Advance, Sky cook up $16M float for eastern gold assets

ASX-listed duo Advance Metals and Sky Metals have struck a deal to combine their respective Australian gold projects into a new, dedicated exploration company that will seek to list on the ASX.

Under a non-binding term sheet, the pair will spin out their Victorian and New South Wales gold assets into a new entity, dubbed “NewCo”, which will look to raise $6 million through an initial public offering to fund its ambitions.

The deal will see Advance vend its Myrtleford and Beaufort gold projects in Victoria into NewCo in return for 30 million shares, representing a deemed value of $6 million and a 37.5 per cent stake in the new company at listing. Sky Metals will contribute its Cullarin, Kangiara and Caledonian projects in New South Wales for 15 million NewCo shares, valued at $3 million and equating to an 18.75 per cent holding.

The proposed IPO will be priced at $0.20 per share, with NewCo targeting an ASX listing in the first half of 2027, sporting an indicative market capitalisation of $16 million. The offer is expected to include a priority offer of up to $3 million to eligible followers of Advance and Sky. Shares issued to the two parent companies are expected to be subject to an ASX-mandated escrow period of 24 months from listing.

′ The proposed transaction provides an opportunity for both Advance and Sky to retain upside, allowing each company to sharpen its focus on core assets.′

Advance Metals managing director and chief executive officer Dr Adam McKinnon

When the Australian assets are spun out, the new entity will likely have plenty to work with. The combined exploration portfolio will give NewCo a footprint of more than 2000 square kilometres across the highly prospective Lachlan Fold Belt of southeastern Australia.

The ground comes with a head start, bundling together existing high-grade gold discoveries. Advance’s Victorian tenure is particularly prospective, including the Happy Valley gold discovery within its Myrtleford project, where recent drilling returned bonanza-grade gold. An updated 3D geological model identified three principal gold-bearing quartz veins extending to at least 500 metres below surface, providing a solid framework for future drill targeting.

Sky’s NSW portfolio includes the high-grade Hume gold discovery and the historic Kangiara mine, which also contains copper, zinc and silver mineralisation with up to 20km of potential strike. Recent drilling and project consolidation activity across Victoria and New South Wales also points to growing exploration momentum in the very regions hosting NewCo’s proposed portfolio.

NewCo will be steered by a dedicated board and management team, with PAC Partners appointed as lead manager to the IPO. The board is proposed to include a director nominated by each of Advance and Sky, with Advance nominating its managing director, Dr Adam McKinnon.

The proposed transaction is subject to a suite of conditions including due diligence, formal agreements, regulatory and shareholder approvals and the successful completion of the IPO. The parties are aiming to satisfy the conditions by March 2027.

Advance Metals managing director and chief executive officer Dr Adam McKinnon said: “We are very pleased to have reached this agreement with Sky Metals to bring together a highly prospective portfolio of Australian gold assets into a dedicated gold exploration company. We believe the combination of Advance’s Victorian projects and Sky’s NSW portfolio creates an exciting opportunity to establish a well-funded, focused gold explorer with significant existing discoveries at Myrtleford and Cullarin, alongside a substantial pipeline of compelling exploration targets.”

Advance’s move looks to be a savvy play to unlock the value of its Australian gold assets by rolling them into a standalone, well-funded explorer with a laser focus on gold discovery. Just as importantly, the deal frees the company to concentrate on its flagship Gavilanes silver-gold project in Mexico. At the same time, Sky can sharpen its focus on its core tin-tungsten portfolio. Both companies will retain a sizeable slice of NewCo, leaving them well placed to share in any future exploration success.

Gavilanes has been turning heads lately, delivering a string of high-grade hits from a maiden diamond drilling program across its sprawling 136-square-kilometre project. Standout hits include a bonanza-grade intercept of 1m going an eye-watering 4120 grams per tonne (g/t) silver. The result came from just 66.7m depth downhole and formed part of a broader 4.6-metre intercept assaying an impressive 945g/t silver, 1.4 per cent zinc and one per cent lead.

The spectacular one-metre hit represents the highest individual silver assay returned from the company’s program to date and highlights the project’s impressive polymetallic potential.

The exploration campaign aims to grow and convert Gavilanes’ existing foreign resource estimate of 2.83 million tonnes at 246g/t silver equivalent for 22.4 million ounces. The lab is expected to deliver assay results before year-end.

The project sits in a world-class mining district, just 23km from First Majestic Silver’s prolific San Dimas mine, an operation that has so far churned out a massive 745 million ounces of silver and 11 million ounces of gold.

Armed with a dedicated board, a proposed $6 million cash injection and a portfolio peppered with known high-grade gold discoveries, NewCo looks set to hit the ASX boards with a running start. For Advance, the deal clears the decks to go all-in on a Mexican project that is already delivering the kind of high-grade silver that can build a company.

Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au