Mining heavyweight BHP Billiton plc (LON:BLT) has taken a shine to SolGold plc (LON:SOLG) and its Cascabel project in Ecuador.
The Anglo-American FTSE 100 heavyweight has offered to take a 10% stake in Brisbane-based SolGold at US$0.22 a share, which comfortably tops an offer on the table from Maxit Capital pitched at 16 cents a share, which in turn was twice the amount Australian gold major Newcrest (ASX:NCM) had offered for a piece of SolGold.
Even so, SolGold’s board has rejected BHP’s proposals.
BHP’s US$30mln offer comes with strings attached, in the form of the right to appoint a director to the board of SolGold, but it is also proposing to sweeten the pot further by spending US$275mln to acquire 70% of SolGold’s 85% interest in Exploraciones Novomining (ENSA), the company that owns the mining rights to the Cascabel project tenements.
The news sent SolGold’s shares racing to 19.25p in the first hour of trading in London, though they subsequently ebbed to 18.35p, up 10.4% on the day.
It is worth noting that BHP’s proposed cash injection is subjection to a number of conditions, such as completion of due diligence and the SolGold board agreeing to row Maxit and Newcrest out of the picture. The latter looks unlikely, as SolGold’s board expressed the view that BHP’s proposal is not superior to the previously announced US$33mln financing with Maxit and Newcrest.
“When all of the elements of the BHP Proposal are taken into account, the BHP proposal implies an attributable price paid to SolGold and in respect of the Cascabel project that is at a significant discount to the current trading price of SolGold and the US$33 million financing with Maxit and Newcrest,” SolGold’s statement said.
"We are very pleased to see BHP join a growing list of international mining companies that are interested in investing in SolGold; however, the current US$33 million financing with Maxit and Newcrest is the preferred option at this time as it leaves us in control of this very exciting project at Cascabel,” said SolGold executive director Nick Mather.
“There is considerable upside in the additional 13 targets as well as the existing and growing Alpala deposit. We have developed the exploration models and strategies to an advanced level, we are well funded and we are intent on delivering and retaining that upside substantially, for all SolGold shareholders," Mather said.