Solaris Resources (SLS.TO) Update - Oct 3

[dan_s]

Solaris Resources is high on my Watchlist. I expect them to sell Warintza at a very good price and keep all of their remaining exploration prospects. You can watch a replay of my September 26th webinar with Daniel Earle, the Company's CEO directly from our website.

Solaris Resources Inc. (TSX: SLS)(OTCQB: SLSSF) just announced the attached press release appointing China International Capital Corporation Limited (“CICC”) as the Company’s Chinese financial advisor after receiving a number of “opportunistic” proposals from parties interested in acquiring all or part of the Warintza Project in Ecuador. CICC will assist in fielding and evaluating the merit of these enquiries and other strategic matters.

Mr. Richard Warke, Executive Chairman, commented: “Warintza is a very special asset that has the potential to create tremendous long-term value for all stakeholders by unlocking one of the last major greenfield districts at low elevation and adjacent to infrastructure in the global copper industry. The Company has a rich opportunity to significantly grow the Project while advancing it through technical studies and permitting with financing consistent with my commitment to minimize shareholder dilution.”

The full release is attached. As an aside, Solaris issued this announcement since there were a number of media reports that surfaced last week discussing M&A about Warintza. See those reports copy/pasted below and links. Some were google translated.

Media:

Mining Journal: China to double down on Ecuador copper
Sina Finance: Chinese capital actively promotes mining projects in Ecuador
Mundo Minero: Exclusive interview with the Vice Minister of Mines of Ecuador, Juan José Espinosa

Mining Journal: China to Double Down on Ecuador Copper

Sep 29, 2023

China is looking to double down on its copper production in Ecuador with two companies checking out, and even making offers, on Solaris Resources and its Warintza deposit.

Solaris is not officially in play, although it is looking at securing some US$80 million in finance to complete a feasibility study and advance Warintza through permitting. Warintza Central hosts an indicated resource of 579Mt grading 0.59% copper equivalent and inferred resources of 887Mt grading 0.47% CuEq.



"A couple of Chinese companies have visited the project, and one has made one or more low-ball offers," a source with knowledge of the situation told Mining Journal.



While it is common practice for project developers to host site visits from interested parties, making offers is not; however, this does not necessarily imply that the target company is negotiating with a potential suitor.



The source said the offer was well below the company's expectations, given the valuations in recent copper development assets transactions. "The Chinese offered 0.2x NAV, so they are not even close," the source said.



The median for recent transactions is 0.8x net asset valuation (NAV), including Glencore's consolidation of the MARA project in Argentina, the Agnico Eagle Mines, and Teck Resources' San Nicolas joint venture in Mexico. SolGold's acquisition of Cornerstone Capital Partners earlier this year to unify ownership of the Cascabel copper-gold project in northern Ecuador implied a 0.6x NAV.



China



Latin America is a primary source of copper for China, primarily concentrates from Chile and Peru, which account for about 55% of its imports. In addition to buying Latin America's copper output, Chinese companies have directly invested in mines.



Chinese firm MMG bought the Las Bambas copper mine in Peru in 2014, and China Minmetals had a right to take a 25% stake in Codelco's Gaby mine in Chile, which in 2008 it decided not to exercise. More recently, Ecuacorriente built the Mirador copper mine and began production in 2019 with an initial output of 11Mtpa of copper concentrates for export to China containing 137Mlb of copper, 34,000oz of gold and 394,000oz of silver for 30 years.



Ecuador's president Guillermo Lasso, has been working to develop closer relations with China for some time. He hosted a Chinese delegation in December 2022 to stimulate more investment by the Asian nation. Ecuador is China's fourth free trade partner in Latin America after Chile, Peru, and Costa Rica. China is Ecuador's second-largest trading partner and largest non-oil products trading partner. In 2022, the bilateral trade volume between the nations reached US$11.9 billion and is set to grow more as in May 2023, the countries signed a free trade agreement.



In July 2023, the Ecuadorian government and China's Ecuacorriente reached a preliminary agreement to expand the Mirador copper mine in Zamora Chinchipe from a throughput of 60,000tpd to 120,000tpd or more through an estimated investment of US$650 million.



China isn't the only nation interested in Ecuador's copper, however. Australia's BHP has a toe-hold stake in SolGold, which is undertaking a strategic review process that includes the possibility of a sale or forming a partnership with a copper producer. Swiss-based Glencore has been expanding its copper footprint, and US company Freeport McMoran has also been looking at the northern Andean region.



The latest entrant into Ecuador, however, is Barrick Gold, which signed an agreement with state mineral company Enami last week to undertake exploration on 40,000ha in southern Ecuador, with a minimum investment of US$27.5 million. Southern Ecuador hosts multiple gold and copper deposits, including Mirador, Warintza, Condor and the Fruta del Norte gold mine.



Solaris financing



With the equity markets currently being challenging for junior developers, the expectation that Solaris needs to raise finance at some point in the near future, is suppressing its share price. Solaris is trading at C$5.24, giving it a market capitalisation of C$776 million.



