Merger will give Spitfire gold inventory to become 100,000oz a year producer, says senior analyst

13th July 2018
Resources Rising Stars

The planned merger of Spitfire Materials (ASX: SPI) and Excelsior Gold (ASX: EXG) will create a company with an extensive resource base capable of underpinning a 100,000 ounce-a-year operation, a new research report says.

Outlining a host of benefits which will be delivered by the merger, Independent Investment Research senior analyst Mark Gordon says the combined group will have JORC Resources of 2.1Moz.

The pair have projects just 20km apart near Kalgoorlie, meaning the combined group will have sufficient resources to justify a stand-alone operation with easy access to infrastructure in a Tier-One mining location.

Gordon says the planned merger continues Spitfire’s strategy to grow into a mid-tier gold producer.

“The synergies inherent in the proposed merger of Spitfire and Excelsior should result in the merged total being more than the sum of the parts,” he says in his report.

“A successful completion will see the combination of the current gold resources, which should form a critical mass to justify the merged entity to look towards development options for a combined project.”

The two key gold projects, Spitfire’s Aphrodite (1.26Moz) and the Excelsior’s Kalgoorlie North Gold Project (825,000oz) “form a natural fit for a combined development and provide operational and development synergies”, Gordon says.

Also in the mix is Spitfire’s Mulwarrie Gold Project, located 65km from Aphrodite.

“The underground resource at Aphrodite contains 662,665oz of gold at the relatively high grade of 7g/t,” the report says.

“In addition, drilling at Mulwarrie has intersected grades of up to 43gpt, again highlighting the potential for a high-grade discovery.

“Identified mineralisation at all three key Spitfire projects and at the KNGP is also open, highlighting significant potential for resource expansions and further exploration success.

“Comprehensive exploration programs are currently underway or planned over all projects, leading to significant news flow over the short to medium term.

“Given the results of historical work, we would expect positive results from these programs.”

Gordon says the merger will generate the scale needed by Spitfire to fulfil its production ambitions.

“The company’s view (with which we concur) is that any viable new standalone development in Western Australia will require around a 10-year, 100,000ozpa production profile,” he says.

“As a ball park figure, this will require a Resource inventory of at least 2Moz to potentially provide sufficient material for conversion to the required Ore Reserves, and thus drive any decisions to investigate a standalone operation.

“A successful merger between Spitfire and Excelsior will result in a Resource base of 2.1Moz, which meets this hurdle.”

Gordon notes that the WA projects have ready access to power and transport infrastructure and a resident workforce and services in Kalgoorlie.

“The company has current management and technical personnel with extensive experience in the junior resources sector and a proven history of technical success and delivering value to shareholders,” he says.

“In addition, key personnel currently hold ~20% of Spitfire, thus aligning their interests with those of other shareholders. The merger will add complementary skills to the current Board and Management.”

To read the Independent Investment Research report, go to


Image via Business News WA

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