Dual-listed SolGold has signed an exploitation contract for its flagship Cascabel copper and gold project, in Ecuador.

The signing follows successful contractual negotiations and approval of the term sheet by the Ecuador government in July last year.

The contract establishes the legal and financial terms and conditions required for the development of the copper and gold mine.

The key terms state that the government’s share of cumulative discounted benefits derived from the project will be at least 50%. SolGold will make an advance royalty payment totalling $75-million, with the first payment of $25-million due upon the contractor construction start date.

Once the government approves the new Investment Protection Agreement, the company expects a corporate income tax rate of 20% during the project's life. Based on this corporate income tax rate, the mining concessionaire, the State, and SolGold have agreed to a variable royalty on net smelter revenues by Ecuadorian Mining Law. 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.

Mines Vice Minister Diego Ocampo said the government supported the Cascabel project, which would bring substantial long-term benefits to the country's economy and local communities.

SolGold CEO and president Scott Caldwell described the signing of the contract as a landmark achievement for the company.

He noted that one of the most crucial principles of the contract was that it offered SolGold autonomy and freedom to make its commercial decisions. The technical design of the mine, investment amount, production capacity, et cetera, are decisions of the company and respond to its business strategy.

Cascabel will be developed in phases, with an  initial price tag of $1.55-billion.

The Phase 1 block cave will achieve a production rate of 12-million tonnes a year, extracting high-grade ore of about 1.45% copper-equivalent for the first ten years of production.

In the second phase, the mining operations will be expanded by an additional 12-million tonnes a year, increasing the yearly production rate to 24-million tonnes in year six.

Over an initial 28-year mine life, Cascabel will produce 4.3-million tonnes of copper equivalent, comprising 2.9-million tonnes of copper, 6.9-million ounces of gold and 18.4-million ounces of silver.