Stratex International plc (LON:STI) shares started on the back-foot on Wednesday after the gold group responded to a move by former directors to block its proposed merger.
In May, the company agreed a US$31.1mln reverse takeover deal to acquire Crusader Resources - a junior miner with two projects in Brazil – with the new shareholders set to own around 81% of the enlarged company.
WATCH: Stratex International's Marcus Englebrecht to 'vigorously defend' Crusader merger
Originally, the deal was due to be rubber-stamped through September for an October close, but, in recent weeks the deal has faced opposition.
Stratex has told investors that a date for a general meeting will be announced shortly.
David Hall, formerly Stratex chief executive, and Paul Foord, who was chief financial officer of the Thani Stratex Resources joint venture vehicle, are part of the activist group which also includes joint venture partner Thani Emirates Resources. The counter proposal from the activist group is to appoint Hall and Foord as chief executive and chairman and for the Crusader deal to be terminated.
READ: Stratex says now has valid requisition notice for general meeting to oust management, terminate takeover
In a statement, released after 6pm on Tuesday, Stratex said it does not welcome the requisition and proposals.
It added that: “[the board] considers them without merit and firmly believes that they are not in the best interest of the Company or its shareholders.
“The principal concerns and proposed resolutions of the Requisitioning Shareholders would see the company abandon its strategy of building a substantial gold producer and explorer, and revert to the previous strategy which focussed solely on early stage gold exploration with the subsequent sale of all or part of projects.”
READ: Stratex International receives meeting request over Crusader deal
Stratex said whilst the prior strategy had “historically enjoyed some early success” it concluded that it “failed to deliver long term value as demonstrated by the current depressed market value of Stratex.”
Defending its plans, the company said it had negotiated a transformational merger that will create a significant gold junior with a substantial resource base and a globally diversified project portfolio.
“The board believes that in the current market, the greatest growth in market value is exhibited by companies turning an exploration asset into a funded development and then producing asset, the strategy that Stratex is adopting via the Crusader merger.
“As a consequence, the board expects to benefit from the premium at which producing mining companies currently trade when compared with exploration-focussed peers.”
Marcus Engelbrecht, Stratex chief executive, in the statement, said: “Whilst it is disappointing to have received this requisition, we remain convinced as a board that the acquisition of Crusader is the right direction for the company to take.
“This merger is in keeping with our long-term strategy of creating a substantial gold producer and explorer, with the near-term potential of Borborema providing a clear path to production and earnings, and potentially an opportunity to substantially increase Stratex's valuation.
“The market today is focussed on development projects, production and cash flow and it is here where the greatest value accretion lies for the company.
“We are confident that this acquisition will proceed, which we hope will put the Company on a path to become one of the premier junior mining companies on AIM."