Boadicea Resources Ltd (ASX:BOA) recently entered a transformational deal with major Fraser Range producer IGO Ltd (ASX:IGO) for the sale of nine exploration licences on the range potentially worth up to $57 million.
The agreement with IGO’s wholly-owned subsidiary IGO Newsearch Pty Ltd provides a number of benefits for Boadicea.
As well as being leveraged to future upside from IGO’s efforts on the tenements, BOA will be well-funded to aggressively explore its remaining properties, including two on Fraser Range.
BOA shareholders will also benefit directly with an unfranked special dividend of 8 cents per share to be paid to those registered on October 12, 2020, subject to shareholder approval.
There have been a number of questions raised in relation to the arrangement with IGO, which Boadicea answers.
Q. What are the future plans for Boadicea and its remaining two licences in the Fraser Range?
A. Both of the remaining licences, Fraser Range South and South Plumridge, are within the Fraser Range gravity high and, therefore, are prospective for VMS Style targets. Boadicea will complete a staged work program to identify potential drill targets.
Q. Why didn’t IGO want the two other Boadicea licences in the Fraser Range – Fraser Range South and South Plumridge?
A. The transaction was a balance between what IGO wanted and what we wanted to keep.
With the cash we now have, we intend to aggressively explore our fully-owned tenements while IGO explores our tenements they have exploration rights over.
Our understanding is the remaining tenements are considered more VMS targets and IGO is seeking nickel targets.
Q. Why was the IGO deal structured with a cap on the upside?
A. IGO wanted some tenements Boadicea was not prepared to relinquish. Boadicea wanted more than IGO wanted to pay just now. The royalty helped find a balance both boards were happy with.
Q. Why are shareholders receiving an unfranked dividend? Why not franked? Why not a capital return?
A. The BOA board sought significant independent advice from a number of sources and the unfranked dividend was recommended as the most value option to shareholders.
Q. Why not hold the money and not have to capital raise in the future?
A. The majority of shareholders were very clear they wanted a share of the income, reward for patience. Boadicea will be armed with sufficient capital to enable it to immediately undertake an aggressive exploration campaign on key tenements and ongoing working capital requirements.
Q. You are handing money back to shareholders. This reduced the market cap of Boadicea. Won’t that mean less liquidity?
A. As part of the proposed deal we will issue 6.25 million shares to IGO at 24 cents per share, a premium to the 60-day VWAP.
We have already seen some profit-taking on the register post announcement, which is an expected outcome of the dividend return.
The board is confident the company is in a much stronger position than before the IGO deal and that will provide support for market capitalisation growth.
Q. Comparing the IGO deal with that of Matsa and Winward, where do you consider the Boadicea deal sits among these other nearby transactions IGO has conducted?
A. The IGO deal allows Boadicea ongoing 100% ownership of the Fraser Range tenements and IGO is paying $5.5 million to explore on our tenements and if successful will pay an additional $50 million plus an ongoing royalty.
During this whole period, Boadicea is 100% free carried, therefore, there is no cost for Boadicea to potentially realise the true value of the tenements.
In the Matsa announcement, they receive $3.5 million if IGO continues to explore to earn up to 70% of some Fraser Range tenements. IGO paid $20 million for Windward.
Q. Why has Boadicea sold the jewels in the crown for the price it settled on?
A. The deal was negotiated over many months to gain Boadicea shareholders the best deal we could from the position we came from which was a limited cash position, and an inability to explore our very prospective tenements to unlock their value.
This deal has derived a significant upside for shareholders without shareholders being asked to fund additional exploration.
The tenements remain in the ownership of Boadicea until we get $50 million. They will be returned in five years if a JORC resource is not found, but they would have been explored for up to five years to derive this upside. IGO can pay the $50 million to acquire the tenements, anytime within the five years.
The new jewel in the Boadicea crown is the Koongulla licence in the Paterson Province, which is an extremely attractive exploration region targeted by many of the majors, including Rio Tinto, IGO and Newcrest.
This deal was negotiated for very little capital expenditure and provides a significant upside to Boadicea’s exploration prospects.
There is also incredulity about the deals as well. As a board and from the feedback we have heard the market is asking how did Boadicea manage to secure $7 million, a potential $50 million payday AND perpetual royalty… and retain some key tenements the board is keen to explore right away, and also acquire a new prospective tenement in the exciting Paterson Province?
Q. Why didn’t Boadicea keep a 30% stake in Symons Hill, which is considered the jewel in the Boadicea crown?
A. The board of management was in a position where we needed to negotiate the best deal we could drive. Keeping a 30% stake in Symons Hill was not on the table.
In the interest of shareholders, we felt the better position was to negotiate the best deal of the terms that were on the table than hold out for a deal that seemed an unlikely possibility at the time.
Further questions will be answered over the next few weeks.