The potential consideration of $57 million from IGO’s wholly-owned subsidiary IGO Newsearch Pty Ltd represents a transformational transaction for Boadicea and also includes a royalty.
It is a win-win-win because as well as benefiting from future upside from IGO’s efforts on the tenements, BOA will be well-funded to aggressively explore its remaining properties, including two on Fraser Range.
BOA shareholders will also benefit directly from the asset sale with an unfranked special dividend of 8 cents per share to be paid to those registered on October 12, 2020, subject to shareholder approval.
The company’s managing director Jon Reynolds said: “The agreement with IGO/Newsearch provides a substantial cash injection and a unique opportunity to leverage the exploration skills of Newsearch within the Fraser Range to explore for nickel sulphide mineralisation, allowing upside participation from any discovery.”
Shares hit new five-year high
Investors responded positively to the news with shares up 73% intra-day to 38 cents, a new high of almost five years.
The nine exploration licences or ballot wins covered by the agreement are all within the Fraser Range gravity high. They are – Symons Hill, Giles, White Knight, Transline North, Transline South, two tenements at Transline West, South Plumridge and Giles South.
Adjacent to Nova
The key Fraser Range ground positions being sold to Newsearch include Symons Hill, which is adjacent to IGO’s Nova mining lease, as well as tenements near the Silver Knight and Mawson discoveries of Great Southern Nickel and Legend Mining Ltd (ASX:LEG) respectively.
Apart from these tenements, the asset sale deal with Newsearch includes a subscription agreement and a royalty agreement.
The potential sale price of $57 million comprises:
- $5.5 million upfront consideration non-refundable cash payment by IGO;
- Payment of subscription price of $1.5 million by IGO to purchase 6.25 million BOA shares at 24 cents per share, which represents a 12% premium to 60-day VWAP;
- Payment of the upfront consideration and subscription price to be made within five days of shareholder approval of the asset sale agreement; and
- $50 million payment by Newsearch to purchase the Fraser Range assets. The purchase of the assets and the $50 million payment is conditional upon declaration of a JORC resource by IGO within the five-year exclusive access period.
The agreement also includes a net smelter return (NSR) royalty payable to BOA by Newsearch for 0.75% of all revenues associated with mineral production from the Fraser Range assets.
This NSR royalty allows for standard deductions of transportation, smelter and refining costs associated with the revenues, but not the mining and concentrating costs.
In return, Newsearch will be granted exclusive rights of access and exploration of the Fraser Range tenements for a period of five years.
After the $1.5 million subscription, IGO will hold 10.1% of BOA’s total issued capital while Newsearch will also be entitled to nominate a non-executive director for appointment to the board of BOA.
“Keen to explore”
IGO’s managing director and CEO Peter Bradford said: “As the dominant landholder along the Fraser Range and the operator of the Nova Operation, IGO maintains a strong conviction for the potential of the region to host multiple nickel-copper sulphide deposits.
“The Symons Hill tenement in particular, which adjoins the Nova mining lease, is an area that has received relatively little exploration to date and represents the extension of the Nova mafic-ultramafic intrusive system.
“We are keen to explore this area for repetitions of Nova-style nickel-copper-cobalt mineralisation.”
BOA will seek shareholder approval as a condition precedent to the asset sale agreement and a general meeting of BOA shareholders is scheduled to be held on October 14, 2020.
Subject to shareholder approval of the asset sale at this meeting, an unfranked special dividend of 8 cents per share will be paid to shareholders registered on October 12, 2020.
The Estate of the late Clarke Barnett Dudley, being the former managing director of BOA, which holds 37% of the shares in BOA, is supportive of the asset sale and has indicated that it intends to vote in favour of the resolution.
Use of funds
Aside from the dividend payment, the balance of proceeds, net of costs associated with the asset sale, will be used for ongoing exploration activities on the remaining exploration licences that BOA continues to hold, general working capital and new business opportunities the board may identify.
BOA retains two Fraser Range tenements - Fraser Range South and Southern Hills – as well as a Paterson Range tenement and the Horseshoe and Wildara prospects.
The company is completing preliminary exploration activities on both Fraser Range tenements with geochemical sampling and surface geological mapping.