PERTH (miningweekly.com) – ASX-listed Develop Global has launched a takeover of junior lithium and gold explorer Essential Metals, and has announced a A$50-million capital raise for a number of initiatives including the potential restart of the Woodlawn zinc/copper project, in New South Wales.

Develop and Essential Metals have entered into a binding scheme of implementation deed under which Develop will acquire Essential, offering shareholders one new Develop share for every 6.18 Essential shares held.

The offer values Essential at around A$152.6-million, and places a value of 56c a share on Essential’s share price. This implies a premium of 34.9% to Essential’s last closing price and a 30.8% premium to the company’s 20-day volume weighted average share price.

The Develop offer also offered a 62.3% premium to Essential’s share price prior to a January takeover offer by Tianqi Lithium Energy Australia (TLEA), which had proposed to acquire all the shares in Essential for 50c a share in cash. Essential shareholders voted against the TLEA deal in April this year.

The Essential board of directors has unanimously voted that shareholders accept the Develop offer in the absence of a superior proposal, and subject to an independent expert concluding that it is in the best interest of shareholders.

Essential’s largest shareholder, Mineral Resources (MinRes), has agreed to vote its 19.55% shareholding in the company in favour of the Develop transaction in the absence of a superior offer.

On the completion of the Develop deal, Essential shareholders would hold an 18.4% in the combined group, which is estimated to have a pro-forma market capitalisation of A$771.3-million based on Develop’s capital raising price of A$3.20 a share and cash of approximately A$81.7-million.

“The scheme announced today provides Essential shareholders with an exciting opportunity to join the rapid growth trajectory of a substantial diversified battery and energy transition metals group, led by Bill Beament, which has delivered exceptional returns for its shareholders over the past two years,” said Essential MD Tim Spencer.

“In addition to delivering a significant premium, the scheme, if approved and implemented, will allow Essential shareholders to retain ongoing exposure to the development of our flagship lithium asset at Pioneer Dome as part of a much larger diversified resources group.

“In considering the merits of this transaction, the Essential board took into consideration a range of factors including the ability for Essential shareholders to participate in the benefits of the combined group with access to Develop’s world-class mining team, funding capability and ability to fast-track the Pioneer Dome asset through to production.

“Develop’s world-class mining team is ideally placed to unlock the value of Pioneer Dome in a timely and efficient manner, while Develop’s balance sheet, future cash flows and access to funding will further underpin and de-risk the development strategy for Pioneer Dome,” said Spencer.

“We believe this transaction is a great outcome for Essential shareholders and for other stakeholders including our employees, suppliers, the Ngadju people and the state of Western Australia, all of whom will benefit from the development of the Pioneer Dome lithium project as part of a large, well-funded and highly regarded Australian resources group with an exciting future.”

Essential’s Pioneer Dome lithium project in Western Australia, is a hard-rock lithium development asset with a mineral resource of 11.2-million tonnes at 1.16% lithium oxide. A feasibility study for the project is currently under way.

Develop’s Beament said on Monday that if approved, the scheme would see Essential shareholders become part of a diversified battery and energy transition metals group, reducing the risks associated with being a single-asset development company.

“Being a one-asset company, particularly in the development phase, brings significant risks and challenges,” he said.

“Develop’s experienced team, multi-asset base and strong cashflow from the mining services division will help mitigate these risks and accelerate the development timetable in the process.”

In addition to the acquisition agreement, Develop on Monday also announced plans to raise A$50-million through a A$30-million share placement and a 1-for-29 accelerated non-renounceable entitlement offer to raise a further A$20-million.

The company will place 9.4-million shares, at a price of A$3.20 a share, representing a 7.5% discount to its last trading price, and a 3.5% discount to its five-day volume weighted average share price.

The 1-for-29 entitlement offer will be broken into institutional and retail components, with the retail component to open on July 10 and close on July 26.

Beament will take up his full entitlement associated with his 19.4% shareholding in the company, contributing A$3.9-million to the capital raise, while all eligible directors of Develop have also signalled their intention to take up their full entitlement.

MinRes, which holds a 12.9% interest in Develop, will also take up its full entitlement, contributing A$6.4-million to the capital raise.

Funds raised will be used to accelerate the development of the Pioneer Dome lithium project, subject to the successful completion of the scheme, as well as prepare for the resumption of production at the Woodlawn project, including underground capital development which is expected to significantly de-risk the production re-start.

Develop will also undertake further drilling at Woodlawn to follow up on the recent significant exploration success and to continue to grow the mineral inventory for the life-of-mine plan. An updated life-of-mine plan at Woodlawn is expected in the September quarter of this year, and Develop recently approved an A$8-million underground development at the project to enhance an early restart scenario.

In addition to Woodlawn, Develop also owns the Sulphur Springs zinc/copper project, which is estimated to have a mine life of eight years producing 490 000 t of zinc and 83 000 t of copper. A recent definitive feasibility study estimated that the project would require a capital investment of A$296-million, and could generate revenues of A$2.8-billion, with a net present value of A$523-million and an internal rate of return of 34%.