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SolGold Shares Remain Muted on Cornerstone Acquisition Approval

Simon Mugo trader
Updated 24 Jan 2023

The SolGold plc (LON: SOLG) share price was trading down 2.74% despite the mining company announcing that it had received all the necessary approvals to complete the acquisition of Cornerstone Capital Resources Inc.

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YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


The deal was a significant win for SolGold since it did not pay any monies to acquire Cornerstone as it chose to fund the entire transaction via a share swap. Hence, the company preserved its current cash flow and did not have to incur new debt to fund the purchase.

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YOUR CAPITAL IS AT RISK. 68% OF RETAIL CFD ACCOUNTS LOSE MONEY

Today’s muted reaction was primarily because most investors expected the deal to close without hiccups since the two companies unveiled plans for a friendly merger on 7 October 2022. The only challenge to the deal would have been regulatory concerns. 

SolGold and Cornerstone chose to merge via a court-approved process, which was completed by granting the Final Order by the Court of King’s Bench of Alberta on the 9th and 10th of January. Shareholders from the two companies had already approved the deal via general meetings.  

Cornerstone shareholders will receive 15 SolGold shares for each Cornerstone share. The merger is expected to strengthen the ability of the combined group to create shareholder value by consolidating ownership of the Cascabel Project along with a solid portfolio of projects across Ecuador.

Since the deal was announced, a lot has happened, including the departure of former CEO Darryl Cuzzubbo on 10 November 2022 and the subsequent appointment of Scott Caldwell, Non-Executive Director, as Interim CEO, as the search for a new substantive CEO continues. 

SolGold also received a $50 million investment from Osiko Gold Royalties targeted at its Cascabel copper-gold project in northern Ecuador. Osisko will receive a 0.6% NSR interest from SolGold, calculated based on the net smelter returns from the Cascabel licence area. 

The funding from Osiko could not have come at a better time as it relieved SolGold of the massive burden of regularly raising capital to fund the Cascabel project. The deal may have been impossible without the planned Cornerstone merger, which gave the company full ownership of the project.

*This is not investment advice. 

SolGold share price. 

Source: IG.com

The SolGold share price was down 2.74%, trading at 15.96p, from Monday’s closing price of 16.29p.


YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading