As a result, the $60 million Ecuadorian gold-copper explorer has become a share punter’s dream almost overnight, dangling the prospect of a big win should the takeover offer eventuate.

Sunstone raised $4m late last month at 0.5c a share to give it working capital as it “advances corporate discussions”. That stock was issued earlier this week, an event which would typically put downward pressure on the share price.

But instead the stock jumped from 0.7c to 1.1c, triggering an ASX price query. The company responded by suggesting the rise could be due to recent positive corporate news and the successful placement.

The next day, it emerged that Ilwella had participated in the placement to nab itself a 5.5% stake in Sunstone.

Ilwella is the family office of Queensland’s Flannery family. Billionaire Brian Flannery is best known for selling Felix Coal to the Chinese last decade.

Flannery is on the board of mineral sands hopeful Diatreme Resources, while son Quentin is a director of Omega Oil & Gas. Ilwella holds plus-20% stakes in both.

The new substantial shareholder comes at a pivotal time for Sunstone.

The company owns the large El Palmar and Bramaderos projects in Ecuador and revealed last year that it was in talks with potential partners on both.

Last week, Sunstone suggested those discussions might be coming to a head.

It said the partnership process had involved several parties accessing Sunstone’s data room and undertaking site visits.

Corporate-level transactions, project-level joint ventures and/or earn-ins and combinations with nearer-term development assets have been explored.

“As a result of these discussions, an attractive opportunity has advanced to the stage where, in the short term, a confidential and incomplete non-binding indicative offer could be finalised,” Sunstone said.

“The company is engaging with the party and is well advanced in its due diligence investigations in relation to the proposal and associated transaction risks.”

MST Access analyst Chris Drew said a successful conclusion to the process would be a key catalyst for Sunstone.

“There has been elevated corporate interest in Ecuadorian mining assets in recent years, suggesting interest in the Sunstone asset base should be strong,” he said.

Fortescue, Barrick Gold Corporation, Silvercorp and Zijin Mining are among the other major names to have an interest in Ecuador.

The opportunities

In northern Ecuador, Sunstone holds the El Palmar gold and copper project.

In October 2024, Sunstone reported an initial pit-constrained resource of 64 million tonnes at 0.6 grams per tonne gold for 1.2 million ounces AuEq, based solely on the outcropping T1 porphyry deposit, which is one of several gold-copper porphyry deposits at the project.

The company also reported an exploration target of 1-1.2 billion tonnes at 0.3-0.7g/t gold and 0.1-0.3% copper for contained metal of 10M-27Moz of gold and 1-3.7Mt of copper.

El Palmar sits in the same belt as SolGold’s 2.7Bt Cascabel copper-gold project, in which BHP and Newmont Corporation have stakes, and Codelco’s 1Bt Llurimagua copper-molybdenum deposit.

Last year, Gina Rinehart’s Hancock Prospecting invested US$120 million to earn 49% of a property held by state-owned ENAMI, which is adjacent to El Palmar.

In the country’s south, Sunstone holds the Bramaderos gold-copper project.

Bramaderos has a resource of 156Mt at 0.53g/t AuEq for 2.7Moz AuEq, as well as a porphyry exploration target of 255-360Mt at 0.4-0.74g/t AuEq for 3.3-8.6Moz AuEq.

The Limon epithermal gold-silver prospect also has an exploration target of 30-44Mt at 0.9-1.2g/t AuEq for 900,000oz to 1.7Moz AuEq.

Late last year, Sunstone reported a new gold-copper porphyry discovery at Bramaderos’ Copete prospect, adjacent to the resource.

Trenching returned results including 113m at 0.64g/t AuEq and 214m at 0.50g/t AuEq, with grades expected to increase in drilling as it is interpreted that copper is leached at surface.

The Copete discovery took the Bramaderos mineralised cluster to 2km by 1.8km, enhancing the potential for a large open pit operation.

Both target and acquirer

As well as the potential transactions over its two large projects, Sunstone also revealed it was separately progressing due diligence and commercial discussions for a material business transaction, which could result in the addition of nearer-term gold development asset to the portfolio.

Sunstone has visited the asset, which is privately owned, and is engaging with the major shareholders to discuss and evaluate the strategic rationale of the combination.

“We think such a transaction, subject to asset quality and price, would be a strong strategic fit with the larger-scale, longer-dated opportunities that Sunstone are currently pursuing,” Drew said.

Last week’s A$4 million raising added to the company’s December 31 cash balance of A$2.3 million.

Participants in the placement have already done well, with the stock now double the A0.5c issue price.

Drew increased his base case price target from A2.3c to A2.8c per share, with an upside case of A3.9c.

“We have valued Sunstone on an enterprise value per ounce basis, identifying a peer group of plus-1Moz ASX-listed explorers who are yet to conclude studies,” he said.

“Sunstone is currently trading on 11x EV/oz versus these peers on an average of 55x.

“Applying a bottom of the peer group multiple of A$5/t to the Sunstone exploration target lifts our valuation to A3.9c as an upside case. We see Sunstone moving towards this as the exploration target is converted to resource.”