DGR Global's Investment in SolGold Boosted by $750 Million Development Financing
DGR GLOBAL LIMITED (DGR) Share Update July 2024 Tuesday 16th
DGR Global's Stake in SolGold Set to Surge with $750M Financing Package
DGR Global Limited (ASX:DGR) has announced that its 6.6% stake in SolGold PLC is expected to see significant gains following SolGold's successful securing of a $750 million development financing package for its Cascabel copper-gold project in Ecuador.
Instant Summary:
- SolGold secures $750M financing package for Cascabel project.
- DGR Global holds a 6.6% stake in SolGold.
- SolGold's share price increased by more than 19% following the announcement.
- The financing package includes $100M in short-term funding and $650M for project development.
- The project has a net present value (NPV) of $3.2 billion and an after-tax rate of return of 24%.
Financing Details
SolGold PLC, in which DGR Global Limited holds a 6.6% stake, has entered into a gold-only streaming agreement with Franco-Nevada and Osisko Royalties. This agreement provides SolGold with $100 million in short-term funding to progress the Cascabel copper-gold project in Ecuador to final feasibility, permitting, and final investment decision stages. Additionally, a $650 million contribution will support project development.
The financing package validates the $3.2 billion net present value (NPV) and an after-tax rate of return of 24% for the Cascabel project, as outlined in SolGold's March 2024 Pre-Feasibility Study (PFS). The PFS adopts conservative metal prices of copper at $3.85/lb and gold at $1750/oz, with a staged development program starting at 12.5 Mtpa for a capital expenditure of $1.55 billion, ramping up to 24 Mtpa.
Project and Financial Impact
The short-term $100 million component will be delivered in three tranches, with the first third available upon signing and the remaining two-thirds tied to milestones within SolGold's control. Over the next 1-2 years, these funds will be used to secure necessary permits and complete the Final Definitive Feasibility Study, which may incorporate several potential upsides, such as improved metallurgical recoveries and the inclusion of the Tandayama Resource as an early-stage development component.
The financing package also includes a life-of-mine stream on gold only, with the syndicate receiving 20% of the gold recovered in concentrate until 750,000 ounces are delivered, after which the percentage drops to 12%. SolGold retains a strategic advantage with a buyback right on change of control over the stream for three years at 50%, then dropping to 33% for a further two years.
This financing package is a significant milestone for SolGold and DGR Global, as it secures a substantial portion of the required development capital for the Cascabel project. The low cost of capital at 9.2% and minimal impact on revenue streams at 5% highlight the attractiveness of this funding strategy. The announcement has already led to a more than 19% increase in SolGold's share price, reflecting investor confidence in the project's potential.
Investor Reaction:
Nick Mather, CEO of DGR and Non-Executive Director of SolGold, described the agreement as a 'spectacular milestone' that validates DGR's support for the project. Analysts have praised the financing package for its strategic flexibility and the minimal equity dilution it entails. Investors are optimistic about the project's potential, given the strong demand for copper and gold in the current market.
Conclusion:
Investors should closely monitor the progress of the Cascabel project and the milestones tied to the financing package. The successful advancement of the project could lead to significant returns for DGR Global and its shareholders. Staying informed on further developments will be crucial for making informed investment decisions.