Pantoro Ltd (ASX:PNR) has moved to gain 100% of the 4.79-million-ounce Norseman Gold Project in Western Australia through a merger with 50% owner Tulla Resources Plc (ASX:TUL).
The two companies have entered into a binding merger implementation deed for an all-scrip merger of Tulla and Pantoro via a scheme of arrangement under the Companies Act 2006 (UK).
Under this agreement Pantoro will acquire Tulla and gain 100% ownership and control of the project, thus consolidating all of the Norseman battery and base metals mineral rights.
New mid-cap gold company
The proposed merger would create a new mid-cap ASX-listed gold company with target gold production of 110,000 ounces per annum, a mineral resource of 4.79 million ounces and an ore reserve of 980,000 ounces.
Given the scale of the Norseman project, there is also significant potential to grow the resource base and production profile through greenfields and brownfields exploration.
“A logical step”
Pantoro managing director Paul Cmrlec said: “Consolidating the Norseman Gold Project into a single entity is a logical step for all parties to maximise value as the project ramps up to reach its full potential as a premier gold asset in Western Australia.
"While Norseman has experienced delays and challenges in its ramp-up, key operational and management changes made late in 2022 are now yielding positive results, with productivity and throughput increasing month on month and process plant ramp-up now virtually complete to nameplate capacity.”
$75 million placement
In support of the merger, Pantoro is launching a two-tranche institutional placement of new fully paid ordinary shares in the company to sophisticated and professional investors to raise A$75 million (before costs).
Placement shares will be issued at A$0.06 per share which represents a 31.8% discount to the last trade price of A$0.088 on February 10, 2023, and a 32.8% discount to the 5-day VWAP of A$0.0893 as at February 10.
They will be issued in two tranches with the first 266,823,085 in line with the company’s placement capacity under ASX Listing Rule 7.1.
In addition, 983,167,915 tranche 2 placement shares are subject to Pantoro shareholder approval at the company’s General Meeting to be held on or around 24 March 24,2023.
Petra Capital Pty Limited and Euroz Hartleys Limited are acting as joint lead managers and joint bookrunners for the placement.
“Well funded”
"The equity raising ensures that the combined group is well funded through the initial phases of production and enables the reduction of the consolidated debt position of the company during this critical phase,” Cmrlec said.
Proceeds from the placement, together with existing cash, will be applied to support the final stages of ramp-up of the Norseman Project, invest in exploration and ore reserve growth, provide appropriate ongoing liquidity and working capital, for debt management and to pay transaction costs.
The merger, before the impact of the Pantoro capital raising, will result in Pantoro’s shareholders owning in aggregate 51.5% and Tulla’s shareholders owning in aggregate 48.5% of Pantoro’s ordinary shares.
Assuming the placement raises A$75 million, following its completion and the implementation of
the merger, Pantoro’s shareholders will own, in aggregate 37.8% and Tulla’s shareholders will own 35.6% of Pantoro’s ordinary shares.
The merger is unanimously recommended by the boards of Tulla and Pantoro, in the absence of a superior proposal, as well as by Tulla’s majority 54.9% shareholder, Tulla Resources Group Pty Limited (TRG), which is controlled by the Maloney family.
New board
Following implementation of the merger, Pantoro will establish a new board:
- Comprising seven directors following the appointment of a new independent chair, with three directors appointed by each of Tulla and Pantoro, combining the skills and experience of both companies for the benefit of all shareholders.
- Wayne Zekulich will act as interim independent chairperson with a commitment to appoint a new independent chairperson after which Zekulich will be an independent non-executive director.
- Paul Cmrlec will continue as managing director.
- Fiona Van Maanen will continue as independent non-executive director.
- Tulla executive chairman Kevin Maloney and executive firector Mark Maloney will be non-executive directors.
- Tulla Mining consultant Colin McIntyre will be an independent non-executive director.
- Kyle Edwards and Scott Huffadine will retire from Pantoro’s board. Huffadine will continue as COO of the merged group with all other duties and responsibilities of his current role retained.
- Pantoro’s experienced senior management team will continue following the merger.
"We look forward to working with our proposed new board members and thank our proposed outgoing directors for the dedicated service and guidance to management of the company through the very challenging environment of the past 3 years in particular,” Cmrlec said.
Industrial minerals plan
As part of the merger, Tulla shareholders will retain beneficial ownership of all industrial minerals.
Norseman's battery and base metals mineral rights include the valuable lithium and nickel mineralisation in the project, which are planned to be combined into a separate battery metals business.
Currently, the Norseman lithium mineral rights are subject to a farm-in arrangement with Mineral Resources Ltd (ASX:MIN).
The new Pantoro board intends to investigate, and if appropriate, progress the spin-out of the Battery Metals business at the appropriate time.
Investment upside
Tulla executive director Mark Maloney said: “Consolidating ownership of the Norseman gold asset and battery metals will deliver significant value for the shareholders of both companies, providing a simplified structure and delivering operational and corporate efficiencies.
"Tulla shareholders will realise the upside of their investment in a significant mid-tier Australian gold producer, with a large, high-grade operation of very substantial value while maintaining 100% ownership of the industrial mineral rights at Norseman.
"I look forward to serving on the new board and working with our former joint venture partner to maximise future value for all shareholders.“