OZ Minerals’ Cassini takeover the latest in a rush of resources M&A action
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The resources sector continues to be a hive of merger and acquisition activity, at both the big and small end of town. Share prices are responding positively.
On Monday, $3.4 billion miner OZ Minerals (ASX:OZL) moved to acquire explorer Cassini Resources (ASX:CZI) through a recommended scheme of arrangement that will give it the remaining 30 per cent of the advanced West Musgrave nickel-copper project in WA.
A recent PFS estimated development of the Nebo-Babel nickel-copper project at West Musgrave would cost $995m to build. But this is a 26 year-long mining operation, estimate to make a cumulative $4.6bn in free cash flow over its life.
“Nebo-Babel is a project for the times as the world needs new (first-world) supplies of sulphide nickel (and copper) as the lithium-ion battery powered electric vehicle and battery storage of renewable energy revolution gathers pace,” Barry FitzGerald said in February.
As part of the deal, Cassini shareholders will receive one OZL share for every 68.5 CZI shares held and 1c cash for every CZI share, which values each Cassini share at about 16c.
This represents a 31 per cent premium to the 1-month volume weighted average price of CZI shares prior to the transaction being announced.
Importantly, Cassini will demerge its Yarawindah Brook (near Chalice’s (ASX:CHN) Julimar discovery) and Mount Squires assets into a new company, Caspin Resources, which intends to list on the ASX. Cassini shareholders will receive shares in the new company.
This follows last week’s announcement that Cardinal Resources (ASX:CDV) is the target of a takeover from China’s Shandong Gold Mining that values it at about $300m.
The 60c all-cash offer represents a 39.9 per cent premium to the company’s 20-day volume weighted average price and a 31.1 per cent premium to Nord Gold SE’s indicative proposal in March.
Larger companies have also moved to divest their non-core project with the latest example being Northern Star Resources (ASX:NST) selling its Mt Olympus Project, which comprises most of the Ashburton Project, in WA to Kalamazoo Resources (ASX:KZR) for a deferred contingent cash consideration of $17.5m.
For Kalamazoo, the attraction is immediately apparent.
Not only does the Ashburton project have an existing resource of more than 1.6 million ounces of contained gold, almost a third of which is in the higher confidence indicated category, the company also does not have to pay anything up front.
Rather, the junior explorer will have to pay Northern Star $5m on mining the first 250,000 tonnes of ore and pay a 2 per cent net smelter royalty on the first 250,000 ounces of gold produced – worth about $12.5m using the current spot gold price of circa $2,500 an ounce – that drops to 0.75 per cent for any subsequent gold produced.
Northern Star chief chair Bill Beament says that while the Ashburton project no longer fits in the company’s portfolio, it still has strong exploration and production potential.
“The royalty structure also enables Northern Star to retain an exposure to the project,” he added.