PERTH (miningweekly.com) – ASX-listed Doray Minerals on Tuesday confirmed market speculation by making an off-market takeover offer for fellow-listed Mutiny Gold.

Doray was offering Mutiny shareholders one of its own shares for every 9.5 Mutiny shares held, valuing Mutiny shares at 5.4c each. The offer represented a 38% premium to the closing price of Mutiny shares on October 20, and a 49% premium to the 30-day volume weighted average price of Mutiny’s shares.

Doray MD Allan Kelly said on a conference call on Tuesday that the merger would create a leading midtier high-grade gold producer with an immediate growth strategy.

“For Mutiny, the transaction offers an attractive premium to recent trading prices and gives its shareholders a significant stake in a larger company going forward,” Kelly said.

The combined company would have a mineral resource base of more than one-million ounces of gold, grading 7.7 g/t gold, as well as some 27 000 t of copper, grading at 0.9%.

The combined group would also have operational flexibility from two high-grade production centres; Doray’s own producing Andy Well mine, in the northern Murchison district, and Mutiny’s Deflector project, in the southern Murchison district.

Kelly said that Doray was aiming to have the Deflector project in production by 2016, effectively doubling the company’s current production to around 160 000 oz/y gold equivalent.

To allow Mutiny to continue with its early works at the Deflector project, Doray had agreed to provide the takeover target with a A$3-million unsecured loan facility to meet its working capital requirements during the offer period.

“Doray wants to get this project into production as soon as possible so we don’t want to hold up the early works that Mutiny has already started,” Kelly said.

Interest of 12% a year would be payable on the amounts drawn down under the loan facility, and would be repayable within three months of the close of the offer.

Kelly pointed out that while Mutiny had already received a significant number of expressions of interests from banks for potential debt funding of the Deflector project, the combined company was likely to generate better terms for financing the project.

“In the medium to longer term, the increased size and liquidity of the combined company should result in increased interest from investors,” he added.

The Mutiny board unanimously recommended the takeover offer, which would be subject to a minimum 90% acceptance condition, as well as regulatory and shareholder approval.