PERTH (miningweekly.com) – Takeover target Gascoyne Resources has urged shareholders to reject a takeover offer from fellow listed Westgold Resources, instead unveiling a business plan that would cut capital spend.
Westgold was offering one of its own shares for every four Gascoyne shares held, representing a premium of 34.7% to Gascoyne’s shares at the close of business on September 29, and a 30.2% premium to its three-month volume weighted average share price.
The takeover offer from Westgold would be subject to the merger between Gascoyne and fellow-listed Firefly Resources, not proceeding.
Gascoyne on Wednesday told shareholders that after careful consideration, the Gascoyne board believed that the offer from Wesgold undervalued the company’s shares, and did not represent a superior alternative to the Firefly deal.
Furthermore, the company said that exposure to Gascoyne’s assets and any potential upside that shareholders would enjoy, would be reduced through the Westgold offer, which in itself was opportunistic in its timing, and made at a time when "material information" was not available to Gascoyne shareholders.
Gascoyne’s largest shareholder, Deutsche Balaton AG, which holds a 22.1% stake in the company, has also stated that it would not be accepting the Westgold offer, in the absence of a superior proposal.
Furthermore, Gascoyne noted that its transaction with Firefly included a ‘no talk’ restraint on its ability to engage with Westgold in relation to its takeover offer, since the offer was deemed not to be superior to the Firefly transaction.
Instead, Gascoyne on Wednesday unveiled plans to improve its cashflow by reducing capital investments during 2022 and 2023, by postponing the Stage 3 cutback of the eastern and western walls of the Gilbey’s pit, at its Dalgaranga gold mine, in Western Australia.
The company noted that the optimised Gilbey’s Stage 2 provided a two-year baseload production at Dalgaranga, to be enhanced by other deposits and stockpiles at Dalgaranga and Firefly’s Yalgoo tenements, along with regional stranded deposits.
Gascoyne has reiterated its 2022 production target of 70 000 oz to 80 000 oz of gold, at a significantly lower all-in sustaining cost, following the removal of some A$60-million worth of waste stripping from the deferred cut-back.
“Gascoyne’s decision to defer the Stage 3 eastern and western wall cut-back of the Gilbey’s pit will greatly increase cash generation from Dalgaranga and Melville over the next three years and protect the business against avoidable financial risk in the current environment,” said MD and CEO Richard Hay.
“We have been able to take this pathway by capitalising on the operational flexibility emerging from the proposed merger with Firefly and exploration success within our Dalgaranga tenements.
“Under the new optimised Stage 2 plan for the Gilbey’s pit, baseload ore feed will be produced for the next two years which will be further supported by satellite feed and stockpiles from 2023. Importantly, production guidance in 2022 remains unchanged and the deferral of up to A$60-million in waste stripping will reduce the all-in cost of production, thereby significantly increasing cashflow generation this year. Furthermore, the decision preserves the future optionality of the cut-back when the operating cost and gold price environment improves,” said Hay.