Two ASX-listed junior gold explorers will join forces in a move that will create a leading Australian-focused gold company with around 1.3 million ounces in JORC resources, a market cap of around $60 million and an advanced exploration and development portfolio across Australia.

Perth-based Spitfire Materials (ASX:SPI) and Aphrodite Gold (ASX:AQQ) have inked a binding terms sheet for a merger by way of a court-approved scheme of arrangement.

The merged entity will hold a diverse asset base spread across several projects including a greenfields exploration opportunity in Queensland and an emerging discovery opportunity at Mulwarrie in Western Australia.

The jewel in the crown of the merged entity will be the Aphrodite gold project near Kalgoorlie in Western Australia. The project is at pre-feasibility study (PFS) stage with near-term-production potential and exploration upside. Aphrodite’s current 2012 JORC Compliant Mineral Resource estimate completed in May 2017 as part of the PFS comprises 13.1 million tonnes averaging 2.99 grams per tonne gold for a total of 1.26 million ounces.

The project offers significant synergies with Spitfire’s Mulwarrie gold project, which lies 65km away, where it has recently discovered significant high-grade primary gold mineralisation.

The merged company board will include Spitfire director Neil Biddle and managing director John Young, as well as Aphrodite executive chairman Mr Peter Buttigieg and non-executive director Roger Mitchell. Mr Young will continue as managing director of the merged company while Mr Buttigieg will be the non-executive chairman.

Commenting on the transaction, Mr Young said it provided an exciting platform to fast-track the growth of a significantly enhanced ASX-listed gold company with a strong pipeline of growth assets.

“The combination of our WA assets at Aphrodite and Mulwarrie gives us the critical mass to pursue a near-term development strategy based on the potential establishment of a new production hub near the world-class mining centre of Kalgoorlie,” Mr Young said.

“The large resource inventory at Aphrodite has exceptional exploration upside and growth potential, and offers significant synergies with our emerging discovery at Mulwarrie. At the same time, shareholders in the combined group will have exposure to a high-potential discovery opportunity at the Alice River Gold Project in North Queensland, where drilling is set to commence next month.”

Mr Young added the transaction was consistent with Spitfire’s strategy to create value for its shareholders through aggressive exploration and value-accretive strategic acquisitions in high quality mineral provinces.

Mr Buttigieg said the transaction allowed Aphrodite’s shareholders to retain participation in the advanced Aphrodite Gold Project while gaining exposure to Spitfire’s exploration portfolio and its high-calibre management team.

“This transaction will realise a view held by the Aphrodite board for some time that there was potential and merit in a consolidation of projects around Kalgoorlie,” he said.

The transaction

Spitfire will acquire all the issued capital of Aphrodite that it does not already hold by way of a scheme of arrangement. Spitfire currently holds a 10.38 per cent stake in Aphrodite.

Both Aphrodite shareholders and Spitfire shareholders will each hold approximately 50 per cent of Spitfire following completion of the Transaction to create a “merger of equals”.

In exchange for their fully-paid ordinary shares, Aphrodite shareholders will receive one  new fully paid ordinary Spitfire share for approximately every 2.9 Aphrodite shares held under the scheme.

The transaction values the acquisition price of Aphrodite at approximately 4.49 cents per share, representing a 87 per cent premium to Aphrodite’s closing share price on 11 August 2017 and a 93 per cent premium to Aphrodite’s 5-Day VWAP.

The deal is subject to several conditions including due diligence and parties entering into a merger implementation agreement. Due diligence and signing of the merger implementation agreement are to be completed by 25 August 2017.

Shares in Aphrodite have jumped 50 per cent in today’s trade to an intraday high of 3.6c while Spitfire had dipped 8 per cent to 12c at 11.40am Monday AEST.


This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.