Gascoyne Resources Ltd (ASX:GCY) has received an unsolicited, conditional off-market takeover offer from $708 million Western Australian gold producer Westgold Resources Ltd.
However, Gascoyne has yet to receive the bidder's statement and is recommending shareholders take no action until the company can provide a formal recommendation.
Focused on gold exploration at its flagship Dalgaranga Gold Project 65 kilometres northwest from Mt Magnet, Gascoyne is considering its response to the offer - however, there is no implication the offer will change Gascoyne’s planned merger with Firefly Resources Ltd.
Westgold offer
Westgold is offering one Westgold share for every four Gascoyne shares, valuing the gold explorer at $105 million, which it says “provides Gascoyne shareholders with an opportunity to achieve a significant market premium for their shares by Gascoyne walking away from the proposed highly dilutive merger by scheme with Firefly”.
“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 ounces per annum with excess ore from Westgold’s Cue operations extending Dalgaranga’s operating life,” Westgold director Wayne Bramwell said in a statement.
This offer sent Gascoyne shares up to 26% higher to A$0.39 intraday.
It is not the first offer Gascoyne has received since the announcement of its intention to merge with Firefly, having knocked back a “highly conditional, unsolicited, non-binding and indicative” proposal from the Rivet Group in August.
Firefly merger on horizon
As Gascoyne outlined in its annual report released a week ago, the company is intending to move ahead with its merger with Firefly.
“Looking forward, we plan on continuing to consolidate and improve our cost and production performance at Dalgaranga, and continue to explore in and around Dalgaranga with the intent of adding to the existing mine life,” chairman George Bauk told shareholders.
“On completion of the acquisition of Firefly the focus will be to bring the Melville deposit into production in the second half of the 2022 calendar year.”
The deal will see Gascoyne acquire Firefly in full, and on September 7, the Supreme Court of Western Australia approved the despatch of the scheme booklet and ordered a meeting of Firefly shareholders to consider and, if thought fit, approve the scheme.
That meeting is scheduled to take place on October 21.
Regional synergies
Gascoyne aims to leverage its gold mining expertise and available processing infrastructure at the Dalgaranga Gold Project for the benefit of Firefly’s highly prospective suite of assets including its flagship Yalgoo Gold Project.
The merger will create a regional gold production and development business and unlock value for Gascoyne and Firefly shareholders by integrating Yalgoo’s near-surface higher grade deposits into the Dalgaranga production plan – providing opportunities to extend and optimise the existing mining schedule, ultimately improving project economics.
Gascoyne managing director and CEO Richard Hay said in June the merger was a “very exciting opportunity for Gascoyne and its shareholders”.
“It represents a key step forward in Gascoyne’s strategy of delivering value by extending mine life and increasing annual production at Dalgaranga,” he said.
“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.”
On September 10, Hay said the merger with Firefly Resources was progressing well.
“The requisite studies and permitting is underway to bring the Yalgoo - Melville deposit into production as soon as possible including a mining licence application lodged by Firefly,”
“Prospects such as Hendricks should also enhance the Dalgaranga mine plan providing additional optionality and flexibility.”
- Daniel Paproth