PERTH (miningweekly.com) – ASX-listed Middle Island Resources has launched an all-scrip takeover offer for fellow-listed junior Alto Metals, which will consolidate the Sandstone greenstone belt, in Western Australia, under a single entity.
Middle Island is offering five of its own shares for every one Alto share held, valuing the takeover target at about A$9.4-million.
Middle Island on Friday pointed out that the offer price represented a 61% premium to Alto’s last closing price on February 28, and a 61% premium to the company’s five-day volume-weighted average share price.
Alto owns the Sandstone gold project, which is currently estimated to host some 261 000 oz of gold.
Middle Island also owns a Sandstone project, with an estimated indicated and inferred mineral resource of 537 000 oz, and an exploration target of between 900 000 oz and 1.5-million ounces.
“Middle Island’s offer is compelling for Alto shareholders, who will receive a significant premium based on the last closing price for their shares and will benefit in the future growth potential of the proposed combined group,” said Middle Island MD Rick Yeates.
“Middle Island will integrate Alto’s asset with Middle Island’s Sandstone gold project, and immediately embark on an updated feasibility study, incorporating Alto’s mineral resource, to determine the economics of the Sandstone gold processing plant.”
Yeates noted that the merger would create a company with near-term cash flow potential and considerable production and exploration upside. The combined group would have access to Middle Island’s processing plant, which is currently under care and maintenance, which would provide Alto shareholders with an immediate, proximal and cost-effective processing solution for Alto’s gold resource, which would not otherwise be available to the company.
The Alto deposits would provide initial mill feed and critical mass to support an early recommisisoning of the Standstone gold processing plant, while Middle Island’s Two Mile Hill deposits would provide considerable scale and project longevity.
“The collective Middle Island-Alto gold assets offer a substantial growth opportunity for current and future shareholders of the combined group, via low capital intensity and a near-term production profile.
“The further potential is to significantly extend this production profile via Middle Island’s Two Mile Hill underground deposits, consolidate further proximal deposits within a 100 km radius and amalgamate an entire greenstone belt offering significant resource and exploration upside,” said Yeates.
“In the view of Middle Island directors, the premium offered, the funding support, Middle Island’s technical and management expertise, and participation in the combined Middle Island-Alto upside, makes the bid a compelling proposal.”
Alto has urged its shareholders to refrain from taking any action, until the company’s board could consider the offer.