Photo by: Reuters
PERTH (miningweekly.com) – TSX-listed gold producer Semafo on Monday announced its intention to launch a takeover offer for ASX-listed Orbis Gold, offering shareholders between 62c and 65c in cash, but the Australian miner responded that the bid undervalued the company.
The Canadian miner said that its all-cash proposal represented a superior outcome to the $20-million capital raising and partnership between Orbis and Greenstone Resources, proposed in September.
Under the agreement, which was subject to shareholder approval, Greenstone Resources would subscribe for $20-million shares in Orbis, with the shares priced at 42c each, resulting in the company holding a 17% interest in Orbis.
It was proposed that the funding would be used to complete a definitive feasibility study on Orbis’ flagship Natougou gold project, in Burkina Faso, which has a resource of about 18-million tonnes, grading at 3.4 g/t gold for two-million ounces of contained gold, as well as to secure the necessary project permitting.
However, Semafo, which itself is producing gold from a mine in Burkina Faso, pointed out that there were a number of inherent risks in developing a greenfield mining project in West Africa. It believed that its cash proposal would offer Orbis shareholders the opportunity to avoid this risk while realising an immediate and substantial cash premium for their shareholding.
However, Orbis told shareholders that the offer from Semafo “significantly” undervalued the company, both in terms of its existing assets and the potential value the company expected to deliver to shareholders in the near future.
Orbis also pointed out that an updated scoping study for the Natougou project was due shortly, following an expanded mineral resource estimate in August this year. The company said Semafo made its proposal prematurely and with the knowledge that the update was imminent.
The company has advised shareholders to take no action on the offer.
Semafo was expected to instigate negotiations with the Orbis board shortly in the hopes of securing a recommended, binding all-cash proposal prior to October 24.
Semafo’s offer was conditional upon the Greenstone placement not proceeding. Orbis shareholders were expected to vote on Greenstone's proposal on October 24.