July 7, 2020 / 3:44 PM / a month ago

Newcrest Mining to explore options for its stake in SolGold: sources

LONDON (Reuters) - Australia’s Newcrest Mining Ltd (NCM.AX) has hired investment bank RBC Capital Markets to explore options for its 13.57% stake in gold and copper producer SolGold (SOLG.L), two sources said, after it contested SolGold’s latest fundraising initiative.

The Ecuador-focused company agreed in May a financing package of up to $150 million and a $15 million bridge loan for its Alpala project with streaming company Franco-Nevada (FNV.TO) defying Newcrest, which had urged it to raise funds via equity.

Australia’s biggest listed gold producer is seeking advice on its options for the stake it holds in SolGold, but no conclusion has been reached on whether to sell or buy more, two sources close to the matter said on condition of anonymity.

Gold XAU= deals are worth nearly $40 billion since the start of 2019, data from Refinitiv showed. The precious metal is at its highest in around eight years.

Copper is also in demand for renewable energy and electric vehicles and new deposits are rare and increasingly difficult to recover.

Newcrest declined to comment on the bank mandate.

It said it had withdrawn its director Craig Jones from Solgold’s board because of “management’s approach to funding the company”.

“The royalty transaction coupled with an expensive bridge loan could lead to a transfer of significant risk to existing SolGold shareholders,” Newcrest told Reuters in an email.

Canada’s RBC declined the comment.

“The funding ... to get to a development decision at Alpala will be mainly done using the Franco royalty deal because it is considerably less dilutive to all shareholders than deeply discounted equity proposals mooted by Newcrest,” SolGold Chief Executive Nick Mather said in an email to Reuters.

SolGold needs to secure more than $2.5 billion to complete its Alpala project, expected to start production of copper and gold in 2025.

Newcrest was supplanted as SolGold’s top shareholder when BHP, the world’s biggest miner, increased its stake to 15.31% in 2019. It is currently at 13.64% after a recent share placement.

BHP has a standstill agreement that runs out in October, which prevents it from buying new shares in SolGold.

Reporting by Clara Denina and Zandi Shabalala; editing by Barbara Lewis and David Evans

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