"The financing overhang is probably clipping C$1-1.50 of Solaris' share price, and it will probably continue to until they pull the trigger and give the market clarity about what they are going to do," the source said.



In June, Solaris chief executive Daniel Earle told Mining Journal that it was potentially looking at a strategic investment or an offtake to raise more funds. "Equity is not attractive where we are trading, so maybe a strategic investment at a significant premium or a range of non-equity options to transact away from public market valuations. We calculate the offtake value for the project as in excess of US$60 million for a quarter of the offtake," Earle said at the time.



An offtake seems to have made its way to the top of Solaris' list of options, according to the source, with a similar structure to that announced this week by K92 Mining with Trafigura to expand its Kainantu mine in Papua New Guinea. This was for 100% of the copper offtake at an interest rate believed to be the secured overnight financing rate (SOFR) plus 3.4%.



"Solaris is looking at a 20% offtake for $60 million, with a commitment from the offtaker to invest $20 million in equity later on," the source said.





Sina Finance: Chinese Capital Actively Promotes Mining Projects in Ecuador

Sep 26, 2023



Juan José Espinosa, Ecuador's deputy minister of mining, revealed in a recent interview that Chinese-funded companies are actively expanding the development of copper mine projects in Ecuador, and some Chinese-funded companies have expressed interest in the Warintza copper mine project in Ecuador by Canadian listed company Solaris Resources.



According to local media in Ecuador, Deputy Minister Espinosa said that mining has become an important sector of the Ecuadorian economy. In 2022, mining exports reached $27.75 billion. From January to July 2023, mining exports reached US$1.7 billion, an increase of 19% over the same period last year. In addition to some small and medium-sized mining projects, Ecuador's mining production mainly comes from two large mines (namely the Mirador copper project, a joint venture between China Group and and another foreign-owned Fruta del Norte gold project).



In July 2023, the Government of Ecuador and the project company at the Mirador Copper Mine reached a preliminary agreement focused on advancing the development of the Mirador North Mine. The company's current mine capacity is 7,60 tons per day, and under this revision, the project will at least double to 000,120 tons or even 000,140 tons per day, with related underlying capital expenditure investments of approximately $000 million. The Government of Ecuador expressed its pleasure at the signing of the preliminary agreement and hoped that the revision of the formal mining agreement could be completed as soon as possible.



Deputy Minister Espinosa said that the Ecuadorian government has made 11 mining projects a priority development project in the country, guaranteeing them in terms of policy permitting. Among the 11 projects is the Warintza copper mine owned by Solaris Resources, which has invested about US$1 million and is scheduled to commence mine construction in 3 and start production in 2025, with an estimated capital investment of US$2027 billion.



Reports mention that some world-class mining companies have expressed interest in the project, and Solaris Resources has received several offers and is evaluating them. Deputy Minister Espinosa revealed that the Ecuadorian government has received visits from representatives of Western and Chinese companies interested in the project. The companies conducted an on-site visit to the project, followed by a meeting with senior representatives of the Guillermo Lasso government.



In addition, the Ecuadorian government signed a preliminary agreement with investors regarding the Cascabel copper-gold project, Ecuador's largest undeveloped mine, owned by participates. The project has already submitted an application to enter the mining phase, and the Ecuadorian government hopes to sign a formal mining agreement before the end of the current government's term so that the project company can obtain all project construction and mining-related permits to facilitate the start-up of $2025 billion in capital expenditure projects by 50.



On May 2023, 5, China and Ecuador signed a free trade agreement, and Ecuador is China's fourth free trade partner in Latin America after Chile, Peru and Costa Rica. China is Ecuador's second largest trading partner and its largest trading partner for products. In 11, the bilateral trade volume between China and Eritrea reached RMB4.2022 billion, a cumulative increase of 873.0% over the same period of the previous year.





Mundo Minero: Exclusive Interview with the Vice Minister of Mines of Ecuador, Juan José Espinosa

Sep 21, 2023



The Mundo Minero journalistic team held an exclusive interview with Juan José Espinosa, in which aspects such as the country's important mining potential, the current situation of mining in Ecuador and the projections of this industry at the national level were addressed.



How do you analyze the possibility of increasing mining production as an alternative to market expansion for Ecuador considering the relevance that the industry has assumed in recent years?



In fact, the mining sector has become an important sector for the country. Thus, in 2022, mining exports reached 2,775 million dollars, making mining Ecuador's fourth largest export category behind oil, shrimp and bananas. This shows that mining has enormous potential in Ecuador considering that we are a country extremely rich in minerals and that is why we must learn how to develop this industry in a sustainable and sustainable way, as important projects have already done in the country.



Good news is that by July of this year the mining industry reached 1,953 million dollars in exports. As of July of last year, we reached $1.6 billion. This means that in 2022 we have exceeded the export of minerals by 21% and the main reason is the consolidation of the production of the two mines in operation plus the contribution of small mining.



