Following a strategic portfolio review, the Board of IronRidge Resources Ltd (IRR) has concluded that the Cape Coast Lithium Portfolio is materially undervalued in IronRidge's current structure and requires a distinct, separate focus to release its true value. The Board therefore announces its intention to progress a demerger of the company's gold assets in Côte d'Ivoire and Chad into a new gold focused entity structured to permit quotation on a recognised stock exchange (NewGoldCo), subject to regulatory and shareholder approvals, as required.
- Intention to demerge company's suite of gold assets into a separate listed entity (NewGoldCo). The Board believes that the creation of a new gold focused company, in a robust gold market, is the optimal way to realise full value for shareholders.
- Restructuring to unlock further value in the Cape Coast Lithium Portfolio following the scoping study, which confirmed the Ewoyaa Lithium Project as an industry stand out lithium asset.
- The Board believes the proposed demerger will deliver shareholders an investment in two high quality companies; each delivering a clear focus on lithium or gold.
Whilst it is the company’s intention to progress with a demerger of its gold assets, there will be a number of steps and conditions that will need to be addressed as part of finalising the demerger structure and there can be no guarantee that the demerger will complete. The company will make further announcements to shareholders accordingly.
Vincent Mascolo, CEO of IronRidge, said: "The proposed demerger is part of the growth strategy for IronRidge, and today's news represents a truly unique opportunity for shareholders to benefit from upside in two distinct and diversified companies at an opportune time for gold and lithium, respectively.
"The Board expects that today's vision can unlock significant shareholder value, help mitigate commodity risk as well as enable the Board to operate with greater efficacies and focus to capitalise on two highly compelling commodity markets."
Overview and rationale
The Board considers the Cape Coast Lithium Portfolio to be materially undervalued at the current share price and in the current structure of IronRidge and believes that the portfolio requires a distinct, separate focus to release its true value.
The Board believes that the creation of a new gold focused company in a strong gold market is the optimal way to realise further value for shareholders.
Under IronRidge ownership, the Cape Coast Lithium Portfolio, which includes the Ewoyaa Lithium Project, has been positioned as an industry standout project, ready for advancement through the development stages to production.
The scoping study confirmed Ewoyaa as a long-life, large-scale, low-cost opencast project, delivering excellent returns, as outlined below:
- Scoping study supports a business case for 2 million tpy production operation with life of mine (LOM) revenues exceeding US$1.55 billion, with significant potential to extend LOM.
- Eight year LOM operation, producing an average 295 000 tpy of 6% lithium oxide (Li2O) spodumene concentrate.
- Study delivers exceptional financial outcomes:
- LOM revenues exceeding US$1.55 billion, post-tax NPV8 of US$345 million, IRR of 125% over 8 years.
- US$68 million capital cost with industry-leading payback period of <1 year.
- C1 cash operating costs of US$247/t of 6% lithium spodumene concentrate Free on Board (FOB) Ghana Port.
- Pre-tax NPV8 of US$539 million and EBITDA of US$854 million for LOM.
- Average EBITDA of US$105 million/yr.
- Significant exploration upside potential from the historic Egyasimanku Hill deposit (1.5 million t at 1.66% Li2O) and surrounding 684 km2 portfolio.
Since completion of the Ewoyaa scoping study, there has been significant interest in Ewoyaa relating to potential partnership and offtake opportunities.
Benefits of the proposed demerger
- Separation of IronRidge's gold and lithium projects into separate focused entities with the objective of unlocking greater value for IronRidge's shareholders.
- Permits each separate entity to appropriately resource and focus on its projects, whilst progressing organic and other value accretive growth opportunities in their respective sectors.
- Allows IronRidge to focus all its resources on its three-stage ramp-up to production strategy at Ewoyaa, following a very strong increase in interest in the project.
- Provides IronRidge shareholders with diversification across investment assets, mitigation of commodity risk.
- Allows IronRidge shareholders to better share in the uplift expected from the lithium and electric vehicle thematic by attracting investors seeking this exposure.
- Provides a timely, clean separation of assets, providing a more direct path to value recognition in the company's asset base.
Read the article online at: https://www.globalminingreview.com/finance-business/01062021/ironridge-announces-intention-to-demerge-gold-assets/
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