SolGold mulling phased development of Cascabel copper mine

Ecuador-focused SolGold (LSE: SOLG) is considering a phased approach to the development of its flagship Cascabel copper-gold project in the Andean country as a way to reduce upfront capital and construction time.

The company, which merged last year with Cornerstone Capital Resources to consolidate 100% ownership of Cascabel, also said it had deferred the definitive feasibility study for the project and Porvenir’s preliminary economic assessment.

Porvenir is a copper-gold deposit located about 100 km north of the Ecuador-Peru border and 100 km south of the Fruta Del Norte deposit held by Lundin Gold (TSX: LUG).

The announcement, included in SolGold’s March quarter results, also said the company was negotiating access rights and ownership for the mine’s proposed tailings. All other project work will focus on obtaining permits and agreements to allow for development.

“SolGold plans to provide an update as the various value-adding options are evaluated and a clearer picture of the future direction of the studies and timeframes emerges,” the miner said.

SolGold approached Ecuador’s Ministry of Energy and Mines in August 2022 to begin negotiations for an exploitation agreement for Cascabel. 

The company says it expects the contract to be finalized before year-end.

SolGold noted that as part of the announced project evaluation, it is looking into a range of financing and strategic options to secure additional funding, including selling a direct or indirect stake in Cascabel, divesting other assets or other transactions.

The miner ended the quarter with a cash balance of $48.1 million plus $25.4 million of shares held. It said management expects current cash balances to last beyond June 2024.

Losing Newcrest

SolGold faces the possibility of losing Newcrest Mining (ASX: NCM), one of its top investors, within the next couple of years if Newmont (TSX: NGT; NYSE: NEM) succeeds in its takeover of the Australian miner and brings those assets into the fold.

Newmont said on Monday it would seek to generate $2 billion cash in portfolio savings, including selling non-core assets, with the transaction.

Newcrest’s 10.3% stake in SolGold could be one of the positions the U.S. gold giant may seek to divest.

The Cascabel project, located in the Imbabura province of northwest Ecuador, is one of the most ambitious mining projects in a country that is keen to develop mineral resources to spur its sluggish economy. 

According to the pre-feasibility study published in April last year, annual production will average 132,000 tonnes of copper, 358,000 oz. of gold and 1 million oz. of silver during Cascabel’s 55-year mine life.

This means the asset has the potential to become one of the 20 largest copper-gold mines in South America.

It’s estimated that the global copper industry needs to spend more than $100 billion to build mines able to close what could be an annual supply deficit of 4.7 million tonnes by 2030.