Osisko Gold Royalties Ltd stated that it has agreed to a binding agreement with SolGold plc (SolGold) for a US$50 million royalty financing (Transaction) to fund the progress of SolGold’s Cascabel copper-gold property in northeastern Ecuador.
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The 4,979-hectare Cascabel property will be covered by a 0.6% net smelter return royalty (NSR) as a result of the Transaction, including SolGold’s renowned Alpala project, for which SolGold published the findings of a pre-feasibility study in April 2022 (PFS).
We are excited to partner with SolGold on one of the best copper-gold discoveries made over the last decade. We believe that Alpala has the potential to become a Tier-1 asset with a much longer mine life than currently envisaged.
Sandeep Singh, President and CEO, Osisko Gold Royalties Ltd
Sandeep Singh adds, “SolGold was a first mover in Ecuador and we view the broader Cascabel property as having the geological potential to support significant further discoveries. Osisko’s investment in SolGold adds yet another high-quality royalty to our portfolio of peer-leading growth.”
Investment Highlights
- Exceptional Royalty on one of the Most Significant Cu-Au Discoveries
- The NSR includes the Cascabel property, which encompasses 4,979 hectares of the Andean Copper Belt.
- Based on the PFS, the NSR might well average approximately 4,700 annual gold-equivalent ounces (GEOs) to Osisko over an initial 26-year mine life and 7,600 GEOs over the first 10-years of nameplate production.
- Total resources at Cascabel presently account for nearly 20% and 16% of the total copper and gold in new major deposit discoveries since 2012, respectively (as gathered by SolGold).
- Exposure to the Large-Scale Alpala Project
- The Alpala deposit is SolGold’s major focus on the broader Cascabel property. The PFS survey on Alpala described a sizable underground block cave mine with a preliminary 26-year mine life based on probable reserves (only 21% of total M&I tonnage inventory).
- Alpala is evaluated to produce an average of 132 kt Cu and 358 koz Au each year over the life of the mine with a higher annual production of 210 kt Cu and 829 koz Au.
- Alpala’s probable reserves encompass 3.3 Mt of Cu, 9.4 Moz of Au, and 30 Moz of Ag (558 Mt of 0.58% Cu, 0.52g/t Au, and 1.65g/t Ag).
- Alpala is anticipated to rank in the first decile in terms of production costs based on the PFS.
- Further Exploration Potential Within the Broader Property
- The PFS mine plan did not include an additional 2 billion tons of resources that could supplement production.
- The presence of regional targets on the Cascabel property that are similar in geophysical and geochemical characteristics to known mineralized porphyry clusters on the property.
- The presence of several prospective targets throughout the Cascabel concession in addition to the discovered Alpala and Tandayama-America deposits.
Transaction Details
- In exchange for the NSR, Osisko will pay SolGold an upfront cash payment of US$50 million.
- The NSR will serve as a life-of-mine instrument that covers the entire Cascabel property, including the Alpala project.
- Starting in 2030 and continuing through the end of 2039, Osisko will be entitled to minimum annual payments under the NSR of US$4 million.
- Osisko has committed to funding specific ESG activities for the project for three years.
- SolGold shall have a right to buydown one-third (1/3) of the NSR % for a period of four years.
- The closing of the transaction is subject to standard precedent conditions.
Alpala Project Overview
The Alpala deposit is the primary focus of the Cascabel concession, which is situated in the northern region of the abundant Andean Copper Belt. The project base is 800 m above sea level in northern Ecuador, about a three-hour drive north of Quito on the sealed roadway, close to water, hydroelectric power supply, and Pacific ports.
The Cascabel property is located on the southwestern edge of the Eocene and Miocene metallogenic belts, which are known for containing some of the world’s greatest porphyry copper and gold deposits.
According to the PFS, the mill will have a throughput of 25 Mt per year and will be fed by a block cave operation. The Alpala mine has the ability to have a very low carbon footprint due to its highly efficient mining technology, transportation of ore to the surface via conveyor belts, and accessibility to hydroelectric power.