Ann: Andromeda and Minotaur to Combine, page-295

This sent by fellow shareholder and broker

Andromeda (ADN)
The announcement on the merger with MEP was made this and it was pretty much as I expected, except that ADN’s remaining non-kaolin interests will not be included in MEP’s copper/gold exploration hive-off Breakaway Resources P/L. Note that ex-MEP shareholders will hold 19.5% of the enlarged ADN. MEP has a 25% interest in the Great White project and a 50% interest in Natural Nanotech P/L, but the dilution of the effective interest of those shareholders in these assets reflects the fact that ADN has other kaolin interests, being Mt Hope, plus the right to earn interests in other tenements near Great White, plus the work on a concrete additive, a kaolin for the cosmetics market, and HPA, in none of which MEP had any involvement.

The other announcement made by ADN was less positive, in that completion of the updated DFS for the Great White project has been pushed out to 1Q 2022, whereas previously it was to be completed in CY21. More time is required:

• To incorporate all the advantages of 100% ownership because the merger provides Andromeda with the options for different project development scenarios not previously considered in the PFS or existing DFS.
• To complete further scenario and optimisation analysis on the product mix including not just the mix between products for the ceramic and coating markets but, potentially, direct shipping ore (DSO).
• To potentially provide sufficient time to incorporate into the study various products for one or more of the higher-priced concrete, cosmetics and HPA markets.

The capital cost will be higher due to having to configure the process plant to enable simultaneous production of the various products, but a good proportion of the cost could be funded by early cash flow from a DSO operation. And in the meantime with a 30 September cash position of $46m ADN is not going to run out of cash.

Some ADN investors were clearly disappointed by today’s news but I take a longer term view and see it as positive for the company.