Australia's top gold miner boosts bet on Ecuador copper project

Australia’s largest gold producer, Newcrest Mining (ASX: NCM) has upped its holdings in Ecuador-focused explorer SolGold (LON, TSX:SOLG), which is developing the promising Cascabel copper-gold project in the country’s north.

The deal further bolsters Newcrest’s position in SolGold against No.2 shareholder, BHP, as it raises its stake in the junior miner to 15.33% from 13.83%.

In September, BHP bought Guyana Goldfields’ 6.1% stake in SolGold for $35 million. It nearly doubled its stake the following month to 11.1%, triggering speculation of a potential takeover battle with Newcrest.

SolGold’s Cascabel copper-gold project, in Ecuador’s north, is one of the very few new ones expected to come online in the near future.

Miners are scrambling for copper amid forecasts that supply of the metal significantly outstrip supply from 2020, due to increasing demand for power generation and electric vehicles (there’s 300kg of copper in an electric bus and nine tonnes per windfarm megawatt).

The Cascabel project is one of the very few new ones expected to come online in the near future. According to Colin Hamilton, director of commodities research at BMO Capital Markets, the current copper pipeline is the lowest seen this century, both in terms of number and capacity.

“After delivery of Cobre Panama (with the main ramp early next year) we are left with a gap until we see the next batch of 200ktpa-plus projects in 2022-23. This is when the likes of Kamoa, Oyu Tolgoi Phase 2, and QB2 are likely to offer meaningful supply growth,” Hamilton said in April.

“Highly prospective” location

Ecuador has gained ground as a mining investment destination in the past two years thanks to a revised regulatory framework and a major investor engagement campaign that has already attracted around 420 applications for concessions in less than a year.

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BHP CEO Andrew Mackenzie himself said the investment allowed the world’s No. 1 mining company to tap into a “highly prospective” mining destination, partly given its relatively untapped reserves.

In March, another big miner, Anglo American (LON:AAL), landed in the South American country. Through a deal with Canadian gold junior Lumina Gold (TSX-V:LUM) (OTC:LUMAF), the company plans to develop two copper and gold concessions there.

Currently, the nation’s emerging mining sector employs 3,700 people, but the government estimates the figure will rise to about 16,000 by 2021.

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