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Westgold announces takeover bid for Gascoyne Resources

Published by , Editor
Global Mining Review,

Westgold Resources Ltd has announced its intention to make an off-market takeover offer for all the issued shares in Gascoyne Resources Ltd.

Westgold’s offer is one Westgold Share for every four Gascoyne Shares.

This offer provides Gascoyne shareholders with an opportunity to achieve a significant market premium for their shares by Gascoyne walking away from the proposed highly dilutive merger by scheme with Firefly Resources Ltd. The offer also enables Gascoyne shareholders to maintain their exposure to the Gascoyne assets and their growth by becoming part of a much larger, well-funded and established group, which is already the dominant gold producer in the region.

Specifically, the Westgold Offer price represents premiums of:

  • 34.7% to the closing price of Gascoyne Shares on the ASX on 29 September 2021.
  • 33.1% to the one-month VWAP of Gascoyne Shares on the ASX to 29 September 2021.
  • 30.2% to the three-month VWAP of Gascoyne Shares on the ASX to 29 September 2021.

The offer will be made by Westgold, either directly or via one of its subsidiaries as the bid vehicle.

The offer will be subject to the merger between Firefly and Gascoyne, announced by Gascoyne on 16 June 2021, not proceeding, including as a result of the valid termination of the Scheme Implementation Deed for the Firefly Scheme.

Westgold offer highlights:

  • Provides a substantially superior financial alternative to Gascoyne shareholders compared with the proposed merger with Firefly given Westgold is bidding a compelling and attractive premium for Gascoyne.
  • Removes ongoing funding risk to Gascoyne shareholders as Westgold is debt free and well-funded.
  • Consolidates a combined exploration portfolio of approximately 3900 km2 across the Murchison and significantly increases the combined company’s Mineral Resource base to approximately 9.1 million oz.
  • Provides a tangible pathway to commercialise Gascoyne’s stranded Mt Egerton and Glenburgh projects by utilising Westgold’s existing milling infrastructure at the Meekatharra and/or Fortnum processing hubs.
  • Removes concerns of longevity of the Dalgaranga operations where mining is currently forecast to end in early 2025 by integrating excess mining tonnage available from Westgold’s Cue operations.
  • Provides Gascoyne the opportunity to join with a larger, financially stronger regional producer and become Australia’s fifth largest Australian domestic gold producer [with expected proforma FY22 production of approximately 350 000 oz of gold], and a growing pipeline of near-term development projects.
  • Builds a larger, regionally dominant producer that can leverage its combined mining infrastructure and >6.5 million tpy total milling capacity across four regional processing hubs with the aim to expand the combined production profile towards 500 000 oz Au per year.
  • Elevates the market presence of the combined entity and may result in improved liquidity.

Wayne Bramwell, Westgold’s Executive Director, comments:

“After several tumultuous years the Gascoyne shareholders now see their company at the crossroads yet again.

“The Independent Technical Assessment and Valuation Report in the proposed Firefly Scheme sees Gascoyne merge with a junior explorer offering all the risks associated with early-stage exploration assets. The Firefly Scheme evidences the cost of the transaction is large to Gascoyne shareholders and the independent valuations of the Firefly mineral assets are significantly lower than the price the Gascoyne Board has agreed to pay.

“Gascoyne’s recently announced financial statements shows that in the last 12 months Gascoyne raised a net AUS$85.2 million in new share issues, then forced to impair its assets by AUS$80.2 million, again in Westgold’s view, destroying value for its shareholders. The financial statements also detail the Gascoyne’s debt burden to its secured and unsecured lenders and their rights to sweep most of Gascoyne’s free cash.

“It is unclear how the Firefly Scheme will remove these burdens.

“The Westgold announced intention to bid provides a clear and logical alternative that reduces uncertainty and risk around the longevity of the Dalgaranga mine, the future of Mt Egerton and Glenburgh, and the ongoing funding risks to Gascoyne shareholders.

“The combination of Westgold and Gascoyne is strategic and value accretive for both groups as we believe the regional integration of mining, processing infrastructure, exploration assets, and people can rapidly expand production capacity above 350 000 oz per year with excess ore from Westgold’s Cue operations, extending Dalgaranga’s operating life.

“With the Westgold announced intention to bid before them, the Gascoyne shareholders now have a superior financial and technical proposal that delivers a premium for their stock and finally the win they deserve.

“It is now up to the shareholders of Gascoyne to speak and enable this offer to be considered. Westgold encourages the Gascoyne Board to respect their shareholders and take all necessary steps to put the decision as to the future direction of Gascoyne in their hands.”

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