NEX METALS EXPLORATIONS LIMITED For personal use only
Replacement Target's statement
In response to the offer by Metalicity Limited (ACN 086 839 992) to acquire all of your ordinary shares in Nex Metals Explorations Ltd (ACN 124 706 449)
If you are in any doubt about how to deal with it, please consult your stockbroker or other professional adviser: or telephone the company on 0436 121 809.
The directors of Nex Metals Explorations Ltd unanimously recommend that, in the absence of a higher offer, you
REJECT
METALICITY LIMITED'S OFFER
TO REJECT METALICITY LIMITED'S OFFER DO NOTHING. Take NO ACTION in relation to all documents sent to you by Metalicity.
IMPORTANT INFORMATION
This is an important document and requires your immediate attention. If you are in any doubt about how to deal with this document, you should consult your financial, legal or other professional adviser without delay.
This Replacement Target's Statement is dated 17 March 2022. This Replacement Target's Statement is ordered by the Takeover Panel to replace the Original Target's Statement dated 29 October 2021
Legal Adviser | Financial Adviser |
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For personal use only
What do your Directors recommend?
REJECT the Offer
To REJECT the offer DO NOTHING
Take NO ACTION in relation to all documents
sent to you by Metalicity.
Your Directors' key reasons to REJECTthe Offer
1. The Offer by Metalicity materially undervalues your shares in Nex Metals
Your Directors unanimously consider that Nex Metals Shares are worth substantially more than the value of the Metalicity Offer (the Metalicity Offer values Nex Metals Shares at $0.0337 as at 11 March 2022).
Your Directors consider that the Enterprise Value1 of Nex Metals on a relative basis should be a premium to the Enterprise Value of Metalicity:
- Nex Metals and Metalicity each have approximately an equal interest in The Kookynie Gold Project ("Kookynie") (Nex Metals 49% vs. Metalicity 51%)
- Nex Metals also owns 100% of the prospective Kookynie Tailings Research Project ("Kookynie Tailings"). Initial drilling and technical studies at Kookynie Tailings infer the potential for considerable value to be realised (subject to additional investment and technical work)In comparison, Metalicity's only other asset is an 80.3% interest in the Admiral Bay Zinc Project, an asset that is dormant and that is currently unable to be monetised in any way, despite historical expenditure of $50m, and is therefore considered by your Directors to be have negligible value
- In summary, Nex Metals has an 49% interest in Kookynie and a 100% interest in
Kookynie Tailings, whereas Metalicity's only asset of value is considered to be its
1 Interest bearing liabilities less cash and cash equivalents
2
only
51% interest in Kookynie. Your Directors therefore consider that Nex Metals has a superior asset holding compared to Metalicity.
Given Nex Metals' superior asset holding, it would be reasonable to assume that the Enterprise Value of Nex Metals would be a premium to Metalicity. However, the Enterprise Value of Nex Metals, and the value of the Metalicity Offer, is at a material discount to the Enterprise Value of Metalicity on the dates shown below:
Enterprise Value of Metalicity Compared to Nex Metals
use
Metalicity | |
pre-Offer | |
13-Sep-21 | |
Price per share ($/sh) | 0.01 |
Market Capitalisation ($m) | 21.4 |
Net Debt / (Net Cash)1 | (2.0) |
Enterprise Value | 19.4 |
Discount to Enterprise Value of Metalicity
Nex Metals
pre-Offer | Announced | Current | ||||||
Offer | Offer | |||||||
13-Sep-21 | 14-Sep-21 | 4-Mar-22 | ||||||
0.037 | 0.048 | 0.0337 | ||||||
9.9 | 12.8 | 9.0 | ||||||
(0.1) | (0.1) | (0.1) | ||||||
9.8 | 12.8 | 8.9 | ||||||
-49% | -34% | -54% | ||||||
For personal
1. Interest bearing liabilities less cash and cash equivalents as at 31-Dec-21
Metalicity is seeking to exploit this disconnection in the relative Enterprise Value of Nex Metals compared to Metalicity with an undervalued Offer for your Nex Metals Shares.
Your Directors unanimously recommend that, in the absence of a higher offer, you REJECTMetalicity's Offer.
In addition, the true value of Kookynie is yet to be realised, with material upside potential, including near-term appreciation in value from the impending declaration of a maiden JORC resource at Kookynie on the back of a gold exploration target of between 294,000 ounces and 967,000 ounces. (as announced by Metalicity on ASX dated 12 March 2020).
Metalicity's undervalued and opportunistic bid for Nex Metals seeks to capture this value, depriving Nex Metals Shareholders of the full opportunity to participate. Metalicity, as project manager, has the best understanding of the inherent value of Kookynie and the lucrative upside available.
