Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Thank you for posting those extracts.
KB,good Rae there many thanks I see copper/gold/silver still moving bodes well for solg imho
Projects often go terribly wrong if they rely too heavily on expats who are detached from on-the-ground realities and subject to rotation.
When people are on rotation and off-site for too long, work streams don’t advance and often go backwards. If our employees live in the influence zone and a firm employs predominantly a local work force, an organisation has made a big step towards effective decision-making, increasing the chances of success. We want employees who are financially and emotionally invested in our projects. Being a good corporate citizen is the most effective insurance policy one can have.
The next step for Solgold is to become compliant with the UN Equator Principles and the IFC Performance standards, viewed as a foundation for a successful project finance package.
SolGold made a name for itself through exploration and in addition to Cascabel has one of the largest exploration property packages in Ecuador. With Cascabel moving towards development, the company faces the challenge of advancing a major mine development project while simultaneously continuing with one of the most aggressive frontier exploration programmes in the world. Regional exploration is continuing to deliver the goods such as the recently announced Blanca discovery, but will the competing forces of development and exploration pull the company in opposing directions or cause it to lose focus?
To some investors we are a mine development story, with Alpala the largest independent potential mine out there, for others we are still very much an explorer, with some high-quality gold but also highly attractive copper porphyry exploration targets, Mather said.
It is getting harder to communicate the value proposition with many competing high-quality assets at varying stages of evolution in our portfolio. The market isn’t giving us much credit for the wider exploration licences in Ecuador, but discussions with strategic investors make it very apparent, that that’s where they see the value too. The regional portfolio comprises 75 licences covering the length and breadth of the country.
This allows us to prioritise targets and move on if we realise the prospectivity is not as expected, ergo no money wasted. Our discovery costs are $1.40 per gold equivalent ounce, which speaks for itself. The synergies we have are enormous based on years of on-the-ground experience and working closely with local communities, which created a lot of goodwill. Consequently, we have no interest in farming-out projects and giving away the upside but spinning them out and finding investors supportive of a particular situation is a topic we are considering carefully.
The goodwill Mather talks about could be the company’s greatest asset. The success of FDN can largely be attributed to the profound social impact and engagement Lundin Gold has had in the region and the extensive regional development programmes it has instigated. SolGold is doing something very similar. We had no interruptions during the recent civil unrest, said Mather.In fact, the message we received from local communities was that the biggest risk to them is for SolGold to leave. An organisation needs to be in touch and integrated with the local communities. Projects often go terribly wrong if they rely too heavily on expats who are detached from on-the-ground realities and subject to rotation.
During LME week, and at the ACW (Asian Copper Week) in Shanghai this year, we were able to meet with the globally significant smelters and traders which can be expected to compete for production from Alpala. The reception was overwhelmingly positive, with the low-cost production and long mine life of Alpala proving a particularly attractive feature for smelters concerned with securing long-term supply. The very low deleterious content of our concentrate allows smelters and traders to be able to blend with more complex supplies and improve the overall economics of their raw material supply chain. The high gold content of the concentrate is an additional economic driver for most western smelters, as they profit from the highly efficient recovery processes that give them a vital edge in competing against state-owned rivals in China.
Hofmaier is an investment banker and former Rio Tinto executive who joined the company in July.
The concentrate market conditions could also help resolve one of the main doubts some observers have over whether SolGold can fund a $2.8 billion construction. Asian companies are happy with long-term asset level investment, Hofmaier said, referring to the fact that Japanese companies in particular often provide 20-30% of project capex to secure concentrate offtake.
With strategic investments from BHP and Newcrest, many observers doubt whether it will be SolGold building Cascabel, but the company is gearing up for that eventuality.
2020 is a transition year for SolGold as it seeks to further strengthen its expertise in construction, mining and mining related infrastructure, required to develop Alpala. We are actively assembling a formidable team familiar with the technical aspects of block caving; the low-cost mass mining method that we expect to utilise. Assets like this are rare and we would expect to attract the brightest minds in the business, keen to be associated with the development of such an outstanding project, said Hofmaier
BHP for one continues to be attracted and recently invested another $22 million to increase its stake to 14.7%.
The two companies agreed a secondment programme, which will allow us to invite experienced personnel from BHP’s ranks into our organisation for extended periods of time to strengthen our operations team, Hofmaier said.
Both sides can be expected to benefit from such an exchange, in engineering, exploration, ESG and during engagement with the government on the fiscal package. Our social license to operate is vital to the success of the project and we are keen to exchange best practice ideas with BHP in areas of environmental and social initiatives. We should be clear that this is an exchange programme with BHP, allowing us to benefit from the experience, network and knowledge of the world’s largest miner. It is not a joint venture.
For Mather, transitioning from a junior explorer with no mine building experience into a large-scale miner via the financing and development of a multi-billion dollar blockcave mining operation seems to be the most natural thing in the world. So far, there has been little evidence to shake the faith in that possibility.
Next year is likely to be the defining year for SolGold and Cascabel with a pre-feasibility study due, as well as negotiation of an investment agreement with the government and concluding concentrate offtake agreements, as well as another funding round. Prior to these, the company aims to publish an updated mineral resource estimate before year
The successful development of Lundin Gold’s Fruta del Norte gold project, which has just entered into production, will smooth some of the turbulence that the company might otherwise have faced, principally as it established a pathway to negotiating investment agreements with the government.
SolGold is currently completing the economic impact assessment for Alpala, supported by Wood Mackenzie, to gain insights on how the development of Alpala will benefit Ecuadorian stakeholders, Mather told Mining Journal, on the conclusions from our preliminary economic assessment, this will look at the economic outlook of the country, the drivers of exports, direct and indirect employment gains linked to our project, the tax take for local and central governments via royalties and direct and indirect taxes, as well as intangible benefits from initiatives that SolGold has put in place to assist small business development opportunities, and improve the skills base for the surrounding populace.
We expect the output from this study to form the basis for a fiscal model on which SolGold and the government can begin informed discussions on Alpala.
Lundin Gold has an investment agreement in place which established a framework for such negotiations, though a final agreement will need to accommodate the benefits that are forthcoming from larger projects such as Alpala.
Wood Mackenzie has many years experience advising the government in Ecuador, particularly on the fiscal regime for the mining and petroleum sectors. It was also instrumental in the FDN contract negotiation, creating the mechanism used for the controversial sovereign adjustment and now defunct windfall tax.
SolGold is getting a jump start to the concentrate contract negotiation process, getting the ball rolling at the LME (London Metals Exchange) Week in late October, with Hofmaier bullish that the company has an advantageous bargaining position given Freeport-McMoRan will begin construction of a copper smelter at its Grasberg mine in Indonesia in 2020, which will limit concentrate exports post 2023.
Alpala will produce an exceptionally clean concentrate, highly attractive to most western smelters as a replacement for production from Freeport’s giant Grasberg mine Hofmaier said.
https://www.mining-journal.com/gold-and-silver-news/news/1376843/2020-defining-year-for-solgold