SolGold (TSX:SOLG,LSE:SOLG,OTC Pink:SLGGF) has entered into a gold stream agreement with Franco-Nevada (TSX:FNV,NYSE:FNV) and Osisko Bermuda to secure US$750 million for its Cascabel project in Ecuador.
An initial deposit of US$100 million will be paid in three tranches, and will be allocated to de-risking, permitting and completing a feasibility study. The first tranche, consisting of US$33.4 million, is expected on Monday (July 15).
The second and third tranches, each set at US$33.3 million, are expected in 2025, and are contingent on specific conditions being met, such as finalizing an investment protection agreement and submitting permit applications.
A construction deposit of US$650 million will fund the project’s development, subject to milestones and approvals.
In exchange for the funding package, Franco-Nevada and Osisko Bermuda will receive 20 percent of Cascabel’s recovered gold in concentrate until 750,000 ounces are delivered, then 12 percent for the remainder of the mine’s life. They will make ongoing payments to SolGold equivalent to 20 percent of the spot gold price at the time each ounce is delivered.
The agreement includes a staged buyback option, allowing SolGold to reduce the gold stream by 50 percent within three years of the deal’s closing date, or by 33.33 percent until the fifth anniversary of the closing date.
According to SolGold, the financing package validates Cascabel’s potential as a world-class copper-gold project, and will contribute significantly to the estimated US$1.55 billion needed for its construction. A prefeasibility study released this past February projects an after-tax net present value of US$3.2 billion and an internal rate of return of 24 percent.
‘We are thrilled to finalize this transformative US$750 million gold stream with Franco-Nevada and Osisko. 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,” said SolGold CEO Scott Caldwell in the company’s press release.
SolGold’s next steps include geotechnical drilling of a tailings storage facility, metallurgical testing and securing land access rights in collaboration with the Ecuadorian government.
Shares of Solgold rose 18.75 percent on the TSX on Monday to close at C$0.19.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.