Can the SolGold (SOLG) share price continue climbing?

The SolGold (SOLG) share price recently surged, but what’s behind this growth? And can the upward momentum continue? Zaven Boyrazian investigates.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The SolGold (LSE:SOLG) share price leapt last week following more encouraging progress from its Cascabel project. The gold and copper mining stock has been on a bit of a rollercoaster ride this past year, reaching as high as 43.9p and as low as 19.82p. That’s certainly not uncommon for a young exploration business. But can the momentum from last week continue? And should I be considering it for my portfolio? Let’s take a look.

The rising SolGold (SOLG) share price

The primary catalyst behind last week’s surge in the SOLG share price appears to be a new set of drilling results. Specifically, those of its Tandayama-Ameríca deposit located approximately 3km north of its flagship Alpala site. The company has confirmed the presence of medium-grade copper & equivalents across the first 13 test drill holes. Assay results from holes 14 to 23 are still being analysed. And drilling for 24 to 27 is now under way.

This discovery is undoubtedly good news. But what seems to have investors excited is a preliminary detection of visible chalcopyrite veining with a 2% concentration at drill hole 24. That’s a fancy way of saying it found high-grade copper. For reference, anything above 1.5% is typically considered excellent. The news is even more promising given that trace amounts of gold were also found.

Beyond confirming the presence of minerals, the purpose of drilling assays is to isolate the best location to establish a fully developed mining site. By the sounds of it, SolGold may have just found what it was looking for. And with an 85% equity stake in the Cascabel project, the SOLG share price could have the potential to explode over the long term.

The SolGold share price has its risks

Taking a step back

As exciting as these results may be, there remains a lot of work to be done.  A mineral resource estimate for Cascabel is expected to be released later this year. But even after this is published, developing a fully functional mining site is a long and expensive process. In other words, it could be several years before any form of ore extraction takes place.

Another important factor to consider is the fact that SolGold is still a pre-revenue business. With no active sites in its portfolio, the company is dependent on external financing to keep the lights on. As it stands, SolGold has around £105m of debt on its balance sheet. The loans have granted it a big chunk of capital to work with. But it may not be sufficient over the long term. So, I wouldn’t be surprised if its equity stake in Cascabel gets smaller or if SolGold decides to issue additional shares. Either way, these actions would likely hurt the SOLG share price.

Can the momentum continue?

Suppose the next set of drilling results also come back positive? In that case, I think it’s likely that the SOLG share price will continue its current upward trajectory. However, as it stands, the stock’s market capitalisation is being driven by future expectations of performance rather than underlying fundamentals. That’s not the sort of investment I’m personally interested in making. Therefore, I’m keeping SolGold on my watchlist for now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »