BHP Billiton PLC (LON:BLT) is likely to come back in with a better offer for SolGold PLC’s (LON:SOLG) Cascabel copper-gold project, according to broker SP Angel.
SolGold shares advanced more than 20% on Monday after it rejected a proposal from the FTSE 100 mining firm that put US$305mln on the table to take control of the project in Ecuador.
Billiton offered US$30mln to take a 10% equity stake in AIM-quoted SolGold, which is the equivalent of 22 US cents per share, and proposed to spend US$275mln on the project in order to earn 70% of the project.
It wasn’t a good enough offer according to SolGold’s board, which previously had backed a proposal from Newcrest Mining and Maxit Capital that would see it receive US$33mln in return for just over 14% of the company, at an equivalent price of 16 US cents per share.
“The BHP proposal would give SolGold less money albeit at a better price,” SP Angel noted.
The broker added: “The tangible interest of a second major mining company in the Cascabel project draws attention to the quality of the project and underlines the potential of the wider licence area at Cascabel, which provides the potential scale to be of interest to the likes of BHP Billiton.
“Unless the motions to approve the Maxit and Newcrest transactions are withdrawn, which currently seems unlikely given the current board stance, shareholders are to be given the opportunity to consider them at a general meeting on 13th October.”
“We await BHP Billiton’s response to this initial rebuttal with interest and reckon there is a good chance BHP might return with an improved proposal.”
SoldGold shares rose as high as 20.37p on Monday, and at around 13:00 were up 19% at 19.80p (around 24.5 US cents).
Nick Mather, SolGold executive director, in a 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.”
“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."