We know from the 28 February 2022 announcement that WML intends to transfer all of its lithium-prospective tenements to a single entity - Liquid Lithium Pty Ltd:
There will no doubt be some administrative convenience arising from this restructuring.
We also know that:
(a) WML was previously looking to divest its lithium tenements; and
(b) more recently, the company has received a number of offers to acquire the tenements but that: (i) it will consider these offers in due course; (ii) “Woomera intends to move forward with exploration programmes across its tenement position to test the licences’ lithium prospectivity”.
So there does appear to be some pivot in approach and the language adopted by WML regarding its lithium-prospective tenement portfolio. It also necessarily follows that the company will be allocating some capital towards lithium-focused exploration in the foreseeable future.
Based on current evidence, the most likely future transactions vis-a-vis the lithium tenements remain JVs with a third party or parties (or outright sale).
However, should the company’s own exploration of the tenements reveal genuine potential for economic resources then demerger and separate listing with in-specie distribution to WML shareholders becomes a real possibility in my opinion (and would be a future option the company may already have in mind) when viewed in the context of WML’s primary focus being on its Au-Ni-Cu-PGE prospects and that are worthy of attention and capital outlay.
Without intending to provide an exhaustive summary, potential benefits of a demerger can include: (a) separate dedicated board with experience and expertise pertaining to the focus of the company, and whose time and effort is not diffused on multiple prospects; (b) tighter and more focused allocation of capital to exploration; (c) improved ability to attract investors and raise capital for specific activities (e.g investors may be interested in lithium but not gold); (d) it can often be the case that the “sum of the parts” is more valuable than the whole - i.e WML’s market cap / share price may not properly reflect the value that ought be separately attributed to its different prospects.
Obvious drawbacks of demerger and separate listing can include the administrative costs of that process, dilution if existing shareholders (albeit this can be mitigated through SPP for the new entity), etc.
I have seen this recently with 2 of my significant holdings, namely LTR and MEP (ADN).
Most relevantly with the former (both as to lithium and the presence of our non-executive director, Dave Richards), LTR demerged its Moora Au-Ni-Cu-PGE prospects from its lithium prospects and listed them in Minerals 260 (MI6). The MI6 prospectus included the following explanatory statement from its chairperson:
It is obviously very early days for WML and any such transaction (if it ever occurs) would be some time away. I am sure it would only ever be pursued with careful consideration by the board and with regard to the best interests of shareholders.
My commentary above is for discussion purposes and entirely speculative; please do your own research and take your own advice when making investment decisions.
