Beament’s ‘cracking’ base metals deal has strong whiff of history repeating
Plus, RareX set for its day in the sun as Cummins Range project gains size and grade in a world desperate for rare earths.
Bustling Billy Beament has been threatening to pull off a signature deal ever since arriving from Northern Star at the base metals developer and mining services group Develop Global (DVP, formerly Venturex).
He has done just that by securing a widely anticipated deal to acquire the mothballed Woodlawn zinc-copper mine near Canberra in NSW from creditors of Heron Resources for $30 million in cash and shares upfront, with $70m payable on success milestones being met.
Heron went belly up in July last year after hitting problems with the $340 million development of Woodlawn when it was virtually within metres of accessing a high-grade ore lens that might well have seen it tough things out.
But that wasn’t to be, leaving Develop to come along to snap up the project up for a song. On that score, Beament is in no doubt, describing the acquisition as an “absolutely cracking deal” in the hot base metals space where opportunities are thin on the ground.
His “cracking deal” analysis was given added reality by the fact that a $50m equity raising in support of the deal is being done at a 5% premium to the 5-day average Develop share price. Now there’s something you don’t see every day.
Beament said the premium goes to the strong shareholder support for the Woodlawn acquisition. He would know as he is a 16% shareholder. He will be taking up his full entitlement, as will Chris Ellison’s Mineral Resources, a 15% shareholder.
A mining engineer with a background in contracting, Beament made his name by taking Northern Star from an explorer worth next to nothing to the $10.5 billion number two Aussie gold producer it is today in under 14 years.
The starting point for Northern Star’s dramatic growth under Beament was the 2010 acquisition of the pretty much clapped out and unloved Paulsens gold mine in the Pilbara.
Paulsens is not producing today but Beament’s success in firstly mobilising the capital to buy the thing for the then lightly-capitalised Northern Star, and then making it bigger and better, gave him the market credibility and subsequent backing to grow Northern Star as rapidly as he did.
His turnaround story for Woodlawn has many similarities.
History tells us that Woodlawn was mined as far back as 1978. It’s more recent history has not been one of joy although in the 20 years of active mining at the site, the mine returned cash to the then owners each and every year.
The collapse of the last two owners, Denehurst and Heron, was not a fault of the orebody.
Denehurst blew up over a dud coal deal while Heron never actually got to see out its plans despite the $340m in developing a new mine and processing plant in the shadows of the wind turbines and biomass energy project owned by others that moved in after Denehurst checked out.
With his contractor’s eye, Beament has identified five key issues that sent Heron/Woodlawn under, one of which was outside of its control back in March 2020 – the rise of COVID-19 and its messing with the commissioning of the “new” Woodlawn.
The other four issues were: A cost overrun and delays during construction; recovery issues in the processing of tailings; underground mine productivity issues and an insufficient working capital buffer to absorb the knocks.
Develop’s plan is to drop tailings reprocessing until an underground-only operation reaches a steady state. It will also be bringing in its team of underground specialists to improve productivity and complete a 25m push to the high-grade Kate lens.
The establishment of underground drilling platforms to upgrade resources to reserves, and to chase new ore positions downdip, is also part of the plan, with Develop well-capitalised to see through the commissioning phase.
The turnaround story at Paulsens followed a similar path, as did the string of turnarounds of other pick-ups by Northern Star during its high-growth phase under Beament.
Develop will take its time to bring Woodlawn into production, and the company was not referencing any of the project metrics that Heron once quoted, notably an annual production target of 40,000t of zinc, 10,000t of copper, 12,000t of lead, 800,000oz of silver, and 3,500oz of gold.
But it can be said Woodlawn has the potential to become a significant producer in the near-term. A production history pre-Heron of 13.8Mt at 19.7% zinc equivalent, and today’s JORC-compliant resource of 18.2Mt at 9.8% zinc equivalent, says as much.
The acquisition comes as Develop’s Sulphur Springs copper-zinc project in WA’s Kimberley progresses through a DFS. The potential scale of Sulphur Springs is a moving feast because a concerted drilling campaign à la Beament-style points to something bigger.
In a 2018 study, its annual production potential was put at 15,000t of copper and 35,000t of zinc. Beament’s arrival at Develop has given some real momentum to Sulphur Springs becoming a producer after years in the wilderness. Boom prices for zinc and copper don’t hurt either.
None of the rare earths juniors can hope to ever match the scale and grade of Lynas’ (LYC) Mt Weld deposit in WA. Afterall, it underpins the group’s $8.4 billion market cap.
But there is nothing wrong with coming second or third to Mt Weld, particularly in a world intent on breaking China’s grip on the strategic metals, most notably NdPr material for use in permanent magnets in EVs and wind turbines.
NdPr was $US136,000/t before Christmas after rallying hard for two years on shortage fears for the green revolution. It has since scooted off to more than $US160,000/t.
The last time NdPr got to these levels was in 2011 when China pulled supplies to Japan over a territorial dispute. Things are different this time though as the price surge is now demand driven.
It was a point made by RareX (REE) managing director Jeremy Robinson at this week’s RIU Explorers Conference in Fremantle, with Robinson posing the question of when the lithium-type boom in prices will rub off on the company, trading at 10.5c for a $48m market cap.
RareX’s time might have arrived, with Robinson highlighting in his presentation that the company’s Cummins Range project in WA’s Kimberley region was on a pathway to becoming Australia’s third biggest.
As mentioned here previously, the 2021 drilling program confirmed mineralisation in the primary zone beneath the oxide material in the top 100m of the deposit that pretty much contains the current resource of 18.8mt at 1.15% total rare earth oxides (TREO) and 0.14% niobium.
It is a handy resource in itself but what the primary exploration success did in style - with hits of up to 10.6% TREO - was to confirm Cummins Range is on its way to becoming a much bigger and higher-grade project.
That came through in the release of a compliant “exploration target” at Cummins Range for an additional 23Mt-41Mt at 1.6% to 2.4% TREO in stacked lodes of primary mineralisation beneath the oxide material.
A funded 15,000m drilling campaign to capture the upside implied by the exploration kicks off in April. So by year-end the company should have a much bigger story to tell about its rare earth credentials in a world crying out for more of the stuff.
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One of Australia’s leading business journalists, Barry FitzGerald, highlights the issues, opportunities and challenges for small and mid-cap resources stocks, and most recently penned his column for The Australian newspaper.