I was wrong.
I recently wrote about the saga of Toronto-listed Cornerstone Capital (CGP.V) and its London-listed partner SolGold (SOLG.L), which have discovered a large but deep copper-gold deposit in Ecuador, called Cascabel. I said I wasn’t a buyer. My thinking was that if the project was really looking viable, a larger mining company would have taken it off these smaller companies’ hands by now.
That was September 26. If I had bought the stock then, I’d be up over 38% as I write today, less than a month later.
What’s changed is that one of the largest miners in the world, BHP, just invested almost US$60 million to raise its stake in SolGold to from 6% to 11.2%. This has splashed over to Cornerstone, which owns 15% of Cascabel, and also owns shares in SolGold, taking its pre-BHP deal ownership of the project to 23%. CGP shares are up over 20% today as I write.
But it’s not missing out on those gains that prompts my mea culpa here. Those come and go.
What matters is that another major, Newcrest Mining, already had a 14.5% stake in SolGold, and now BHP is clearly stepping up to the plate to compete. In other words, I was wrong about my assessment of the interest on the part of the larger companies that have the capacity to build a mine at Cascabel.
I think I was wrong for the right reasons—better safe than sorry—but wrong just the same.
Cascabel may indeed become a mine someday. Both SolGold and Cornerstone shareholders stand to benefit—especially if the majors interested in the project end up in a bidding war over it.
I do not own the stock. I have no immediate plans to change that. But this deal does change my outlook on both SOLG and CGP for the better, and I’ll be watching them more closely.
My congratulations to those who called this one better than I did.
