The King of Kalgoorlie is Baaaack

They once dubbed Bill Beament the ‘King of Kalgoorlie’. And no wonder.

Bill drove resource firm Northern Star [ASX: NST] from a shell to one of the premier gold mining companies in the ASX Top 50.

Now that’s value creation. Or… as they say in mining… That’s hitting PAYDIRT.

When it comes to mining shares, I only want to back people who have been successful – very successful – before.

Bill left Northern Star a very rich man. Did he turn to a life of beaches and pina coladas?

Not a chance!

In 2021 Bill B bought into a mining junior called VentureX Resources

No doubt about it. Bill has energy and hustle to burn. He’s also a man of strong convictions. I love that when it comes to backing anyone in the market. Bill didn’t just take an executive role for his new gig. He invested his own money to help recapitalise the firm and get it going again.

VentureX had one project – copper zinc territory in the Pilbara called Sulphur Springs. Bill’s ambition was bigger than that. Bill put the overall business strategy in place in 2022. Bill wanted a hybrid business model. For years he’s said the future of mining is underground and Australia’s mining workforce is too thin and unqualified to meet the enormous demand looming.

The first thing Bill did at VentureX is establish an underground mining services division. The idea was to bring in immediate cashflow…and a crack team ready for future operations. Bill says he’s hired the best and brightest he can find too. You can’t see human capital like this on a balance sheet, but I trust him that it’s there.

By April 2022 Bill won his first services contract. He also changed the name of the firm to Develop Global [ASX: DVP]. Mining services is one division for Develop, with a strategic purpose. The big money, though, is always going to be in owning producing mines. Develop focuses on the ‘critical’ metals essential for the renewable transition (and not gold).

Bill moved fast.

In 2022 he bought an idle mine – in ‘care and maintenance’, as they say in the trade - called Woodlawn in NSW, 250k south of Sydney. That’s a Tier 1 location. It’s a copper-zinc deposit, fully permitted. It was once a producing mine from 1978-1998. This was Bill grave dancing again - exactly in the same way he did with Northern Star. The previous owner, Heron, spent A$340 million in capital expenditure for the project. Outcome? They dusted their money. Ramp up issues plagued the launch, then Covid smashed Heron even further. Heron went into administration in 2021. That left Woodlawn, as an asset, stranded.

Bill came knocking soon after. You see… Bill drove Northern Star, famously in the resource space, into an acquisition spree over his leadership tenure. He bought 14 gold mines over ten years. One of his “secrets” was that every acquisition had the infrastructure in place before he bought it. This meant he avoided the gigantic costs associated with building it all. He paid cents in the dollar for huge chunks of capital. These buyouts were pre-Covid, before the global inflationary breakout.

You, me or him wouldn’t have a hope of replicating the Woodlawn infrastructure at the prices Heron paid. I saw Bill present on this acquisition in 2023. He said that some of the Heron equipment at the mine was still in its original packaging – untouched. Smart man, that Bill. Develop picked up Woodlawn for an initial payment of just $30 million (with a total projected acquisition cost of $100m, subject to milestone payments).

It gets better…

Bill saw a modest restart cost and big upside from expanding the resource base.

Bill knew there was copper and zinc here…and potentially more of it

The only question was how much more Develop could find. Woodlawn was ripe for further drilling – and still is. With his brilliant track record, Bill would also have no trouble attracting the large financing he needed to get Woodlawn back churning out copper and zinc either. There’s nothing cheap about mining.

Bill wasn’t wrong about the drilling potential either.

By 2024, Develop discovered an additional 60,000 tonnes of copper and 235,000 tonnes of zinc to add to the existing metal already known at the mine. There could be more too! This exciting story all began in 2022…

Now, here we are 3 years later

I’ve been watching this dynamic develop for a long time. 3 years of hard work has gone into Develop now. 

Good news! Right now, DVP are right in the zone where you want them to be.

It’s the mining “sweet spot” a stock enters when a developer gets within about a year before its first cash flow. A stock can often double in this period, if it all goes to plan.

You can also take a calculated punt on higher copper, zinc and lithium prices over the next two years…and beyond. If Bill’s complete vision for Develop comes into fruition over time, you could double or triple your money…maybe even more! He says that Pilbara Minerals went up 10x between 2016 and 2021.

Could Develop to the same? It’s a chance!

The fundamentals are forming fora DVP share price breakout

DVP has every chance of breaking out from this into an uptrend if Develop can deliver operationally. The catalysts to move the stock are close.

I can’t guarantee it. There are big and clear risks here. But all the ingredients we want to see as speculators are here. Cash flow – big cash flow – is now in sight for the market.

Bill’s a mover and shaker, no doubt about it. He made this comment back in December…

‘“Our re-start study shows Woodlawn will generate pre-tax cashflow of A$1.1 billion based on a 10-year mine plan.

“At recent spot prices for copper and zinc, the first three years of post-ramp up production yields ~A$375m of free cashflow, providing substantial cash generation while repaying all the debt”.

The vision – and potential profits – get bigger the further we look out over time… There are dozens of variables at play here. And, like all mining junior executives, Bill has to sell a big story to get people on board. However, in this instance, I’m backing Bill. As long as Woodlawn gives him cash to splash, he can go after any project he likes. The market will back him. Maybe he’ll even go back to gold!

Let’s look a little deeper at Woodlawn here…

The restart study says Woodlawn will produce, on average per annum, 12,000 tonnes of copper and 36,000 tonnes of zinc for a 10 year life. 

