Peter Cook, President of Westgold Resources (ASX: WGX), has launched an unsolicited bid to defeat the proposed merger by Gascoyne Resources (ASX: GCY) with Firefly Resources (ASX: FFR) in an attempt to become a producer of gold of 500,000 ozpa.
If successful, the proposed takeover bid would position Westgold as Australia’s fifth largest gold producer and the main gold producer in WA’s historic Mid-West region, with production of Proforma 2022 gold of 350,000 ounces and a path to more than 500,000 ounces per year with a processing network of four mills and 6.5 Mtpa of capacity.
This would involve canceling Gascoyne’s merger with Firefly, which Westgold says is dilutive and does not represent value to Gascoyne shareholders.
Westgold, which owns the Cue, Meekatharra and Fortnum gold projects, would offer one Westgold share for every four shares held by Gascoyne investors, a 34.7% premium over its closing price on Wednesday.
While Gascoyne told his shareholders not to take any action, the news was well received, pushing the shares of the owner of the Dalgaranga gold mine up 21% to 37.5c.
Westgold stock fell 1.8% on announcement, while Firefly took a big hit from the revelation that a much larger shark had entered the pool, down 17.5% at 12pm AEST at 9.9c. This is significantly lower than the implied share value of CA 14.5 ca attributed to Firefly shareholders in the original deal.
The parties to the Gascoyne deal share the prices today:
The Firefly Affair
Firefly owns the 196,000 ounce Yalgoo gold project, approximately 110 km from the Dalgaranga plant in Gascoyne.
His friendly plan of arrangement with Gascoyne, which would give Firefly shareholders about 32.4% of the combined entity, was announced in June.
The scheme booklet has been submitted to ASIC, along with shareholders due to the scheme vote on October 21.
The report of an independent BDO expert declared the merger “fair and reasonable”.
Westgold, on the other hand, will argue to Gascoyne shareholders that the Firefly deal dilutes them and undervalues the company in an attempt to acquire an early stage, undeveloped resource.
“After several tumultuous years, Gascoyne shareholders once again see their company at a crossroads,” said Wayne Bramwell, executive director of Westgold.
“The Firefly Scheme independent technical and appraisal report provides for the merger of Gascoyne with a junior explorer offering all the risks associated with early stage exploration assets.”
“The Firefly Scheme proves that the cost of the transaction is significant to Gascoyne shareholders, and the independent valuations of Firefly’s mining assets are significantly lower than the price Gascoyne’s board of directors has agreed to pay.”
Gascoyne, a long history of bad luck
Gascoyne Resources has had a heinous history since becoming the next mid-level gold miner around 2016 with the Dalgaranga mine near Mt Magnet in Washington state.
He initially struggled to mine as much gold as promised and fell into financial disputes, entering administration in mid-2019.
It was eventually recapitalized through an envelope of $ 125 million in a corporate arrangement document.
Gascoyne expects to produce 70,000 to 80,000 ounces at Dalgaranga in FY 2022 at an AISC price of $ 1,600 to $ 1,700, but also revealed that it would bear a non-monetary depreciation charge of around $ 80 million. dollars on its flagship asset in June.
Bramwell of Westgold said the sweeping arrangements held by Gascoyne’s lenders left her exposed as well.
“Gascoyne’s recently announced financial statements show that over the past 12 months, Gascoyne has raised $ 85.2 million net in new share issues, then was forced to write down its assets by $ 80.2 million. , again in Westgold’s view, destroying value for its shareholders, ”he said.
“The financial statements also detail Gascoyne’s debt burden to its secured and unsecured lenders and their rights to wipe out most of Gascoyne’s available cash. It is not known how the Firefly Scheme will remove these burdens. “
Westgold’s intention to bid “provides a clear and logical alternative that reduces uncertainty and risk regarding the longevity of the Dalgaranga mine, the future of Mt Egerton and Glenburgh and the continued funding risks for Gascoyne shareholders. “, did he declare.
“The combination of Westgold and Gascoyne is strategic and value-creating for both groups, as we believe that regional integration of mining, processing infrastructure, exploration assets and people can quickly increase the Production capacity in excess of 350,000 ounces per year with excess ore from Westgold’s Cue operations extending Dalgaranga’s operational life.