SolGold has signed a $US100 million ($155 million) agreement with Franco-Nevada Corp for the Alpala copper-gold project and the Cascabel license in northern Ecuador.
The net smelter returns (NSR) financing would see Franco-Nevada receive a perpetual 1 per cent NSR interest from SolGold from the first $US100 million deal.
The BHP and Newcrest-backed SolGold will also have the option to upsize the financing to $US150 million.
Concurrently, SolGold and Franco-Nevada formed a $US15 million bridge loan agreement for immediately available funds as an initial advance prior to closing the NSR financing agreement.
Franco-Nevada, which has indicated its interest in financing SolGold’s share of mine development at Alpala via a gold stream, will be entitled to receive certain minimum royalty payments of $US10 million from 2028.
SolGold expects Alpala’s gold-rich porphyry prospects to support up to $US1 billion of precious metal stream financing.
Franco-Nevada will have the right to appoint an observer to the Alpala project advisory committee, being in a position to advise the SolGold board on strategic, financial and technical project matters.
SolGold’s current largest shareholder BHP last year increased its hold in the company to 14.7 per cent last year.
BHP received over 19.25 million SolGold shares, which were exercisable until November 2024 at a price of 37 pence (70 cents) per share.
The mining giant also agreed not to discuss or collude with other shareholders about a change of control or acquisition of additional shares in SolGold without consent.
SolGold general manager, project and corporate finance Ingo Hofmaier said SolGold received a “broad range” of funding options before deciding to proceed with Franco-Nevada.
“The decision to proceed with Franco-Nevada is based on various factors, including the size of the investment, the permanent nature of its financing, Franco-Nevada’s understanding of Latin America and the competitive cost of capital,” Hofmaier said.
“With BHP, Newcrest and now Franco-Nevada having exposure to the project, there should be no doubt as to the quality of Alpala or Ecuador as a sovereign mining destination.”