Name of the Project
Alpala copper/gold/silver project.

Location
Northern Ecuador.

Project Owner/s
SolGold, which holds an 85% registered and beneficial interest in Exploraciones Novomining that, in turn, holds 100% of the Cascabel project.

Project Description
A preliminary economic assessment (PEA) has suggested that the Alpala copper/gold/silver deposit at the Cascabel project has the potential to support a large-scale, low-cost underground block cave mining operation – and associated processing and project infrastructure facilities – capable of sustaining commercial production over a mine life of more than 55 years, depending on the production scenario finally adopted.

Four production scenarios have been assessed. Case 1 involves a 40-million tonne-a-year mining operation with life-of-mine (LoM) of 66 years, and Case 2a involves a 50-million-tonne-a-year mining operation with a staged ramp-up and an LoM of 57 years.

Case 2b involves a 50-million-tonne-a-year operation with a fast production ramp-up and an LoM of five years, while Case 3 involves a 60-million-tonne-a-year mining operation with an LoM of 49 years.

The production rate scenario proposed for the base case is Case 2b.

The copper concentrator and gold recovery circuit proposed for Alpala is based on two parallel lines, with one line built for Phase 1 (ramp-up to 50% nameplate capacity) and a second line to reach 100% nameplate capacity in the case of the 40-million-tonne-a-year and 50-million-tonne-a-year mine production scenarios. Three parallel modules are considered for the 60-million-tonne-a-year scenario.

Metallurgical recoveries to the chalcopyrite copper concentrate for the first 30 years of operation are estimated at between 93.9% and 87.1% for copper, and between 85.4% (high grade) and 49.4% (lowgrade) for gold (50-million tonnes a year in staged ramp-up), depending on mill feed grades.

Based on the Case 2b scenario, the yearly metal production average for the first 25 years is estimated at 207 000 t of copper, 438 000 oz of gold and 1.4-million ounces of silver in concentrate.

The project will produce high-quality concentrates – 28.2% copper, 22.1 g/t gold and 65.7 g/t silver, which should deliver a sales premium for the concentrates.

Potential Job Creation
Not stated.

All-in Sustaining Costs/All-in Costs
Not stated.

Net Present Value/Internal Rate of Return
The project has an after-tax net present value, at an 8% discount rate, from $4.1-billion to $4.5-billion, and an internal rate of return ranging from 24.8% to 26.5%, depending on the production rate scenario.

Payback on initial startup capital ranges from 3.5 years to 3.8 years after the start of construction, depending on the production-rate scenario.

Capital Expenditure
Capital cost estimates for the four cases assessed range from $2.4-billion to $2.8-billion.

Planned Start/End Date
Not stated.

Latest Developments
SolGold has secured a royalty financing package for the Alpala project with Toronto-headquartered royalty and streamlining company Franco Nevada, paving the way for the “rapid advancement” of the copper/gold project.

The package consists of a $100-million net smelter returns NSRs financing agreement, with an option to upsize the financing to $150-million at SolGold’s election.

Concurrently with the financing agreement, SolGold and Franco-Nevada have entered into a $15-million secured bridge loan agreement, which is immediately available.

Franco-Nevada joins other majors with exposure to the Alpala project, including BHP and Newcrest. This underscores the confidence that large organisations have in the quality of the project and Ecuador as a sovereign mining destination, SolGold has said.

SolGold will use the proceeds of the NSRs financing to fund the costs to complete the feasibility study. Any surplus will be used for its share of the development of Alpala pursuant to agreements with the minority shareholder of ENSA, TSX-V-listed Cornerstone Capital Resources.

Cornerstone's share to completion of the feasibility study of Alpala is debt-funded by SolGold. Cornerstone must contribute to all expenses and capital costs after the feasibility study.

If Cornerstone's equity stake in ENSA is diluted below 10%, its equity stake will be converted to a 0.5% NSR, which SolGold can then acquire for $3.5-million at any time. Currently, Cornerstone's indebtedness to SolGold is $30.5-million. The latest budget indicates that this liability is expected to reach $52-million in the period to completion of the feasibility study.

Meanwhile, Franco-Nevada has agreed to contribute $150 000 for three years towards environmental and social initiatives in Ecuador in the direct zone of influence of the Alpala project through joint projects.

SolGold's field operations are currently on care and maintenance, owing to Covid-19 physical distance rules and respect for communities in the area, to reduce the potential transmission of the virus.

The Ecuadorian mining authorities have requested the company's plans for reactivation of operations, pending the full agreement from local county authorities.

Franco-Nevada and SolGold have each received all required corporate approvals for entering into the transactions.

Key Contracts and Suppliers
Wood (minerals processing, materials handling and project infrastructure components of the study); SRK Consulting (resource estimation), SRK Exploration Services (geology), Mining Plus (geotechnical, hydrogeology and mine planning), Knight Píesold (environmental and community studies), and EY (economic analysis).

Contact Details for Project Information
SolGold, tel +61 7 3303 0660 and email info@solgold.com.au.