Ground Breakers: More M & A to brighten your day as Develop and Ramelius pounce on lithium and gold
Bill Beament has made his most extreme change of tack yet, forking out over $150 million in his mining services and copper developer Develop Global’s (ASX:DVP) shares in a bid to become a West Australian lithium player.
Formerly the boss of top two Aussie gold miner Northern Star Resources (ASX:NST), Beament has gone all in on his pivot to EV metals, adding lithium to the copper and zinc assets it owns at Sulphur Springs in WA and Woodlawn in NSW through the $152.6 million acquisition of Essential Metals (ASX:ESS).
That will see Essential’s Pioneer Dome project near Norseman — one of only a handful of defined JORC lithium resources in WA containing 11.2Mt at 1.16% Li2O — be delivered to DVP in a 1 for 6.18 share offer valued at 56c per share.
Importantly, it’s being backed by Chris Ellison’s Mineral Resources (ASX:MIN), which took up a near 20% stake in the junior to block a previous 50c per share cash offer from IGO (ASX:IGO) and China’s Tianqi through their JV TLEA, owner of 51% of the Greenbushes lithium mine and the Kwinana lithium hydroxide plant.
MinRes has fingers in both pies. It will up its stake in DVP from 12.9% to 14.2% as part of a $50 million capital raising at $3.20 being pursued by Develop, with Develop’s exec chair Beament also tipping another $3.9m into the burgeoning mining services and green metals play.
It comes in at a 34.9% premium to Essential’s last share price of 41.5c on June 30, 30.8% premium to its 20 day VWAP and 62.3% premium to its share price on January 6, before the TLEA bid launched.
But it’s only 12% above the price of the TLEA scheme that MinRes helped scuttle, leading you to wonder how much of an upgrade this is on the cold hard cash they turned down in April.
It wasn’t the only M & A action taking place on a manic Monday for ASX juniors.
Under the terms of the recommended takeover offer Musgrave holders will get 34c per share including 1 RMS share for each MGV share in their wallet and a 4c per share cash sweetener.
Set against the backdrop of a market where large caps are dramatically outperforming small caps, the offer for the 927,000oz Cue gold project owner comes in at a 27% premium to the implied price of the all scrip WGX offer, though that will ironically come down because Westgold investors have sent their shares up today and RMS stock is down 2%.
The structure of the Develop takeover of Essential will enable ESS shareholders to maintain ownership in a less concentrated form of the Pioneer Dome asset.
But Beament says it will be stronger in a multi-asset vehicle, with $25 million from the raising to be put towards early capital ahead of the resumption of underground production at Woodlawn.
“Being a one-asset company, particularly in the development phase, brings significant risks and challenges,” Beament said.
“Develop’s experienced team, multi-asset base and strong cashflow from the mining services division will help mitigate these risks and accelerate the development timetable in the process.
“The funds will ensure we can accelerate the development of Pioneer Dome with updated mining and economic studies and advance the approvals process while seeking to grow the inventory and Resource confidence with more drilling.”
“This strategy is aimed at increasing and unlocking the value of Pioneer Dome sooner than would otherwise be the case.
“The proceeds will also advance the options we have at our exceptional Woodlawn project, where A$340m has already been spent by the previous owner, mainly on the plant, surface infrastructure and underground capital development, and everything on site is as good-as-new.”
It’s understandable that both Ramelius and Westgold have made a beeline for Musgrave.
Its 927,000oz resource base at Cue, coming in at 2.3g/t, is within trucking distance of both of their mills.
Of particular interest though is the Break of Day discovery at Mt Magnet, which comes in at 327,000oz and a grade of 10.4g/t.
Unlike Westgold, which has seen Musgrave tell shareholders to reject its initial offer for the gold explorer, Ramelius has over 12% of support for its $201 million bid already including top shareholder Westminex and the Musgrave directors.
The news came as Ramelius also announced it had hit the lower end of its production guidance of 240,996oz for FY23, including 68,752oz in the fourth quarter.
RMS said additional production from its high grade, high margin Penny mine, feeding its existing Mt Magnet mill, helped deliver $42.6m in positive operational cashflow.
Its bank balance lifted from $154.4m as of March 30 to $272.1m at June 30, thanks also to $75.1m cash picked up in its acquisition of Breaker Resources.
Speaking to analysts after announcing the Musgrave deal today, Ramelius MD Mark Zeptner and CFO Tim Manners said the Cue assets would likely take more than 18-24 months before they were developed.
Despite a wave of acquisitions in recent years, the $1.25 billion gold miner remains on the lookout for more as it looks to add a third hub to its Mt Magnet and Edna May operations.
WA remains the most interesting jurisdiction for a 100,000ozpa sort of asset, with Ramelius also looking to incorporate Breaker’s Lake Roe assets into its planned development of the Rebecca gold project near Kalgoorlie.
“(A new acquisition) may not initially have 10-year life but maybe have a view to a 10-year life because life is something that we see as quite valuable,” Zeptner said.
“Whether it’s east-west-north-south of Project X, Y Z, which is obviously a bit harder to pin down but WA is a good place to start.”