It’s the copper that’s the most appealing about this project. We know there’s big demand brewing here, and few ASX ways to play the thematic these days. Copper demand is expected to rise 50% out by 2040. The biggest anomaly in the market right now is that copper is rising while talk of US recessions swirls. The copper market, as opposed to zinc, is our best chance for a price breakout over the next two years to juice Develop’s share price even more.

That 12,000 tonne a year production figure cited above makes Develop a small ASX copper producer. By way of comparison, MAC Copper produces 40,000 tonnes and Sandfire gets out around 100,000 tonnes per annum. Rio Tinto produced nearly 700,000 tonnes last year.

Remember the game here though: Woodlawn is just cashflow for Bill to build up or buy more assets.

There is a mining analyst and commentator called Jeff Clark…

Jeff wrote a nifty book for mining investors called PayDirt. Jeff puts down his ‘6P’ preconditions he demands to see to consider any resource stock. Let’s handicap Develop along these lines before we consider the upside.

Jeff’s criterion are:

1. Proven People
2. Participation Partners
3. Promising Projects
4. Protected Politics
5. Potent Push
6. Proper Price

Let’s take a look…

1. Proven people?

Clearly, Bill Beament is a proven mining executive. Northern Star is one of the most successful stocks on the ASX of all time.

Bill also says people are the number one asset in mining. Develop had 6 employees two years ago. Now there’s 400 employees with a turnover rate of less than 3%.

They’re ready to get their hands dirty too. By the end of this year the Develop workforce will likely double again. Things are happening here.

2. Participation Partners?

Jeff is talking about skin in the game here. Are management invested alongside ordinary shareholders? There’s no disputing this one.

Bill B owns approximately 20% of DVP shares – a stake worth over $100 million. That’s a huge incentive for Bill to drive the value of DVP higher.

He presented at a recent conference. Bill told the crowd he won’t be selling any DVP shares.

He expects his return to come from future dividend payouts. He won’t be diluting Develop’s equity base with more capital raisings either, absent a wildcard development.

3. Promising Projects?

Bill is the type of character you want to back in this game. He’s a “go big or go home” type of guy.

DVP has turned Woodlawn’s initial projected mine life from 3 years at acquisition to at least a projected ten years now.  DVP will, in turn, use the projected Woodlawn cashflow to fund the development of the original Sulphur Springs copper-zinc project in the Pilbara.

Bill believes the Sulphur Springs project is superior to the Woodlawn mine. But it’s less developed and further away from producing. In other words, he’s going to use Woodlawn as a cash cow to fund a second producing asset for the company. If he can pull it off, DVP will have two producing mines (plus a mining service company).

Bill can, in turn, use that double stream of cashflow to develop his lithium project (called Pioneer Dome, acquired in 2023) or fund another acquisition, in time.

Hello! Bill is angling to repeat his whole playbook from Northern Star. As it is today, Develop’s Woodlawn mine should be in production by mid this year - 3 months away. I call that promising…and it’s just the start of a potentially decade long journey.

4. Protected politics

This refers to geopolitical risk.

Last year we saw multiple property infringements over in Africa. African based miners trade with lower multiples on the ASX because of this elevated risk.

One CEO was even held to ransom. It cost his company millions to get him released. Australian politics might inspire no one, but property rights are secure. Develop operates in Australia – and only Australia.

5. Potent Push

We’re talking catalysts here. That’s something the market can see, touch and feel to drive the price higher. Speaking generally, a catalyst could be a new contract, mineral strike or new market.

For DVP, it’s derisking from pre-revenue developer to producing miner. If they hit their milestones to production, the market will bid up the stock to access the incoming cashflows. The is the best part, adjusted for risk, of the famous ‘Lassonde Curve’. 

6. Proper Price

If a share had no risks, and everyone knew about the upside, then there would be no potential gain. It would all be in the price.

Right now, you can see below that the share price has gone sideways in a wide range since 2022. A technical analyst would call this ‘accumulation’.  Now DVP is moving up alongside copper…

This can often form a powerful base for a share price lift.

Let me emphasise…

Don’t forget the risks!

Mining stocks are risky, unpredictable and volatile because they are hostage to variables they have no control over.

Any position in Develop Global should be consider speculative.

That said, there’s no share without risk.

If Bill and team can deliver on Woodlawn’s promise, within 2 years I think the stock could see a $1.2 billion dollar valuation…and double your capital.

There’s one more thing…

There’s a little more of ‘Sam Zell’ about Bill and Develop as a final kicker

In US real estate mogul Sam Zell’s memoir ('Am I Being Too Subtle?’) he talks about buying a distressed business with millions in tax losses.

Zell then used this company to buy one of his healthy business units. That way he could use the structure of the dud business, with the tax losses, to offset the profits of its healthy ‘subsidiary’. There is a bit of Sam Zell about Bill Beament.

What do you know? Bill makes a point of saying that Develop’s forecasted cashflows from Woodlawn have the benefit of A$283 million in tax losses (as at 30 June 2023) in which to offset profits from. That helps send more profits your way as a shareholder, if you decide to become on.

If all goes to Bill’s plan, Woodlawn will be generating $100 million in free cash flow annually by 2027. It will be in production in about 3 months.

Are you game to back the King of Kalgoorlie?

I say you should be.

Best wishes,

Callum Newman