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Andrew Todd
Larvotto Resources has launched an audacious bid to acquire advanced copper-gold explorer Hammer Metals and its massive exploration footprint in the revered Mt Isa copper province.
The move is a classic two-pronged growth play, marrying Larvotto’s looming antimony-gold cash flow from Hillgrove in NSW with Hammer Metals’ sprawling copper and critical minerals portfolio.
The all-scrip $54 million takeover has won unanimous support from Hammer’s board. The standout seal of approval, however, comes from commodities heavyweight Glencore, which has agreed to stump up $15 million for Larvotto shares at a healthy 15 per cent premium.
’The anticipated cash flow from Hillgrove and Glencore’s $15 million investment provides a strong foundation to accelerate Larvotto.”
Larvotto Resources managing director Ron Heeks
Glencore’s move builds on an already strong relationship, with the global giant having recently signed a seven-year offtake agreement for gold concentrate from Larvotto’s flagship Hillgrove mine.
Under the terms of the bid, Hammer shareholders will receive one new Larvotto share for every 22 Hammer shares they hold, implying an offer price of 6c per share, a tidy 18 per cent premium to Hammer’s last traded price.
Hammer’s Western Australian gold assets in the Yandal greenstone belt will be simultaneously demerged into a separate, unlisted public company, allowing Hammer’s followers to retain the upside from that ground.
Larvotto Resources managing director Ron Heeks said: “The acquisition comes at an important time with Larvotto transitioning into production at Hillgrove. The anticipated cash flow from Hillgrove and Glencore’s $15 million investment provides a strong foundation to accelerate Larvotto’s next stage of growth.”
The acquisition will see Larvotto get its hands on Hammer’s district-scale copper portfolio spanning a vast 3600 square kilometres in the Mt Isa region, an area long recognised as one of Australia’s premier mineral provinces.
The ground comes with a resource inventory of some 530,000 tonnes of copper-equivalent metal across its Kalman, Lakeview, Elaine and Overlander deposits.
The prize in the package is Hammer’s Kalman project, which hosts an impressive 39.2 million tonnes, grading a solid 1.27 per cent copper equivalent for 208,400 tonnes of contained copper.
Adding further grunt to the portfolio, the deal delivers Larvotto a powerful partnership with major miner South32 at Hammer’s separate Isa Valley project, which sits west of its main Mt Isa project. South32 is already in the throes of a Stage 3 earn-in arrangement, which will require it to spend $3 million on exploration to secure a 70 per cent interest in the project.
Larvotto’s deal and cash-grab will create a powerful new entity with a pro forma market capitalisation of around $871 million.
The company says its new-look portfolio will offer a rare combination of near-term critical minerals cash flow from a strategically vital asset and large-scale exploration upside in a tier-one jurisdiction as the soon-to-be miner stretches its reach across Australia.
Larvotto is already on the brink of production at Hillgrove, with commissioning on track for August and first ore already being delivered to the surface stockpiles.
Along with its gold production, the mine is set to become one of the biggest antimony producers outside of China. The critical commodity is under increasing scrutiny by Western governments and is seeing strong demand from the defence and renewable energy sectors.
The cash flow from Hillgrove should provide a powerful, non-dilutive funding engine to unlock the potential of the newly acquired Mt Isa copper assets.
No doubt Larvotto’s newest partners in Glencare are hoping the company can repeat history with the Hammer assets, having already demonstrated its development credentials by taking Hillgrove from acquisition to the verge of production in just a couple of years.
The timing of the move into copper looks particularly astute, with the red metal still trading near all-time highs and demand forecast to soar.
With major league partners and an enlarged critical minerals portfolio, Larvotto will now control two major Australian strategic projects. A cash-generating critical minerals mine in NSW and a massive copper exploration and development play in Queensland, both with a handy bit of precious metals in the back pocket.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au
