Plenty of corporate activity in the local mining sector at the moment, with developments today on the proposed takeovers of DGO Gold by Gold Road Resources and Western Areas by IGO Ltd.
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So will rival bidders emerge to try and top Gold Road Resources’ (ASX: GOR) recommended off-market takeover offer to acquire all ordinary shares in DGO Gold (ASX: DGO)?
At stake could be a big foot placed on control of one of the best gold discoveries in Australia in recent years.
Gold Road is offering 2.16 of its shares for every DGO share, which implies an offer price of $3.38 a share (DGO shares were steady at $3.46 yesterday and Gold Road shares ended down 3.4% or so at $1.565) compared to DGO’s last sale price of $2.89 last Friday.
The paper bid values DGO at around $305 million but there seem to be some goodies in DGO that might attract rivals.
DGO has a 14.4% shareholding in De Grey Mining (the owner of the nine-million-ounce Mallina gold project in Western Australia) and 6.8% of Dacian and 20.1% of Yilgarn (an explorer, while Dacian controls the Mount Morgans mine).
While DGO also has its own portfolio of exploration tenements located in the Pilbara, Yilgarn, Bryah and Stuart Shelf provinces in WA and South Australia, the big interest is in the equity stakes – De Grey is the best of the lot.
Located in the iron ore region of the Pilbara, De grey’s Hemi prospect contains at least 6.8 million ounces of gold with at least another 2.2 million ounces outside the Hemi area in the rest of the Mallina prospect.
De Grey has already revealed plans (in a 2021 scoping study) to produce up to 473,000 ounces of gold a year in the first stage of the project.
That mine would fit well with the 50% Gold Road has of the Gruyere gold mine in the northeastern goldfields of WA which is slated to produce at least 350,000 ounces of a gold a year under an underground expansion plan started last year.
“The acquisition of DGO aligns with Gold Road’s strategy to invest in high-quality gold projects in Tier-1 jurisdictions,” Gold Road CEO Duncan Gibbs said in a statement to the ASX.
“In particular, Gold Road views the substantial shareholding in the owner of the high-quality Hemi gold discovery, combined with our 50 per cent ownership of the Gruyere gold mine, as an exciting opportunity to participate in two of the most significant gold discoveries in Western Australia this century.”
In the absence of any better offer, DGO’s directors have unanimously recommended its shareholders accept the offer.
Gold Road will require 80% of DGO shareholders to approve the takeover for it to be successful.
DGO executive chairman Eduard Eshuys said the takeover offer represents a fantastic investor opportunity.
“DGO has consistently traded at a discount to the value of its assets, and this offer not only recognises and unlocks that value, but provides DGO shareholders with ongoing exposure to these assets and the Gold Road portfolio, as part of a more liquid investment in a cash flow generating ASX-200 gold producer.”
This is the second attempt in five months Gold Road has made a big play – back in November of last year it was frustrated by Ramelius Resources in a bidding war for control of Apollo Consolidated. What was surprising about that offer is that Gold Road started with an advantage – a 19.9% holding in Apollo and yet failed to win a cash bidding war.
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Meanwhile, IGO Ltd’s (ASX: IGO) $A1.1 billion bid for Western Areas (ASX: WSA) looks like it is headed for the same fate as the dodo after the independent expert appointed by WSA reportedly described the offer as neither fair nor reasonable.
IGO is offering $3.60 a share for Western Areas and the offer has been supported by big shareholders Perpetual, with around 14.7%, and Andrew Forrest’s Wyloo Metals with 9.8%.
The news on the independent expert’s view came from an IGO statement to the ASX on Tuesday morning. That was after a two-day trading halt was granted to Western Areas by the ASX.
In noting Western Areas request for the trading halt, IGO said it understands “the primary reason for this trading halt is that the Independent Expert engaged by Western Areas has concluded in its draft Independent Expert’s Report (IER), which IGO has not sighted, that the Scheme is neither fair nor reasonable to Western Areas shareholders and is therefore not in the best interests of Western Areas shareholders.”
“.. and, as a result, the Board of Western Areas intends, based on the terms of the current Scheme, to adversely change its recommendation to vote in favour of the Scheme and terminate the Scheme Implementation Deed with IGO.”
IGO told the ASX that it will consider all options with respect to the Scheme once the draft IER is received and reviewed. “However, there can be no guarantee that the Scheme will proceed,” IGO warned.
“As previously stated, IGO’s valuation of Western Areas and the proposed Scheme consideration of A$3.36 in cash per share were based on IGO’s long term view of the nickel market fundamentals and price. Despite recent volatility in the nickel price, IGO’s long term view on the nickel price has not materially changed.
“IGO remains focused on pursuing growth opportunities that deliver value to IGO’s shareholders. While it will assess all options available with respect to the Scheme, IGO will remain disciplined in the execution of all merger and acquisition activity,” IGO said in an apparent attempt to stop speculation of a share price higher than the $3.60 offered in the bid.
If IGO manages to find a way to get control of Western Areas, it will control the latter’s Forrestania nickel mine in WA as well as the Cosmos and the Odysseus mines.
IGO had hoped the deal would be wrapped up this month, but that is now a moot point.
Western Areas shares remained halted at Monday’s close of $3.65 while IGO shares lost 2.9 to $14.56 on disappointment the bid may not now happen.
