Several more major mining companies have joined BHP Billiton and Newcrest in running the ruler over exciting copper and gold junior Solgold, according to chairman Nicholas Mather.
The Brisbane based company now ranks as one of the hottest exploration plays in the world, after BHP tried to spoil Newcrest's planned investment in Solgold by lobbing a conditional, $US305 million ($404 million) offer in recent days.
BHP offered to pay $US30 million for a 10 per cent stake in Solgold, which is exploring an exciting copper and gold deposit called Cascabel in Ecuador.
BHP also offered to spend a further $US275 million earning a 70 per stake in the company that holds Cascabel; Exploraciones Novomining (ENSA).
The unsuccessful bid came barely five days before Solgold shareholders were due to meet in Brisbane to vote on whether to approve Newcrest's earlier bid to take a 10 per cent stake in their company.
At stake is a copper, gold and molybdenum deposit that has already been compared to Rio Tinto's Oyu Tolgoi copper mine in Mongolia, despite having just 17 exploratory holes drilled into it so far.
Newcrest has been in discussions with Solgold since August, and in September it offered $US22.8 million for 10 per cent of Solgold shares under a fundraising proposal that will also see Canadian mining investor Maxit pay $US10 million for about 4 per cent of the junior.
Solgold's Australian chairman Mr Mather declined to comment when asked if Rio Tinto has also inspected Cascabel, but he did say other global miners had taken a look at the deposit.
"They are not the only only ones," he said of BHP and Newcrest.
"The realisation that Ecuador is highly mineralised and has a permissive approach from the government is taking the blinkers off the world's majors who are all copper hungry, and that is why we are getting the attention we are getting."
"We believe that Cascabel truly is a tier one copper and gold asset and given the grade that we are getting there it is something that is going to continue to attract very intense attention, it is big and its rich and it is something majors are intensely interested in"
Solgold, which has an office in Brisbane and is listed on London's AIM index, told the market on Monday night that it had received and rejected BHP's approach.
The board of the junior said on Monday evening that the BHP offer was not in the best interests of its shareholders, and not a superior offer to the one made by Newcrest.
That is despite the fact BHP's offer values Solgold shares at US22¢, while Newcrest's offer values them at US16¢.
"The board considers that when all of the elements of the BHP proposal are taken into account, the BHP proposal implies an attributable price paid to SolGold and in respect of the Cascabel Project that is at a significant discount to the current trading price of SolGold and the US$33 million financing with Maxit and Newcrest," said Solgold in a statement.
Mr Mather noted that the Newcrest bid would also allow the junior to retain control of Cascavel.
Solgold was also concerned about the conditional nature of the BHP offer, including the condition that the offer was subject to BHP completing 60 days of due diligence.
"The BHP proposal is highly conditional, non‐binding and subject to due diligence," said Solgold.
"There is no certainty the BHP proposal would be consummated on the terms proposed given the number of key documents that would need to be completed: earn‐in agreement, private placement, shareholder agreements.
The opportunistic swoop on Solgold demonstrates that BHP will not be sitting on its hands while it waits for Anglo American to determine whether it will sell its Moranbah and Grosvenor coking coal mines to BHP and joint venture partner Mitsubishi.
BHP has long expressed an interest in making acquisitions in copper and oil in particular, and if it were able to capture Solgold's Ecuador asset, it would deepen BHP's exposure to copper in the Andes mountains of South America.
Major discovery
BHP already has exposure to the Escondida, Spence and Cerro Colorado copper mines in Chile, plus copper and zinc in Peru's Antamina mine.
The interest in Solgold from two of Australia's biggest miners comes despite drilling at Cascavel still being at an early stage.
Just 17 holes have been drilled into Cascavel, with all of those at one of the 14 major targets. That target is called Alpala.
In a very enthusiastic research note, Mackie Research analyst Barry Allan said Alpala could be a major discovery.
"Of the 17 holes drilled so far on Alpala, six of the holes rank in the top 30 best porphyry drill holes ever drilled. Oyu Tolgoi being the only other porphyry with this high number of ranking drill holes," he said.
"While still early days with only 17 holes drilled, geology, geophysics and soil geochemistry all point to a high possibility of discovering additional copper-gold porphyry deposits of a size and quality that may rival some of the largest known existing copper-gold systems."
Newcrest has made a number of low-cost exploration agreements with juniors over the past two years, as it seeks to grow its portfolio from the ground up under chief executive Sandeep Biswas.
Rio Tinto and OZ Minerals have also been very active in striking farm-in deals with small exploration companies that are desperate for cash.
