Unlocking the value of hidden assets by spinning them off in to a separate and focussed ASX listing is proving fertile ground for the junior mining sector.
More often than not it has been structural shifts in supply/demand scenarios, and the resultant impact on the pricing of commodities, that has given rise to the spin-off opportunity.
What were previously considered secondary assets to the main focus of a junior all of a sudden get a shot at the limelight. Done properly in terms of properties, pricing, and management, the spin-offs can take on a life of their own and heaven forbid, the day could well come when they outshine the parent.
There are a couple of recent spin-off examples that reflect all that – Heron’s (ASX:HRR) cobalt/nickel play Ardea (ARL) and TNG’s (TNG) base metals play Todd River (TRT).
Ardea joined the lists in February and its 20c shares now trade at 59c, such is the global interest in securing developed supplies of cobalt for lithium-ion batteries in preference to the near 60 per cent reliance on cobalt supplies from one of the scariest places on earth, the Democratic Republic of Congo.
Ardea’s flagship project is what Heron used to call the Kalgoorlie Nickel Project, or KNP.
Cobalt’s meteoric price rise means that if it was being named today, it would be the KCP.
Within the global resource (5.6 million tonnes of nickel and 386,000 tonnes of cobalt), put together after the expenditure of $50 million by Vale/Inco and Heron during the heyday of nickel laterite projects, there is a high-grade cobalt zone of 60,000 tonnes of contained cobalt that has got the market excited.
That is particularly so as the known cobalt (and nickel) resource makes for legitimate direct comparisons with Robert Friedland’s Clean TeQ (ASX:CLQ) Syerston project in NSW.
Clean TeQ is about 16 months more advanced than Ardea in terms of development planning and financing. Clean TeQ’s $510m market capitalisation says as much. Needless to say, the $38m Ardea (at 59c a share) is planning to close the gap.
Like Ardea, Todd River started listed life with the benefit of the hard yards its parent TNG put in to building up and then advancing a portfolio of zinc and copper assets in the Northern Territory in earlier years. Read More.
Plus, Heron ticks boxes at Woodlawn and are Syrah’s shorters playing with fire? Read More.
