PERTH (miningweekly.com) – Gold miner Silver Lake Resources has made a recommended A$52-million takeover offer for fellow listed EganStreet Resources.
The two companies have entered into a bid implementation agreement, under which Silver Lake would disuse 0.27 of its own shares for every EganStreet share held, valuing EganStreet shares at 40c each.
The implied value represented a 28.9% premium to EganStreet’s last closing price on July 29, and a 24.2% premium to its five-day volume weighted average share price.
The EganStreet board has unanimously recommended that shareholders accept the offer, with the company’s major shareholder, Lion Select, also having entered into a pre-bid acceptance deed for its 16.2% holding in EganStreet.
EganStreet holds the Rothsay gold project, which is some 85 km south-east of Silver Lake’s Deflector mine and processing hub.
Silver Lake on Tuesday told shareholders that the acquisition of EganStreet would allow the company to consolidate an additional Joint Ore Reserves Committee- (Jorc-) compliant resource of 454 000 oz and a Jorc reserve of 200 000 oz at the Rothsay gold project, and would provide a near-term development opportunity to introduce a new high-grade ore source to an upgraded Deflector processing facility.
“The acquisition of EganStreet and its Rothsay gold project is consistent with Silver Lake’s strategy of creating new opportunities to compete for capital and maximise the value of the existing asset base,” said Silver Lake MD Luke Tonkin.
“Silver Lake’s nearby infrastructure at Deflector can unlock additional value at Rothsay and this is reflected in the share price premium offered to EganStreet shareholders.”
EganStreet MD Marc Ducler said that the transaction would reward the company’s shareholders for the progress achieved at Rothsay to date, while giving them exposure to a successful ASX-300 listed gold producer with a strong balance sheet, diversified production profile, mine development expertise, established systems and practices, and installed infrastructure.
“This will significantly mitigate the development risk at Rothsay and provide exposure to a much larger and highly liquid Australian gold producer with the ability to attract an investment premium in the current strong Australian dollar gold market.”
Ducler said that on backing the takeover offer, EganStreet had taken into consideration a range of factors, including the current challenges in securing development funding for new projects in the junior gold sector, and the risk profile involved with taking an asset into production.
“The board has resolved that the opportunity to combine with a substantial multi-asset gold producer with a strong operational track record represents an attractive outcome.”
The takeover offer will be subject to a 90% minimum acceptance condition.
Meanwhile, Silver Lake on Tuesday reported that group production for the quarter ended March had increased by 85% on the previous quarter, to 64 557 equivalent ounces, as production from the Deflector operation, increased.
Gold production at the Mt Monger underground operation reached 25 253 oz, while the Daisy complex produced 11 402 oz, and the Mount Belches mining center produced 13 851 oz of gold.
At Deflector, 27 514 oz of gold was produced during the quarter, along with 575 t of copper.
Sale volumes for the same period reached 63 319 equivalent ounces at an average A$1 790/oz during the quarter. For the full year, 171 322 equivalent ounces was sold, at an average sales price of A$1 754/oz.
Looking at the 2020 financial year, Silver Lakes is targeting group sales of between 215 000 and 230 000 equivalent ounces.