The best merger's create significant synergy benefits or...

The best merger's create significant synergy benefits or improvements in the combined risk profile. I just cant see where any material benefits would accrue in a merger between WC8 and DLI. Yep it would be a bigger entity but it would simply be the sum of the parts and probably needs a bigger management team to co-ordinate the work across multiple projects still needing development. There would simply be a shift from Mt Ida Gold/Lithium and Yinnetharra Lithium to Mt Ita Gold/Lithium, Yinnetharra Lithium, Tabba Tabba lithium and a very low value Hobbs Pipe Gold Project. There may be gold exploration value given all the past nearby workings but Hobbs itself is low-value. Also all of these are pre-feasibility projects.

So why do I think Hobbs Pipe Gold is low value? The first clue that Hobbs Pipe is low value is that high value JORC resources don't sit for 10 years with progress on developing the project. The Hobbs Pipe resource wasn't defined in 2019, it was defined in 2013.

The second clue is Hobbs pipe is low grade and grade matters. Both gold deposits are superficially a similar size at 752k oz and 770k oz. Mt Ida is however 6.6Mt @ 3.5g/t for 752k oz. Hobbs Pipe is 20.5Mt @ 1.1g/t for 770k oz. Hobbs Pipe is much lower grade. Its also concerning when there are maths mistakes in JORC results and Hobbs Pipe has these. Initially they couldn't get the difference between 700m right and 900m right and needed to make a correction announcement. Sovereign also calculate that 0.2Mt @ 0.6g/t is larger at 39k oz than 0.9Mt @ 0.9g/t for 18k oz. This is mathematically impossible so there's additional typo's or errors in the resource that are repeated into WC8's updates.

So Delta's gold uses an open pit cut of 0.5g/t. When Baldock is 2.86Mt @ 4.0g/t for 367k oz that's massively above the cut-off grade and therefore probably high margin gold. For Baldock UG the resource is 1.96Mt @ 4.9g/t for 307k oz which is again a long way above the 1.5g/t UG cut-off used by Delta and again likely to be at least good margin gold.

Back to Hobbs, there's only 153k oz within the open pit at ~1g/t which is at least above the Sovereign proposed 0.5g/t open pit cut-off. Hobbs also has 16.7Mt @ ~1.1 to 1.2g/t UG. Sovereign proposed a 0.9g/t cut-off UG grade so Hobbs UG is barely above cut-off grades. If you applied Delta's 1.5g/t UG cut-off grade then on-average the entire Hobbs UG deposits is below cut-off. There may be pockets above 1.5g/t but that 610k oz of UG gold will crash down to much smaller volumes with a 1.5g/t cut-off. WC8's gold in Hobbs doesn't appear to be worth very much at all, its just too lower grade and too deep.

The market also agreed Hobbs held little value. While its impossible to split gold vs lithium values now from WC8 if you go back to Dec 2020 and WC8 had a share price of 2.8c with 317m shares on issue with $3.8m cash. WC8 had a MC of $8.9m for an EV of $5.1m inclusive of all other WC8 assets beyond Hobbs. At best Hobbs was being valued at a couple of million dollars.


The biggest problem Delta faces is that it takes a lot of capital to build large scale concentration plants. Raising this capital in the current market would create significant dilution. An ideal merger candidate would create synergy benefits by having a project or projects that are either in production or require only limited capital to be brought into production. They would add cash not debt to the group. This in production project would help fund development costs and capex costs reducing or removing post merger CR risks so the merger shareholders get to keep more of the group as it brings projects into production.

In the lithium space there is only one candidate that doesn't have a MC massively above Delta and doesn't have highly problematic offtake ceilings or involve Africa and that company is Core lithium. While Core has its issues, a merger with them would resolve who runs Delta. It would be Paul Brown who is the current CEO at Core. Paul Brown previously ran the lithium operations of MinRes for Chris Elison so CE/MinRes would most likely be very supportive of PB as a new group CEO. The group would have a JORC resource of 88.6Mt @ 1.19% and with only modest upgrades would be over 100Mt. The restart capex for Grants is minimal and the decline development length to get BP33 into production is short. BP33 ore starts ~50m deep and the box cut is to 40m deep. The decline needed to be in production is short but it does remain unclear how much other capex is needed for BP33. Core also is well capitalised with $87.6m cash at June so a June 2024 pro-forma would be $174.3m cash.

Once BP33 is in production cash flow from this would be able to help get Mt Ida going. The combination of Finniss and Ida could then finance Yinnetharra. If you had all 3 in production, a CoreDelta group could be 500ktpa+ of production with the likely multi-billion dollar value that would provide.