Kin Mining merges with PNX Metals to target extensive Australian resource base

Kin Mining (ASX: KIN) has proposed a $123 million merger with PNX Metals (ASX: PNX) to create a diversified exploration group with base metals and uranium assets in Western Australia and the Northern Territory.

The assets host total mineral resources in excess of 1.4 million ounces gold, 16.2Moz silver and 177,000 tonnes zinc with significant near-term expansion potential.

Under the terms of the proposal, PNX shareholders will receive one ordinary Kin share for every 13 ordinary PNX shares held.

On completion, Kin shareholders will have a stake of approximately 72% in the merged group while PNX shareholders will hold the remaining 28%.

Growth platform

The transaction is believed to offer “an exceptional platform for growth”, with an implied pro-forma enterprise value of $33.4m and a balance sheet consisting of $89.6m in cash and liquid investments and zero debt.

Independent board committees for both companies have recommended that shareholders vote in favour of the merger in the absence of a superior proposal.

Kin has appointed Hamilton Locke as legal advisor to the deal, while PNX has retained Taylor Collison as corporate advisor and Piper Alderman as legal advisor.

Value-adding transactions

Kin executive director Nicholas Anderson said the merger was consistent with Kin’s strategy of pursuing value-adding transactions nationwide.

“PNX has an extensive and high-quality tenement portfolio in the Pine Creek region of the Northern Territory, which is one of Australia’s most prolific resource provinces,” he said.

“It includes a unique mix of development-level zinc, gold and silver assets and an exciting uranium deposit at Thunderball which has sat dormant for over a decade.”

“[Our] strong balance sheet position gives us the capability to evaluate and fast-track the exploration of these projects, in parallel with our ongoing gold and base metals exploration at the Cardinia project in WA.”

‘Sensible consolidation’

Mr Anderson said the merger would be a “great example of sensible consolidation” in the junior resource sector in what continues to be a challenging market for small companies.

PNX executive director Graham Ascough also welcomed the merger.

“This deal is set to create one of the most exciting growth stocks in the [Australian] junior resource sector,” he said.

“The combined entity will have unparalleled balance sheet strength, a dynamic management team comprising like-minded individuals from each company and a fantastic exploration and growth pipeline in WA and the NT.”

“Our shareholders will gain exposure to Kin’s high-quality gold projects in the Leonora region,” he added.

“[The] retained gold inventory in this district offers outstanding optionality and growth potential, particularly in a rising gold market, along with the upside of Kin’s recent […] base metal discovery and other exploration breakthroughs.”

The strong funding position and enhanced liquidity is expected to allow for accelerated exploration at the high-grade Thunderball uranium project and the development of PNX’s gold, silver and polymetallic resources at the Fountain Head and Hayes Creek discoveries.

Loan agreement

Kin and PNX have entered into an unsecured term loan agreement that will see Kin provide PNX with up to $1.5m to assist with the company’s transaction costs and working capital during implementation of the proposed merger.

The funds will be provided in tranches to PNX over the term of the loan, with the first $500,000 payment due within five days of signing the agreement.