SolGold saves $1bn in Cascabel upfront cost with phased mine development

Pre-production capital used for initial mine development, first process plant module and infrastructure is now estimated at $1.55 billion, compared to $2.75 billion from the PFS issued in April 2022.

The after-tax net present value, discounted at 8%, is $3.2 billion, with an internal rate of return of 24%. The gives the project a payback period of approximately 4 years from the start of processing. These economics are also improvements on those from 2022.

The 2024 study incorporated a phased block cave development strategy at Cascabel, which SolGold says can substantially reduce the initial capital expenditure and optimize project development by gradually scaling up operations. Post-production costs, however, will be higher at $2.57 billion.

The project will begin with a ramp-up period of approximately two years, following which the initial block cave will achieve a production rate of 12 million tonnes per annum, extracting high-grade ore averaging approximately 1.45% copper-equivalent for the first 10 years of production.

Mining operations will then double to a production rate of 24 million tonnes per annum in year 6. The Phase 2 mill expansion is expected to be entirely funded from project cash flow, SolGold said.

The current Cascabel mine plan reflects the profitable exploitation of only 18% of measured and indicated mineral resource at the Alpala deposit (3 million tonnes at 0.52% copper equivalent) through a 28-year mine life.

According to the company, the size of the entire resource indicates the mine’s potential to be a multi-generational mining asset, potentially one of the 20 largest copper-gold mines in South America. Mine construction is set to start in 2025.

However, investors have been skeptical of SolGold management’s ability to deliver the project to its potential. The company’s share price has halved over the past year, while miner has had to cut spending to stay afloat, prompting a strategic review of its assets.

In its most recent financial year, SolGold, which so far generates no revenue, swung to a much larger operating loss at $38.5 million from $21.4 million on the back of rising administrative costs. In its year-end release, the company said additional funding will be needed to continue its exploration and development programs.

In late 2022, SolGold raised $36 million through an equity investment by China’s Jiangxi Copper, after already netting $50 million in a royalty deal with Osisko Gold Royalties (TSX, NYSE: OR). However, those deals did little to assuage investor concerns and stop the stock decline.

On Friday, SolGold’s shares traded 4.3% higher at C$0.12 apiece as of 12:30 p.m. in Toronto, still at the lower end of the 52-week range of C$0.10 and C$0.38. Its market capitalization is C$378.6 million ($280.9m).