XRF Scientific Completes Full Acquisition of Orbis Mining Pty Ltd
XRF (XRF) Share Update July 2024 Monday 8th
XRF Scientific Exercises Call Option to Acquire Remaining 50% of Orbis Mining
XRF Scientific Ltd (ASX: XRF) has announced it has exercised a Call Option to acquire the remaining 50% of Orbis Mining Pty Ltd, a move that is expected to significantly enhance its market position and revenue streams.
Instant Summary:
- XRF Scientific to acquire remaining 50% of Orbis Mining Pty Ltd.
- Settlement conditional on third-party approvals by 31 December 2024.
- Orbis has shown significant growth since initial acquisition in 2021.
- Acquisition price set at $3.91 million, with potential for partial payment in XRF shares.
- Earn-out payment based on 2025 financial year profits.
Acquisition Details
XRF Scientific Ltd (XRF) has exercised a Call Option to acquire the remaining 50% of Orbis Mining Pty Ltd (Orbis). The acquisition is conditional on the satisfaction or waiver of various conditions precedent by 31 December 2024, including obtaining third-party approvals.
Orbis, a manufacturer of laboratory jaw crushers primarily used in the mining sector, has shown significant growth since XRF's initial 50% acquisition in September 2021. At that time, XRF invested $800,000, and since then, Orbis has expanded its market share and revenue.
Financial Performance
In FY21, Orbis generated unaudited revenue of $2.3 million and a profit before tax of $0.34 million. By FY24, these figures had grown to $5.8 million in revenue and $1.7 million in profit before tax. Orbis is fully integrated into XRF’s operating structure and will continue to be led by co-founder and General Manager, Brad Hunting.
Acquisition Benefits
The acquisition will enable XRF to achieve 100% ownership of a low-risk, bolt-on acquisition with highly complementary products. The majority of XRF’s existing customers require jaw crushers, which Orbis manufactures. Orbis also has significant addressable markets covering a wide range of mined commodities, with current sales predominantly to commercial labs. XRF intends to further develop sales to mining companies for their on-site labs.
The acquisition will also diversify XRF’s revenue into the gold mining sector, as Orbis’s products are used in gold assaying processes such as fire assay and photon assay.
Acquisition Price and Earnout
The acquisition price for the remaining 50% shares in Orbis is set at $3.91 million, based on a 5x multiple of average FY23 and FY24 EBIT of $1.57 million, at a rate of 50%. XRF may elect to pay up to 50% of the consideration in XRF shares, calculated on a 10-day Volume Weighted Average Price ending three business days prior to settlement. The cash consideration will be funded from XRF's cash reserves.
The acquisition is expected to settle by 31 July 2024, provided all conditions are satisfied. An earn-out payment will be payable, equivalent to 50% of the profits after tax for the 2025 financial year. Up to 50% of the earn-out can be paid in XRF shares, at the 10-day Volume Weighted Average Price prior to the issue of the shares. The cash and/or shares should be paid by 31 October 2025.
FY24 Financials
XRF confirms that sales conditions during the June 2024 quarter were positive as expected. The FY24 full-year statutory accounts are scheduled for release on 20 August 2024.
The acquisition of the remaining 50% of Orbis Mining is expected to have a positive impact on XRF Scientific’s stock. The move will enhance XRF’s market position and diversify its revenue streams, particularly into the gold mining sector. The financial growth of Orbis since the initial acquisition in 2021 indicates a strong potential for future profitability.
Investor Reaction:
Investors and analysts have reacted positively to the announcement, noting the strategic benefits of full ownership of Orbis Mining. The significant growth in Orbis’s revenue and profit before tax since the initial acquisition is seen as a strong indicator of future performance.
Conclusion:
Investors should monitor the final settlement of the acquisition and the release of XRF’s FY24 full-year statutory accounts on 20 August 2024. The acquisition of Orbis Mining is expected to provide significant strategic and financial benefits to XRF Scientific, making it a potentially attractive investment opportunity.