SPECIAL REPORT: What junior mining company wouldn’t want a cash balance in excess of $20 million with which to power ahead with its flagship project in the current environment.

That’s the enviable position West Australian gold explorer Apollo Consolidated (ASX: AOP) should soon be in after striking a deal to sell its minority interests in two Cote d’Ivoire gold assets.

Apollo finished the March quarter with $16.6 million in cash after completing a prescient $10 million capital raising in late February before the coronavirus threat gripped capital markets.

On Thursday the company announced it would receive a further US$4.5 million (A$7 million) upon completion of the sale of its 20% interests in the Liberty and Bagoe gold projects in northern Cote d’Ivoire to private equity firm Ibaera Capital.

Apollo sold 80% of Liberty and Bagoe to Exore Resources (ASX: ERX) in 2018 in order to concentrate its efforts on the Lake Rebecca Gold Project, near Kalgoorlie in Western Australia, where exploration was starting to turn up exciting results.

Earlier this year Apollo announced a pit-constrained maiden resource of 1.035 million ounces at a grade of 1.2 g/t for Lake Rebecca, a milestone that has helped lift the company’s market capitalisation to more than $60 million.

Commenting on the Ibaera deal, Apollo managing director Nick Castleden said: “We consider this an attractive opportunity to realise the somewhat hidden value of these assets.

“Our previous decisions to focus on building value at Rebecca have been supported by strong subsequent results, and in our view this deal represents an attractive premium relative to the value of the interests inferred from recent ERX share price trading values.”

Exore, which recently announced a maiden resource of 530,000 ounces at 2.5 g/t for Bagoe, has seen its share price rise from a low of 2.2c in late March to 5.3c at the close of trading on Wednesday.

At this price, the company is capitalised at just over $30 million, with $13 million in cash.

The Ibaera deal places a see-though valuation of $66/oz on the Bagoe resources, which compares favourably to valuations seen in comparable West African gold transactions.

It also implies a per share valuation (net of cash) for Exore significantly above its current share price.

Exore has a pre-emptive right over Liberty and Bagoe under the existing joint venture agreement with Apollo.

The progress of the Ibaera deal is dependent on the company opting not to exercise that right or waiving it during the 30-day pre-emption period.

Exore entered a trading halt on Thursday pending an announcement on the deal.

Apollo retains a 1.2% royalty over the advanced Seguela project in central Cote d’Ivoire owned by Canadian company Roxgold, where scoping work was recently carried out on the one million-ounce resource.

But the focus will continue to be on Lake Rebecca, with Apollo comfortably funded to carry out much more drilling and start on development studies.

 

This story was developed in collaboration with Apollo Consolidated, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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