El Salvador president proposes bill to overturn metals mining ban
In 2017, El Salvador became the first country in the world to ban forms of metals mining.
Shares in Ecuador-focused SolGold (LON, TSX: SOLG) shot up 6% on Thursday after the company announced the signing of an exploitation contract for the Cascabel project, its flagship copper-gold asset in the Andean country.
The document and existing regulations establish the legal and financial terms and conditions required for the development of Cascabel.
Among the key items, the contract guarantees the Ecuadorian government at least a 50% share of the project’s cumulative benefits and grants SolGold the rights to mine for 33 years, with provisions for investor autonomy and protection.
SolGold will make a total of $75 million royalty payments, with $25 million due at starts of construction, which is set to start in 2025.
Once the government approves the new Investment Protection Agreement, the company expects a corporate income tax rate of 20% during the Cascabel mine’s life.
The royalty on net smelter revenues will follow a variable percentage rate from 3% to 8%, depending on the type of mineral and its price.
“The Government of Ecuador supports the Cascabel Project, which will bring substantial long-term benefits to our country’s economy and local communities through significant investment, job creation, and sustainable growth,” Diego Ocampo, vice minister of mines, said in the statement.
The news follows the Australian company’s commitment to invest $3.2 billion in the project, which would be the largest mining investment in Ecuador’s history, and a loan of $10 million granted to SoldGold in May.
SolGold began its exploration at Cascabel in 2012, which led to the significant discovery at Alpala in early 2014, followed by the identification of the Tandayama-Ameríca deposit in subsequent drilling programs.
The company released in February a new pre-feasibility study (PFS) for Cascabel in which it managed to slash upfront costs. Pre-production capital used for initial mine development, first process plant module and infrastructure is now estimated at $1.55 billion, compared to $2.75 billion from the PFS issued in April 2022.
According to SolGold, the size of the entire resource indicates the mine’s potential to be a multi-generational asset, potentially one of the 20 largest copper-gold mines in South America.
Investors have been skeptical of SolGold management’s ability to deliver the project to its potential. The company’s share price has halved over the past year, while the miner has had to cut spending to stay afloat, prompting a strategic review of its assets.
SolGold’s shares were trading 2.5% higher in London mid-afternoon to 9.3p, leaving the company with a market capitalization of £279 million (about $356m).
