Aeris Resources (ASX: AIS) is hoping to extend the life of its Tritton copper operation in New South Wales’ Cobar Basin with the acquisition of Peel Mining (ASX: PEX) and the nearby South Cobar project (comprising the Mallee Bull and Wirlong developments).
The mines are located within haulage distance of each other and the acquisition will create a diversified mining hub utilising Tritton’s 1.8 million tonnes per annum processing plant, reducing unit costs and eliminating significant capital, complexity, and funding risk associated with building a new plant at South Cobar.
Mallee Bull and Wirlong contain a total indicated and inferred resource estimate of 10.6 million tonnes at 1.85% copper for 197,000 tonnes of contained copper (74% indicated).
The companies expect combining this with Tritton will boost the total resource to 29.5Mt at 1.73% copper for 511,000t contained metal.
Peel Asset Demerger
Under the terms of the transaction, Peel will demerge its remaining precious and base metals assets in the Cobar Basin into a new company (NewCo), which will run a $4 million public offering at an issue price of $0.20 per NewCo share (equivalent to $0.044 per Peel share) prior to listing on the ASX.
The assets will include the Southern Nights Complex (comprising the Southern Nights and Wagga Tank deposits) with a resource estimate of 10.0Mt at 7.69% zinc equivalent for 768,000t contained ZnEq (46% indicated), the May Day deposit with 1.61Mt at 0.98 grams per tonne gold, 25g/t silver, 0.92% zinc and 0.61% lead for 51,000 ounces gold 1.3 million ounces silver, 15,000t zinc and 10,000t lead, and the historical Nombinnie prospect which had a recent best assay of 33m at 2.47g/t gold from 21m including 9m at 3.10g/t from 22m and 9m at 5.32g/t from 42m.
The demerger will allow Peel shareholders to retain full exposure to the value and upside of the company’s base metals operations, receiving one NewCo share for every 4.6 Peel shares held (again valued at $0.044 per Peel share).
As consideration for the acquisition, Aeris will issue Peel shareholders with 0.3363 Aeris shares for every one Peel share held (valuing South Cobar and associated tenements at $0.19 per share).
New Market Capitalisation
If the acquisition is approved, the “highly synergistic combination” of assets would give the new group a pro-forma market capitalisation of $851m, along with a balance sheet of $106m in cash and concentrate receivables with no debt.
It values Peel at $0.234 per share and $214m on a diluted equity value basis, representing a 46% premium to the company’s closing share price and a 49.1% premium to its one-month volume weighted average price.
On completion, Peel shareholders will own 20.5% of the new group.
The transaction has been unanimously endorsed by Peel’s board of directors and shareholders have been advised to vote in favour.
Major Peel shareholder Perth Capital and its associates — which control 139 million shares or 16.1% of the company — has stated its intention to vote all of its shares in favour.
Extended Mine Life
The Peel acquisition positions Aeris to significantly extend Tritton’s mine life beyond the original 11.5 years, underpinned by baseload feed from the Constellation and Mallee Bull deposits and supplemented by satellite discoveries at Tritton and Wirlong.
Aeris is currently advancing an integration study, highlighting optimising synergies between Tritton and Mallee Bull that include mine scheduling and improved resource and operating efficiency.
The company plans to fast-track South Cobar’s development using Tritton’s established processing infrastructure, strong operating capabilities, and experienced management team.
Aeris also intends to conduct further resource drilling at Wirlong, which represents a highly-prospective exploration target and potential future ore source for Tritton.
It expects to finalise a maiden ore reserve for the combined operations within six months of completing the acquisition.
Win-Win Outcome
Aeris executive chair Andre Labuschagne said the acquisition would be a win-win outcome for shareholders of both companies.
“The South Cobar copper project is a logical source of ore for Tritton offering scope to extend mine life and transform our mining complex into a larger and more resilient operation,” he said.
“The transaction unlocks compelling value for Aeris and we welcome Peel shareholders to become part of our larger copper and gold company with strong, diversified cash flows, a robust balance sheet, and enhanced market position.”
“The combination of Aeris and Peel represents a compelling and logical consolidation within the Cobar Basin, providing a clear pathway to accelerate and de-risk the development of the South Cobar project by leveraging Aeris’ operational expertise and the high-quality Tritton processing facility,” Peel managing director Nick Woolrych said.
“Our shareholders will receive immediate value at an attractive premium and […] benefit from the market re-rating that is expected to flow from the creation of a larger base and precious metals producer with increased mine life and an enhanced production profile.”
