ADN Shares Down — Set to Merge with Minotaur Exploration (ASX:ADN)

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The Andromeda Metals Ltd [ASX:ADN] and Minotaur Exploration Ltd [ASX:MEP] are set to merge to create a leading Australian kaolin/halloysite company.

Reaction to the merger was mixed.

While MEP shares are currently up 35%, Andromeda Metals Ltd [ASX:ADN] share price, however, are down 15%.

ASX ADN - Andromeda Share Price ChartSource:

Andromeda and Minotaur to merge

Andromeda and Minotaur today announced they entered a bid implementation agreement which will see AND acquire all the issued ordinary shares of Minotaur via an off-market takeover offer.

Once fully implemented, the agreement will see Andromeda consolidate 100% ownership of both the Great White Kaolin Project and Natural Nanotech via the acquisition of Minotaur’s current 25% and 50% respective joint venture interests in the projects.

No doubt shedding some light on the disparity in the share price action of the two stocks today, Andromeda acknowledged the deal represents a ‘compelling premium’ for Minotaur shareholders.

The deal implies an equity valuation for MEP of $108 million.

Minotaur will own approximately 19.5% of ADN after the offer is fully implemented.

According to Andromeda, the merger is accretive, providing the company an increased effective interest in Great White and Natural Nanotech, while also delivering significant strategic and financial benefits.

As Andromeda explains:

100% ownership of Great White will deliver a simplified and streamlined ownership and will enable the design, funding mix and timetable for development of Great White to be optimised. Similarly, 100% ownership of Natural Nanotech will enable enhanced development and commercialisation of any future intellectual property in relation to new technology created for halloysite applications and uses, including battery technology, water purification and carbon capture.’

Andromeda’s Managing Director James Marsh said:

The acquisition of Minotaur and consolidation of the Great White Kaolin Project represents a significant step towards optimizing value for both Andromeda and Minotaur shareholders.

We view this acquisition and resultant consolidation of Great White and Natural Nanotech ownership as a logical positive next step in the evolution of the project, unlocking value for all Andromeda and Minotaur shareholders.

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Andromeda updates market on DFS

Apart from the big merger news, ADN today also updated the market regarding its definitive feasibility study.

ADN noted ‘good progress’ has been made on the DFS, with significant optimisation work and scenario analysis currently being conducted.

This includes analysis of the optimal CRM and PRM product mix along with the potential incorporation of low start-up costs prior to construction of a wet processing plant.

There were caveats.

Andromeda acknowledged that to optimise the multi-product DFS, additional time is needed to incorporate all the advantages of 100% ownership and complete further scenario and optimisation analysis on product mix to ideally balance net present value, funding, and risk.

Now, commodities like halloysite-kaolin are starting to receive more attention.

And since halloysite-kaolin is part of the supply chain for HPA — a key ingredient in lithium-ion batteries — it may yet play a bigger role in the coming renewables revolution.

That’s why I recommend reading our free report on the future of renewables, where energy expert Selva Freigedo discusses three ways you can capitalise on the $95 trillion renewable energy boom.

Read the report here.


Kiryll Prakapenka,
For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding…

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