Rox chasing long term growth with share consolidation, spin-off
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Rox’s move to consolidate its shares and spin-off its nickel and base metal assets is all about its long-term growth as a gold-focused play.
Key to this is the company’s move to carry out a 1 for 15 consolidation of its shares that will drastically reduce the number of shares in circulation without reducing its market capitalisation.
This has a number of benefits, chief of which is opening up Rox Resources (ASX:RXL) to serious institutional investors that often have a mandate to invest only in shares above a certain price point.
Additionally, stocks with large share volumes often have difficulty creating momentum for price gains even when reporting good news and consolidations serve to address this issue.
To top it off, the company recently received a major vote of confidence from well-regarded private equity investor Hawkes Point, which completed a $11m share placement late last month.
Here’s where it gets a little interesting.
The combination of Hawkes Point and share consolidations has been a positive for Capricorn Metals (ASX:CMM), which has seen major growth following its one for five consolidation in 2019 and the equity investor making a cornerstone $10m investment back in 2017.
As part of its focus on developing its Youanmi gold project near Mt Magnet, WA, the company is spinning out its Fisher East and Collurabbie nickel and base metal assets into a new ASX listed company, Cannon Resources.
The decision to spin-off these assets follows the company determining that this would result in the most efficient and direct means of delivering value.
Existing Rox shareholders will still own the lion’s share of Cannon, receiving 81 per cent of its shares through an in-specie, pro-rata distribution of one Cannon share for every 4.3 post-consolidation RXL shares.
“The demerger of Rox’s nickel and base metal assets will allow a crystal-clear focus for Rox to develop Youanmi into a high-grade producing mine, while allowing Rox investors to retain exposure to the nickel and base metal assets through a pro-rata holding in Cannon,” managing director Alex Passmore said.
The proposed initial public offering will include a public offer to new investors and a priority offer to eligible existing Rox shareholders.
Both the Fisher East and Collurabbie projects are considered to be advanced exploration assets with established resources.
Fisher East has a combined resource of 4.2Mt grading 1.9 per cent for 78,000t of contained nickel while Collurabbie has an inferred resource of 573,000t at 1.63 per cent nickel, 1.19 per cent copper, 0.082 per cent cobalt, 1.49 grams per tonne (g/t) palladium and 0.85g/t platinum.
Rox is confident that there is potential to expand on existing resources through exploration in close proximity to the Camelwood, Cannonball and Musket deposits at Fisher East.
Sabre, a nickel mineralised zone to the south of Musket, is an area of particular focus for Cannon’s new exploration programs.
Its successful past exploration has also allowed for the development of exploration strategies that can be applied regionally through the use of combined geophysics and geochemistry.
This article was developed in collaboration with Rox Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.