De.mem’s Acquisition Risks and Rewards Amid Surging Gold Prices

Strategic Acquisition in a Booming Sector

De.mem Limited (ASX, DEM) has announced the acquisition of Core Chemicals Pty Ltd for $2.68 million, a move that significantly strengthens its foothold in the gold mining chemicals market. Core Chemicals, based in Burswood, Perth, specialises in processing chemicals and services designed to maximise gold extraction and recovery from refining waste streams. This acquisition aligns with De.mem’s strategy to leverage the surging gold sector, which has seen gold prices soar past US$4,000 per ounce in 2025.

The deal is structured with 85% cash and 15% De.mem shares, paid in two tranches subject to milestones, alongside a working capital adjustment. Funding is supported by a $3 million equity placement at 10.5 cents per share and a $500,000 shareholder loan facility, reflecting confidence in the transaction’s accretive potential.

Financial Upside and Synergies

Core Chemicals reported an EBITDA of $1.6 million for FY2025, with revenues around $4 million and a forecasted 25% growth for FY2026. When combined with De.mem’s existing operations, the proforma EBITDA nearly doubles, highlighting the acquisition’s immediate impact on earnings. The transaction is attractively priced at approximately 0.7 times revenue and 3.7 times pre-tax profit, below De.mem’s historical acquisition multiples.

Significant synergy opportunities exist, particularly with De.mem’s Capic subsidiary in Western Australia. These include revenue synergies from cross-selling to a combined client base of over 30 gold mining customers and cost synergies through streamlined operations and purchasing. De.mem’s average revenue per gold mining client currently stands at about $250,000, compared to Core Chemicals’ $222,000, indicating potential for margin expansion.

Leveraging a Bullish Gold Market

The acquisition is well-timed amid a robust gold market outlook. Gold prices have surged 40% in 2025, reaching record highs, with major investment banks like Goldman Sachs forecasting further gains into 2026. This bullish environment enhances demand for Core Chemicals’ specialised products and services, which are critical to optimising gold recovery processes.

Core Chemicals currently services 18 gold mines in Western Australia, while De.mem has 15 gold mining clients nationally. The combined entity is well positioned to expand domestically and internationally, targeting untapped gold mines in Australasia, including New Zealand and Papua New Guinea.

Management and Integration

Key personnel from Core Chemicals, including founder Kit Chia, will join De.mem’s management team for a minimum of two years, ensuring continuity and expertise during integration. De.mem’s track record of successfully integrating four bolt-on acquisitions since 2019, with average revenue growth of 69%, bodes well for the smooth assimilation of Core Chemicals.

With a lean overhead and low-cost integration plan, De.mem expects to realise cost efficiencies quickly, further enhancing profitability. The acquisition complements De.mem’s high-margin, recurring revenue model, with over 90% of revenues derived from consumable sales and services.

Looking Ahead

De.mem’s acquisition of Core Chemicals represents a well-priced, strategically sound expansion that capitalises on sector tailwinds and operational synergies. The combined company is on track for record full-year results in 2025, supported by strong cash flow visibility and a diversified client base. Investors will be watching closely to see how effectively De.mem leverages this acquisition to sustain its growth momentum in a volatile commodities market.