Brought to you by BULLS N; BEARS
Andrew Todd
West Wits Mining has opted to trim the fat from its asset portfolio, striking a deal to offload its Mt Cecelia gold project in Western Australia while retaining a meaningful stake in any future success.
The company has agreed to sell 100 per cent of the project via its subsidiary Northern Reserves to Aventine Resources, a private explorer gearing up for an ASX listing and a push into the highly prospective Paterson Province.
On the surface, it looks like a clean exit. But dig a little deeper and it is more of a strategic reshuffle than a full goodbye.
West Wits will pocket $2 million in Aventine equity, giving it direct leverage to any exploration success as the new owner looks to make its mark in one of Australia’s hottest gold-copper regions.
‘The divestment of the Mt Cecelia Project represents a strategically compelling outcome forWest Wits shareholders.’
West Wits Mining chief executive officer Rudi Deysel
Layered over the top is a one per cent net smelter royalty across any future production from Mt Cecelia. That royalty could prove a handy long-term cash stream if Aventine hits pay dirt, although half of it can be bought back for $2 million.
There is also a carrot dangling for a bigger discovery. If Aventine can define a JORC-compliant resource of at least 500,000 ounces of gold, West Wits stands to receive up to an additional $1 million, either in cash or shares, upon a milestone being met.
Importantly, West Wits will not have to spend another dollar advancing the project, as the company remains free carried to focus on its flagship African gold production.
West Wits has been steadily advancing its Witwatersrand Basin portfolio, a globally renowned gold district that has already produced more than 1.5 billion ounces over its lifetime.
Its Qala Shallows project is shaping as the centrepiece, with a substantial resource of 7.24 million ounces at 4.0 grams per tonne (g/t) gold – a grade that most gold miners would envy – the company is keen to channel funds and operational focus into pushing that development story forward.
By divesting Mt Cecelia, West Wits is effectively sharpening its strategy, moving away from early-stage exploration in Western Australia and doubling down on a more advanced, potentially near-term production play in South Africa.
West Wits Mining chief executive officer Rudi Deysel said:
“The transaction structure delivers immediate and potential future value, while preserving
meaningful exposure to exploration success through equity participation and a royalty
entitlement.“
Meanwhile, Aventine appears to be no mug buyer.
The incoming owner is assembling a sizeable landholding across the Paterson Province, a region that hosts multiple tier-one copper-gold deposits, including Telfer, Havieron and Rio Tinto’s Winu development.
With plans to list on the ASX in June, Aventine will likely be well funded and highly motivated to push exploration at Mt Cecelia and across its broader ground package.
That combination could work nicely for West Wits, which now has exposure to the upside without having to fund the full headache.
It is a classic case of having your cake and eating it too. If Aventine delivers a discovery, West Wits wins. If not, it has still cleaned up its balance sheet and redirected funds. Either way, it is a savvy corporate divestment for the miner that could potentially pay big dividends down the track.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au
