, producing mines and on the basis of available
independent opinions which may be referenced to define the term "World Class"
(or "Tier 1").

The Company considers that World Class deposits are rare, very large, long
life, low cost, and are responsible for approximately half of total global
metals production. World Class deposits are generally accepted as deposits of
a size and quality that create multiple expansion opportunities and have or
are likely to demonstrate robust economics that ensure development
irrespective of position within the global commodity cycles, or whether or not
the deposit has been fully drilled out, or a feasibility study completed.

Standards drawn from industry experts (1Singer and Menzie, 2010; 2Schodde,
2006; 3Schodde and Hronsky, 2006; 4Singer, 1995; 5Laznicka, 2010) have
characterised World Class deposits at prevailing commodity prices. The
relevant criteria for World Class deposits, adjusted to current long run
commodity prices, are considered to be those holding or likely to hold more
than 5 million tonnes of copper and/or more than 6 million ounces of gold with
a modelled net present value of greater than US$1billion.

The Company cautions that the Cascabel Project remains an early-stage project
at this time and there is inherent uncertainty relating to any project at
prior to the determination of pre-feasibility study and/or defined feasibility
study.

On this basis, reference to the Cascabel Project as "World Class" (or "Tier
1") is considered to be appropriate.

 

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