Westgold Resources has made an unsolicited and conditional off-market takeover bid to acquire all the shares of Musgrave Minerals, for a total consideration of $177.3m.
Musgrave shareholders are offered to receive one fully paid ordinary share of Westgold, for every 5.37 Musgrave shares held, which implies a price of $0.30 per share.
The exchange price represents a 30.5% premium to Musgrave’s five-day volume weighted average share price and a 33% premium to its 30-day volume weighted average share price
Musgrave told its shareholders that the company had not yet received a bidder’s statement, and its board is currently not prepared to make a formal recommendation.
Also, the company requested the shareholders to refrain from making any decisions in relation to the unsolicited offer by Westgold.
Westgold managing director Wayne Bramwell said: “Westgold’s view is that Musgrave’s plan to construct a new, small processing plant within close trucking distance of two established larger processing plants is ambitious.
“Their proposed development path costing $121 million in startup capital at a PFS level of certainty materially escalates risk to Musgrave shareholders, as it exposes them to all the uncertainties, challenges and dilution associated with project development.
“It is a high risk and inefficient use of their shareholder’s capital at a time when securing capital for small scale, single asset companies is becoming more difficult and costly.”
Westgold said that the proposed transaction would enable Musgrave shareholders to pursue the development of their gold assets by a well-funded and experienced mining company.
The business combination provides an immediate and attractive premium that eliminates the process of approval, finance, construction, and start-up of a small processing facility.
Also, it would consolidate the regional assets of both the companies, into a large-scale, more profitable, and highly investable Western Australian-focused gold miner, said Westgold.
The combined entity would be supported by Westgold’s technical capability, team, and strong financial position, which includes around $180m in cash and liquid assets.
Bramwell added: “Those risks will escalate and will include approvals, financing, construction, the competition for scarce labour and the myriad of schedule and capital cost blowouts evident in many recent Western Australian resource project start-ups.
“There is a faster and lower risk solution available to Musgrave shareholders to see their Cue gold assets developed in a timely manner.
The combination of Musgrave’s assets with our regional infrastructure and operating teams will fast track and de-risk the development of Musgrave’s Cue Gold Project and provides Musgrave shareholders immediate exposure to a much larger, established Western Australian gold producer.”
