K2fly Limited (ASX:K2F) has executed a share sale agreement to acquire Sateva Pty Ltd and Sateva Development Pty Ltd to strengthen its technical assurance suite of software solutions that address global tier-1 and tier-2 mining companies.
SATEVA’s software products will tie directly into K2F’s own leading software-as-a-service (SaaS) based Resource Governance software solutions.
Shares have been up almost 12% to 39.5 cents, approaching the new 9-year high of 42 cents set earlier this month.
“Game changer in mining industry”
K2fly chief executive officer Brian Miller said: “We are constantly looking for complementary software solutions that further improve and extend our customers’ experience.
“SATEVA and our new block model management capabilities will be a game-changer in the mining industry and beyond, as we use modern technologies to dramatically improve what is increasingly a big data management and governance problem for the resources industry.”
Additional depth to technical assurance
The SATEVA acquisition brings additional depth to K2fly’s technical assurance that will underpin its resource inventory solutions and provide deeper and richer functionality for resources’ clients, particularly senior geologists at corporate-level, who are the main target audience.
Since acquiring the intellectual property of RCubed 17 months ago, the Resource Inventory Management solution has been particularly successful with 14 tier-1 and tier-2 mining companies now using the cloud-based product.
The mid-year release of the RCubed Reconciliation module is already gaining momentum with several paid-pilot studies underway.
The acquisition of SATEVA will further enhance these offerings via an integrated Block Model Management solution, in the form of Model Manager, and other discrete solutions within the technical assurance space.
Model Manager will revolutionise the way annual reporting and planning processes are undertaken in global mining companies.
It will include a rigorous governance and compliance overlay, for version control, access permissions, touch tracking and control over resource and reserve models.
"Three strategic objectives"
K2fly chief commercial officer Nic Pollock said: “The SATEVA acquisition contributes to three key strategic objectives for K2fly.
"It provides additional software solutions that address our technical assurance capability in mining and ESG.
“It increases our opportunities to deliver improving annual recurring revenues and further strengthens our share of software solutions in major iron ore producers.
“As a significant additional bonus, we get to leverage Mark Forster and his team to further enhance our local development capability for further scale.”
Share sale agreement
K2fly will acquire SATEVA for the following consideration:
- Cash consideration of $1 for each $1 of consolidated net assets of SATEVA, excluding any amounts relating to intangible assets, with an amount of $2 million to be paid on the settlement date;
- Fully paid ordinary shares in K2F to the value of $2 million to be issued at the deemed issue price of the lower of 10-day VWAP of K2F shares and $0.355; and
- Deferred consideration based on SATEVA software product and product consulting invoiced amounts until June 2024.
The net effect is an acquisition for scrip of $2 million, with a 3.5-year contingent consideration based on sales performance.
The shares will be subject to a 12-month voluntary escrow period.
Mark Forster joins K2fly
Further, SATEVA founder and managing director Mark Forster has joined K2fly’s executive team as chief development officer.
As part of his employment package, Forster will be issued zero exercise price options (ZEPOs) to the value of A$50,000, which will vest upon the completion and commercial delivery of three software products by SATEVA.
The three products - Maximum Return, Optimiser and Block Model Manager – will have to be delivered by June 30, 2021.
SATEVA, which provides innovative software solutions and IT consulting services for mining, resources and rail industries, has also developed and is in the process of developing additional SaaS-based solutions within the resource technical assurance space, complementing and adding to the company’s existing software products.
The Perth-based company’s current clients in the resources sector include Rio Tinto Iron Ore, Roy Hill and FMG. It also has RAC Insurance as a client.