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SolGold: will Ecuador project need further financing beyond $100m cash pile?


SolGold (LON:SOLG) has reported higher losses for its FY ending 30 June, against its 2020 financial year. Shares have slumped recently from a recent peak at around the 30.5 level and were priced at 27 at time of writing. Volumes have been trending down since Q1 of this year, however.

The gold miner reported a loss of $22.89m versus $14.2m in fiscal 2020. Significantly, we note that SolGold is keeping cash in hand of $109.6m. Despite investor loyalty, however, SolGold still has to generate some revenues from its operations. It still looks very much like an exploration play, but one with some interesting assets in hand.

The company also told investors that it was likely to be raising more funds in the next 12 months.

SolGold shares are well off their 52 week high at 43.9 and showing little sign of getting back there. They went through a big sell off in January which saw the price breach the 20p level. That has since been rectified with a more recent peak in the share price achieved in May at around 35.25.

Plenty of cash on SolGold balance sheet

Despite the poorer numbers, the miner does have a big cash reserve ($110m) and seems to have the financial wherewithal to push forward with the more promising projects in its portfolio. It also has big long term shareholders from within the mining industry who seem happier to stick it out for the longer term.

SolGold has a number of mining projects under its belt: it has 13 priority projects in Ecuador at the exploration stage, plus some ongoing exploration projects in Australia (tenements in central and southeast Queensland).

The jewel in the SolGold crown at the moment is the Alpala deposit in the Cascabel concession. This is located in the Andean copper belt in Ecuador, recognisably one of the more fruitful copper mining zones in South America.

Last month SolGold announced an update on its Tandayama-America porphyry copper-gold project, which is 3km north of its Alpala deposit. This included 1010m at 0.55% CuEq with 0.93% CuEq at 392m and 1.09% CuEq at 132m.

Head of Exploration Jason Ward said the drilling results and preliminary work using Leapfrog GEO and EDGE software supported what he called “a prospective bi-modal resource that appears amenable to both bulk surface mining methods as well as bulk underground mining methods.

Hatchet buried with Cornerstone Capital Resources

Last time we covered SolGold in detail, we noted that it was at odds with Cornerstone Capital Resources, which owned 20% (directly and indirectly) of the Alpala deposit and 8% of SolGold. There were disagreements over how the Alpala project should be developed. SolGold also mounted a hostile takeover of Cornerstone in October 2020.

It is therefore gratifying to note that this particular hatchet was buried in June. Both companies said they would “work cooperatively” to advance the Cascabel project, including the evaluation of strategic and financing options. This peace treaty seems to be holding, which is good news for investors at least.

SolGold has an annual shareholders meeting scheduled for 17 December.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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