February 17, 2022
Mawson Gold Ltd. (TSX:MAW, BUY, C$0.50 target, David A. Talbot) provided an update on the spinout of its Australian assets into Southern Cross Gold Pty. Ltd. Mawson has decided that it is in its best interests to hold its shareholding in Southern Cross, rather than distributing the shares from the upcoming IPO to individual Mawson shareholders. Mawson currently owns 84.6% of Southern Cross, which holds a 100% of the Sunday Creek and Mt. Isa projects, the Redcastle and Whroo joint ventures, and 10% of Nagambie Resources Ltd. (ASX:NAG, Not Rated), which intends to list via an IPO on the ASX in Q2/22. Southern Cross is in the final stages of preparing its prospectus and plans to raise an additional A$8M to A$10M at the IPO, diluting Mawson’s shareholding in Southern Cross down to ~58%. Management believes that holding the shares provides future funding optionality to Mawson, provides value by attracting a larger investor base and helps tighten Southern Cross’ capital structure allowing it to execute its business plan during its infancy. The ASX has approved this decision and Southern Cross will be classified as restricted shares for Mawson, and thus escrowed for 24 months following the IPO. Additionally, several individuals with capital markets, technical and exploration experience were appointed to Southern Cross’ board on 11-Feb-22, two of whom also sit on Mawson’s board. We would say that this is somewhat positive news for Mawson as the company is currently not receiving much value for its Australian assets in the current gold market, despite its subsidiary being cashed up, self-sufficient and privy to extensive exploration upside potential. Mawson only trades at an EV/oz AuEq of US$27 vs. peers at US$108. We believe that holding on to these shares internally will help avoid any shareholder sell-off upon listing, particularly by those that don’t wish to have ASX exposure, and give management ample time to carry out its exploration mandate in Australia, which could result in further gold discoveries. All value derived from exploration success would be shared by both Mawson and Southern Cross shareholders. Read more
