Neometals (NMT) - Widgie Nickel Spinoff Vote Date Set

We recently spoke with Christopher Reed, CEO at Neometals, an ASX-listed project developer based in Perth, Western Australia. He shared with us the details regarding the company’s decision to demerge their Mt. Edwards Nickel Project into a separate business entity.

Company Overview

Neometals is involved in the development of projects for a sustainable future that utilize key minerals, commodities, and materials. They especially focus on the supply chain for electric vehicles and stationary energy storage.

Mt. Edwards Demerger                      

In July 2021, Neometals announced their proposed plans to demerge the company’s Mt. Edwards Nickel Project in the eastern goldfields of Western Australia into a listed nickel exploration and development company to be called Widgie Nickel Limited. Mt. Edwards is the most upstream project in Neometals portfolio. It comprises 162,000 t of nickel in 11 separate nickel sulphide deposits. The leases have produced 31,000 t of nickel from 1980 to 2009. They are overseen by a fantastic management team and Reed envisions that the leases will be taken to an investment decision.

Proposed Structure of the Demerger 

The proposed demerger is pending shareholder approval at an upcoming extraordinary General Meeting.  If approved, Neometals shareholders will receive 1 free share in Widgie Nickel, which will have a listing price of $0.20 for every 4.218 Neometals shares that they have and they'll get that via capital reduction. In addition, they will have the opportunity to subscribe for new shares at that $0.20 issue price, and they'll be able to subscribe for 1 new share for every 0.923 that they have. Reed is very confident that the demerger will be approved.

Widgie Nickel’s Management Team

Steve Norregaard, trained as a mining engineer, will be the CEO of Widgie. He was previously the Chief Operating Officer of Westgold, a company that operates ten open-pit and underground operations, so he's a real mine builder.  Graeme Scott, previously CFO at Peak Resources, will be the CFO. 

The Chairman of the Board is Andrew Parker. Also on the board are Felicity Repacholi and Scott Perry. These three board members bring a wealth of geologic, metallurgic, marketing, mining, engineering, finance, and legal experience to Widgie.

The Mechanics of Value Creation at Widgie

Reed is quite convinced that the new team will be able to create value at Widgie.  The property needed a dedicated management team and it has that now. It’s a fantastic asset and will be run by a superb team. The nickel deposits are in an advanced stage, so no major infrastructure building will be required.  The two key metrics will be how fast can they mine the ore and how much can they sell. Widgie will probably continue to sell to Broken Hill Proprietary (BHP). The BHP ore-treatment and concentrate-purchasing route is what has been used by Neometals thus far. 

With nickel, a company is generally evaluated based on the enterprise value of the nickel ore. Every company that has nickel assets divides their ore into different grades: inferred, indicated and measured. As more and more of the resource gets categorized in the top two classes, the enterprise value of the company rises.  At Mt. Edwards, two-thirds of the 10Mt resource is inferred. As the operation gets infilled and extended to make it bigger, more value will be ascribed to Widgie. 

They have about $24 M to play with. With that, they intend to carry out the infill-drilling program and increase the amount of indicated ore. This has to be done for the project to get permitted, financed and into production, because the reserve base is calculated on inferred and measured resource. 

Mt. Edwards was originally acquired by Neometals at a relatively low cost. In short, Widgie has a massive base of 162,000 t of nickel, worth about $3 to $4 Bn in the ground today, and it's going to become more valuable as confidence increases, and the company proves that it can mine it economically and get it into production.

Furthermore, Reed is highly confident that the price of nickel is going higher over the course of this decade. Nickel is not the simplest ore to get into production. There’s short supply all over the world. Quite a bit of nickel will be going into batteries for the electric vehicle (EV) revolution. 

Neometals will be involved with Widgie at every step of the way. They will continue to provide advice and will provide underwriting as needed.

Upside Mineral Potential                   

Reed told us that less than 10 percent of all the assays ever done at Mt. Edwards have ever been evaluated for other metals such as platinum group metals (PGM), cobalt, and copper. Full analyses have been completed on some assays and the PGM are present. So, the deposits, which are open at depth and open along strike, are going to be assayed for cobalt, copper, palladium, platinum, and gold, not just nickel. All of these metals will get recovered to the concentrate. These metals will make a difference in the economics, but the degree of difference is what needs to be evaluated. 

Investors should stay tuned. There is going to be a fantastic news flow about new metals and assay results at the deposit. This will lead to mining studies and eventually reserve numbers. 

Summary of Pending Events

Reed and all the shareholders are looking forward to the results of the extraordinary General Meeting on August 18, 2021.  Pending approval, expect commencement of trading of Widgie Nickel shares on the Australian Stock Exchange on the 22nd of September 2021. 

To find out more, go to the Neometals Website