Start again16 Oct 2018 10:55
Oct 16 2018 at 5:54 PM
Updated 52 mins ago
SolGold buys time as BHP pays up for second bite
Nick Mather has brought SolGold out of the shadows in recent months. Nic Walker
by Peter Ker
SolGold managing director Nicholas Mather pushed for a two-year freeze on BHP buying further shares in his copper explorer in a bid to ensure the $1.1 billion takeover target was not "vulnerable to opportunistic advances" from the multinational miner.
The two-year freeze was a condition of a private placement agreement that will see BHP pay a 30 per cent premium to market prices this week for an extra 5 per cent of SolGold, whose copper and gold acreage in Ecuador has drawn the attention of the world's biggest miners.
The £45 million ($82.9 million) transaction will be BHP's second raid on the SolGold register in the space of six weeks, and will grow BHP's stake from 6 per cent to 11 per cent at a 120 per cent premium to SolGold's closing share price on September 3.
The repeat raids have seen SolGold's valuation soar beyond $1.1 billion, as investors speculate that BHP is positioning for a bidding war against SolGold's largest shareholder Newcrest Mining, which owns 14.5 per cent.
Mr Mather said the two-year freeze on BHP could be relaxed in certain circumstances, but was designed to allow the explorer to prove the true value of its Cascabel tenement in northern Ecuador.
"We want to make sure we reveal Cascabel in all its glory first before we get jumped on opportunistically. They can always negotiate something with us and do it quicker but it needs to be negotiated," he said.
BHP has also agreed to support SolGold capital raisings and change of control transactions, so long as 60 per cent of SolGold shareholders are in favour.
"It means that they can't just use their position as a blocking stake," said Mr Mather.
Newcrest is not bound by any share purchase freeze, but has also agreed to support change of control transactions if independently recommended.
'Dangerously undervalued'
SolGold has 12 drill rigs working at Cascabel currently, and Mr Mather said more drilling results were expected to be published before Christmas.
When asked if SolGold was doing private placements with any other shareholders, Mr Mather said "it is just [BHP] at the moment".
"I imagine the premium [paid by BHP] is challenging for some people but in my view people need to look at SolGold from a value point of view, not a price point of view. It is still dangerously undervalued," he said.
Newcrest and BHP first revealed their interest in SolGold in October 2016, but the explorer opted to accept Newcrest's offer of buying 10 per cent of its shares, partly because SolGold management believed Newcrest's experience in block caving made them the ideal partner for the particular type of geology present in Ecuador.
Many of the world's biggest miners have since flocked to Ecuador to explore for copper, including Chilean copper giant CODELCO an
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