Execution Risks Loom as Medallion Seeks Final Investment Decision for Forrestania Deal

Transaction Overview and Revised Terms

Medallion Metals Limited (ASX: MM8) and IGO Limited have agreed to amend the terms of their proposed transaction involving the Forrestania Nickel Operation (FNO). Under the updated Asset Sale Agreement, Medallion will acquire full legal and beneficial ownership of the FNO tenements, including the Cosmic Boy processing plant, infrastructure, inventories, and associated mineral rights, except for reserved rights retained by IGO to explore and mine nickel and lithium.

In exchange, Medallion will grant IGO a net smelter return (NSR) royalty of up to 1.5% on all future gold production from the tenements. Notably, no upfront or deferred cash consideration is payable, positioning this as a royalty-driven acquisition that aligns incentives for both parties.

Strategic Rationale and Production Potential

This transaction aims to establish a new gold and copper producer in Western Australia’s southern Goldfields by integrating Medallion’s Ravensthorpe Gold Project (RGP) mineral resources with the established Forrestania infrastructure. A December 2024 scoping study underpins this strategy, outlining a technically robust and commercially attractive development pathway targeting approximately 70,000 ounces per annum gold equivalent production.

The study highlights include a 5.5-year mine life, pre-tax free cash flows approaching half a billion Australian dollars under base case assumptions, and an IRR exceeding 120%. Capital costs are relatively modest at $73 million, reflecting the advantage of leveraging existing processing facilities. The project’s payback period is estimated at just 12 months, underscoring its potential for rapid value generation.

Transaction Conditions and Timeline

Completion of the transaction remains subject to several conditions precedent, including the execution of binding agreements, a bankable feasibility study, securing financing, and Medallion’s board approval of a final investment decision (FID) for the RGP development utilizing FNO’s processing infrastructure. Regulatory consents and third-party approvals are also required.

To accommodate the complexity of these negotiations and approvals, the exclusivity period has been extended to August 2025, with Medallion targeting transaction completion in late 2025. Concurrently, Medallion is advancing multiple workstreams such as in-fill drilling, metallurgical testwork, permitting, and discussions with financiers and offtake partners.

Operational and Financial Implications

Medallion will assume all rights and obligations related to the tenements upon completion, including uncapped rehabilitation liabilities. IGO’s reserved rights to nickel and lithium exploration and mining come with guaranteed access and logistical support from Medallion, ensuring operational coexistence.

The royalty structure aligns IGO’s interests with Medallion’s success in gold production, while Medallion gains control over a significant asset base without upfront capital outlay. This arrangement could prove advantageous in a volatile market environment, balancing risk and reward between the parties.

Looking Ahead

Medallion’s management is preparing for operational control by expanding the senior management team and progressing towards FID. The company anticipates strong news flow through 2025 as drilling results are reported and feasibility studies advance. The integration of Forrestania’s infrastructure with Ravensthorpe’s resources presents a compelling growth platform with multiple upside opportunities, including resource extensions and potential throughput increases.