Theta Gold Mines Ltd (ASX:TGM) has flagged an off-market takeover bid for West Aussie gold explorer Focus Minerals Ltd (ASX:FML).
Under the takeover, which can only become reality if Focus drops an entitlement offer, Theta proposes to issue two TGM shares for every Focus security held, implying an A$0.36-cent-per-share value.
Notably, that pricing represents a 41.2% premium to the last closing price of Focus shares, as well as a 44% premium to that company’s A$0.25 entitlement offer price.
If the takeover bid pulls through, Theta will add some local assets to its exploration portfolio, establishing a network of precious metal properties across three iconic goldfields.
Creating a gold stock with presence
Speaking to the offer, Theta Gold Mines chairman Bill Guy said: “Theta Gold believes that the offer presents a compelling opportunity to Focus shareholders to realise value for their shareholding while continuing to have an indirect interest in the Focus assets.
“A combination of Theta Gold and Focus would create a group with a significant presence on the ASX, operating bases in South Africa and WA, and over 12 million ounces of gold resources under management.
“Focus also has numerous old mine sites in the Eastern Goldfields with good grades and potential at depth, and Theta Gold believes its experienced underground mining management team could add value to any consideration of these assets.
“In essence, Theta Gold considers that its offer is a more attractive proposition to Focus shareholders (including Shandong Gold) than the uncertain and highly dilutive development proposal put forward by Focus.”
The fine print
If Focus comes under Theta’s wings, the companies would create an explorer that would oversee more than 12.3 million gold ounces in JORC-compliant mineral resource.
Those resources are spread between two mining-friendly jurisdictions, Western Australia and South Africa, and provide exposure to gold camps either side of the Indian Ocean.
Theta’s proposal contrasts an entitlement offer put forward by Focus management earlier this month.
Under that proposal, major shareholder Shandong Gold has the chance to further entrench its holding, meaning existing Focus shareholders must subscribe for further shares or risk being substantially diluted.
Following the entitlement offer, Shandong Gold’s interest in Focus could increase to 66.25%.
Focus itself acknowledges that the entitlement offer may further consolidate Shandong Gold’s control.
Previously, the company stated: “If Shandong Gold’s voting power were to increase above 50%, it would be able to solely determine the outcome of ordinary shareholder resolutions that it is permitted to vote on, including the issue of new shares beyond the limit set under the ASX Listing Rules …
“[It] would have greater influence over the outcome of any special shareholder resolutions, including amendments to the constitution of the company.”
If the Theta offer is accepted, the company claims Focus investors can become part of a larger, more liquid and more geographically diverse group.
The premium value of TGM’s offer price is illustrated below:
At present, TGM’s proposal relies on the entitlement offer not proceeding but does not come with a minimum acceptance condition.
Looking ahead, Theta has encouraged the Focus board to consider the possible proposal, as well as the opportunities it represents.