A little over 20 years after selling two gold deposits for $123 million, British-born mining engineer Mark Creasy has sealed another fortune-making deal.
Mr Creasy's wealth rose $630 million on Monday as he backed the merger of his nickel-copper miner Sirius Resources with Independence Group. In the process, he has catapaulted himself well inside the top 100 of the BRW Rich List from being a rank outsider a year ago.
Independence Group and Sirius have mines and exploration acreage in the Fraser Range area of Western Australia with Independence Group holding a 30 per cent stake in the newly developed Tropicana gold mine near where Sirius's Nova-Bollinger mine is located.
The proposed merger places a $1.8 billion value on the Nova-Bollinger nickel copper mine.
Under the deal terms, Mr Creasy is to emerge as the largest single shareholder in Independence Group, parlaying a 35 per cent stake in Sirius into an 18.6 per cent stake in the merged entity which will rank him as the largest shareholder. He will also pocket $75 million in cash and will be the largest shareholder in a newly created public company, dubbed S2, which will end up with some unwanted Sirius assets and $22 million in cash.
Independence said it is to merge with Sirius via an agreed scheme of arrangement, offering 0.66 Independence shares and 52c in cash for each Sirius share held. Sirius shareholders will emerge with 53 per cent of the merged entity.
'Long-life assets'
The Tropicana and the Nova-Bollinger mines are "tier 1, long-life assets," Sirius managing director Mark Bennett said, arguing their combined acreage in Western Australia is in an "underdeveloped, highly prospective area".
The cash component of the merger will cost Independence $215 million leaving it with net debt of $80-90 million when the merger is completed, which is scheduled for September.
Mr Creasy was free to sell the shares he will receive in Independence Group at any time, the miner's chief executive, Peter Bradford said.
"He likes the mix of assets; he likes the exploration potential" of the acreage held through the Fraser Range and the Tropicana belt, he said.
"We look forward to having him on the register for some time to come."
Independence Group defended the price paid. "This is an outstanding asset. If you want quality you've got to pay," Mr Bradford said.
A good deal, for some
Analysts said the deal terms are good for Sirius shareholders, but less so for Independence Group holders.
"In the short term it is not so good for Independence Group shareholders, but longer term it makes sense," said GMP Securities analyst Duncan Hughes. "Independence Group had to do something - the pipeline was not so impressive, so it is [now] positioned for long term growth."
Given the full price being paid, Independence shareholders will be hoping the present 10-year Nova-Bollinger mine life will be extended which will help to give them some upside from the deal.
"We haven't factored anything in" for the future upside from extending the mine life and the existing reserves, Mr Bradford said of the deal.
"If you're going to transact, you're better off doing that at the low point in the cycle," he said.
Asked about the outlook for the nickel price, Mr Bradford said the "medium term it is positive - the question is: how positive?".
As for the 12 per cent slide to $5.15 in the Independence Group share price Monday, he said: "we've had a good rise .. we're just giving some of that back".
At present, gold makes up around 45 per cent of Independence Group's asset base "which gives us the look and feel of a gold company",Mr Bradford said.
Buying Sirius will "give us more of a base metal feel", he said, but over time, the intention is to lift the gold portion of the group's assets back to around the present weighting.
And the market is speculating that Independence has Gold Road in its sights.
With the ramping up of production of the Tropicana mine, Independence Group has been the subject of ongoing speculation about acquisition targets, and it recently emerged with a 4 per cent stake in Gold Road, which is hoping to develop a gold deposit, Gruyere, which lies to the north of Independence Group's Tropicana mine.
"It's a holding position awaiting further news on that asset," Mr Bradford said on Monday of this investment. Gold Road is scheduled to complete a preliminary feasibility study on the mine by the end of September.
Buying Sirius will potentially lift Independence Group into the ASX100, with sufficient liquidity to attract offshore investors, Mr Bradford said.
The Nova-Bollinger mine will not be in production until late in 2016.
Independence Group was advised by UBS with Herbert Smith Freehills the legal adviser, with Euroz and Treadstone Partners advising it on the schemes of arrangement.
Sirius was advised by Hartleys with Ashhurst the legal adviser with respect to the schemes of arrangement.
