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Rex Minerals shareholders to take the money and run


Rex Minerals shareholders to take the money and run

In this week’s video insight, I discuss the often overlooked “cost of growth” by analysts, using Rex Minerals (ASX:RXM), a minerals exploration and development company, as an example. Despite significant resource potential, Rex Minerals has faced substantial capital requirements and market volatility, highlighting the financial challenges of bringing projects to production. This week, MACH Metals Australia made a takeover bid, valuing Rex Minerals at $393 million, a significant increase from earlier valuations, underscoring the complex relationship between growth costs and company valuation.


Hello, I’m David Buckland, and welcome to this week’s video insight.

One of the biggest criticisms of the analytical community is they frequently do not consider “the cost of growth”, particularly with respect to old-world businesses, which require capital to grow. 

Take Rex Minerals (ASX:RXM) as an example, the owner of one of Australia’s biggest undeveloped fully permitted Copper resources, known as the Hillside project, which is based 12 kilometres south of Ardrossan and 150 kilometres north-west of Adelaide by road. In addition, Rex Minerals owns the Hog Ranch Gold project in Nevada, a 2.26 million ounce epithermal resource (165 million tonnes at 0.43 grams/tonne).

But what is the cost of getting these projects into production and into positive cash flow?

The first discovery at Hillside was made in 2009, and since then, 800 drillholes and 240km of core drilling have taken place. The Hillside project now contains 337 million tonnes at 0.56 per cent Copper and 0.14 grams per tonne of Gold for a mineral resource of 1.9 million tonnes of Copper and 1.5 million ounces of Gold. The proposed Stage One mine will produce around 42,000 tonnes per annum of Copper and 30,000 ounces per annum of Gold over 11 years, with a forecast four-year payback. Stage 2 is expected to extend the life of the mine to over 20 years.

By 2023, the company’s accumulated losses came to $233 million, and the Rex Minerals share price had traded in a range of $3.13 in 2011 and $0.03 in 2020; and this enormous swing is primarily due to the “cost of growth”. In January 2024, Rex Minerals raised $30 million, of which $12 million was placed with MACH Metals Australia, controlled by the enormously wealthy Salim Family from Indonesia, at $0.185 per share, and $18 million was raised via a 1/6 issue at $0.17 per share. MACH also entered into an agreement to sub-underwrite the entitlement offer and ended up with about 122 million shares or 16 per cent of the company’s issued capital.

At that point, Rex Minerals had a market capitalisation of $130 million (at $0.17 per share) and $23 million of cash on hand. However, there was $870 million required for the Hillside pre-production capital costs, the processing plant, the full fleet, and contingency costs. This point highlights the difference between company valuation and capital requirement.

This week, MACH made an agreed takeover bid for Rex Minerals at $0.47 per share, valuing the company at $393 million, up 176 per cent from January 2024, at $0.17, and up 98 per cent on the 90-day volume weighted average price. The Rex Mineral Board of Directors unanimously recommended acceptance in the absence of a superior offer.

That’s all I have time for this week. Please continue to follow us on Facebook and X.


Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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