SYDNEY SolGold Plc (SOLG.L) on Thursday approved a financing proposal by Australia's Newcrest Mining (NCM.AX) to help it develop a giant copper mine in Ecuador, after the board rejected an alternative package offered by BHP Billiton (BHP.AX) (BLT.L).
SoldGold said a shareholders meeting in Australia voted in favor of the board's preferred deal with Newcrest and also with private investment firm Maxit over BHP's offer, which would have diluted SolGold's ownership in the Cascabel project near the border with Colombia.
Based on early exploration work, SolGold believes it may have made a major new high-grade copper and gold find to rival some of the largest existing mines, such as Grasberg in Indonesia, controlled by Freeport McMoran Inc (FCX.N), and Oyu Tolgoi in Mongolia, controlled by Rio Tinto <RIO.AX,> (RIO.L).
The deals call for Newcrest to spend $22.86 million acquiring new shares equivalent to 10 per cent of SolGold, while Maxit gets 4.43 percent of the company for a $10.1 million investment, according to SolGold.
BHP had offered $30 million, or 22 cents per share, for a 10 percent stake in SolGold.
BHP's offer included an additional $275 million proposal, linked with acquiring a much larger stake in the unit managing the Cascabel project, Exploraciones Novomining (ENSA).
Under its popular two-term president, Rafael Correa, Ecuador is raising its profile as a country to open to foreign mining - a stark reversal from the start of his presidency in 2007, when a moratorium on new mining projects was declared.
But the recent crash in oil prices is curbing the government's tax revenues and leading to a rethink on mining in the country, according to SolGold Chief Executive Nick Mather.
Canada's Lundin Gold Inc (LUG.TO) owns the Fruta del Norte gold project located in southeast Ecuador, which it has said is one of the largest undeveloped gold projects in the world.
In the next few years, Ecuador expects to attract more than $2.5 billion in new mining projects, according to Dundee Capital Markets.
(Reporting by James Regan; Editing by Christian Schmollinger)