BHP Plans to Increase Its Stake in Ecuador-Focused SolGold

(Bloomberg) -- BHP Group increased its stake in Ecuadorian copper miner SolGold Plc, another sign that the biggest miners are increasing exposure to copper in the hope that the electrification of cities and cars will boost demand.

SolGold shares surged the most since June after Bloomberg earlier reported the companies were in talks. Melbourne-based BHP paid 17.1 million pounds ($22 million) to raise its holding in the company to 14.7%, almost drawing level with top investor Newcrest Mining Ltd.

Brisbane-based SolGold’s interests in Ecuador include the flagship Alpala copper-gold project, which the company estimates has a potential 55-year life and is among the world’s best undeveloped deposits. The company is also studying 13 other priority targets in the nation, according to a presentation this month.

BHP paid 22.15 pence a share, a 9.3% premium to SolGold’s 20-day volume-weighted average, according to a statement on Monday. The deal also gives BHP options to purchase another 19.25 million shares by 2024. It had built its stake last year through two transactions and agreed it wouldn’t acquire further shares for two years without SolGold’s consent.

SolGold shares earlier jumped as much as 20%, and were up 7.3% by 10:25 a.m. in London.

In October, the shares fell to a three-year low amid growing concerns about SolGold’s funding as it burned through cash. Its cash position was just $16.5 million at the end of September and the company has since slowed spending to make that cash stretch until February, Liberum Capital Markets said.

BHP, preparing to install Mike Henry as its new chief executive officer from January, is prioritizing future growth in copper and oil, and sees Ecuador as a key focus for new mining projects. Dwindling supply from aging copper mines and rising demand from renewable energy and the electric vehicle sector will combine to boost the metal’s outlook, the miner said in August.

The company is also partnering with Luminex Resources Corp. on a project in southeastern Ecuador and carrying out its own work in the country.

Exploration will be “the most cost effective way” of adding to the company’s growth pipeline, outgoing CEO Andrew Mackenzie said last month in a webcast. “We have positions in some very prospective parts of the world where we think we can add significantly to our resource base.”

--With assistance from Harry Brumpton.

To contact the reporters on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net;David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editors responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net, Nicholas Larkin, Lynn Thomasson

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