Equinox Gold to sell 10M Solaris shares

Growing gold miner Equinox Gold (TSX: EQX; NYSE: EQX) has announced that, in response to a request from Ecuador-focused explorer Solaris Resources (TSX: SLS), it has agreed to sell 10 million of the 27.8 million Solaris shares it currently holds at $8.25 a share. The miner will also grant the buyers, Augusta Investments (a B.C.-based corporation associated with Solaris chairman Richard Warke) and a strategic shareholder, warrants to purchase five million Solaris shares for a 12-month period at $10 a share.

Proceeds from the sale are estimated at $82.5 million, increasing to $132.5 million in the event that the warrants are exercised.

Christian Milau, Equinox Gold’s CEO, stated in press release that the proceeds are expected to “further strengthen Equinox Gold’s already solid balance sheet as we continue to execute on our expansion and growth objectives.”

After the sale, Equinox will hold 17.8 million Solaris shares, or 16.9% of the company. If the buyers warrants are exercised, this would decrease to 12.2%. The producer also owns warrants to acquire 10.3 million shares. After the sale, if both the buyers and Solaris exercise their warrants, Equinox’s Solaris stake would increase to about 20%.

Aerial view of Warintza. Credit: Solaris Resources

Equinox currrently owns 26% of the explorer, in addition to the 10.3 million warrants. The company recently announced the results of an expansion study for its Castle Mountain mine in California and increased its stake in the pre-production Hardrock project in Ontario to 60% from 50% previously.

Solaris’ flagship 268-sq.-km Warintza property in southeastern Ecuador features an open-pit copper-molybdenum-gold resource within a 5 km by 5 km cluster of outcropping porphyries and is 40 km north of the Mirador copper mine, held by a Chinese state-owned company. Solaris is part of the Augusta Group, that also includes Equinox Gold.

Mining analyst Kerry Smith, who covers Equinox Gold for Haywood Securities, described the partial sale of Solaris shares as “a nice win for Equinox, given their cost base was US$12 million for the entire position, although Solaris continues to drill off a very large copper porphyry system in Ecuador, and we expect this deposit will continue to grow.” 

“Equinox has moved from a non-producer in mid-2018 to a company with eight operating gold mines and a pipeline of growth projects today. The company is well on the way towards the goal of building a 1-million-ounce producer by the end of 2023.”

As for Solaris, Smith noted he believes that its chairman likely took the lion’s share.

“These shares were sold to Richard Warke, executive chairman of Solaris and one other “strategic buyer” and we expect Richard took the bulk of these shares,” he commented in a research note. “Once this sale closes, we will be able to confirm through regulatory filings how much Richard increased his holdings. Richard already owned 27,503,849 shares (26.1%) and continues to build his ownership in Solaris.”