The leading mining company BHP has recently signed a deal with SolGold, the Australian gold and copper mining company to earn a 6.1% stake in the latter. The deal, in which BHP will be paying $35 million for the stakes, will ensure that BHP earns a share in the copper-gold project, Cascabel, Ecuador.

The Cascabel project is anticipated to be the biggest gold-copper project ever discovered. The acquisition by BHP was viewed as a vote of confidence in the project by the market and consequently SolGold’s share price escalated by approximately 17%.

Andrew Mackenzie, CEO, BHP, has been reported to say that the deal is expected to provide BHP with a promising exposure to a lightly prospective location and a high-quality copper exploration project.

Incidentally, BHP along with other mining companies recovered after the price crash in 2015-2016 and is now looking to expand its asset base with special focus on copper. Mining companies are increasingly investing in acquiring copper mines as electric vehicles and renewable energy has created demand for the metal, the requirement of which is expected to far surpass its supply by 2020. 

According to analysts, the deal has created a setting for a veritable showdown between top SolGold shareholder Newcrest Mining Ltd – an Australian gold mining company with 14.54% stakes in Cascabel, making it the majority owner and operator.

Prior to the completion of the current deal, SolGold rejected an offer by BHP to purchase 10% stake in the firm for $30 million in October 2016. SolGold also rejected an offer of $275 million by BHP to acquire 70% stakes in Cascabel as the company did not want to lose control of the mine.

Experts of the opinion that SolGold will display a closer affinity with Newcrest due to the fact that Newcrest is among the rare miners that have experience in block caving, a method that involves urging the collapse of an ore body with its own weight by hollowing it out.