Aeris Resources Ltd (ASX:AIS) has entered a "transformational" agreement with Washington H Soul Pattinson and Company Ltd (WHSP) to acquire Round Oak Minerals Pty Limited for a total purchase consideration of A$234 million.
This "on strategy” transaction will transform Aeris into a diversified, mid-tier producer with a strong balance sheet to deliver an organic growth pipeline.
It delivers two cash generative, operating base metals mines in Queensland and Western Australia and also introduces a long-life copper/zinc development project in Victoria.
Boosting copper exposure
The operations will increase Aeris’ FY23 copper equivalent production by 81% to 63,000 tonnes and add significant high-grade ore reserve tonnes, increasing the company's long-term exposure to copper.
This acquisition also provides a strong platform for further growth with both near-mine extension opportunities and regional exploration upside.
"An excellent fit"
Aeris executive chairman Andre Labuschagne said: “This transaction transforms Aeris into a mid-tier copper, gold and base metals producer with multiple operations and exceptional growth potential.
"The Round Oak asset portfolio is an excellent fit with Aeris’ stated strategy to acquire advanced copper, base metals and gold assets in Australia that are strongly cash flow generative with attractive exploration upside."
Round Oak has a diverse portfolio of high-quality Australian copper and zinc assets, including:
- Jaguar zinc-copper underground mine in Western Australia;
- Mt Colin underground copper mine and Barbara deposit in North-West Queensland;
- Advanced Stockman copper-zinc development project in Victoria; and
- Highly prospective exploration tenements across all sites including a foothold into the mineral-rich Mt Isa region of North-West Queensland.
These will add to Aeris' existing copper operations at Tritton in NSW and gold operations at Cracow in Queensland.
To underpin production
"The introduction of the Stockman Project provides us with a second long-life project, alongside Tritton, to underpin the group’s production into the next decade," Labuschagne said.
“We are confident that through the current team at Aeris and the experienced, high-quality operational team joining us from Round Oak that we will add significant value to
these assets and continue to grow the company to the benefit of shareholders.
“We are also looking forward to having Washington H Soul Pattinson as a major shareholder of Aeris. WHSP shares our vision for the company and will be a long term, supportive investor going forward.”
Transaction consideration
Aeris has agreed to pay WHSP A$234 million upon closing of the transaction, comprised of an A$80 million cash payment and the issue of 1,466.7 million ordinary shares in Aeris at an issue price of A$0.105 per share up to a total value of A$154 million.
The acquisition of Round Oak will be on a debt-free basis and at completion of the transaction, Aeris will have A$16.9 million in cash.
In addition to the transaction consideration, WHSP is expected to receive total cash distributions of about A$100 million from Round Oak in FY22 up until completion.
To be largest shareholder
Aeris intends to fund the cash component through a fully underwritten A$117 million equity raising conducted via an institutional placement and a 1 for 4.22 pro-rata, accelerated non-renounceable entitlement offer.
This arrangement will result in WHSP becoming Aeris’ largest shareholder with a 30.3% ownership interest and WHSP's chairman Robert Millner will join the Aeris board as a non-executive director upon completion.
The transaction combines two complementary businesses to create an emerging, mid-tier base and precious metals company with a diverse portfolio of four operating mines and the flagship Stockman development project underpinning an attractive organic growth pipeline.
WHSP managing director Todd Barlow said: “This transaction represents the culmination of a significant phase of investment in building a substantial base metals business and, through the combination of Round Oak with Aeris, provides a strong platform to continue WHSP’s exposure to copper which is well-positioned to benefit from global trends in electrification and renewable infrastructure.”