In the future, the projection is that mining exports will continue to increase considering that more projects begin to develop and become mines in the short term, such as the La Plata project and Curipamba de Curimining, categorized as medium-sized mining and which are already in production. the environmental licensing process.



Considering the results of the Yasuní Popular Consultation, do you consider that mining can become an industry with the potential to mitigate in the medium term the economic effect of reducing oil exploitation?



I believe that we should not think of them as substitutable items for each other; on the contrary, they have a lot to complement each other. We have been an oil country for many years, this being Ecuador's largest export item. On the other hand, mining is without a doubt the future, which is why it will take us 2030 and subsequent years to generate income of 7 billion to 8 billion under normal conditions, that is, for all projects to be developed. . For this reason, we must continue to support both sectors.



In the case of mining, we have two mines plus small mining projects that together would reach 2.8 billion and, with all the projects that are coming in line, we hope to significantly exceed this figure.



Among the projects prioritized by the Current Government is Warintza, mainly due to the exploratory results they report in their bulletins. What are your expectations regarding this project and its contribution to the country?



The National Government had prioritized 11 projects of which we have exhaustive monitoring and each one has a roadmap. From the Government we have promoted that these projects have greater security to access the respective permits in order to follow their processes appropriately. Of the 11 projects, today we continue with 7, among which is Warintza with the company Solaris Resources, which has Lowell Mineral Explorations in the country as its subsidiary. Personally, I was able to visit their witness library and it caught my attention that it is well conceived and that they have an impressive chain of custody of witnesses, which is a sample of around 130 million invested by the company.



One aspect that I would like to highlight about Warintza is that it was discovered many years ago and, in its beginnings, it was crossed by moments of high social conflict, mainly with the Shuar communities. However, they have done an extraordinary job in which they have invited the community to be part of the project and learn about their good social and environmental practices. Thus, the Warintza project currently employs more than 500 people. I know that they have already obtained permits and approval for advanced exploration and, from the information we have, they hope to begin mine construction in 2025 and the exploitation phase in 2027.



The Warintza project has planned more than USD 2 billion in CAPEX, profits for the Ecuadorian State of USD 1 billion; In addition, it is estimated 5,000 jobs during the construction stage and 2,000 thousand jobs during operation.



Thank you for the economic and labor information on the Warintza project, it is of great importance for the country. We understand that world-class operators have shown strong interest in this project. Furthermore, we understand that Solaris has received between 2 and 3 offers and is currently evaluating them. Do you consider that they are close to the next phase of the project?



The National Government has already received visits from representatives of Western and Chinese companies interested in the project. These companies visited the project in Morona Santiago and then senior representatives of the Government of President Guillermo Lasso met.



In recent months the Government has announced good news for the mining sector such as the extension of the Mirador contract, the exploitation contract agreement for Cascabel and the projections with the Fruta del Norte project. How are these agreements progressing and what expectations does the Government have? National government?



Precisely in July of this year we reached an agreement with Ecuacorriente, which is in charge of the Mirador project, which has a focus on advancing with an additional mine, Mirador Norte. Today the company processes 60 thousand tons per day and, with this amendment, production will be able to double, reaching 120 thousand and even 140 thousand tons with a base investment of 650 million CAPEX dollars. We are excited to have signed the negotiation minutes and hope to be able to sign the amendment to the contract.



With respect to Cascabel, it should be noted that this is one of the most important mines in Latin America. We reached a negotiation with the company after several months, we signed the negotiation document which will mean an investment of 5 billion dollars in CAPEX. The other good news is that they have submitted the request to move to the exploitation phase and we hope to be able to sign the corresponding contract before the end of this government so that the company has all the licenses and permits to begin the construction of the mine planned for 2025.


In the case of Fruta del Norte, I was lucky to learn about this project that has excellent environmental and labor practices since they always put people first. They also have excellent water management, tailings dam management, among other aspects to highlight. Currently this project produces 4,500 tons and they have given us the good news that they have continued to carry out advanced exploration, determining reserves in what is called Fruta del Sur, which will allow increasing production.



Finally, I want to point out that from the National Government and from this ministry we have given all the impetus to the private sector and the mining sector, we have strengthened ENAMI, a company owned by all Ecuadorians that produces minerals. We are an open-door ministry that supports the development of sustainable mining, we support good mining practices at all scales and recognize their contribution to development.

[ChuckGeb]

Sad to see China capturing all of the valuable resources. We just take all the fleeing migrants from South America while China acquires all the valuable resources.

[Fraser921]

up 14 % in a crap market... wowser

[ChuckGeb]

Ecuador elects conservative leader

Noboa ran on a platform of fighting drug violence, pro-business policies, and speeding up a stagnant economy in Ecuador. “We need to address the urgencies: lower violence, youth unemployment and create new work opportunities,” Noboa says. “Ecuador must turn into a competitive country. Because it’s not.”