NICHOLAS MATHER

Ecuador 2020 | MINING & INDUSTRY | VIP INTERVIEW

TBY talks to Nicholas Mather, CEO of SolGold, on investment in mining, regional markets, and leaving a positive legacy as a mining firm.

What are the advantages of investing in the mining sector in Ecuador compared to other markets in Latin America?

There are many things SolGold finds appealing about Ecuador, one of which is the willingness of the government. Another is the increasing acceptance by Ecuadorians of just how much time, effort, and money it takes to discover and then properly appraise a find because a large sum of capital has to go into the next stage, which is development, then mining. Ecuador's economy and the standard of living of all Ecuadorians can be greatly improved by the delivery of a safe, responsible, and inclusive mining industry. SolGold understands we are guests in Ecuador, and we want to be regarded as an important part of the local economic and social framework and culture. We are putting in great effort into making sure the government and people understand we will be here for the long term. The exploration activities we necessarily need to undertake to discover these ore bodies first will be carried out sensitively and inclusively, making sure we employ and involve as many Ecuadorians as possible. We will do this safety and apply an environmental standard of care that is at the top of the global standards. From an exploration risk point of view, Ecuador is a virtually unexplored 700-km long section of the world's richest copper belt—the Andean Copper Belt—and it was not surprising when we found an ore body at Cascabel, the Alpala deposit. There could well be more on the Cascabel license. Some of the great porphyry ore bodies in Chile are up to 10 times bigger than Alpala. Therefore, Alpala can get bigger yet, and it might be just the first of maybe 10 deposits throughout the Ecuadorian Andeans.

What strategies does SolGold use to mitigate the risks of being a first mover in a country like Ecuador?

We use several strategies, the first of which is social and environmental. We put a great deal of time and effort into ensuring we are accepted by the local community. We demonstrated this in the Cascabel area, where we employ 700 Ecuadorians. We expect to replicate that in other areas as we start to look more intensively at some of our projects through the rest of the country. We have identified other places with the same signatures throughout Ecuador. There are companies with exploration projects, like Lumina Gold, Luminex, Cornerstone, BHP, Icarus, and so on, though none have gone in with an entire country mega-structural and mega-geochemical filtering strategy like us. It is fairly conceivable that as SolGold grows, we could have 10 exploration and appraisal projects going on at once. Our aim is to ultimately have several tier-one copper-gold mines operating in Ecuador and make Ecuador the greatest copper-producing nation on earth. That goal is achievable within 20 years, though it will take a focused and coordinated effort between industry and the government departments and a great deal of understanding by the people. The government also has to be careful that the groups it hands licenses out to will do the work and act responsibly. We are grateful to Lundin Gold for its gold-silver project at Fruta del Norte in a sensitive area. It has done that project smoothly, on time, and on budget, which endorses the claim that Ecuador is a great place to explore and develop mines. However, we recognize the industry now must be careful to retain and protect that reputation.

How much do you plan to invest in your Cascabel project until it starts producing?

Between now and the completion of the feasibility study, including regional exploration, we expect to spend approximately USD150 million. The development of the Cascabel project will take around USD2.7 billion. The project will start at about 20 million tons per year and build up to 50 million tons per year. It will hit peak production in year 14. We currently plan to start production in mid-2025. Ecuador's share of the benefits from the mine will be around USD17 billion. If we can have five projects working under the SolGold banner over the next 20 years, we can deliver in excess of USD80 billion a year in extra income for Ecuador, which will completely change everything for Ecuadorians.

What is your main source for acquiring more capital pre-production?

Because of the high nature of the income toward the front-end of the project, it suits debt funding well. We are making great progress at the moment in discussions with mining financiers around the world, particularly from a debt funding point of view. Global economic conditions suggest we will have lower interest rates for longer than we thought, which endorses debt funding as a route to funding the USD2.7 billion development. All these sums need to be refined through the pre-feasibility study and the definitive feasibility study. We hope to have the definitive feasibility study out after 2Q2021, after which we hope to be in construction within nine months. The quicker we can deliver a result for Ecuador, the quicker Ecuador and Ecuadorians will see this is a great thing for the country and help us to help them through all the other projects throughout the country.

The mining industry is still relatively new in Ecuador compared to other markets in Latin America. What will be SolGold's main contribution to the consolidation of this market?

The greatest legacy any company can leave for a new mining nation is increased education and standard of living, which is what SolGold is focused on doing. If we can do that, we will have become important to Ecuadorians and Ecuador. In terms of assisting with consolidation, because of the big pipeline and the vast array of other projects we have in play, we have a huge amount to get on with on the ground. We do not see ourselves being part of any corporate consolidation. We have such a huge asset base that we just need to get on with the job of discovering, developing, and mining ore bodies. Our hands are full. We are also building our management and mine construction teams. I am confident we will discover many ore bodies once we get going. The project areas that really stand out to us currently are Chical, Rio, Amarillo, Sharug, Porvenir, La Hueca 6, Chillanes, and Cisne Loja. But we have around 13 priority project areas in Ecuador.