Metallica Minerals (ASX:MLM) merger proposal with Melior Resources


by Rachael Jones

January 7, 2019: The discussed merger between Metallica Minerals and Melior Resources did not proceed. The transcript is for historical purposes only.

Metallica Minerals Limited (ASX:MLM) Managing Director Simon Slesarewich and Melior Resources (TSXV:MLR) MD & CEO Mark McCauley talk about the rationale behind the merger, what it will mean for shareholders and key projects.

Rachael Jones: Hello I’m Rachael Jones for the Finance News Network. Joining me today from Metallica Minerals Limited (ASX:MLM) is MD, Simon Slesarewich. Also joining us today from Melior Resources Limited (TSXV:MLR) is MD and CEO, Mark McCauley. Mark and Simon, welcome to FNN.

Simon Slesarewich: Thank you.

Mark McCauley: Thank you.

Rachael Jones: Simon, first up to you. Could you give us a recap on Metallica Minerals Limited (ASX:MLM)?

Simon Slesarewich: Metallica Minerals (ASX:MLM) is an ASX listed junior mining company, based in Brisbane with assets in Queensland. We’ve got a laser like focus to change the company from exploration, into a sustainable cash producing company. Initially that’s going to be focused on Urquhart bauxite, which most recently we got our access agreement, which has taken us nearly two years to negotiate. That’s been a fantastic achievement for the company and we’ll see Urquhart coming into production, next year in 2019.

For the last two to three years, the company’s been very open with its shareholders, saying that it wants to look at a transformative transaction, to change the company. Although Urquhart can be a very nice project in the right circumstances, we know it’s not a company maker. And therefore, we’ve been focusing and diligently looking at opportunities. After that diligent process, we met up with Melior Resources Limited (TSXV:MLR) and we think the opportunity of merging with Melior Resources Limited (TSXV:MLR), is a fantastic opportunity for all our shareholders.

Rachael Jones: Now to you Mark. Could you give us a brief introduction to Melior Resources (TSXV:MLR)?

Mark McCauley: Melior Resources Limited (TSXV:MLR) is a TSXV listed company. We have about 29 million shares on the register and our primary asset is the Goondicum ilmenite and apatite project, located in Central Queensland, Australia. We have just recently completed a six month, AUD$7.5 million restart of Goondicum, and that came in on time and on budget and so Goonidum is now back in production producing both ilmenite and apatite as at the start of November, 2018.

We anticipate that project ramping up production over the next six months. We'll start shipping product to our customers early next year and be cash positive by the middle of next year.

Rachael Jones: Now to the merger proposal in more detail. Simon, can you give us the rationale?

Simon Slesarewich: The rationale is very, very clear; it goes back to that keyword in cashflow. Both the companies are focused on cashflow. And to be sustainable through the cycle, we need to be cashflow positive and growing the business moving forward. Coming from that, the merged entity will have a great balance, production development and exploration assets. Coupled with that, will be a very strong management team and a Board, moving forward. One of the other key positives coming out of the merger will be a very balanced shareholder base. And that’ll be headed up by Pala Investments.

Rachael Jones: Could you touch upon the recently completed expert report?

Simon Slesarewich: Absolutely, that's a critical document for our shareholders to assess the merger with Melior Resources (TSXV:MLR) most importantly the experts came out and said that the merger is reasonable for our shareholders which is an absolute tick for the plan of the board and our process moving forward. Most importantly the project financing that Mark and his team have put in place to restart the Goondicum project the independent expert found is comfortably manageable and will allow Metallica Minerals (ASX:MLM) shareholders to leverage their position and create more value. 

Rachael Jones: Simon what will the merged entity look like, should it proceed?

Simon Slesarewich: The merged entity will be called Kalimina Resources. The company will continue to be based in Brisbane and list on the ASX. Most importantly, we’ll have a strengthened management team, which Mark and I will both be a part of and a strengthened Board, to push forward. The merged entity will be fully funded and looking to move forward from there.

Mark McCauley: The share register will be a combination of institutions and a good retail investor spread, with Pala Investments being probably the largest shareholder. Pala have been very supportive of Melior Resources Limited (TSXV:MLR) in the last three or four years and are a great asset, to have on your register. The asset portfolio of the merged group will be more diversified, both from a commodity point of view and from a stage or project point of view, with Goondicum already in production. And just coming into generating positive cashflow and several assets, including Urquhart bauxite, not too far off coming into production themselves.

And with that strong shareholder support and a balanced portfolio of assets, we are definitely in a very good position to achieve our aspirations of corporate growth, flowing through and reflected in improved shareholder wealth. And that’s what we’re all about.

Rachael Jones: Simon, now to a more general question, Metallica Minerals Limited (ASX:MLM) has been around for 10 years developing different projects with minerals. What does this transaction mean for Metallica Minerals Limited (ASX:MLM)?

Simon Slesarewich: The transaction is absolutely transformational. So Metallica Minerals Limited (ASX:MLM) in the past was always about being an exploration company, and trying to find the next deposit. Now we know that’s not sustainable going through the cycle. And fundamentally, I was brought in two or three years ago to change Metallica Minerals Limited (ASX:MLM) from an exploration company, into a cash producing company. My background is all about identifying opportunities and developing mines, and bringing them into cashflow sustainable positions.

Mark McCauley: This is definitely a win-win transaction for both parties and their respective shareholders. It allows mergco to bring together a more diversified portfolio of assets and just as importantly, it will allow extraction of maximum value from those assets. And that’s what this is all about Rachael. So again, we’re very excited about this, we hope the shareholders support it. And we think that it will be in shareholders best interests, if we go forward on this basis.

Rachael Jones: Simon and Mark, last question now. Is there anything you’d like to finish with?

Simon Slesarewich: We’re at a critical point for Metallica Minerals Limited (ASX:MLM). We’ve been aiming for this and we’ve flagged this for years out. It’s transformative the merger that we want to do with Mark and his team, over at Melior Resources Limited (TSXV:MLR). We believe it’s in the best interests of all shareholders. We shouldn’t underestimate what good management, great ideas and a supportive shareholder base that we’ll have with Pala, can do for our shareholders moving forward. We absolutely believe it’s in the best interests of all shareholders, to vote in favour of this merger on the January 7, 2019. We want people to look to the future and to grow this business. And not play on the people’s fears, as some have been doing in the past.

Rachael Jones: Simon Slesarewich and Mark McCauley, thanks for the update.

Simon Slesarewich: Thank you.

Mark McCauley: Thank you Rachael.