They’re back! The team behind one of the share market’s biggest recent success stories
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Veteran mining executives Neil Biddle and John Young have a big following among investors on Australia’s east coast.
And for good reason. The pair, who have worked together for more than two decades, were the driving force behind Pilbara Minerals (ASX: PLS) – one of the first ASX juniors to spot the looming opportunity in the burgeoning battery metals sector.
The exploration and subsequent development of Pilbara’s Pilgangoora lithium-tantalum project in WA, which is now being commissioned, took the company from an unknown 1.5c tiddler to a $1.7 billion mid-tier miner in the space of just three years – creating huge wealth for shareholders.
Mr Biddle and Mr Young hit the road this week to promote their new venture, Spitfire Materials (ASX: SPI) – and it’s a fair bet investors will be tuning in to find out more given the pedigree of its key directors.
Spitfire has recently unveiled a proposed merger with fellow gold junior Excelsior Gold (ASX: EXG).
The pair will be promoting the deal with Excelsior chief Rowan Johnston, telling investors that it will set the company up to become a major new force in Australia’s mid-tier gold sector.
The Pilbara Minerals founders took control of Spitfire last year and, in the space of just 18 months, have already executed three M&A transactions in the Aussie gold space.
“There’s a lot of people talking about consolidation and M&A opportunities in gold, but there hasn’t actually been that much action so far,” Mr Young says.
“We believe the deals we’ve done will put Spitfire well and truly ahead of the pack in that space.”
Mr Biddle and Mr Young firstly backed their private company, Admiral Gold, into Spitfire last year before going on to unveil a merger with Aphrodite Gold, which quickly increased its resource base in the Kalgoorlie region to 1.26Moz.
The merger with Excelsior will allow Spitfire and Excelsior to fold their neighbouring Aphrodite and North Kalgoorlie projects (respectively) under one corporate roof, almost doubling the expanded company’s total resource base to 2.1Moz and “providing the critical mass required to accelerate development plans to become a recognised mid-tier producer.”
According to analysts, the planned merger will create a company with an extensive resource base capable of underpinning a +100,000 ounce-a-year operation.
Independent Investment Research analyst Mark Gordon says the deal will deliver a host of benefits, effectively combining projects located just 20km apart near Kalgoorlie, meaning the combined group will have sufficient resources to justify a stand-alone operation with easy access to infrastructure in a Tier-One mining location.
“The synergies inherent in the proposed merger of Spitfire and Excelsior should result in the merged total being more than the sum of the parts,” he said in a recent research report.
“A successful completion will see the combination of the current gold resources, which should form a critical mass to justify the merged entity to look towards development options for a combined project.”
The two key gold projects, Spitfire’s Aphrodite (1.26Moz) and Excelsior’s Kalgoorlie North gold project (825,000oz) “form a natural fit for a combined development and provide operational and development synergies”, Mr Gordon says.
Also in the mix is Spitfire’s Mulwarrie gold project, located 65km from Aphrodite, where Spitfire recently completed a deal to acquire 100 per cent ownership.
“The underground resource at Aphrodite contains 662,665oz of gold at the relatively high grade of 7g/t,” the report says.
“In addition, drilling at Mulwarrie has intersected grades of up to 43g/t, again highlighting the potential for a high-grade discovery.
“Identified mineralisation at all three key Spitfire projects and at the KNGP is also open, highlighting significant potential for resource expansions and further exploration success.
“Comprehensive exploration programs are currently underway or planned over all projects, leading to significant news flow over the short to medium term.
“Given the results of historical work, we would expect positive results from these programs.”
Mr Gordon says the merger will generate the scale needed by Spitfire to fulfil its production ambitions.
“The company’s view (with which we concur) is that any viable new standalone development in Western Australia will require around a 10-year, 100,000ozpa production profile,” he says.
“As a ball park figure, this will require a resource inventory of at least 2Moz to potentially provide sufficient material for conversion to the required ore reserves, and thus drive any decisions to investigate a standalone operation.
“A successful merger between Spitfire and Excelsior will result in a resource base of 2.1Moz, which meets this hurdle.”
Mr Gordon notes that the WA projects have ready access to power and transport infrastructure and a resident workforce and services in Kalgoorlie.
“The company has current management and technical personnel with extensive experience in the junior resources sector and a proven history of technical success and delivering value to shareholders,” he says.
“In addition, key personnel currently hold ~20 per cent of Spitfire, thus aligning their interests with those of other shareholders. The merger will add complementary skills to the current board and management.”
To read the Independent Investment Research report, go to www.spitfirematerials.com
This special report is brought to you by Spitfire Materials.
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