425: Rigel Resource Acquisition Corp to Merge with Aurous Resources, Creating Publicly Traded Gold Producer

Rigel Resource Acquisition Corp announces a definitive business combination agreement with Aurous Resources, a South African gold producer, to create a publicly traded company.

Summary

• Rigel Resource Acquisition Corp (RRAC) will merge with Aurous Resources, a South African gold producer, making Aurous a publicly traded company.
• The transaction values Aurous at a pre-money equity value of $362 million.
• Newco is expected to change its name to Aurous Resources and list its ordinary shares on the NASDAQ.
• Holders of Target Companies' equity will receive Newco Ordinary Shares: 600,000 to Blyvoor Gold for Tailings shares, 28,017,500 to Blyvoor Gold for Blyvoor Resources shares, and 6,982,500 to Orion for Blyvoor Resources shares.
• Blyvoor Gold may receive additional Newco Ordinary Shares based on PIPE Investment proceeds.
• Sellers may receive additional Earnout Shares based on cumulative payable gold production milestones.
• Rigel stockholders will receive cash consideration and one Newco Ordinary Share for each Rigel Class A ordinary share.
• Sponsors will vote in favor of the transaction and waive anti-dilution adjustments.
• PIPE Investors have agreed to purchase 750,000 Newco Ordinary Shares at $10 per share for $7.5 million.
• The transaction is subject to customary closing conditions, including stockholder approval and NASDAQ listing approval.
• The deal is expected to close in the second half of 2024.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the merger, highlighting growth potential and cost efficiencies. However, it also acknowledges risks and uncertainties, resulting in a moderately positive sentiment score.

Positives

• Aurous is a cash-generating gold producer with industry-leading mid-term production growth.
• Aurous has a first quartile production-cost position.
• The transaction is expected to enable Blyvoor to expand its underground infrastructure, enhance surface infrastructure and optimize operations by achieving economies of scale.
• The transaction and associated influx of foreign investment into South Africa has the potential to enable further meaningful job creation, continued revitalization of the local community and recapitalization of Africa's precious metals industry.
• The resulting company is expected to be particularly debt-light, with anticipated debt levels of approximately $6 million at Transaction close.

Negatives

• The consummation of the Transactions is subject to customary closing conditions for transactions involving special purpose acquisition companies, including, among others, approval of the Rigel Stockholder Approval Matters by Rigels stockholders (the Rigel Stockholder Approval), (ii) no order, statute, rule or regulation enjoining or prohibiting the consummation of the Transactions being in force, (iii) the Registration Statement having become effective, (iv) the shares of Newco Ordinary Shares to be issued pursuant to the Business Combination Agreement having been approved for listing on the NASDAQ and (v) certain other customary bring-down conditions.
• In addition, the obligation of the Sellers to consummate the Transactions is subject to the availability of Aggregate Cash Proceeds (as defined in the Business Combination Agreement) of not less than $50,000,000 at the Closing.

Risks

• The document contains forward-looking statements that are subject to risks, uncertainties, and other factors that could cause actual results to differ materially.
• The consummation of the proposed business combination is subject to approval of the shareholders of Rigel or the Target Companies, obtaining financing, and satisfying other closing conditions.
• Changes to the proposed structure of the business combination may be required or appropriate.
• The proposed business combination may disrupt current plans and operations of the Target Companies.
• The Target Companies may be adversely affected by other economic, business, and/or competitive factors.
• The assumptions and estimates used in the S-K 1300 Technical Reports may be different than the actual results.

Future Outlook

Aurous intends to ramp up Blyvoor Mine gold production to average ~150koz per year at an all-in-sustaining-cost of ~$815/oz with further upside from Gauta Tailings.

Management Comments

• Richard Floyd, Aurous CEO: 'This Transaction represents one of the first significant gold industry deals in South Africa in some time and is expected to enable Blyvoor to expand its underground infrastructure, enhance surface infrastructure and optimize operations by achieving economies of scale.'
• Jon Lamb, Rigel CEO: 'We are thrilled to combine with a cash-positive, debt-light target such as Aurous that has already achieved impressive operational milestones and is expected to deliver market-leading growth.'
• Nate Abebe, Rigel President: 'Aurous offers significant long-term investment value thanks to its high-margin, high-growth and expected fully-funded mine life.'

Industry Context

The transaction represents one of the first significant gold industry deals in South Africa in some time and is expected to enable Blyvoor to expand its underground infrastructure, enhance surface infrastructure and optimize operations by achieving economies of scale.

Comparison to Industry Standards

• The transaction values Aurous at a pre-money equity value of $362 million, implying a Price / Net Asset Value transaction multiple of 0.3x, thereby providing an attractive entry point for Rigel shareholders at a discount to other leading public gold producers.
• Aurous benefits from a first quartile production-cost position amongst comparable gold mines.
• Aurous's production growth through near-term ramp-up exceeds nearly all peers.

Stakeholder Impact

• Shareholders of Rigel will receive cash and Newco Ordinary Shares.
• Employees of Aurous are expected to continue employment.
• The local community in South Africa is expected to benefit from job creation and economic revitalization.

Next Steps

• Rigel will hold a special meeting of stockholders to approve the transaction.
• Newco will file a registration statement with the SEC.
• The parties will seek regulatory approvals, including from NASDAQ and the Financial Surveillance Department of the South African Reserve Bank.
• The transaction is expected to close in the second half of 2024.

Key Dates