Gascoyne Resources Ltd (ASX:GCY) and Firefly Resources Ltd (ASX:FFR) have entered into a binding scheme implementation deed that will see the two companies merge by way of a scheme of arrangement.
This agreement will result in Gascoyne acquiring 100% of the ordinary shares in Firefly to create a leading regional gold production and development business in the Murchison Region of WA.
In conjunction with the scheme, Gascoyne and Firefly will undertake a demerger of their copper-gold and lithium exploration assets into a new energy metal focused exploration company.
The combined entity is estimated to have a pro forma market capitalisation of $159 million, cash and equivalents of $33 million and bank debt of $17.5 million for a net cash position of $15.5 million as of March 31, 2021.
“Key step forward”
Gascoyne managing director Richard Hay said: “This merger is a very exciting opportunity for Gascoyne and its shareholders and represents a key step forward in Gascoyne’s strategy of delivering value by extending mine life and increasing annual production at Dalgaranga.
“The integration of high-grade Yalgoo ore in our production plan moving forward has excellent potential to extend mine life, reinforcing Gascoyne’s position as a key gold producer in the Murchison region.
“Exploration upside”
Hay said: “Furthermore, the merger with Firefly will consolidate around 1,200 square kilometres of the Yalgoo and Dalgaranga greenstone belts under single ownership, significantly enhancing the exploration upside potential with over 100 high-quality targets.
“Any discoveries can quickly be brought into production at Gascoyne’s high quality, low-cost Dalgaranga processing plant.”
Merger process
Firefly shareholders will receive 0.34 Gascoyne shares for each Firefly share held at the scheme record date, which will result in shareholders of Gascoyne and Firefly having an interest in the combined entity of approximately 67.4% and 32.6%, respectively.
Following scheme implementation, Gascoyne will continue to be led by its managing director and CEO Richard Hay while Firefly’s managing director and CEO, Simon Lawson will join the board of Gascoyne as a non-executive director.
Future plans and strategy
The combined entity will have approximately 372.3 million fully paid ordinary shares on issue and continue to trade as Gascoyne Resources Limited under the ASX ticker GCY.
Both companies also intend to undertake a demerger of their copper-gold and lithium exploration assets in the Paterson, Murchison and Forrestania regions of WA into a new metal focused exploration company, to be named Firetail Resources Limited, which will also be listed on the ASX.
The merger will combine complementary assets in the Murchison region of Western Australia, unlocking a number of synergies by leveraging Gascoyne’s gold mining expertise and available processing infrastructure at Dalgaranga.
Part of larger regional company
Firefly managing director Simon Lawson said: “The combination of Gascoyne and Firefly is a compelling opportunity for value-creating, logical consolidation in the Murchison district, providing a clear pathway to accelerate and de-risk the development of the Yalgoo Gold Project by leveraging Gascoyne’s mining expertise and high-quality processing facility at Dalgaranga.
“Firefly shareholders will have the opportunity to be part of a larger, regional gold company with strong cash-flows, enhanced market positioning and the ability to rapidly unlock the exploration potential of a consolidated 1,200 square kilometres ground position in the Yalgoo and Dalgaranga greenstone belts.
“Firefly shareholders will hold approximately 32% of the merged entity, with the transaction providing an opportunity for immediate value realisation at an attractive premium.”
“Re-rating expected”
Lawson said: “Through their holdings in the enlarged Gascoyne, Firefly shareholders will stand to benefit from the re-rating that we would expect to flow from the creation of a larger gold company with an increased mine life and enhanced production profile.
“In addition, they are intended to benefit from the proposed demerger of our copper-gold and lithium exploration assets through Firetail Resources and receive an in-specie distribution in this exciting new energy metals focused company.”