Art of the Deal: New World’s $185m cash takeover has fans

Josh Chiat

New World Resources is on track to execute a $185m cash sale. What do experts think? Pic: Getty Images

4 hours ago.

Updated 3 hours ago

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• Arizona copper developer New World Resources announced a $185m cash takeover by London-listed Central Asia Metals last week

• At 5c a share the deal clocks in at a near 80% premium to its pre-bid share price

• We check what analysts and instos think of the deal

New World Resources' (ASX:NWC) planned $185 million takeover by London-listed Central Asia Metals has been branded a 'sensible deal' and received a positive response from at least one large shareholder after the copper explorer plotted an exit via the acquisition.

The company owns the Antler project in Arizona, one of the top copper jurisdictions in the United States. While it doesn't have the heft of the nearby Resolution deposit, a potential 400,000tpa mine on the books of Rio Tinto and BHP, it is far more likely to get developed in the near term.

With most of its infrastructure on public land and key approvals already well progressed, the previously operating underground mine could be approved by early next year and in production as soon as 2027, within the term of pro-mining US President Donald Trump.

At 30,000tpa copper equivalent (including 16,000tpa of the red metal), the project is ready to benefit as copper surpluses shift to deficits amid surging demand for the metal from clean energy technologies.

The deal was announced on Wednesday night. Priced at 5c a share, the offer came in at a 78.6% premium to New World's undisturbed May 20 closing price of 2.8c, 95.7% premium to its 30-day VWAP and 150% premium to the terms of a $14m capital raise in March.

CAML already has operating experience at the Kounrad project in Kazakhstan and Sasa in North Macedonia, 150km east of the capital of Skopje. America is a different kettle of fish, but one that has become increasingly development friendly for miners in recent months, with Antler notably joining the rush of companies to be placed on the FAST-41 transparency list, a designation that should streamline approvals.

What did analysts say?

With the deal announced, the verdicts have started to flow through.

Canaccord Genuity's Paul Howard described the $185m deal as "sensible" in a note to clients.

"After undertaking a recent financing and strategic partnering process, the Board unanimously recommends that shareholders vote in favour of the scheme, in the absence of a superior proposal/subject to the independent expert, with the Board considering the scheme an attractive and accelerated realisation of value," he said.

"Given permitting and development risk, this screens as a sensible deal at this point in time, in our view."

Howard noted the transaction remains subject to the receipt of US and North Macedonian regulatory approvals, an independent expert report and Australian court approval.

His London counterpart Tim Huff said the deal came in at a 0.24x multiple on the NPV in the Antler PFS, but described it as a "sensible discount" with the DFS and permitting still to be completed.

"With the Antler PFS forecasting over US$100m of annual FCF at full run-rate, we see this as a solid and affordable transaction for CAML and a positive for its longer-term growth strategy," he said.

Over at Argonaut, George Ross noted the scheme will not be voted on until August, leaving the door open for a competitive bidding process. The Perth brokerage has cut its price target from 6.5c to 5c in line with the deal price, changing its recommendation from a spec buy to a hold.

What do investors say?

By and large the deal appears to have been well received on the market, with the company's shares trading slightly below the offer price.

Nero Resource Fund portfolio manager and founder Rusty Delroy says his fund holds in the order of 52 million shares, which would place it among the top 10 shareholders at a stake of close to 1.5%.

The largest shareholder, Perth-based private equity firm Resource Capital Funds, has over 7%.

Delroy said high prices for copper and gold, mixed with weak sentiment for junior explorers and developers had tipped the scale in favour of M&A.

"In terms of copper M&A more broadly, I think we are in an M&A cycle in copper, gold and other commodities. I think across the resources landscape there are big and mid-size operators that have very healthy balance sheets," he said.

"At the same time ... In the single-asset, small-cap land, companies with progressed, legitimate assets, there are also very compelling valuations in those.

"So when you have a combination of good balance sheets and reasonable operating margins up the food chain, combine that with low valuations down the food chain, then that should precipitate M&A."

Delroy said New World's management team, led by managing director Nick Woolrych and CFO Warwick Amos, had done a good job to present an asset with a feasible timeline to production.

"This (deal) is an absolute credit to management. The MD and the CFO are real weapons, they’re good blokes and proper mining adults," he said. "It's precipitated a corporate outcome much quicker than we anticipated."

He added that the change in the political framework under Donald Trump was precipitating M&A, with cashed-up companies now hunting the US market.

"America is becoming relatively more attractive as an investment destination in natural resources, and I think this deal very clearly demonstrates that," Delroy said.

At *, we tell it like it is. While New World Resources is a * advertiser, it did not sponsor this article.