RE: bid16 Mar 2022 10:18
“ Once BHP and Newcrest take control, they are expected to buy out 50% of the royalty option awarded to Franco Nevada by former boss Nick Mather. They cannot acquire the remaining 50% under the terms of the royalty deal announced in September 2020.
The accord with Franco Nevada was derided at the time by the two majors as royalty deals involve surrendering a portion of future profits in exchange for development capital. Newcrest said it would have been better to have gone for an equity raise. The issue spilt into a period of infighting that was resolved when Mather stood down and Cuzzubbo took over.
For BHP, acquiring a much larger stake in SolGold makes sense. Despite talk of a mega-merger before too long, BHP is understood to be reluctant to buy at the top of the market and before its oil merger with Woodside is completed in the next few months. In the absence of immediate, big bang M&A action, Henry is likely to continue to seek out advanced exploration assets, and SolGold fits the bill. He views it as a relative rarity: there aren't many large-scale undeveloped copper assets up for grabs, from one side of the world to the other.
Henry knows he must diversify away from iron ore (about 60% of earnings) so he needs to get bigger in copper and nickel, and successfully add potash to the portfolio through the development of the Jansen project in Canada.
Ecuador has opened its doors to foreign miners in recent years in a bid to cut its reliance on oil and gas and leverage its position as a producer of metals critical for the energy transition. Gina Rinehart's Han**** Prospecting, Codelco, First Quantum, Southern Copper, Atico Mining Corp and Solaris are either on the ground or have acquired concessions, while Blackrock has emerged as a significant investor.
SolGold owes much to Mather, co-founder and driver of the project. He remains a non-executive director, a 3.96% shareholder and head of DGR Global, the ASX-listed project generator which speaks for more than 8% of SolGold's equity.
Mather has talked in the past about "not giving it away" when speaking speculatively about a potential bid from BHP and/or Newcrest.
We'll find out more precisely what he means soon enough”
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