Develop has purchased the Woodlawn zinc-copper project in New South Wales in a deal worth up to $100 million.
The transaction involves an upfront consideration of $30 million along with milestone-related payments of up to $70 million.
Heron Resources invested $340 million into the Woodlawn underground mine and processing plant until the company was placed in administration in July 2021. Woodlawn has been on care and maintenance since 2020.
Develop aim to conduct an aggressive underground drilling program to grow Woodlawn’s inventory. This will target extensions to known mineralised zones.
The company will also look to complete infill drilling to improve the geological confidence and home in on electromagnetic conductors which consultants NewExco identified during due diligence.
“Such outstanding acquisition opportunities are extremely rare,” Develop managing director Bill Beament said. “Woodlawn hosts future-facing metals in a Tier-1 location and meets all our criteria for creating shareholder value.
“It is a substantially-developed project with extensive underground infrastructure and a new processing plant.
“The geology is first-class, with a VMS (volcanogenic massive sulphide) system which is under-explored and open in a number of areas. We are very confident that we will be able to grow the inventory rapidly by extending the key lenses using underground drilling.”
Woodlawn produced 13.8 million tonnes of 19.7 per cent zinc equivalent from 1978 until 1998. Heron took on the project in 2017 but encountered various challenges in 2020, including COVID-related concerns and project ramp-up issues.
Of the $30 million upfront consideration, $15 million is payable in cash and $15 million is payable through the issue of Develop shares at a price of $3.14 per share.
Once Develop has met various resource definition milestones, an additional $20 million will be payable, with a further $20 million owed if the company makes a positive final investment decision on the project.
The remaining $30 million is payable once Woodlawn has achieved 18 months of continuous production.
Develop is undertaking a fully underwritten $50 million equity raising to support the purchase, revealing on Monday it had received ‘firm commitments’ for $37.2 million through an initial placement and institutional entitlement offer.
The placement raised approximately $25 million (7.6 million shares issued) and the entitlement offer raised circa $12.2 million (3.7 million shares issued). This marks the first stage of the $50 million equity raise.