In the event Metalicity acquires 100% of Nex Metals, Nex Metals Shareholders will have an effective interest of 37.5% in Metalicity and therefore a 37.5% interest in Kookynie. However, Nex Metals shareholders currently have an effective interest of 49% in Kookynie. Therefore, Nex Metals Shareholders accepting the Metalicity offer will have their effective interest in Kookynie significantly diluted. Your Directors believe it is not rational to dilute your interest in Kookynie and therefore unanimously recommend that you REJECTMetalicity's undervalued and opportunistic Offer.
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2. The price offered to Nex Metals Shareholders and implied acquisition premium are highly unattractive, opportunistic and significantly less than market standard acquisition premiums for comparable transactions
Metalicity's Offer to Nex Metals Shareholders is highly unattractive, opportunistic and not compelling for Nex Metals Shareholders to accept.
The following chart shows Nex Metal's historical share price over the last two years from 12 March 2020 to 11 March 2022.
Nex Metals 2-year Share Price Performance (12 March 2020 to 11 March 2022)
0.170
0.150
0.130
0.110
0.090 | 14-Sep-2021: | ||||
Announcement of | |||||
Offer for Nex Metals | |||||
0.070 | |||||
0.050 | Current Offer | ||||
0.030 | |||||
$0.0337/sh | |||||
0.010 | |||||
Mar-20May-20Jul-20Oct-20Dec-20 | Mar-21May-21Jul-21Oct-21Dec-21Mar-22 | ||||
Nex Metals Share Price | Current Offer ($0.034/sh) | ||||
Nex Metals Shareholders would currently realise a loss by accepting the Metalicity Offer. The current price of $0.0337 per share offered by Metalicity for your Nex Metals Shares is less than the last traded price for Nex Metals Shares of $0.037 per share2.
As illustrated by the above chart, the Metalicity Offer for Nex Metals is significantly below the recent trading performance of Nex Metals. Therefore, your Directors consider the Offer to be undervalued and opportunistic.
Furthermore, the Offer is unattractive and opportunistic when compared with a range of historical trading prices for Nex Metals Shares. The current Offer of $0.0337 per share (as at 11 March 2022) represents:
2 As at 11 March 2022
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- a 9.0% discount to the last traded price of Nex Metals Shares of $0.037 per share on 11 March 2022
- a 9.6% discount to the 30-day Volume Weighted Average Price ("VWAP")3 of $0.037 per Nex Metals share
- a 36.9% discount to the 180-day VWAP3 of $0.053 per Nex Metals share
- a 38.8% discount to $0.055 per Nex Metals share, being the most recent price that Nex Metals raised capital on 2 July 2020
- a 58.4% discount to the 52-week4 high price of $0.081 per Nex Metals share
- a 34.7% premium to the 52-week4 low price of $0.025 per Nex Metals share
The Offer for Nex Metals is undervalued and opportunistic. Your Directors unanimously recommend that, in the absence of a higher offer, you REJECTMetalicity's Offer.
3. Nex Metals has a number of highly attractive near-term opportunities, including the ongoing work on Kookynie and Kookynie Tailings, that are anticipated to create material valuation upside for Nex Metals Shareholders.
Nex Metals' near-term value creation opportunities are detailed below:
- The declaration of a maiden resource at Kookynie
- Further drilling and definition of the Kookynie ore body
- Commencement and completion of a Scoping Study at Kookynie
- Further technical work defining the opportunity at Kookynie Tailings
- Development and commencement of production at Kookynie Tailings
Kookynie has recently had expenditure on drilling and technical studies of approximately $5.0m. An increase in the value of Kookynie from this expenditure is yet to be fully realised, pending the declaration of a maiden resource at Kookynie. Nex Metals anticipates the declaration of a resource at Kookynie will occur in the near-term, which is expected to translate to material valuation upside.
Nex Metals is also enthusiastic to realise the commercial potential of Kookynie Tailings (See ASX announcement dated 29 July 2020). Nex Metals regards Kookynie Tailings as "low-hanging fruit" and able to be monetised in the near-term. The Kookynie Tailings opportunity is 100% owned by Nex Metals and, in the absence of the Metalicity transaction, will not be able to be realised by Metalicity.
- VWAPs are based on trading prior to the Offer announcement date of 14 September 2021
- The 52-week high and 52-week low prices represent the 52-weeks trading prior to the Metalicity Offer on 14 September 2022
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Nex Metals Exploration Limited published this content on 17 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 March 2022 04:50:02 UTC.
