PERTH (miningweekly.com) – ASX-listed Westgold Resources on Thursday flagged an off-market takeover offer for fellow-listed gold miner Gascoyne Resources.

Westgold said that it would offer one of its own shares for every four Gascoyne shares held, representing a premium of 34.7% to Gascoyne’s shares at the close of business on September 29, and a 30.2% premium to its three-month volume weighted average share price.

The takeover offer from Westgold would be subject to the merger between Gascoyne and fellow-listed Firefly Resources, not proceeding.

Gascoyne and Firefly in June this year announced plans for Gascoyne to acquire all of the fully paid ordinary shares in Firefly through a scheme of arrangement, which would see Firefly shareholders receive 0.34 Gascoyne shares for each Firefly share held.

Firefly’s board and three of its largest shareholders had backed the merger agreement with Gascoyne, and the two companies in July inked a demerger implementation deed to demerge their copper/gold and lithium exploration assets into a new energy metals focused exploration company called Firetail.

In August, Gascoyne received a non-binding indicative proposal from the Rivet Group, allowing for Gascoyne to acquire the gold rights at Rivet’s Snake Well gold project, in Western Australia.

This proposal was also subject to the merger with Firefly not proceeding.

A review and consideration of the non-binding indicative proposal saw the Gascoyne board unanimously reject the offer, saying that it was not superior to the Firefly merger proposal.

The gold miner on Thursday urged shareholders not to take any action with regards to the Westgold offer, saying that at this stage, it had not received a bidder’s statement and that the company’s board was not in a position to make a formal recommendation.

Westgold has argued that its offer for Gascoyne provided 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, and removed ongoing funding risk to Gascoyne shareholders as Westgold is debt free and well-funded.

Westgold argued that the transaction would also consolidate a combined exploration portfolio of some 3 900 km² across the Murchison, and would significantly increase the combined company’s mineral resource base to more than  9.1-million ounces.

Furthermore, it also removes concerns of longevity of Gascoyne’s Dalgaranga operations where mining is currently forecast to end in early 2025 by integrating excess mining tonnage available from Westgold’s Cue operations.

“After several tumultuous years the Gascoyne shareholders now see their company at the crossroads yet again,” said Westgold executive director Wayne Bramwell.

“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 A$85.2-million in new share issues, then forced to impair its assets by A$80.2-million, again in Westgold’s view, destroying value for its shareholders. The financial statements also detail Gascoyne’s debt burden to its secured and unsecured lenders and their rights to sweep most of Gascoyne’s free cash,” said Bramwell.

“It is unclear how the Firefly Scheme will remove these burdens,” he added.

“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/y 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,” Bramwell said.