SolGold Strikes Gold and Copper
I’ve talked to people about PDAC and it seems Ecuador has opened the door to mining. I followed the Kinross Fruta del Norte saga for years. In the end they took a $720 million dollar write off and essentially gave the project to Lukas Lundin of Lundin Gold for $240 million. In typical Lundin fashion, the project has moved forward at rocket speed and a feasibility study is due in Q2 of 2016. Fruta del Norte has resources of about 10 million ounces of gold with 15 million ounces of silver and considerable upside potential.
I talked to someone today about the country that was very positive about the prospects for Ecuador to become a leading producer of both copper and gold given the new approach to foreign investment. The very famous David Lowell of Lowell Copper has filed for some gold rich copper porphyries in the south of the country.
David Lowell may as well have invented copper; he has so many discoveries under his belt including the world’s largest copper deposit in Chile called Escondida. Chile however is running short of water in the Atacama Desert. Lately Kinross has run afoul of regulators in Chile who want to shut down their Maricunga gold mine claiming that Kinross is removing subsurface water necessary for local farmers.
Ecuador has water, a lot of it. They have power and now it seems a more mining friendly government. I stumbled across a company that has one problem after another, all they have going for them is a boatload of copper and gold.
The company is named SolGold. It’s an Australian company. I hate Australian companies. While the country is rich in natural resources, it’s a socialist country founded on the backs of inmates and guards and I can’t tell you which are worse. But SolGold isn’t even an Australian listed company; they are listed on London’s AIM exchange. And that’s the only exchange I hate more than Australia.
Aussie companies love to issue billions and billions of shares. When I first started looking at SolGold, the shares were 3 pence. That’s it, 3 pence. What the hell is a pence? And they have the worst website ever. It looks like someone’s brother-in-law put it together. It’s terrible.
They have projects in the South Pacific and that’s fine, Aussie companies know the South Pacific. But they have a giant series of deposits in Ecuador which until recently was one of the worst places on earth to deal with the government. So SolGold had one strike after another strike after another strike. So why do you think I even looked at them?
Blue sky all the way to the moon and a management team headed by Nicholas Mather who just happens to own 9% of the shares. I love companies where management has a dog in the fight. Go through their recent presentation that they did for PDAC. On page 7 of the PDF they get to the heart of the matter and the reason I went out and scarfed up some shares. They are targeting 10 billion tonnes of 0.67% copper and 0.81 g/t gold. As I write, gold is $1226, copper is $2.21. That rock is worth $64.58 in the ground. So they are targeting $645.8 billion dollars worth of rock at their Cascabel project in Ecuador.
That’s not only a lot of copper; it’s a lot of gold and blue sky as well. What if they only find 1% of what they would like to find? Well, that would be $6.45 billion worth of copper and gold.
China and the world are in a state of flux. But we will need copper in the future and gold is always handy. Peru and Chile are getting harder to work in while Ecuador is getting more mining friendly.
SolGold has already announced simply incredible intercepts. Hole 12 had 1050 meters of 0.68% copper with 0.92 g/t gold. Hole 9 showed 772 meters of 0.80% copper with 1.19 g/t gold. Hole 5 had 0.66% copper and 0.89 g/t gold. The shares were as low as 1 pence at the first of the year. They seemed to have impressed someone at PDAC because the shares have shot up in the last month from 2 pence to a high of 4.84 pence before profit taking took over.
The company announced results from hole 14 today showing 768 meters of 0.50% copper and 0.45 g/t gold. While those results were not as barn burning as previous holes, they do show this is a giant system. The share price dropped in response and it might be a good time to be picking up shares.
You would have to look at the presentation I have linked above but from a technical point of view, this deposit seems to offer a very low cost way of mining called block caving. Underground mining is usually very expensive but when an ore body is pretty much vertical, the use of block caving can bring down mining costs to almost that of an open pit.
SolGold owns 85% of Cascabel. Cornerstone owns the other 15% and is listed in Canada. If you want shares of SolGold, you are going to have to buy through AIM and that’s difficult.
Here’s what SolGold needs to do. (1) Set a date for putting out a resource. Great holes all add up but until a company comes out with a resource, you won’t know what they add up to. (2) Get either a US listing or preferably a Canadian listing. Nobody buys mining stocks on the AIM no matter how great the potential. Any company needing money to drill off 10 billion tons of anything needs a lot of money. It isn’t in London, it’s in the US and Canada. (3) Burn down the website and start all over. It really is a mess and (4) Drill more and drill faster. This project has not only the potential to put SolGold on the map, it has the potential to put the country of Ecuador right up in the leaders of worldwide mining.
All of the information I have about SolGold came from the web. I have no financial or other relationship with them other than I have bought some shares in the open market. Do your own due diligence.